Exhibit 99.1
ConocoPhillips Reports Second-Quarter
Net Income of $301 Million or $0.18 Per Diluted Share
Earnings of $4.8 billion or $2.90 per share, adjusted for
Venezuela impairment of $4.5 billion ($2.72 per share)
HOUSTON--(BUSINESS WIRE)--July 25, 2007--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Second Quarter Six Months
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2007 2006 2007 2006
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Net income $301 5,186 $3,847 8,477
million million million million
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Diluted income per share $0.18 3.09 $2.31 5.49
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Earnings adjusted for Venezuela $4,813 5,186 $8,359 8,477
impairment million million million million
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Diluted earnings per share
adjusted for Venezuela impairment $2.90 3.09 $5.02 5.49
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Revenues(a) $47.4 47.1 $88.7 94.1
billion billion billion billion
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(a) Effective April 1, 2006, revenues no longer include the sales
portion of buy/sell contracts, reflecting the adoption of EITF No.
04-13, "Accounting for Purchases and Sales of Inventory with the Same
Counterparty."
ConocoPhillips (NYSE:COP) today reported second-quarter net income
of $301 million, or $0.18 per share. This compares with $5,186
million, or $3.09 per share, for the same quarter in 2006. Revenues
were $47.4 billion, versus $47.1 billion a year ago.
Second-quarter net income included an after-tax impairment of
$4,512 million ($2.72 per share) in the Exploration & Production
segment related to expropriation of the company's Venezuela oil
projects. Earnings adjusted for the Venezuela impairment were $4,813
million, or $2.90 per share.
"In our upstream business, we produced 2.4 million BOE per day,
including an estimated 0.5 million BOE per day from our LUKOIL
Investment segment, during the second quarter," said Jim Mulva,
chairman and chief executive officer. "Our downstream business
benefited from a strong market environment. During the second quarter
our crude oil capacity utilization rate was 93 percent, despite
planned downtime for maintenance and commissioning of a new coker at
the Borger refinery.
"We ended the quarter with debt of $22.8 billion, a
debt-to-capital ratio of 21 percent and a cash balance of $1.4
billion. During the quarter, we funded $2.6 billion of our capital
program, reduced debt by $0.9 billion, increased cash balance by $0.6
billion, repurchased an additional $1 billion of ConocoPhillips common
stock, and paid $0.7 billion in dividends. This was accomplished using
$4.8 billion of cash generated from operations and $0.9 billion in
proceeds from asset dispositions."
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
Second-quarter financial results: E&P second-quarter net loss was
$2,404 million, reflecting the $4,512 million after-tax Venezuela
impairment. E&P earnings adjusted for the Venezuela impairment were
$2,108 million, down from $2,329 million of net income in the first
quarter of 2007 and $3,304 million of net income in the second quarter
of 2006. The decrease from the previous quarter primarily was due to
the effect of the company's asset rationalization efforts and lower
sales volumes. This decrease was offset partly by higher realized
commodity prices. The decrease from the second quarter of 2006
primarily was due to higher taxes, lower sales volumes, the effect of
the company's asset rationalization efforts, and lower crude oil
prices. This decrease was offset partially by higher natural gas
prices.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 1.9 million
barrels of oil equivalent (BOE) per day, a decline from 2.0 million
BOE per day in the previous quarter and 2.1 million BOE per day in the
second quarter of 2006. The production decrease from the previous
quarter primarily is due to scheduled maintenance in the North Sea,
the company's exit from Dubai, and planned downtime and seasonality in
Alaska.
The production decrease from the second quarter of 2006 primarily
was due to normal field decline, planned maintenance in the North Sea,
the effect of asset dispositions, the company's exit from Dubai,
production sharing contract impacts, OPEC reductions, and pipeline
sabotage impacts in Nigeria. This decrease was offset slightly by
volumes from the upstream business venture with EnCana and new
production from Alpine satellite fields in Alaska.
Before-tax exploration expenses were $259 million in the second
quarter of 2007, compared with $262 million in the previous quarter
and $134 million in the second quarter of 2006.
Six months financial results: E&P net loss for the first six
months of 2007 was $75 million. E&P earnings adjusted for the
Venezuela impairment were $4,437 million over the same time frame,
down from $5,857 million of net income in 2006. This decrease was due
to higher taxes, lower crude oil sales volumes, lower commodity
prices, and higher operating costs and depreciation, depletion and
amortization expense. The decrease was offset partially by the
inclusion of Burlington Resources' results for the entire six-month
period in the current year and the effect of the company's asset
rationalization efforts.
Midstream
Second-quarter financial results: The Midstream segment includes
the company's 50 percent interest in DCP Midstream, LLC. Midstream
second-quarter net income was $102 million, up from $85 million in the
previous quarter and down from $108 million in the second quarter of
2006. The increase from the previous quarter primarily was due to
higher realized natural gas liquids prices. The decrease from the
second quarter of 2006 primarily was due to lower volumes partially
offset by higher realized natural gas liquids prices.
Six months financial results: Midstream net income for the first
six months of 2007 was $187 million, down from $218 million in 2006.
The decrease primarily was due to lower volumes partially offset by
higher realized natural gas liquids prices.
Refining and Marketing (R&M)
Second-quarter financial results: R&M net income was $2,358
million in the second quarter, up from $1,136 million in the previous
quarter and $1,708 million in the second quarter of 2006. The increase
from the previous quarter was due to higher worldwide realized
refining and marketing margins, including positive inventory impacts.
The increase from the second quarter of 2006 primarily was due to
higher worldwide realized refining and marketing margins, a net
benefit associated with the company's asset rationalization efforts,
and lower costs associated with turnarounds and Hurricane Katrina
impacts in 2006. This increase was offset partially by lower volumes
due to the contribution of assets to the downstream business venture
with EnCana.
The domestic refining crude oil capacity utilization rate for the
second quarter was 93 percent, compared with 95 percent in the
previous quarter. The international crude oil capacity utilization
rate was 93 percent, compared with 90 percent in the previous quarter.
Worldwide, R&M's refining crude oil capacity utilization rate was
93 percent, down slightly from 94 percent in the previous quarter, and
up from 91 percent in the second quarter of 2006. Before-tax
turnaround costs were $58 million in the second quarter of 2007,
versus $75 million in the previous quarter and $115 million in the
second quarter of 2006.
Six months financial results: R&M net income for the first six
months of 2007 was $3,494 million, up from $2,098 million in 2006. The
increase was due primarily to higher worldwide realized refining and
marketing margins, a net benefit associated with the company's asset
rationalization efforts, and lower costs associated with turnarounds
and Hurricane Katrina impacts in 2006. This increase was offset
partially by lower volumes due to the contribution of assets to the
downstream business venture with EnCana.
LUKOIL Investment
Second-quarter financial results: LUKOIL Investment segment net
income was $526 million, up from $256 million in the previous quarter
and $387 million in the second quarter of 2006. The results include
ConocoPhillips' estimated equity share of OAO LUKOIL's (LUKOIL) income
for the second quarter based on market indicators and historical
production trends for LUKOIL. The company's equity ownership interest
in LUKOIL at the end of the second quarter was 20 percent of LUKOIL's
851 million issued shares and 20.5 percent based on an estimated 831
million shares outstanding.
The increase in net income from the previous quarter primarily was
due to higher estimated realized prices, slightly offset by the net
impact from the alignment of estimated net income to LUKOIL's reported
results. The increase from the second quarter of 2006 primarily was
due to higher estimated volumes and realized prices, as well as
ConocoPhillips' increased equity ownership. This increase was offset
partially by the net impact from the alignment of estimated net income
to LUKOIL's reported results and higher estimated operating costs.
For the second quarter of 2007, ConocoPhillips estimated its
equity share of LUKOIL production was 473,000 BOE per day and its
share of LUKOIL daily refining crude oil throughput was 184,000
barrels per day.
Six months financial results: Net income for the first six months
of 2007 was $782 million, up from $636 million in 2006. The increase
primarily was due to higher estimated volumes and realized prices, and
ConocoPhillips' increased equity ownership. This increase was offset
partially by the net impact from the alignment of estimated net income
to LUKOIL's reported results and higher estimated operating costs.
Chemicals
Second-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported net income of $68 million, down from
$82 million in the first quarter of 2007 and $103 million in the
second quarter of 2006. The decrease from the previous quarter
primarily was due to a $21 million after-tax asset retirement,
partially offset by lower turnaround costs. The decrease from the
second quarter of 2006 was due largely to lower olefins and
polyolefins margins and the asset retirement.
Six months financial results: Net income for the first six months
of 2007 was $150 million, down from $252 million in 2006. The decrease
primarily was due to lower olefins and polyolefins margins, the asset
retirement, and higher turnaround costs. This decrease was slightly
offset by higher aromatics and styrenics margins.
Emerging Businesses
The Emerging Businesses segment second quarter net loss was $12
million compared to a net loss of $1 million in the first quarter of
2007, and a net loss of $12 million in the second quarter of 2006. The
decrease from the previous quarter primarily was due to lower power
generation results.
Corporate and Other
Second-quarter Corporate expenses were $337 million, after-tax,
down slightly from $341 million in the previous quarter and down from
$412 million in the second quarter of 2006. Compared to the previous
quarter, lower net interest expense was offset by higher
benefit-related charges. The decrease from the second quarter of 2006
primarily was due to lower net interest expense, lower
acquisition-related charges and reduced foreign currency losses. This
decrease was offset partially by higher benefit-related charges.
Total debt at the end of the second quarter was $22.8 billion, a
reduction of $0.9 billion during the quarter. The company's
debt-to-capital ratio was 21 percent, compared to 22 percent at the
end of the first quarter of 2006. The cash balance at the end of the
quarter was $1.4 billion, an increase of $0.6 billion.
ConocoPhillips' second-quarter effective tax rate was 91.4
percent. The effective tax rate adjusted for the Venezuela impairment
was 40.6 percent, compared with an effective tax rate of 41.5 percent
in the first quarter of 2007.
Outlook
Mr. Mulva concluded:
"We remain focused on increasing shareholder value through
operating excellence, project execution, capital discipline, and by
improving our financial strength. As part of this focus, we recently
announced a new share repurchase program of up to $15 billion through
the end of 2008. We anticipate third-quarter 2007 share repurchases to
be approximately $2 billion to $3 billion.
"We anticipate the company's third-quarter E&P segment production
will be lower due to the expropriation of our Venezuela oil projects,
unplanned downtime in the U.K. as a result of damage and repairs on a
third-party pipeline, and planned downtime in the Timor Sea and
Alaska.
"We continue negotiations with the Venezuela government concerning
appropriate compensation for the expropriation of the company's oil
projects and have preserved all legal rights, including international
arbitration.
"In our downstream refining business, the third-quarter crude oil
capacity utilization rate is expected to be similar to the second
quarter. Turnaround costs are anticipated to be approximately $40
million before-tax for the quarter.
"We recently announced an agreement with Peabody Energy to explore
development of a commercial scale coal-to-substitute natural gas
facility using proprietary ConocoPhillips "E-GAS(TM)" technology. The
project, which would utilize a mine-mouth facility at a U.S. location
where Peabody has access to large reserves and existing
infrastructure, is anticipated to annually produce 50 billion to 70
billion cubic feet of pipeline quality substitute natural gas from
more than 3.5 million tons of Midwest sourced coal. This is another
example of the company's commitment to proactively find solutions for
both near- and long-term energy challenges.
"Additionally in the U.S., we are urging American policymakers to
outline a clear path to attain energy security and address climate
change. A comprehensive, successful policy must achieve four major
tenets: diversifying our energy sources, lowering the carbon intensity
of our energy supplies, improving our energy efficiency, and
encouraging investment in new technology. This will require a clear
vision of the realities of the energy market with a commitment to act
for the greater good."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 37,900 employees, $171 billion of assets, and $177
billion of annualized revenues as of June 30, 2007. For more
information, go to www.conocophillips.com.
ConocoPhillips' quarterly conference call is scheduled for 11 a.m.
Eastern time today.
To listen to the conference call and to view related presentation
materials, go to www.conocophillips.com and click on the "Investor
Information" link.
For financial and operational tables and detailed supplemental
information, go to www.conocophillips.com/investor/reports/index.htm
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created thereby.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as "anticipate,"
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," "objective,"
"projection," "forecast," "goal," "guidance," "outlook," "effort,"
"target" and other similar words. However, the absence of these words
does not mean that the statements are not forward-looking. Where, in
any forward-looking statement, the company expresses an expectation or
belief as to future results, such expectation or belief is expressed
in good faith and believed to have a reasonable basis. However, there
can be no assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected by
a variety of risks and other matters including, but not limited to,
crude oil and natural gas prices; refining and marketing margins;
potential failure to achieve, and potential delays in achieving
expected reserves or production levels from existing and future oil
and gas development projects due to operating hazards, drilling risks,
and the inherent uncertainties in interpreting engineering data
relating to underground accumulations of oil and gas; unsuccessful
exploratory drilling activities; lack of exploration success;
potential disruption or unexpected technical difficulties in
developing new products and manufacturing processes; potential failure
of new products to achieve acceptance in the market; unexpected cost
increases or technical difficulties in constructing or modifying
company manufacturing or refining facilities; unexpected difficulties
in manufacturing, transporting or refining synthetic crude oil;
international monetary conditions and exchange controls; potential
liability for remedial actions under existing or future environmental
regulations; potential liability resulting from pending or future
litigation; general domestic and international economic and political
conditions, as well as changes in tax and other laws applicable to our
business. Other factors that could cause actual results to differ
materially from those described in the forward-looking statements
include other economic, business, competitive and/or regulatory
factors affecting our business generally as set forth in our filings
with the Securities and Exchange Commission (SEC). Unless legally
required, ConocoPhillips undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Cautionary Note to U.S. Investors -- The SEC permits oil and gas
companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or
conclusive formation tests to be economically and legally producible
under existing economic and operating conditions. Production is
distinguished from oil and gas production because SEC regulations
define Syncrude as mining-related and not part of conventional oil and
natural gas reserves. The company uses certain terms in this release,
such as "including Canadian Syncrude," and "resources" that the SEC's
guidelines strictly prohibit us from including in filings with the
SEC. U.S. investors are urged to consider closely the disclosures in
the company's periodic filings with the SEC, available from the
company at 600 North Dairy Ashford Road, Houston, Texas 77079 and the
company's Web site at www.conocophillips.com/investor/sec. This
information also can be obtained from the SEC by calling
1-800-SEC-0330.
CONTACT: ConocoPhillips
Kristi DesJarlais, 281-293-4595 (media)
or
Gary Russell, 212-207-1996 (investors)