ConocoPhillips Fourth-Quarter 2002 Interim Update.Business/Energy Editors --(BUSINESS WIRE) This update is intended to give an overview of market and operating conditions experienced by ConocoPhillips during the fourth quarter of 2002. The market indicators and company estimates may not necessarily reflect, and may differ considerably from, the company's actual results expected to be reported to be spoken of; to be mentioned, whether favorably or unfavorably. See also: Report on or about Jan. 29, 2003. Highlights - Fourth Quarter vs. Third Quarter
-- Fourth quarter will reflect ConocoPhillips' first full quarter
of operation.
-- Upstream
-- Slightly lower average benchmark prices for crude oil.
-- Improved natural gas prices.
-- Daily production in line with previously stated target.
-- Downstream
-- Improved average benchmark refining margins.
-- Capacity utilization rate in the low 90 percent range.
-- Lower worldwide realized marketing margins.
-- Financial impact related to downtime at Humber refinery.
-- Impairment charge related to retail assets held for sale.
Exploration and Production The table below (click here for graphs: http://www.conocophillips.com/news/nr/earnings/4Qep.asp) reflects benchmark prices for crude oil and Lower 48 natural gas. The company's actual realizations may vary from the benchmark prices due to quality and location differentials, as well as the effects of pricing lags, particularly in Alaska.
Market Indicators
4Q 2002 3Q 2002 4Q 2001
------- ------- -------
Dated Brent ($/bbl) $26.78 26.94 19.36
WTI ($/bbl) 28.20 28.31 20.31
ANS USWC ($/bbl) 26.75 27.31 17.79
Henry Hub daily average ($/mcf) 4.25 3.20 2.40
Source: Platt's
ConocoPhillips' average worldwide crude oil sales price for the fourth quarter is expected to be lower than that of the previous quarter, but the company's average natural gas sales price is expected to be higher. Daily production for the quarter is expected to be in line with the previously stated target of 1.62 million barrels-of-oil-equivalent, despite the negative impact from the ongoing labor strike in Venezuela. 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 and Marketing The table below (click here for graphs: http://www.conocophillips.com/news/nr/earnings/4Qrm.asp) reflects refining margins for regions where the company conducts significant refining operations. The weighted U.S. 3:2:1 margin is based on geographical location of company refinery capacities.
Market Indicators
4Q 2002 3Q 2002 4Q 2001
------- ------- -------
Refining Margins ($/bbl)
East Coast WTI 3:2:1 $4.64 3.11 2.46
Gulf Coast WTI 3:2:1 3.79 2.84 1.79
Mid-Continent WTI 3:2:1 5.75 5.20 3.96
West Coast ANS 3:2:1 8.40 8.58 9.96
Weighted U.S. 3:2:1 5.29 4.53 3.87
NW Europe Dated Brent 2.72 1.70 2.41
WTI/Maya differential
(trading month $/bbl) 6.04 4.90 6.32
Source: Platt's
Realized margins may differ due to the company's specific refinery locations, refinery configurations, crude oil slates or operating conditions. As shown above, the weighted U.S. refining margin for the fourth quarter is expected to be improved from that of the third quarter. In addition, 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. costs are expected to be approximately $15 million after-tax, in line with previously stated targets. These costs do not include the approximately $50 million after-tax in downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. and lost opportunity costs Opportunity costs The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up. associated with a power failure at the 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. in the United Kingdom. The company's average crude oil capacity utilization rate Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. for the fourth quarter is expected to be in the low 90 percent range. The capacity utilization rate was negatively impacted by the above-mentioned downtime at the Humber refinery, the previously mentioned labor strike in Venezuela, and Hurricane Lili This article is about the Atlantic hurricane in 2002. For other storms of the same name, see Hurricane Lili (disambiguation) Hurricane Lili was a powerful hurricane during the 2002 Atlantic hurricane season that caused damage across the Caribbean and into Louisiana. . Fourth-quarter worldwide marketing margins are expected to be somewhat lower than those of the third quarter, while sales volumes are expected to be higher. As part of the company's rationalization rationalization, in psychology: see defense mechanism. plan for its refining and marketing assets, ConocoPhillips will dispose of dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. a substantial portion of its company-owned retail sites and exit certain geographic markets. Consequently, the company expects to recognize charges primarily related to the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of property, plant and equipment, goodwill, and intangibles in the fourth quarter. Finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the amount of this impairment is currently in process, but it is expected to reduce fourth-quarter net income by up to $1.3 billion. Midstream/Chemicals/Emerging Businesses Segments For the 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. segment, the realized average natural gas liquids sales price for the fourth quarter is expected to be above that of the previous quarter. This segment reflects ConocoPhillips' 30 percent interest in Duke Energy Field Services, as well as consolidated midstream operations. In the Chemicals business, operating and market conditions deteriorated in the fourth quarter, as this segment remains negatively impacted by low margins and sluggish demand, reflecting the ongoing difficult market environment of this business. This segment reflects the company's 50 percent interest in Chevron Phillips Chevron Phillips is a chemical producer jointly owned by Chevron Corporation and ConocoPhillips. The company was formed July 1st, 2000 by merging the chemicals operations of both Chevron Corporation and Phillips Petroleum Company. Chemical Company. Emerging Businesses' performance includes gas-to-liquids, carbon fibers, fuels technology, and power generation. Corporate The company's debt balance at the end of the fourth quarter is expected to be approximately $19.8 billion. CAUTIONARY STATEMENT FOR THE PURPOSES 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. This update 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. within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are about ConocoPhillips' business segments: exploration and production (E&P); refining and marketing (R&M); natural gas gathering, processing and marketing (Midstream); chemicals and plastics manufacturing (Chemicals); and emerging businesses. There are also forward-looking statements about ConocoPhillips' expected sales prices for crude oil, natural gas, and natural gas liquids; crude oil production; refining crack spreads Crack Spread The spread created when purchasing oil futures and offsetting the position by selling gasoline and heating oil futures. Notes: As the two futures contracts within the spread are relatively similar, risk is hedged against. ; marketing margins; refinery utilization rates; sales volumes; potential impairment charges related to the company'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.). rationalization plans; and the company's debt balance. These statements are based on activity from operations for the first two months of the fourth quarter of 2002 and include estimated results for December, and as such are preliminary and are estimates. All of the forward-looking data is therefore subject to change. Actual results, expected to be reported in the company's earnings release for the fourth quarter of 2002 on or about Jan. 29, 2003, may differ materially from the estimates given in this update. 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 that could cause the stated expectation or belief to differ materially from that stated in this update. |
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