ConocoPhillips Reports Third Quarter Net Income of $2.0 Billion.HOUSTON -- ConocoPhillips (NYSE NYSE See: New York Stock Exchange :COP COP In currencies, this is the abbreviation for the Colombian Peso. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. )
Earnings at a glance
Third Quarter Nine Months
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2004 2003 2004 2003
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Income
from
continuing
opera-
tions $2,011 million $1,249 million $5,627 million $3,608 million
Income
(loss)
from
discontinued
operations $ (5) $ 57 $ 70 $ 201
Cumulative
effect
of
changes
in
accounting
prin-
ciples $ - $ - $ - $ (95)
Net income $2,006 $1,306 $5,697 $3,714
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Diluted
income
per share
Income
from
continuing
opera-
tions $2.87 $1.82 $8.06 $5.28
Net
income $2.86 $1.90 $8.16 $5.43
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Revenues $34.7 billion $26.5 billion $96.8 billion $79.1 billion
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ConocoPhillips (NYSE:COP) today reported third quarter net income of $2,006 million, an increase of 54 percent compared with $1,306 million for the same quarter in 2003. Net income per share for the third quarter was $2.86, versus $1.90 for the same period a year ago. Total revenues were $34.7 billion, versus $26.5 billion a year ago. Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter was $2,011 million, an increase of 61 percent compared with $1,249 million for the same period a year ago. Income from continuing operations per share for the third quarter of 2004 was $2.87, compared with $1.82 for the third quarter of 2003. "We had a good quarter," said Jim Mulva, chairman and chief executive officer. "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 , we ran well, producing 1.48 million barrels of oil equivalent per day. 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.). , our refineries ran at 94 percent of capacity, slightly higher than last quarter. At the same time, we completed significant planned maintenance in our upstream business and elected to accelerate turnarounds at two refineries. During the quarter, we recognized higher exploration expenses, as well as certain 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 contingency contingency n. an event that might not occur. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and impairments. Our quarterly results continued to benefit from the strong commodity price environment. "Our financial position continues to steadily improve, and our return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). remains strong and competitive. We ended the quarter with a debt-to-capital ratio of 28 percent. During the quarter, we generated $4.4 billion in cash from operations, invested $1.6 billion in capital projects, paid $296 million in dividends, and increased our cash balance to approximately $3.3 billion in anticipation of the capital investment in the LUKOIL strategic alliance." For the first nine months of 2004, net income was $5,697 million, a 53 percent improvement when compared with $3,714 million for 2003. Net income per share was $8.16 for the first nine months of 2004, versus $5.43 for the 2003 period. Income from continuing operations was $5,627 million, a 56 percent increase over $3,608 million for the same period a year ago. Income from continuing operations per share for the first nine months of 2004 was $8.06, compared with $5.28 for the first nine months of 2003. Total revenues were $96.8 billion, versus $79.1 billion a year ago. The results of ConocoPhillips' business segments follow. Exploration & Production (E&P) Third quarter financial results: E&P income from continuing operations in the third quarter was $1,420 million, up from $1,354 million in the second quarter of 2004 and up from $967 million in the third quarter of 2003. The increase from the second quarter was primarily the result of higher crude oil prices, as the impact of reduced production was mostly offset by sales volumes, which exceeded production by 19,000 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. . The increased earnings were partially offset by the impact of reduced benefits from tax law changes in the second quarter and reduced foreign exchange gains during the third quarter. In addition, third quarter results were impacted by higher pre-tax exploration expenses totaling $205 million, which included the 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 the Zafar-Mashal well, as well as certain leasehold An estate, interest, in real property held under a rental agreement by which the owner gives another the right to occupy or use land for a period of time. leasehold n. impairments. Improved results from the third quarter of 2003 were primarily due to higher crude oil and natural gas prices, partially offset by reduced gains on asset sales and lower volumes. ConocoPhillips' daily production for the quarter averaged 1.48 million barrels of oil equivalent (BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip ) per day, 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. When compared with the second quarter, increased output from Bayu-Undan in the Timor Sea Timor Sea An arm of the Indian Ocean between Timor and Australia. Noun 1. Timor Sea - an arm of the eastern Indian Ocean between Timor and northern Australia was more than offset by the impact of scheduled maintenance in Alaska and the North Sea, as well as normal seasonal declines. While the company's production volumes declined by 5 percent from the prior quarter, sales volumes experienced only a slight decline. When compared with the third quarter of 2003, volumes were lower, primarily due to asset sales and scheduled maintenance, partially offset by increased production from Bayu-Undan and Vietnam. Nine months financial results: E&P income from continuing operations for the first nine months of 2004 was $4,031 million, up from $3,169 million in 2003, primarily due to higher realized worldwide crude oil and natural gas prices, partially offset by lower volumes largely associated with asset sales, higher exploration costs, and reduced gains on asset sales. 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. Third quarter financial results: Midstream income from continuing operations was $38 million, down from $42 million in the second quarter of 2004 and up from $31 million in the third quarter of 2003. Contributing to the decrease from the prior quarter were $12 million in 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. charges at Duke Energy Field Services, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (DEFS DEFS Duke Energy Field Services DEFS Direct-Applied Exterior Finish Systems (building construction) ), related to assets held for sale and certain other impairments. The increase over the third quarter of 2003 was primarily due to higher natural gas liquids prices for both DEFS and the company's consolidated operations, partially offset by lower volumes in the company's consolidated operations associated with asset sales and increased impairments in DEFS. Nine months financial results: Midstream operating results increased to $135 million, from $87 million in 2003. The increase was primarily the result of higher natural gas liquids prices in both DEFS and the company's consolidated operations, partially offset by lower volumes associated with asset sales and inventory impacts in the company's consolidated operations. Refining and Marketing (R&M) Third quarter financial results: R&M income from continuing operations was $708 million, down from $818 million in the previous quarter and up from $485 million in the third quarter of 2003. The decrease in third quarter R&M earnings, compared with the second quarter of 2004, was primarily driven by lower U.S. refining margins, and worldwide marketing margins, partially offset by improved international refining volumes and margins, as well as favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. U.S. inventory impacts. In addition, third quarter results were negatively impacted approximately $40 million, after-tax, by certain contingency and impairment charges. Overall, the company's third quarter refinery 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. averaged 94 percent, compared with 93 percent last quarter. Driving this increase was the improvement in international utilization rates to 99 percent from 69 percent. The U.S. utilization rate was 93 percent, despite the impact of accelerated turnarounds at the Bayway and Sweeny refineries, and a planned crude unit 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 Lake Charles Lake Charles, city (1990 pop. 70,580), seat of Calcasieu parish, SW La.; inc. 1867. It is located on Lake Charles at the mouth of the Calcasieu River in a rice, timber, oil, and natural gas region. refinery. Third quarter turnaround costs of $57 million, before-tax, were higher than expected due to accelerated turnarounds, but lower than the $78 million in the second quarter of 2004. Contributing to the improved results over the third quarter of 2003 were higher worldwide refining margins, partially offset by lower worldwide marketing margins, and increased contingency and impairment charges, as well as turnaround and energy costs. Nine months financial results: R&M income from continuing operations for the first nine months of 2004 increased to $1,990 million, compared with $1,195 million in the same period a year ago. Contributing to the increased earnings were higher worldwide refining margins, partially offset by lower worldwide marketing margins, and increased contingency and impairment charges, as well as turnaround and energy costs. Chemicals Third quarter financial results: The Chemicals segment, which includes 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 LLC, reported income from continuing operations of $81 million, compared with $46 million in the second quarter of 2004 and $7 million in the third quarter of 2003. The improvement from the second quarter was largely due to improved margins, particularly in the international aromatics and styrenics business line, as well as lower maintenance costs. The increase from the third quarter of 2003 reflects improved margins and volumes in olefins and polyolefins, as well as improved margins in the aromatics and styrenics business line. Nine months financial results: During the first nine months of 2004, the Chemicals segment had income from continuing operations of $166 million, compared with a loss of $4 million for the same period a year ago. The increase is primarily attributable to higher margins and volumes in the olefins and polyolefins business lines, as well as improved margins in the aromatics and styrenics business line. Emerging Businesses The Emerging Businesses segment had a loss from continuing operations of $27 million in the third quarter of 2004, compared with losses of $29 million in the second quarter of 2004 and $18 million in the third quarter of 2003. The higher losses from the third quarter of 2003 were primarily attributable to lower U.S. power margins and increased costs associated with the commissioning and operation of the Immingham combined heat and power plant in the United Kingdom. Corporate and Other Third quarter after-tax Corporate expenses from continuing operations were $209 million, compared with $218 million in the previous quarter and $223 million in the third quarter of 2003. The decrease over the second quarter was primarily driven by lower net interest expense, and increased foreign exchange gains, partially offset by approximately $43 million after-tax of increased early retirement of debt premiums paid during the quarter. The decrease from the third quarter of 2003 was primarily the result of reduced merger-related costs and higher foreign exchange gains, partially offset by the increased early retirement of debt premiums paid during the third quarter of 2004. Total debt at the end of the third quarter was $15.5 billion, compared with $15.6 billion at the end of the previous quarter and $2.3 billion below year-end 2003. At the end of the third quarter, the company's debt-to-capital ratio was 28 percent, down from 29 percent at the end of the second quarter. The company increased its cash balance from $804 million to $3.3 billion in anticipation of the capital investment in the LUKOIL strategic alliance. The company's third quarter effective tax rate of 45 percent was higher than that of the second quarter, primarily due to a higher proportion of income in high-rate tax jurisdictions, generally associated with the company's international upstream operations. Discontinued Operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. Third quarter financial results: Third quarter losses from discontinued operations were $5 million, compared with income of $62 million in the second quarter of 2004 and income of $57 million in the third quarter of 2003. The decreases in both periods were primarily related to the impacts of asset sales. Nine months financial results: During the first nine months of 2004, income from discontinued operations was $70 million, compared with $201 million for the same period a year ago. The decrease is primarily attributable to the impacts of asset sales. Outlook Mr. Mulva concluded: "Execution of the 2004 operating plan by our major business segments during a period of high commodity prices resulted in another quarter of strong earnings and cash flow. We have made significant progress on our 2004 objectives and continue to apply capital and cost discipline, regardless of the price environment. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. associated with our major projects continues as planned. In addition, we recently announced a 16 percent increase in our quarterly dividend rate. "As we announced in late September, the strategic alliance with LUKOIL, a leading international integrated oil and gas company in Russia, represents an important step for our company. This transaction is consistent with our E&P strategy of increasing reserves and production growth in new legacy areas at attractive costs, and is expected to provide access to possible substantial future reserve additions. "We expect our production in the fourth quarter to increase as startup of the Hamaca upgrader has begun, and as the Magnolia Magnolia, city, United States Magnolia (măgnō`lyə), city (1990 pop. 11,151), seat of Columbia co., SW Ark.; inc. 1855. Its oil industry has been important since 1938. project begins production later in the quarter. We anticipate full-year daily production to average about 1.56 million BOE. "The size and scope of our downstream asset base allows us to optimize optimize - optimisation planned downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. and stage projects to best use our resources, which is particularly important in the environment of strong margins. We have planned extensive crude unit turnaround activity during the fourth quarter, but expect our overall refinery crude oil capacity utilization rate to remain in the mid 90-percent range. In addition, we will continue to focus on our five-year, $2 billion clean fuels program. "We look forward to updating the financial community on the status of our business and operating plans at our November 17 analyst meeting in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ." ConocoPhillips is an integrated petroleum company with interests around the world. Headquartered in Houston, the company had approximately 35,800 employees, $89 billion of assets, and $129 billion of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenues as of Sept. 30, 2004. For more information, go to www.conocophillips.com. ConocoPhillips' quarterly conference call is scheduled for 10 a.m. Central today. To listen to the conference call and to view related presentation materials, go to www.conocophillips.com and click on the "Third Quarter Earnings" link. For financial and operational tables, go to www.conocophillips.com/news/nr/earnings/highlights/3q04earnings.html For detailed supplemental information, go to www.conocophillips.com/news/nr/earnings/detail/3q04summary.xls 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, such as "(the strategic alliance with LUKOIL) ... is expected to provide access to possible substantial future reserve additions"; "we expect our production in the fourth quarter to increase as startup of the Hamaca upgrader has begun, and as the Magnolia project begins production later in the quarter"; "we anticipate full-year daily production to average about 1.56 million BOE"; and "we have planned extensive crude unit turnaround activity during the fourth quarter, but expect our overall refinery crude oil capacity utilization rate to remain in the mid 90-percent range" involve certain risks, uncertainties and assumptions that are difficult to predict. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Economic, business, competitive and regulatory factors that may affect ConocoPhillips' business are generally as set forth in ConocoPhillips' filings with the Securities and Exchange Commission (SEC). ConocoPhillips is under no obligation (and expressly disclaims any such obligation) to update or alter its 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. 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 with the SEC. U.S. investors are urged to consider closely the disclosure in the company's periodic filings with the SEC, available from the company at 600 North 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 or on the company's Web site at www.conocophillips.com. This information can also be obtained from the SEC by calling 1-800-SEC-0330 or on the SEC's Web site at www.sec.gov. |
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