ConocoPhillips Reports 2Q, Six-Month Results

Strong quarter, Mulva says

Published in CSP Daily News

HOUSTON -- ConocoPhillips has reported second-quarter net income of $3.138 billion, or $2.21 per share, compared with $2.075 billion, or $1.48 per share, for the same quarter in 2004. Total revenues were $42.6 billion, versus $31.9 billion a year ago. Income from continuing operations for the second quarter was $3.131 billion, or $2.21 per share, compared with $2.013 billion, or $1.44 per share, for the same period a year ago.

We had a strong quarter, said Jim Mulva, chairman and CEO. Upstream, we ran as expected. Downstream benefited from a strong market [image-nocss] environment in refining, partially offset by narrowing light-heavy differentials. Worldwide crude oil capacity utilization was at 97%, as expected, with our U.S. refining system running near stated capacity. In addition, worldwide marketing margins improved over the previous quarter.

For the first six months of 2005, net income was $6.050 billion, or $4.26 per share, versus $3.691 billion, or $2.65 per share, for 2004. Income from continuing operations was $6.054 billion, or $4.26 per share, compared with $3.616 billion, or $2.60 per share, for the same period a year ago. Total revenues were $81.5 billion, versus $62.1 billion a year ago.

Second-quarter Exploration & Production income from continuing operations was $1.929 billion, up from $1.787 billion in first-quarter 2005 and up from $1.354 billion in second-quarter 2004. Six-month E&P income from continuing operations was $3.716 billion, up from $2.611 billion in 2004.

Second-quarter Midstream income from continuing operations was $68 million, down from $385 million in first-quarter 2005 and up from $42 million in second-quarter 2004. Six-month Midstream income from continuing operations increased to $453 million from $97 million in 2004.

And second-quarter Refining & Marketing income from continuing operations was $1.11 billion, up from $700 million in the previous quarter and $818 million in second-quarter 2004. The increase in second-quarter 2005 R&M earnings over the previous quarter was primarily the result of higher U.S. refining market cracks driven by higher gasoline and distillate demand, as well as increased throughput. Although light-heavy crude differentials remain strong, they decreased from high first-quarter levels.

Worldwide marketing margins and sales volumes also improved over the previous quarter. The improved results from second-quarter 2004 were due primarily to increased worldwide refining margins and volumes, and increased U.S. marketing margins, partially offset by higher turnaround and utility costs.

Domestically, second-quarter 2005 realized refining margins improved 11% over the first quarter, while the refineries ran at 98% of crude oil capacity. Successful completion of first-quarter turnaround activity benefited second-quarter throughputs while unplanned downtime remained flat quarter-over-quarter. Turnaround costs were 39% lower in the second quarter, compared with the previous quarter. Marketing margins and volumes also increased from the previous quarter primarily due to a return to positive margins on the West Coast during the early part of the second quarter.

Overall, R&M's refinery crude oil capacity utilization rate averaged 97%, compared with 92% in the previous quarter and 93% in the second quarter of 2004. Before-tax turnaround costs were $106 million, versus $108 million in first-quarter 2005.

Six-month R&M income from continuing operations increased to $1.81 billion, compared with $1.282 billion in first-half 2004. The increased earnings were driven by higher worldwide refining margins, partially offset by higher turnaround activity and utility costs.

For the company's Lukoil investment, second-quarter Income from continuing operations was $148 million, up from $110 million in the prior quarter. The increase from the prior quarter was attributable to higher realized price estimates and an increased equity ownership position. At the end of the second quarter of 2005, the company's equity ownership in Lukoil was 12.6%.

Mulva's outlook: With respect to downstream, we expect a strong margin environment and continued high utilization rates in the near term. Our focus is on continuous improvement and execution of our five-year, $2 billion clean fuels program. In addition, the five-year, $3 billion incremental refining investment program that we announced in the first quarter will result in expanded capacity, stronger processing flexibility and higher clean product yields throughout our domestic and international refining network.