EXHIBIT 99.1
ConocoPhillips Reports Third-Quarter Net Income of $3.7 Billion or $2.23
Per Diluted Share
HOUSTON--(BUSINESS WIRE)--Oct. 24, 2007--ConocoPhillips
(NYSE:COP):
Earnings at a glance
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Third Quarter Nine Months
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2007 2006 2007 2006
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$3,673 3,876 $7,520 12,353
Net income million million million million
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Diluted income per
share $2.23 2.31 $4.54 7.78
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Earnings adjusted for
the second-quarter
2007 Venezuela $3,673 3,876 $12,032 12,353
impairment million million million million
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Diluted earnings per
share adjusted for
the
second-quarter 2007
Venezuela impairment $2.23 2.31 $7.26 7.78
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$46.1 48.1 $134.8 142.1
Revenues(a) 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 third-quarter net income
of $3,673 million, or $2.23 per share. This compares with $3,876
million, or $2.31 per share, for the same quarter in 2006. Revenues
were $46.1 billion, versus $48.1 billion a year ago.
"During the third quarter, our upstream business produced 2.2
million BOE per day, including an estimated 0.4 million BOE per day
from our LUKOIL Investment segment," said Jim Mulva, chairman and
chief executive officer. "In the downstream business, our domestic
refineries ran at 97 percent of capacity, an improvement from the
previous quarter. Worldwide, our refining crude oil capacity
utilization rate improved to 94 percent.
"We ended the quarter with debt of $21.9 billion, a
debt-to-capital ratio of 20 percent and a cash balance of $1.4
billion. During the quarter, we repurchased $2.5 billion of
ConocoPhillips common stock, funded $2.8 billion of our capital
program, reduced debt by $0.9 billion, and paid $0.7 billion in
dividends. This was accomplished using $6.0 billion of cash generated
from operations and $0.8 billion in proceeds from asset dispositions."
For the first nine months of 2007, net income was $7,520 million,
or $4.54 per share, including a second-quarter, after-tax impairment
of $4,512 million in the Exploration and Production segment related to
the expropriation of the company's Venezuelan oil projects. Earnings
for the first nine months of 2007 adjusted for the Venezuela
impairment were $12,032 million, or $7.26 per share, versus net income
of $12,353 million, or $7.78 per share, for the same period a year
ago. Revenues were $134.8 billion, versus $142.1 billion a year ago.
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
Third-quarter financial results: E&P third-quarter net income was
$2,082 million, compared to second-quarter earnings adjusted for the
Venezuela impairment of $2,108 million, and third-quarter 2006 net
income of $1,904 million. The decrease from the second quarter of
2007, adjusted for the Venezuela impairment, primarily was due to
lower volumes, lower realized natural gas prices, and higher operating
costs. These decreases were mostly offset by higher realized crude oil
prices, a $203 million net benefit from the company's asset
rationalization efforts, and a $94 million benefit related to
retroactive adjustments for crude oil quality differentials on
Trans-Alaska Pipeline System shipments. The increase from the third
quarter of 2006 primarily was due to the negative impact of new tax
legislation on third-quarter 2006 results, higher realized crude oil
prices, the effect of the company's asset rationalization efforts, and
the Alaska crude oil quality differential settlements. These increases
were largely offset by lower volumes, lower realized natural gas
prices, and higher operating costs.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 1.8 million
barrels of oil equivalent (BOE) per day, a decline from 1.9 million
BOE per day in the previous quarter and 2.0 million BOE per day in the
third quarter of 2006. The production decrease from the previous
quarter primarily was due to expropriation of the company's Venezuelan
oil projects, unplanned downtime in the United Kingdom as a result of
damage and repairs on a third-party pipeline, and planned downtime in
the Timor Sea and United Kingdom.
The production decrease from the third quarter of 2006 primarily
was due to expropriation of the company's Venezuelan oil projects, the
company's exit from Dubai, and the effect of asset dispositions. In
addition, the decrease was attributed to normal field decline,
unplanned downtime in the United Kingdom and Nigeria, planned downtime
in the Timor Sea and Norway, production sharing contract impacts, and
lift timing in Libya. This decrease was partially offset by volumes
from the upstream business venture with EnCana, less downtime in
Alaska, and new production from the Alpine satellite fields in Alaska.
Before-tax exploration expenses were $218 million in the third
quarter of 2007, compared with $259 million in the previous quarter
and $197 million in the third quarter of 2006.
Nine months financial results: E&P net income for the first nine
months of 2007 was $2,007 million, or earnings of $6,519 million
adjusted for the second-quarter 2007 Venezuela impairment. This
compared to $7,761 million of net income for the same period in 2006.
The decrease primarily was due to higher operating costs and taxes,
increased depreciation, depletion and amortization expense, and lower
realized prices. These impacts were partially offset by the company's
asset rationalization efforts and net foreign exchange gains.
Midstream
Third-quarter financial results: The Midstream segment includes
the company's 50 percent interest in DCP Midstream, LLC. Midstream
third-quarter net income was $104 million, up slightly from $102
million in the previous quarter and down from $169 million in the
third quarter of 2006. The increase from the previous quarter
primarily was due to higher volumes. The decrease from the third
quarter of 2006 primarily was due to a favorable third-quarter 2006
tax adjustment on an asset sale and lower volumes.
Nine months financial results: Midstream net income for the first
nine months of 2007 was $291 million, down from $387 million in 2006.
The decrease primarily was due to lower volumes, higher operating
costs, and the favorable third-quarter 2006 tax adjustment on an asset
sale. This decrease was partially offset by higher realized natural
gas liquids prices.
Refining and Marketing (R&M)
Third-quarter financial results: R&M net income was $1,307 million
in the third quarter, down from $2,358 million in the previous quarter
and $1,464 million in the third quarter of 2006. The decrease from the
previous quarter primarily was due to significantly lower realized
refining margins, partially offset by higher domestic refining volumes
and a $141 million benefit from tax legislation enacted by Germany.
The decrease from the third quarter of 2006 primarily was due to lower
refining and marketing realized margins and a business interruption
insurance benefit recognized in the prior year. The decrease is
further attributed to the net impact associated with the contribution
of assets to the downstream business venture with EnCana. These
decreases were largely offset by a net benefit associated with the
company's asset rationalization efforts, as well as the German tax
legislation impact.
The domestic refining crude oil capacity utilization rate for the
third quarter increased to 97 percent, compared with 93 percent in the
previous quarter, due in part to lower turnaround activity. The
international crude oil capacity utilization rate decreased to 84
percent, compared with 93 percent in the previous quarter, primarily
due to the economic shutdown of the Wilhelmshaven, Germany, refinery
during the month of August.
Worldwide, R&M's refining crude oil capacity utilization rate was
94 percent, up slightly from 93 percent in the previous quarter, and
down slightly from 95 percent in the third quarter of 2006. Before-tax
turnaround costs were $27 million in the third quarter of 2007, down
from $58 million in the previous quarter and $42 million in the third
quarter of 2006.
Nine months financial results: R&M net income for the first nine
months of 2007 was $4,801 million, up from $3,562 million in 2006. The
increase primarily was due to the company's asset rationalization
efforts, higher realized refining and marketing margins, higher Gulf
and East Coast refining volumes, and the German tax legislation
impact. This increase was partially offset by the net impact
associated with the contribution of assets to the downstream business
venture with EnCana, as well as the business interruption insurance
benefit recognized in the prior year.
LUKOIL Investment
Third-quarter financial results: LUKOIL Investment segment net
income was $387 million, down from $526 million in the previous
quarter and $487 million in the third quarter of 2006. The results
include ConocoPhillips' estimated equity share of OAO LUKOIL's
(LUKOIL) income for the third quarter based on market indicators and
historical production trends for LUKOIL.
The decrease in net income from the previous quarter primarily was
due to lower estimated realized prices, higher estimated operating
costs, and the net impact from the alignment of estimated net income
to LUKOIL's reported results. This decrease was partially offset by
higher estimated volumes. The decrease from the third quarter of 2006
primarily was due to the net impact from the alignment of estimated
net income to LUKOIL's reported results and higher estimated operating
costs. This decrease was partially offset by higher estimated volumes,
ConocoPhillips' increased equity ownership, and higher estimated
realized prices.
For the third quarter of 2007, ConocoPhillips estimated its equity
share of LUKOIL production was 432,000 BOE per day and its share of
LUKOIL daily refining crude oil throughput was 226,000 barrels per
day.
Nine months financial results: Net income for the first nine
months of 2007 was $1,169 million, up from $1,123 million in 2006. The
increase primarily was due to higher estimated volumes,
ConocoPhillips' increased equity ownership, and higher estimated
realized prices. This increase was mostly offset by the net impact
from the alignment of estimated net income to LUKOIL's reported
results and higher estimated operating costs.
Chemicals
Third-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported net income of $110 million, up from $68
million in the second quarter of 2007 and down from $142 million in
the third quarter of 2006. The increase from the previous quarter
primarily was due to a second-quarter asset retirement and lower
utility costs. The decrease from the third quarter of 2006 was largely
due to lower olefins and polyolefins margins and, to a lesser extent,
lower aromatics and styrenics margins.
Nine months financial results: Net income for the first nine
months of 2007 was $260 million, down from $394 million in 2006. The
decrease primarily was due to lower olefins and polyolefins margins
and higher turnaround costs.
Emerging Businesses
The Emerging Businesses segment's third-quarter net income was $3
million, compared to a net loss of $12 million in the second quarter
of 2007, and net income of $11 million in the third quarter of 2006.
The increase from the previous quarter primarily was due to improved
power generation results.
Corporate and Other
Third-quarter Corporate expenses were $320 million, after-tax,
down from $337 million in the previous quarter and up from $301
million in the third quarter of 2006. The decrease from the previous
quarter primarily was due to lower net interest expense, partially
offset by deferred tax expense related to foreign currency impacts.
The increase from the third quarter of 2006 primarily was due to net
foreign exchange impacts, largely offset by lower net interest expense
and acquisition-related costs.
ConocoPhillips' third-quarter effective tax rate was 42.3 percent,
compared with an effective tax rate of 91.4 percent in the second
quarter of 2007. The second-quarter effective tax rate adjusted for
the Venezuela impairment was 40.6 percent.
Outlook
Mr. Mulva concluded:
"We continue to progress our long-term strategic investment plans,
and we remain focused on improving our operations and financial
flexibility. As planned, we repurchased $2.5 billion of our shares in
the third quarter, and we anticipate fourth-quarter 2007 repurchases
to be between $2 billion and $3 billion. The results from our asset
rationalization program have met our expectations, with proceeds of
approximately $3.5 billion since inception. We anticipate continued
progress through the remainder of 2007 and into next year.
"Operationally, we recently completed two key downstream projects.
The commissioning of a coker and other modifications have enabled the
Borger, Texas, refinery to efficiently produce ultra-low-sulfur diesel
fuel, lower costs and process more heavy, sour crude oils. An
expansion at the company's Ferndale, Wash., refinery has resulted in a
4 percent increase in the refinery's crude capacity and improved
energy efficiency. In upstream, we achieved first commercial
production earlier this month from the Surmont oil sands project in
Canada.
"We anticipate the company's fourth-quarter E&P segment production
will be 50,000 to 60,000 BOE per day higher than the third quarter as
a result of normal seasonality and the successful completion of our
summer maintenance program.
"In our downstream refining business, the fourth-quarter crude oil
capacity utilization rate is expected to be in the mid-90 percent
range. Turnaround costs are anticipated to be approximately $85
million before-tax for the quarter.
"We recently announced an agreement with Archer Daniels Midland
Company to collaborate on the development of renewable transportation
fuels from biomass. We are hopeful this collaboration will provide
innovative technology toward the large-scale production of biofuels
that can be moved efficiently and affordably through existing
infrastructure. ConocoPhillips believes the development of
next-generation biofuels is a critical step in the diversification of
our nation's energy sources."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 32,500 employees, $173 billion of assets, and $180
billion of annualized revenues as of September 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/financial_reports/earnings_reports
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
Becky Johnson, 281-293-6743 (media)
or
Gary Russell, 212-207-1996 (investors)