ConocoPhillips Reports Second-Quarter Earnings of $4.2 Billion or $2.77 per Share
HOUSTON, Jul 28, 2010 (BUSINESS WIRE) --
Copyright Business Wire 2010
--Highlights
--Second-quarter adjusted earnings of $2.5 billion, or $1.67 per share
--E&P production of 1.73 million BOE per day
--U.S. refining capacity utilization rate of 96 percent
--Program to sell entire interest in OAO LUKOIL
--Completed the Syncrude and CFJ dispositions
--Cancelled Wilhelmshaven Refinery upgrade project
--Strengthened balance sheet and reduced debt
ConocoPhillips (NYSE:COP) today reported second-quarter earnings of $4.2
billion, compared with second-quarter 2009 earnings of $0.9 billion.
Excluding a net benefit of $1.7 billion, primarily from dispositions and
an impairment, second-quarter 2010 adjusted earnings were $2.5 billion,
or $1.67 per share.
"We had a solid quarter, with strong earnings and meaningful progress in
executing our plans to create value," said Jim Mulva, chairman and chief
executive officer. "E&P delivered production volumes and costs in line
with expectations, while our R&M business benefited from improved global
refining and marketing margins and higher U.S. refining capacity
utilization rates. We are pleased to announce agreement with LUKOIL for
the sale of a 7.6 percent interest in LUKOIL. This, along with our
Syncrude and CFJ divestments, is consistent with our strategy to enhance
returns."
"Over the past five years, ConocoPhillips and LUKOIL have worked closely
together to develop opportunities in and out of Russia," Mulva added.
"Our experience with LUKOIL and the Russian authorities has been
positive, and we look forward to a productive relationship in the
future. However, given the expected business environment and our stated
strategy to enhance returns and increase distributions, we have made the
decision to sell our entire stake in LUKOIL. We expect to accomplish
this by the end of 2011, with the proceeds used primarily to repurchase
ConocoPhillips shares."
ConocoPhillips and LUKOIL have reached an agreement under which
approximately 64.6 million Russian registered shares will be purchased
by LUKOIL for $3.44 billion. These shares represent a 7.6 percent
interest in LUKOIL, or 40 percent of ConocoPhillips' 163.3 million
shares currently owned. This transaction is expected to close in the
third quarter of 2010. The remaining 60 percent owned by ConocoPhillips
are depositary receipts and are expected to be sold in open market
transactions or to LUKOIL by the end of 2011.
Production from the Exploration and Production (E&P) segment for the
second quarter of 2010 was 1.73 million barrels of oil equivalent (BOE)
per day, compared with 1.87 million BOE per day in the same period in
2009. Approximately 140,000 BOE per day of the decrease was from normal
field decline, primarily in North America, the United Kingdom and
Norway. In addition, production was negatively impacted 50,000 BOE per
day from planned maintenance, primarily reflecting the routine
three-year turnaround in the Greater Ekofisk Area in Norway and the full
shutdown at Bayu-Undan and the Darwin LNG plant in Australia. New
production of 75,000 BOE per day in China, Canada and Indonesia
partially offset these decreases. Excluding planned and unplanned
downtime, as well as production sharing contract impacts, production for
the second quarter of 2010 would have been approximately 1.8 million BOE
per day.
In Exploration, ConocoPhillips successfully completed the drilling and
testing of the Kronos-1 well on the Greater Poseidon structure off the
northwest coast of Australia. Testing has validated the significance of
this discovery, and additional appraisal activity is being conducted to
fully assess the scope of future development.
In the Eagle Ford shale play, ConocoPhillips continued a five-rig
drilling program. During the quarter, the company successfully drilled
seven wells and completed five. Given the encouraging results to date,
the company has allocated additional capital to this area, bringing the
total to $450 million for full year 2010. The company expects to deploy
at least five additional drilling rigs prior to year end.
Refining and Marketing (R&M) benefited from improved market conditions,
with global refining market crack spreads improving more than 15
percent, compared with the same period last year. Realized refining
margins improved more than $550 million and primarily reflect stronger
distillate market cracks, as well as increased premium coke production.
In the United States, distillate market cracks almost doubled from the
low levels experienced a year ago, while internationally they improved
nearly 50 percent. Realized marketing margins improved approximately
$150 million, compared with a year ago, largely due to favorable market
conditions.
The U.S. refining crude oil capacity utilization rate for the second
quarter of 2010 was 96 percent, compared with 93 percent for the same
period in 2009. The increase primarily reflects less unplanned downtime
and turnaround activity. The international refining crude oil capacity
utilization rate was 54 percent for the second quarter of 2010, compared
with 72 percent for the same period in 2009. The decrease primarily
reflects economic run cuts at the Wilhelmshaven Refinery, partially
offset by less turnaround activity elsewhere. Excluding Wilhelmshaven,
the international capacity utilization rate would have been 88 percent.
"As previously announced, we have cancelled our plans to upgrade
Wilhelmshaven and will explore other options to improve shareholder
value, including operating the facility as a terminal and pursuing the
sale of the asset," added Mulva. "These moves are consistent with our
strategy of improving returns through capital discipline and reducing
our downstream presence over time."
The company's second-quarter 2010 earnings from the Chemicals, Midstream
and LUKOIL segments improved due to market conditions, compared with the
same quarter in the prior year.
Adjusted Corporate expenses were $365 million after-tax for the quarter,
compared with $157 million of expenses in the previous year.
Approximately $150 million of the increase is due to foreign currency
losses in the current quarter, compared with gains in the prior year,
primarily resulting from the impact of the strengthening U.S. dollar
against British pound and Canadian dollar financing transactions.
Corporate expenses for the second quarter of 2010 were $389 million,
compared with $157 million for the second quarter of 2009.
For the first six-months of 2010, controllable costs adjusted for market
conditions, new project scope, and E&P turnaround activity were
approximately $300 million lower, or 5 percent, compared with the same
period in 2009. The improvement is equally split between the E&P and R&M
segments. Controllable costs for the six-month period in 2010 were $6.4
billion, compared with $6.3 billion in the same period in 2009.
The Syncrude and the CFJ sales represent significant progress in
achieving the company's $10 billion disposition program. Proceeds from
the program are expected to reach $7 billion to $8 billion by year end
and will be targeted toward debt reduction.
ConocoPhillips' second-quarter results were not significantly impacted
by the current U.S. offshore drilling moratorium, as less than one
percent of the company's oil and natural gas production comes from the
impacted areas. However, as recently announced, ConocoPhillips is
participating with peers in a plan to build and deploy a rapid response
system designed to improve the industry's capability to contain oil in
the event of a potential future underwater well blowout in the deepwater
Gulf of Mexico.
"There has been heightened public focus on the safety of the oil and gas
industry during this past quarter, and we are committed to improve our
ability to respond immediately to offshore incidents," said Mulva.
"Safety and environmental stewardship, including the operating integrity
of our assets, remain our highest priorities."
2010 Financial Highlights
Second-quarter 2010 adjusted earnings were $2.5 billion, or $1.67 per
share, compared with adjusted earnings of $1.0 billion, or $0.66 per
share, for the same period in 2009. Adjusted earnings increased versus
the prior year, primarily due to higher commodity prices and global
refining and marketing margins, partially offset by lower production
volumes. For the second quarter of 2010, ConocoPhillips reported
earnings of $4.2 billion, or $2.77 per share, compared with earnings of
$0.9 billion, or $0.57 per share, for the same period in 2009.
ConocoPhillips' adjusted earnings for the first six months of 2010 were
$4.7 billion, compared with adjusted earnings of $1.7 billion in the
corresponding period of 2009. Adjusted earnings for 2010 were higher
than 2009, primarily due to higher commodity prices and global refining
and marketing margins, partially offset by higher taxes and lower
production volumes. Six-month 2010 earnings were $6.3 billion, compared
with $1.7 billion for the same period of 2009.
During the second quarter of 2010, the company generated $3.5 billion in
cash from operations and $5.8 billion in cash proceeds from asset
dispositions. This cash was used to pay $2.7 billion of debt, fund a
$2.2 billion capital program, repurchase $0.4 billion of ConocoPhillips
common stock and pay $0.8 billion in dividends. The company had a cash
balance of $4.1 billion at quarter end, the majority of which will be
used to pay down debt. As of June 30, 2010, debt was $26.3 billion and
the debt-to-capital ratio was 28 percent. After considering the ending
cash balance, the second-quarter 2010 net-debt-to-capital ratio was 25
percent.
ConocoPhillips will host a conference call at 11 a.m. Eastern time today
to discuss its quarterly results and provide a status update on
operational and strategic plans. To listen to the conference call and
view related presentation materials, go to www.conocophillips.com
and click on the "Investor Information" link. For detailed supplemental
information, go to www.conocophillips.com/EN/investor/financial_reports/earnings_reports/Pages/index.aspx.
ConocoPhillips is an integrated energy company with interests around the
world. Headquartered in Houston, the company had approximately 29,900
employees, $151 billion of assets, and $181 billion of annualized
revenues as of June 30, 2010. For more information, go to www.conocophillips.com.
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Use of Non-GAAP Financial Information -- This press release
includes the terms adjusted earnings, adjusted earnings per share, and
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Adjusted earnings and adjusted earnings per share are included to
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SOURCE: ConocoPhillips
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