Conoco Posts Highest Earnings in 125-Year History.Business/Energy Editors HOUSTON--(BUSINESS WIRE)--April 25, 2000 Conoco (NYSE NYSE See: New York Stock Exchange :COCA coca (kō`kə), common name for shrubs of the genus Erythroxylum, particularly E. coca, of the family Erythroxylaceae, and found abundantly in upland regions and on mountain slopes of South America, as well as in Australia, India, ) (NYSE:COCB) -- Record Net Income, Up Five-Fold Adj. 1. five-fold - having five units or components fivefold, quintuple multiple - having or involving or consisting of more than one part or entity or individual; "multiple birth"; "multiple ownership"; "made multiple copies of the speech"; "his multiple -- Record 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. -- Record Revenues, Up 63 Percent -- Record 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 Earnings; Production Up 4 Percent Conoco (NYSE:COCA)(NYSE:COCB) today announced the best quarterly earnings in its 125-year history. First quarter net income before special items was a record $391 million, or $.62 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, up 371 percent compared to the first quarter of 1999, underpinned by strong prices and higher production. Net income was a record $399 million or $.63 per diluted share, versus $83 million or $.13 per diluted share last year, and up 24 percent over strong fourth quarter 1999 results. After-tax operating income before special items of $441 million also was a record, more than three times higher than the $133 million earned in 1999. Revenues of $8.7 billion set a record for the second consecutive quarter, up $3.4 billion or 63 percent over 1999. The following table lists highlights for first quarter 2000 and 1999.
FINANCIAL HIGHLIGHTS FIRST QUARTER
------------------------- ------------------------------
(In millions of dollars,
except per share data) 2000 1999 Change
------ ------ --------
Net Income Before
Special Items 391 83 371%
Net Income 399 83 381%
ATOI Before Special Items 441 133 232%
Net Income Before
Special Items ($ per
diluted share) .62 .13 377%
Net Income ($ per
diluted share) .63 .13 385%
Diluted Shares Outstanding
(millions of shares) 633 635 --
Revenues 8,691 5,335 63%
"Highly profitable production growth allowed us to fully capture the benefits of strong market conditions to deliver outstanding financial results for the quarter," said Archie W. Dunham, Conoco chairman and chief executive officer. "We established several earnings records during the quarter, and took major steps to further grow our international upstream operations with key acquisitions in Canada and Vietnam and a new exploration license in Azerbaijan. Approximately 75 percent of operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before came from the company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and 25 percent from outside our traditional core areas of North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , which confirms the effectiveness of our globalization globalization Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation strategy. "Conoco's 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.). operations performed well, given the difficult challenge of rising crude oil prices during the quarter. In particular, international downstream was much improved on the strength of the company's highly efficient 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 operations. Going forward, we expect improvement in downstream earnings from reduced 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 which began to take effect late in the quarter," he added. Looking to the future, Dunham noted several important new developments. "In the e-business arena, the company is one of 14 founders of a giant global procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. exchange for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. used in the petroleum and petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. industries. The combined purchasing power Purchasing Power 1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase. 2. of its participants will give the exchange leveraged buying power Buying Power The money an investor has available to buy securities. In a margin account, the buying power is the total cash held in the brokerage account plus maximum margin available. Also referred to as "Excess Equity. of $125 billion in annual expenditures," he said. "At the same time, we made an equity investment in HoustonStreet.com, the first fully web-based exchange and portal for acquiring and trading crude oil, refined products and natural gas. "Other initiatives that hold great promise include the announcement of a new carbon fiber that will offer a host of high value-in-use applications in a myriad Myriad is a classical Greek name for the number 104 = 10 000. In modern English the word refers to an unspecified large quantity. The term myriad is a progression in the commonly used system of describing numbers using tens and hundreds. of industries, and a pilot plant to confirm the commercial viability of our proprietary Gas-to-Liquids technology," he said. "These initiatives demonstrate our commitment to increase shareholder value through innovative and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. ways to acquire, trade or sell goods, services and commodities, and 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>. our core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
Strategic business highlights during the quarter included: -- Continued progress in completing the giant Petrozuata heavy oil production/upgrading joint venture in Venezuela, now producing about 100,000 gross barrels of oil per day (bpd) and expected to reach 120,000 bpd by year-end. Construction of the $1 billion oil upgrader is about 90 percent complete, with first commercial sales of Petrozuata syncrude scheduled to begin in early 2001. -- Immediate production and earnings were realized through the acquisition of a large share of the Rang Dong oil producing field in Block 15-2 of Vietnam's Cuu Long Cửu Long (literally "nine dragons"; Hán Tự: ) was a province on the Mekong Delta in southern Vietnam. It was created in 1976 from the merger of Vinh Long Province and Vinh Binh Province. In 1992 Cuu Long was re-split into Vinh Long and Tra Vinh provinces. Basin, with further appraisal and development wells planned this year. Conoco has additional exploratory acreage in adjacent Block 15-1, and this summer will drill the first exploration well in this very attractive block, also in the Cuu Long Basin. Additionally, a Heads of Agreement Heads of Agreement A non-binding document outlining the main issues relevant to a tentative partnership agreement. Notes: It is the draft used by lawyers when drawing up the contract. It serves as a guideline for both parties before any documents are legalized. was signed with Petrovietnam and the Korea National Oil Company to explore attractive acreage in Block 16-2, paving the way for Conoco to become operator with a 40-percent working interest in the block. Vietnam is a key element in the company's strategy to develop Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. into a core area. -- The fast-track U.K. North Sea Vixen vixen female fox. natural gas field is advancing toward first production in October 2000. The field is distinguished by its rapid discovery-to-market timetable. Vixen, located between two Conoco-producing fields, will utilize existing processing and transportation facilities. Proved net reserves are about 60 billion cubic feet of natural gas. -- Construction is underway on an innovative natural gas processing platform for the West Natuna Sea offshore Indonesia. The platform, a Movable Offshore Gas Production Unit, will be assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. for cost-effective installation and brought on line in mid- mid- pref. Middle: midbrain. 2001. This unique facility can be relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. to optimize optimize - optimisation production within the numerous gas fields discovered in Block B over the past few years. The unit will have a 25-year design life and can process and compress as much as 250 million cubic feet of gas per day. The 28-inch West Natuna transportation trunk A communications channel between two points. It generally refers to a high-bandwidth, fiber-optic line between telephone switching centers (central offices). Telephone "trunks" handle thousands of simultaneous voice and data signals, whereas telephone "lines" are the wires from the line is about 65 percent complete, connecting Singapore to Block B. -- Acquired a 20-percent interest in the ExxonMobil-operated Zafar Mashal exploration block offshore Baku, Azerbaijan. This acreage is in the oil-rich Volga Delta The Volga Delta is the largest inland river delta in Europe, and occurs where Europe's largest river system, the Volga River, drains into the Caspian Sea in Russia's Astrakhan Oblast, north-east of the republic of Kalmykia. play in the South Caspian Basin -- an area that includes several mega-discoveries. -- Acquired substantially all of Petro-Canada's natural gas liquids business, including the fifth-largest natural gas processing plant in North America. The purchase, immediately accretive to earnings, will increase Conoco's processing capacity by 65 percent and reduce overhead and operating costs operating costs npl → gastos mpl operacionales per processed barrel by 24 percent. The acquisition complements the 1999 purchase of 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. producing assets from Renaissance Energy that doubled Conoco Canada's natural gas production and increased proven reserves in Canada by about 60 percent. -- Completed the sale of five natural gas processing Natural gas processing plants, or fractionators, are used to purify the raw natural gas extracted from underground gas fields and brought up to the surface by gas wells. The processed natural gas, used as fuel by residential, commercial and industial consumers, is almost pure plants and 2,300 miles of natural gas gathering pipelines in Oklahoma as part of Conoco's effort to move away from a midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. business of scattered Scattered Used for listed equity securities. Unconcentrated buy or sell interest. assets in mature basins toward a more profitable business built on centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. , large-scale gas processing systems. -- Began construction of a $430 million natural gas development in Syria, the first U.S. hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen investment in that country in several years. Coupled with Conoco's longtime long·time adj. Having existed or persisted for a long time: a longtime friend; a longtime resident of Detroit. longtime Adjective presence in Dubai, the service contract in Syria demonstrates the company's intention to capture an expanded position in the Middle East. -- Signed an agreement to design a pilot plant using Conoco's proprietary Gas-to-Liquids technology. When the process is used commercially, liquid products from gas reserves in remote locations can be easily captured for delivery to the marketplace. -- Entered the carbon fiber business to produce a new product utilizing a Conoco-developed, patent-protected manufacturing process, (an expansion of the company's carbon-upgrading expertise). The product has excellent market potential and will enable the development of lighter and stronger products with new applications in the electronics, automotive, construction, transportation and other technological markets such as fuel cells. The first plant will be capable of producing eight million pounds of petroleum-based carbon fibers a year and is expected to be onstream in fourth quarter 2001. Special Items First quarter 2000 earnings contained special items that resulted in a net gain of $8 million -- there were none in the same period of 1999. A $27 million gain was recognized on the sale of certain natural gas processing assets in the U.S., while downstream results were reduced by $19 million for litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. provisions and a write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of related refinery assets. The following commentary compares segment results for the first quarter of 2000 with the first quarter of 1999, after excluding the earnings impact of special items. Upstream For the quarter, upstream had record earnings of $412 million, almost four times higher than the $108 million earned last year, bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. by strong crude oil, natural gas, and natural gas liquids prices, along with increased production -- especially from Petrozuata. Production costs were 5 percent lower, while exploration expenses were down 20 percent on lower dry hole costs. Earnings from natural gas and gas processing operations were significantly improved, reflecting stronger margins and benefits from previously mentioned portfolio upgrades. U.S. earnings were $115 million, up 188 percent, on higher prices and increased petroleum liquids production. International upstream earned $297 million, more than four times larger than the $68 million earned last year, due to higher crude oil prices and production growth. The company's worldwide net realized crude oil prices were up 139 percent to $26.29 per barrel. Natural gas prices were up 12 percent to $2.32 per thousand cubic feet (mcf). U.S. natural gas prices climbed 40 cents to $2.11 per mcf, while international prices were relatively unchanged at $2.49 per mcf. Overall, the company had total production of 682,000 barrels-of-oil-equivalent per day for the quarter, up 4 percent versus first quarter 1999. Total petroleum liquids production was up 7 percent to 375,000 bpd. U.S. petroleum liquids production was up 9 percent, as additional volumes from the Ursa field in the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east more than compensated for the disposition of the Grand Isle Grand Isle can refer to:
Worldwide natural gas production rose 1 percent to over 1.8 billion cubic feet per day. International natural gas volumes jumped 18 percent with strong production from the Britannia and Vampire vampire, in folklore, animated corpse that sucks the blood of humans. Belief in vampires has existed from the earliest times and has given rise to an amalgam of legends and superstitions. fields in the U.K., along with the newly acquired Canadian properties. The 14-percent decline in U.S. natural gas volumes was attributable to the reduced drilling program implemented last year in the South Texas Lobo trend and natural declines elsewhere. Downstream Downstream earned $54 million during the quarter versus $40 million in the same period last year, an increase of 35 percent. Worldwide refinery inputs increased 5 percent to 908,000 bpd over the same period in 1999. U.S. earnings of $5 million were down $12 million, as higher feedstock costs continued to impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. refining earnings, including lower margins on co-products. International earnings increased 113 percent during the period to $49 million, largely due to improved refining margins, partly offset by lower European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. marketing and co-product earnings. In addition, in Asia Pacific, the Melaka refinery operated at essentially full capacity, taking advantage of the improved environment in the region. Corporate and Other Corporate and Other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $25 million, $10 million higher than last year, primarily due to increased business development costs in the emerging power sector and the introduction of corporate advertising. Interest and non-operating expenses were $50 million, unchanged from first quarter 1999. Other Financial Highlights During the quarter, the company generated $469 million in cash provided by operations, including $14 million in dividends received from the company's Polar Lights the aurora borealis or australis. See also: Polar Russian Russian associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. joint venture. This was the first dividend paid by the Russian-American enterprise, reflecting its continued strong operating performance. Total debt at the end of the period was $4.8 billion, down $200 million from March 31, 1999. On April 24, Standard & Poor's affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its ratings for the company's debt and revised its outlook to stable from negative as a result of progress the company has made in upgrading its capital structure. Capital expenditures and investments of $489 million included the acquisition of Canadian natural gas processing and gathering assets. Conoco's full-year capital budget for 2000 remains unchanged at $2.2 billion. Conoco is a major, integrated energy company based in Houston and active in more than 40 countries. This release contains forward-looking statements 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. about Conoco's exploration, production, refining, marketing, power and other operating and financial plans and results. These statements 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 accurate. Therefore, actual outcomes and results may differ materially from what is expressed herein. Among the factors that could cause such differences are crude oil and natural gas prices; refining and marketing margins; potential failure to achieve, and potential delays in achieving, expected production from existing and future oil and gas development projects; unsuccessful exploratory drilling activities; general domestic and international economic and political conditions; future price of and demand for electrical power; the future prices of plant fuels; the ability to obtain government approvals; the ability to meet government regulations; the availability of financing for the projects; and 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 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. of the Company's facilities due to accidents or political events. Such matters are detailed in Conoco's publicly available filings with the Securities and Exchange Commission.
CONOCO INC.
STATEMENT OF INCOME (unaudited)
(millions of dollars, except per share)
First Quarter
--------------------------------
2000 1999
------------ -------------
Sales and Other Operating
Revenues (a) 8,524 5,311
Income from Equity Affiliates 80 (4)
Other Income 87(1) 28
------------ ------------
Total Revenues 8,691 5,335
Cost of Goods Sold 5,124 2,528
Operating Expenses 506(2) 477
Selling, General and
Administrative Expenses 188 186
Exploration Expenses (b) 37 46
Depreciation, Depletion,
and Amortization 339(3) 302
Taxes Other Than Income (a) 1,702 1,591
Interest and Debt Expense 83 71
------------ ------------
Income Before Income Taxes 712 134
Provision for Income Taxes 313 51
------------ ------------
Net Income 399 83
============ ============
Earnings Per Share of
Common Stock:
Basic $.64 $.13
Diluted $.63 $.13
Earnings Before Special Items
Per Share of Common Stock:
Basic $.63 $.13
Diluted $.62 $.13
Average Shares of Stock
Outstanding:
Basic 625,616,017 627,633,168
Diluted 633,313,676 634,980,346
(a) Includes consumer excise taxes.
(b) Includes Exploration O&O, DD&A, Dry Hole Costs and Impairment
of Unproved Properties.
Pretax Impact of Special Items:
(1) Includes $42 million in gains from the sale of natural gas
processing assets in the U.S.
(2) Includes $25 million of U.S. Downstream litigation provisions.
(3) Includes $5 million write-down of certain refinery assets in
the U.S.
CONOCO INC.
EARNINGS BY SEGMENT (unaudited)
(millions of dollars)
First Quarter
--------------------------
2000 1999
---------- ----------
Upstream
United States 142 (1) 40
International 297 68
---------- ----------
Total Upstream 439 108
Downstream
United States (14)(2) 17
International 49 23
---------- ----------
Total Downstream 35 40
Corporate and Other (25) (15)
---------- ----------
Total ATOI 449 133
Interest and Other (50) (50)
---------- ----------
Net Income 399 83
========== ==========
(1) Includes $27 million in gains from the sale of natural gas
processing assets in the U. S.
(2) Includes $16 million of litigation provisions and $3 million
for the write-down of related U.S. refinery assets.
CONOCO INC.
EARNINGS BEFORE SPECIAL ITEMS BY SEGMENT (unaudited)
(millions of dollars)
First Quarter
--------------------------
2000 1999
---------- ----------
Upstream
United States 115 40
International 297 68
---------- ----------
Total Upstream 412 108
Downstream
United States 5 17
International 49 23
---------- ----------
Total Downstream 54 40
Corporate and Other (25) (15)
---------- ----------
Total ATOI 441 133
Interest and Other (50) (50)
---------- ----------
Net Income 391 83
========== ==========
CONOCO INC.
Capital Expenditures and Investments (unaudited)
(millions of dollars)
First Quarter
----------------------------
2000 1999
------------ ----------
Upstream:
United States 83 113
International 257 198
----------- -----------
Total Upstream 340 311
Downstream:
United States 60 32
International 64 70
----------- -----------
Total Downstream 124 102
Corporate and Other 25 2
----------- -----------
Total 489 415
=========== ===========
CONOCO INC.
Net Exploration Investment (unaudited)
(millions of dollars)
First Quarter
-----------------
2000 1999
-------- -------
Cash Expense:
United States 14 9
International 10 19
--- ---
Total Cash Expense 24 28
Capital:
United States 1 9
International 5 30
--- ---
Total Capital 6 39
Exploration Asset Sales (1) (13)
--- ---
Net Exploration Investment 29 54
=== ===
CONOCO INC.
OPERATING DATA AND PRICES (unaudited)
First Quarter
------------------------
2000 1999
---------- ---------
Net Realized Crude Oil
Prices ($/Bbl)
----------------------
United States 26.60 10.93
International 26.22 11.01
Worldwide 26.29 11.00
Net Realized Natural
Gas Prices ($/MCF)
--------------------
United States 2.11 1.71
International 2.49 2.47
Worldwide 2.32 2.08
Net Petroleum Liquids
Production (MBD) (1)
---------------------
United States 74 68
International 301 283
----- -----
Total Petroleum Liquids
Production 375 351
Net Natural Gas Production
(MMCFD) (1)
---------------
United States 813 944
International 1,029 872
----- -----
Total Natural Gas Production 1,842 1,816
Total Net Production
(MBOED) (1) 682 653
Net NGLs Processed
(MBD) (1)
------------------
United States 55 57
International 22 3
----- -----
Total Net NGLs Processed 77 60
Refinery Inputs Processed
(MBD) (1)
-------------------------
United States 548 532
International 360 329
----- -----
Total Refinery Inputs
Processed 908 861
Refined Product Sales (MBD)
---------------------------
United States 878 694
International 491 414
----- -----
Total Refined Product Sales 1,369 1,108
(1) Includes volumes from equity affiliates.
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