Conoco Announces 2002 Second Quarter Earnings.Business Editors & Energy Writers HOUSTON--(BUSINESS WIRE)--July 23, 2002 Conoco (NYSE NYSE See: New York Stock Exchange :COC See chip on chip. ) -- Earnings 22 Cents Per Diluted Share -- Production Up 25 Percent -- Natural Gas Prices and U.S. Downstream Refining Margins Significantly Lower -- Gulf Indonesia Tender Offer Successful -- Conoco & Phillips Merger On Track Conoco (NYSE:COC) today said sharply lower natural gas prices and refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar margins, as well as non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. resulting from adverse currency movements, led to much lower earnings for the quarter. Net income before special items totaled $141 million, or 22 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, 77 percent lower than last year's record second quarter of $606 million, or 95 cents per diluted share. After-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $242 million was $130 million higher than the first quarter. Upstream From the consumer to the provider. See downstream. (networking) upstream - Fewer network hops away from a backbone or hub. For example, a small ISP that connects to the Internet through a larger ISP that has their own connection to the backbone is downstream from the larger increased $118 million, or 76 percent, while downstream From the provider to the customer. Downloading files and Web pages from the Internet is the downstream side. The upstream is from the customer to the provider (requesting a Web page, sending e-mail, etc.). improved $12 million, or 63 percent. Revenue for the quarter totaled $9.7 billion, down 8 percent from $10.6 billion last year on lower prices. Net income totaled $130 million, or 20 cents per diluted share, down from $552 million, or 87 cents per diluted share, earned during the same period last year. "It was a difficult quarter due to weak refining margins, especially in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The relative increase in the cost of heavy crude oil Heavy crude oil or Extra Heavy oil is any type of crude oil which does not flow easily. It is a relative term, compared to light crude oil, but relates to specific technical issues of its own on production, transportation, and refining. was particularly disadvantageous dis·ad·van·ta·geous adj. Detrimental; unfavorable. dis·ad  van·ta to Conoco's
complex refinery configuration designed to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. lower feedstock feed·stock n. Raw material required for an industrial process. Noun 1. feedstock - the raw material that is required for some industrial process raw material, staple - material suitable for manufacture or use or finishing costs," said Conoco Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Archie (ARCHIvE) An earlier Unix utility used to search for file names on Internet FTP sites. Considered by some as the first search engine, in its heyday before the Web, there were approximately 30 Archie servers throughout the Internet that maintained catalogs of files available W. Dunham Dunham is a surname, and may refer to
"Although crude oil prices were similar to last year, natural gas prices were significantly depressed versus 2001. We also saw the negative impact of a weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. U.S. dollar on our earnings," Dunham
said."We were pleased with the continued strong performance of upstream, with production volumes up 25 percent versus last year, reflecting increases in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. , Norway Norway, Nor. Norge, officially Kingdom of Norway, constitutional monarchy (2005 est. pop. 4,593,000), 125,181 sq mi (324,219 sq km), N Europe, occupying the western part of the Scandinavian peninsula. and Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. ," he said. "Finally, our discussions with the Federal Trade Commission concerning the proposed merger with Phillips Phil·lips A trademark used for a screw with a head having two intersecting perpendicular slots and for a screwdriver with a tip shaped to fit into these slots. Petroleum continue to be positive, and we are confident that the remaining issues can be resolved soon," he said. Special Items Special items for the quarter totaled $11 million, primarily due to costs associated with the pending merger, partially offset by a revised insurance recovery estimate in connection with the U.K. Humber refinery The Humber Refinery is an oil refinery owned by ConocoPhillips. It is located at South Killingholme, North Lincolnshire in the United Kingdom. Situated approximately 10 miles north west of Grimsby, it processes approximately 221,000 barrels of crude oil per day. explosion last year. During the same period last year, a $54 million charge was recorded for costs associated with the Humber Humber, river, Canada Humber, river, c.75 mi (120 km) long, rising in the Long Range Mts., W Newfoundland, N.L., Canada, and flowing SE then SW, through Deer Lake, to the Bay of Islands at Corner Brook. incident. The following table lists highlights for the second quarter and first six months of 2002 and 2001.
FINANCIAL AND OPERATING HIGHLIGHTS
(In millions of dollars, except per
diluted share and production data)
SECOND QUARTER FIRST SIX MONTHS
----------------------- -----------------------
2002 2001 Change 2002 2001 Change
------ ------ ------ ------ ------ ------
Net Income 130 552 -76% 234 1,205 -81%
------ ------ ------ ------ ------ ------
Net Income
($ per share) .20 .87 -77% .37 1.90 -81%
------ ------ ------ ------ ------ ------
Net Income Before
Special Items 141 606 -77% 196 1,222 -84%
------ ------ ------ ------ ------ ------
Net Income Before
Special Items
($ per share) .22 .95 -77% .31 1.92 -84%
------ ------ ------ ------ ------ ------
Diluted Shares
Outstanding
(millions of
shares) 636 636 -- 636 636 --
------ ------ ------ ------ ------ ------
Revenues 9,660 10,550 -8% 17,679 21,227 -17%
------ ------ ------ ------ ------ ------
Total Net
Production (MBOED) 836 670 25% 848 677 25%
------ ------ ------ ------ ------ ------
Note: Table includes Gulf Canada acquisition in the first and
second quarter of 2002.
The following commentary compares segment results for the quarter with results for the same period in 2001, excluding the earnings impact of special items. Second quarter 2002 earnings, prices and volumes include the Gulf Canada acquisition. Upstream Upstream earned $273 million, down 45 percent from last year, largely as a result of lower natural gas prices. Production increased by 25 percent year-over-year. Exploration expense totaled $106 million, up 89 percent, mainly reflecting the inclusion of Gulf Canada. U.S. upstream earned $57 million, down 77 percent, due to much lower natural gas prices and decreased volumes due to dispositions. Last year's results also benefited from higher natural gas transportation and storage margins and mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. gains on commodity hedges. International upstream earnings were $216 million, a decrease of 11 percent, due to lower natural gas prices. Significantly higher volumes limited the decline. Conoco's share of Petrozuata's earnings totaled $41 million, compared to $16 million last year, on increased volumes of a higher-priced product mix. Further devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the Venezuelan bolivar this quarter depressed Conoco's share of earnings by $12 million. The company received its first dividend from Petrozuata in April. The Gulf Canada acquisition remained accretive to earnings, including crude oil and natural gas hedges. The company's worldwide net realized crude oil price decreased 6 percent to $22.45 per barrel. The worldwide net realized natural gas price declined 27 percent to $2.83 per thousand cubic feet (mcf). In the U.S., natural gas prices declined 29 percent to $3.18 per mcf, while international natural gas prices fell 20 percent to $2.68 per mcf. Total quarterly production (including Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. syncrude This article is about Syncrude Canada Ltd.. For synthetic crude oil, see synthetic crude. Syncrude Canada Ltd. is the world's largest producer of synthetic crude oil from oil sands and the largest single source producer in Canada. ) of 836,000 barrels of oil equivalent (boe) per day rose 25 percent from 670,000 boe per day during the same period last year. Asset dispositions decreased production by about 22,000 boe per day. Including Canadian syncrude, worldwide petroleum liquids production of 448,000 barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. (bpd) was up 17 percent, reflecting increases in Canada, Indonesia and Venezuela. The Oshkotyn field, adjacent to Polar Lights' Ardalin field in Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). , began production during the quarter. The new field has expanded production in the region almost 30 percent, with two additional satellite developments being planned. Worldwide natural gas production totaled 2.3 billion cubic feet (bcf) per day, up 36 percent from 2001. U.S. natural gas volumes decreased 14 percent to 717 million cubic feet (mmcf) per day, due to asset dispositions and normal decline. International natural gas production averaged 1.6 bcf per day, up 82 percent, reflecting increases in Canada, Indonesia and Norway. Downstream Downstream earnings of $31 million decreased 86 percent, due to significantly lower refining margins during the quarter. In the U.S., downstream lost $16 million, down $237 million. Very weak refining spreads and lower marketing margins decreased earnings by $240 million. The company's refinery configuration, designed to handle low-cost heavy crude oils, was negatively affected, as the discount for heavy crudes versus light sweet crudes was significantly reduced. Domestic refinery throughputs of 556,000 bpd were up 4 percent despite a turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. at the Denver Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. refinery. International downstream earned $47 million, up $41 million, largely due to higher refining volumes and improved marketing margins. International throughputs were up 89 percent to 354,000 bpd. Last year, the Humber refinery did not operate for most of the quarter. Worldwide refined product sales were 1.3 million bpd, down 3 percent, due to reduced demand in the U.S. Emerging Businesses The cost of expanding the company's emerging businesses increased $13 million to $30 million in the quarter, on higher construction expenses for the Gas-to-Liquids This technology deals with the conversion of natural gas to hydrocarbon liquids such as gasoline or diesel fuel. One method starts with partial oxidation of methane (a component in natural gas) to carbon dioxide, carbon monoxide, hydrogen and water, the carbon monoxide to hydrogen (H (GTL GTL - Gunning Transceiver Logic ) pilot plant in Ponca City Ponca City, city (1990 pop. 26,359), Kay co., N Okla., on the Arkansas River; founded 1893 with the opening of the Cherokee Strip, inc. 1899. It is a trade, processing, and shipping hub in a grain, livestock, and oil area. , Okla. The company conservatively expenses pilot plant costs, rather than capitalizing them, given the research nature of the facility. The plant is scheduled for completion by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . Discussions continue with several countries toward the possible construction of commercial GTL plants to capture stranded strand 1 n. The land bordering a body of water; a beach. v. strand·ed, strand·ing, strands v.tr. 1. To drive or run ashore or aground. 2. natural gas reserves. Construction of the carbon fiber plant in Ponca City was completed during the quarter. Production from this plant, with current capacity of 4 million pounds, will enable the development of numerous product applications for the automotive and construction markets. Conoco and Aker Aker can refer to:
Corporate and Other Corporate operating and non-operating expenses totaled $133 million, up $36 million from last year, because of higher deferred taxes due to foreign currency movements. Net after-tax interest costs of $48 million decreased despite debt levels being more than double following the Gulf Canada acquisition. Other Financial Highlights The company generated $864 million of cash provided by operations during the quarter, including a $400 million accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. facility that provides additional long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. liquidity at rates competitive with commercial paper. Capital expenditures totaled $852 million, including the acquisition of an additional 6-percent interest in the Heidrun field and a 15-percent interest in the Njord Njord god of the north wind. [Norse Myth.: Wheeler, 260] See : Wind field from the Norwegian Norwegian associated in some way with Norway. Norwegian buhund, Norwegian sheepdog a medium-sized (26-40 lb), spitz-type dog with a short, dense coat in wheaten, black, red or sable, sometimes with black markings on the face, ears government. Proceeds from asset sales were $52 million, bringing the total since last July July: see month. to more than $800 million. Cash at quarter-end was $313 million, while debt was $10 billion. The net debt ratio at quarter-end was 55 percent. During the quarter, the company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. $364 million of Conoco Canada Resources Limited (CCRL CCRL Cement and Concrete Reference Laboratory CCRL Catholic Civil Rights League CCRL California Center for Regional Leadership CCRL College and Career Reference Library CCRL Computer Chess Rating Lists ) preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. and $87 million of remaining outstanding higher cost notes. In addition, CCRL's tender offer to acquire the remaining 28-percent minority interest in Gulf Indonesia Resources Limited (NYSE: GRL GRL Girl GRL Greenland (ISO Country code) GRL Geophysical Research Letters GRL Air Greenland (ICAO code) GRL global reach laydown (US DoD) GRL Grain Length ) expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. on July 19 with 73.5 percent of the shares having been tendered during the initial period. A subsequent offer for the remainder of the shares outstanding was initiated yesterday. Outlook "We are on track to achieve our production growth target for the year with a total of six new fields in Indonesia, Vietnam Vietnam (vēĕt`näm), officially Socialist Republic of Vietnam, republic (v), 128,400 sq mi (332,642 sq km), Southeast Asia. Occupying the eastern coastline of the Southeast Asian peninsula, Vietnam is bounded by China on the north, by Laos and the U.K. scheduled to come onstream OnStream Holdings of the Netherlands was spun off from Philips in 1998 and went bankrupt for a second time in 2003. [1] As a result of its first bankruptcy in 2001, the company was split into two parts, OnStream Data and OnStream MST. before the end of the year," Dunham said. "Downstream margins remain well below historic norms, but we feel comfortable that over time inventories and margins will return to more normal levels as economies around the globe improve." Looking at the third quarter, Dunham noted that the Britannia platform is in the process of being re-started after a brief interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. , but the Interconnector to the Continent remains shut down, depressing U.K. gas prices to their lowest level in years. The production impact from downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. at Britannia should be about 1 million barrels of oil equivalent. He also said the company had reached an agreement with the U.S. government on the drilling moratorium A suspension of activity or an authorized period of delay or waiting. A moratorium is sometimes agreed upon by the interested parties, or it may be authorized or imposed by operation of law. in Destin Dome dome, a roof circular or (rarely) elliptical in plan and usually hemispherical in form, placed over a circular, square, oblong, or polygonal space. Domes have been built with a wide variety of outlines and of various materials. offshore Florida. "Conoco's share of the settlement will be $47 million and will result in an estimated gain of approximately $11 million in the third quarter," he said. "Finally, with the planned sale of certain non-core assets, the completion of the debt refinancing Refinancing An extension and/or increase in amount of existing debt. and the purchase of the Gulf Indonesia minority interest, the integration of Gulf Canada will be largely complete," Dunham concluded. Conoco is a major, integrated energy company active in more than 40 countries. For more information, the company's financial analyst teleconference will be broadcast live today on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.conoco.com, beginning at 1:30 p.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT (2:30 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). Additional financial and operating results are posted on the company's website. Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the -- This release contains forward-looking statements within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's operations, business plans and the Conoco/Phillips merger. These statements are based on management's current expectations, estimates and projections, are not guarantees of future performance, involve certain risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially. Factors that could cause actual results to differ materially from those described in the forward-looking statements include, without limitation, changes in crude oil and natural gas prices; unsuccessful exploratory and development drilling; failure to achieve expected reserve or production levels for existing and future projects due to operating hazards, drilling risks, and the inherent engineering uncertainties in estimating oil and gas reserves; difficulties or cost-overruns in constructing production facilities; potential disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. or interruption of the Company's facilities and operations due to accidents or political events; and general domestic and international economic and political conditions. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include the risk that Conoco's and Phillips' businesses will not be integrated successfully; costs related to the proposed merger; and other economic, business, competitive and/or regulatory factors affecting Conoco's and Phillips' businesses generally as set forth in Conoco's and Phillips' filings with the Securities and Exchange Commission (SEC), including their Annual Reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended 2001, especially in the Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial section, their Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. for the first quarter ending March 2002 and their Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. . Conoco and Phillips are under no obligation to (and expressly disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any such obligation to) update or alter their 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 proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. that a company has demonstrated by actual production or conclusive Determinative; beyond dispute or question. That which is conclusive is manifest, clear, or obvious. It is a legal inference made so peremptorily that it cannot be overthrown or contradicted. formation tests to be economically and legally producible under existing economic and operating conditions. Syncrude 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. We use certain terms in this release, such as "including Canadian syncrude" that the SEC's guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. strictly prohibit pro·hib·it tr.v. pro·hib·it·ed, pro·hib·it·ing, pro·hib·its 1. To forbid by authority: Smoking is prohibited in most theaters. See Synonyms at forbid. 2. us from including in filings. U.S. investors are urged to consider closely the disclosure in our Form 10-K, File No. 1-14521, available from us at 600 N. Dairy Ashford, Houston, Texas “Houston” redirects here. For other uses, see Houston (disambiguation). Houston (pronounced /'hjuːstən/) is the largest city in the state of Texas and the , 77079. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
CONOCO INC.
EARNINGS BY SEGMENT (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
------- ------- ------- --------
Upstream
United States 57 249 40(1)(2) 581(3)
International 216 244 389(4)(5) 532(6)
------- ------- ------- --------
Total Upstream 273 493 429 1,113
Downstream
United States (16) 221 14(2)(4) 289(6)
International 53(7) (48)(8) 81(4)(7) 5(8)
------- ------- ------- --------
Total Downstream 37 173 95 294
Emerging Businesses (30) (17) (57) (34)
Corporate (47)(9) (31) (72)(9)(10) (55)
------- ------- ------- --------
Total ATOI 233 618 395 1,318
Non-Operating (103)(11) (66) (161)(11) (113)
------- ------- ------- --------
Net Income 130 552 234 1,205
======= ======= ======= ========
Includes the following Special Items:
(1) $19 gain from disposition of Permian Basin assets.
(2) $1 Upstream U.S. and $1 Downstream U.S. in costs associated
with ConocoPhillips merger.
(3) $8 gain from transition adjustment for implementation of SFAS
133 and 138.
(4) $2 Upstream International, $22 Downstream U.S., and $18
Downstream International gain from implementation of an
accounting change requiring reversal of major maintenance
accruals.
(5) $19 loss from transition adjustment from the application of
SFAS 133 and 138 as clarified by FASB Derivatives
Implementation Group.
(6) $32 Upstream International gain and $3 Downstream U.S. charge
from transition adjustment for implementation of SFAS 133 and
138.
(7) $6 gain associated with the Humber refinery incident.
(8) $54 in costs associated with the Humber refinery incident.
(9) $15 in costs associated with ConocoPhillips merger; $23
year-to-date.
(10) $18 insurance recovery proceeds related to a discontinued
business.
(11) $2 charge for premium on the early retirement of debt related
to the Gulf Canada acquisition; $3 year-to-date.
EARNINGS BY SEGMENT BEFORE SPECIAL ITEMS (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
------- ------- ------- --------
Upstream
United States 57 249 22 573
International 216 244 406 500
------- ------- ------- --------
Total Upstream 273 493 428 1,073
Downstream
United States (16) 221 (7) 292
International 47 6 57 59
------- ------- ------- --------
Total Downstream 31 227 50 351
Emerging Businesses (30) (17) (57) (34)
Corporate (32) (31) (67) (55)
------- ------- ------- --------
Total ATOI 242 672 354 1,335
Non-Operating (101) (66) (158) (113)
------- ------- ------- --------
Net Income 141 606 196 1,222
======= ======= ======= ========
CONOCO INC.
STATEMENT OF INCOME (unaudited)
(millions of dollars, except per share)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- ------------------------
2002 2001 2002 2001
--------- --------- ---------- ---------
Sales and
Other
Operating
Revenues
(a) 9,558 10,377 17,556 21,002
Income from
Equity
Affiliates 80 59 116 80
Other Income 22(1) 114(1) 7(1)(2)(3) 145(1)(4)
--------- --------- ---------- ----------
Total
Revenues 9,660 10,550 17,679 21,227
Cost of
Goods Sold 5,739 6,344 10,207 12,963
Operating
Expenses 783(5) 700(1) 1,475(5)(6) 1,314(1)
Selling,
General
and
Administrative
Expenses 200 208 412 404
Exploration
Expenses(b) 106 56 176 93
Depreciation,
Depletion
and
Amortization 466 338 932 691
Taxes Other
Than On
Income(a) 1,949 1,736 3,727 3,374
Interest
and Debt
Expense 119 67 235 142
--------- --------- ---------- ----------
Income Before
Income
Taxes 298 1,101 515 2,246
Provision
for Income
Taxes 166 549 301 1,078
Income Before
Extraordinary
Item and
Accounting
Change 132 552 214 1,168
--------- --------- ---------- ----------
Extraordinary
Item (2)(7) -- (3)(7) --
Cumulative
Effect of
Accounting
Change -- -- 23(3)(8) 37(4)
--------- --------- ---------- ----------
Net Income 130 552 234 1,205
========= ========= ========== ==========
Earnings Per
Share of
Common Stock:
Basic $.21 $.88 $.37 $1.93
Diluted $.20 $.87 $.37 $1.90
Earnings
Before
Extraordinary
Item and
Accounting
Change Per
Share of
Common Stock:
Basic $.21 $.88 $.34 $1.87
Diluted $.21 $.87 $.34 $1.84
Average Shares
of Stock
Outstanding:
Basic 627,676,898 625,428,654 627,327,603 625,066,622
Diluted 636,443,412 636,225,662 636,275,383 635,540,918
(a) Includes Petroleum
Excise Taxes of:
1,891 1,676 3,620 3,240
(b) Includes Exploration O&O, Dry Hole Costs, Depreciation,
Impairment of Unproved Properties and Taxes Other Than On
Income.
Includes the Pretax Impact of the following Special Items:
(1) $50 in costs associated with the Humber refinery incident ($8
in Other Income and $58 in Operating Expenses) in 2001. $9
gain in Other Income in 2002.
(2) $30 gain from disposition of Permian Basin assets.
(3) $28 loss ($19 after-tax) from the application of SFAS 133 and
138 "Accounting for Derivative Instruments and Hedging
Activities," as clarified by the FASB Derivatives
Implementation Group. This amount represents the fair value of
certain international gas contracts at January 1. Included in
"Other Income" is a $28 pretax gain ($18 after-tax) related to
changes in the fair value of these same contracts from
January 1 to the June 30, 2002 reporting date.
(4) Accounting change is the cumulative transition impact of
adoption on January 1, 2001 of SFAS 133 and 138 "Accounting
for Derivative Instruments and Hedging Activities." This
amount primarily reflects a pretax gain of $64 ($40 after-tax)
related to changes in the fair value of certain crude oil put
options from their purchase date to the January 1 adoption
date of these standards. Included in "Other Income" is an $83
pretax expense ($52 after-tax) related to changes in the fair
value of these same crude oil put options from January 1 to
the June 30, 2001 reporting date.
(5) $15 in costs associated with the ConocoPhillips merger; $27
year-to-date.
(6) $28 insurance recovery proceeds related to a discontinued
business.
(7) $4 charge for premium on the early retirement of debt related
to the Gulf Canada acquisition; $5 year-to-date.
(8) $62 gain ($14 equity earnings, $48 operating expenses) from
implementation of an accounting change requiring reversal of
major maintenance accruals.
CONOCO INC.
PRELIMINARY BALANCE SHEET (unaudited)
(billions of dollars)
June 30 December 31
2002 2001
----------- -----------
ASSETS
Current Assets
Cash And Cash
Equivalents 0.3 0.4
Other Current Assets 3.8 3.9
----------- -----------
Total Current Assets 4.1 4.3
Net Property Plant &
Equipment 19.8 17.9
Goodwill 3.1 2.9
Investments in
Affiliates and Other
Assets 2.8 2.8
----------- -----------
Total Assets 29.8 27.9
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings 1.8 1.1
Other Accrued Liabilities 4.7 4.4
----------- -----------
Total Current Liabilities 6.5 5.5
Long-Term Borrowings 8.3 8.3
Deferred Taxes and Other
Liabilities 7.0 6.3
----------- -----------
Total Liabilities 21.8 20.1
Minority Interests 0.8 1.2
Stockholders' Equity 7.2 6.6
----------- -----------
Total Liabilities and
Stockholders' Equity 29.8 27.9
=========== ===========
PRELIMINARY CASH FLOW STATEMENT (unaudited)
(billions of dollars)
Six Months Ended
June 30
--------------------------
2002 2001
----------- -----------
Net Income 0.2 1.2
Non-Cash Charges and Credits 0.7 0.9
Accounts Receivable
Securitization 0.4 0.0
Other Working Capital Changes 0.0 (0.5)
----------- -----------
Cash Provided by Operations 1.3 1.6
Investments (1.4) (1.0)
Proceeds From Asset Sales 0.1 0.1
----------- -----------
Cash Used in Investing
Activities (1.3) (0.9)
Cash Dividends (0.2) (0.2)
Net Change in Borrowings 0.5 (0.2)
Other Financing Activities (0.4) (0.0)
----------- -----------
Cash Used in Financing
Activities (0.1) (0.4)
Effect of Exchange Rate
Changes on Cash 0.0 (0.0)
----------- -----------
Increase/(Decrease) in Cash
and Cash Equivalents (0.1) 0.3
=========== ===========
CONOCO INC.
CAPITAL EXPENDITURES AND INVESTMENTS (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Upstream
United States 139 165 255 287
International 582 236 933 413
---------- ---------- ---------- ----------
Total Upstream 721 401 1,188 700
Downstream
United States 40 41 63 67
International 39 62 68 103
---------- ---------- ---------- ----------
Total Downstream 79 103 131 170
Emerging Businesses 51 56 126 90
Corporate 1 5 3 11
---------- ---------- ---------- ----------
Total 852 565 1,448 971
========== ========== ========== ==========
NET EXPLORATION INVESTMENT (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Cash Expense
United States 19 19 23 29
International 69 29 105 49
---------- ---------- ---------- ----------
Total Cash Expense 88 48 128 78
Capital
United States 15 25 20 35
International 39 26 80 42
---------- ---------- ---------- ----------
Total Capital 54 51 100 77
Total Exploration
Outlays 142 99 228 155
Exploration Asset Sales (30) -- (31) --
---------- ---------- ---------- ----------
Net Exploration
Investment 112 99 197 155
========== ========== ========== ==========
CONOCO INC.
OPERATING DATA AND PRICES (unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
--------------- ---------------
2002 2001 2002 2001
----- ----- ----- -----
Net Realized Crude Oil
Prices ($/Bbl)(1)(2)
----------------------
United States 22.37 24.21 22.80 24.75
International 22.46 23.75 20.34 23.29
Worldwide 22.45 23.82 20.57 23.51
Net Realized Natural Gas
Prices ($/MCF)(1)(2)
------------------------
United States 3.18 4.47 2.91 5.62
International 2.68 3.33 2.84 3.73
Worldwide 2.83 3.89 2.81 4.61
Net Realized Canadian
Syncrude Prices ($/Bbl) 23.96 -- 22.80 --
------------------------
Net Petroleum Liquids
Production (MBD)(1)
---------------------
United States 56 72 57 73
International 372 312 377 309
----- ----- ----- -----
Total Net Petroleum
Liquids Production 428 384 434 382
Net Canadian Syncrude
Production 20 -- 21 --
----- ----- ----- -----
Total Net Petroleum
Liquids Production
Including Syncrude 448 384 455 382
Net Natural Gas
Production (MMCFD)(1)
----------------------
United States 717 831 725 828
International 1,609 885 1,630 940
----- ----- ----- -----
Total Net Natural Gas
Production 2,326 1,716 2,355 1,768
Total Net Production
(MBOED)(1)(3) 836 670 848 677
--------------------
Net NGLs Processed
(MBD)(1)
------------------
United States 53 55 53 49
International 51 36 51 42
----- ----- ----- -----
Total Net NGLs
Processed 104 91 104 91
Refinery Inputs
Processed (MBD)(1)
-------------------
United States 556 536 555 539
International 354 187 355 278
----- ----- ----- -----
Total Refinery Inputs
Processed 910 723 910 817
Refined Product Sales
(MBD)
---------------------
United States -
Downstream 740 913 720 835
International -
Downstream 534 396 505 460
----- ----- ----- -----
Total Refined Product
Sales - Downstream 1,274 1,309 1,225 1,295
NGL Sales 276 155 262 176
----- ----- ----- -----
Total Refined Product
Sales 1,550 1,464 1,487 1,471
(1) Prices and volumes include equity affiliates.
(2) Prices include the effect of crude oil and natural gas hedges
associated with the Gulf Canada acquisition.
(3) Includes Canadian Syncrude production.
CONOCO INC.
SUMMARY OF HEDGES IMPLEMENTED WITH THE GULF CANADA ACQUISITION
(unaudited)
(after-tax and in millions of $ except where noted)
2001 2002
------------------------------ --------------- Since
Crude Oil 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr Inception
---------------------------------------------------------
Mark-to-Market
Adjustment
(Other Income) 5.2 30.4 73.7 109.3 (89.1) (9.8) 10.4
Realized Revenue 0.0 0.0 15.6 15.6 11.5 (2.1) 25.0
------------------------------- ----------------------
Total Earnings 5.2 30.4 89.3 124.9 (77.6) (11.9) 35.4
=============================== ======================
Other
Comprehensive
Income 7.9 24.1 30.7 62.7 (64.5) (2.5) (4.3)
WTI Forward
Price ($/Bbl) 25.03 23.46 20.51 20.51 25.79 26.28 26.28
Natural Gas
Mark-to-Market
Adjustment
(Other Income) 18.7 23.2 2.7 44.6 (13.4) 5.3 36.5
Realized Revenue 0.0 0.0 8.9 8.9 8.4 5.0 22.3
------------------------------- ----------------------
Total Earnings 18.7 23.2 11.6 53.5 (5.0) 10.3 58.8
=============================== ======================
Other
Comprehensive
Income 13.6 22.2 (6.6) 29.2 (19.9) 1.3 10.6
NYMEX Forward
Price ($/mmBTU) 3.57 2.77 2.68 2.68 3.45 3.43 3.43
Total
Mark-to-Market
Adjustment
(Other Income) 23.9 53.6 76.4 153.9 (102.5) (4.5) 46.9
Realized Revenue 0.0 0.0 24.5 24.5 19.9 2.9 47.3
------------------------------- ----------------------
Total Earnings 23.9 53.6 100.9 178.4 (82.6) (1.6) 94.2
=============================== ======================
Other
Comprehensive
Income 21.5 46.3 24.1 91.9 (84.4) (1.2) 6.3
Value of Hedges
(Pre-tax) 72.1 230.8 429.2 429.2 164.0 159.6 159.6
(After-tax) 45.4 145.3 270.3 270.3 103.3 100.5 100.5
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