USA: ConocoPhillips Posts Q3 Earnings of USD 2.6 Billion

ConocoPhillips today reported third-quarter adjusted earnings of $3.5 billion and earnings of $2.6 billion.

This compares with third-quarter 2010 adjusted earnings of $2.2 billion and earnings of $3.1 billion. Special items for the current quarter of $837 million were primarily related to losses on asset dispositions, impairments and a tax law change enacted in the United Kingdom.

“This quarter’s results benefitted from improved market conditions,” said Jim Mulva, chairman and chief executive officer. “While commodity prices were higher, E&P production was lower, mainly due to suspended operations in Bohai Bay and Libya. Our downstream business ran well, allowing us to capture stronger refining margins.”

Exploration and Production’s (E&P) third-quarter 2011 adjusted earnings were higher, compared with the same period in 2010, primarily due to stronger commodity prices, partially offset by higher taxes and lower volumes. Excluding the impact of dispositions and the civil unrest in Libya, production was 90,000 barrels of oil equivalent (BOE) per day lower than the third quarter of 2010. China production was lower by 32,000 BOE per day, primarily due to suspended operations in Bohai Bay. Higher planned downtime in the North Sea and unplanned downtime in Alaska further impacted production by 28,000 BOE per day. Decline in Russia reduced production by an additional 24,000 BOE per day. Production per share, excluding Libya, increased by 2 percent, compared with the prior year.

During the quarter, ConocoPhillips sanctioned the Australia Pacific LNG (APLNG) project, which holds one of the largest coal seam gas reserve positions in Australia. This satisfied the final condition for Sinopec’s subscription for a 15 percent interest in the joint venture. In Exploration, the company continued to expand its worldwide shale position and recently resumed deepwater Gulf of Mexico drilling activities.

Refining and Marketing’s (R&M) adjusted earnings in the third quarter of 2011 were $928 million higher than the corresponding period of 2010, primarily due to improvement in global refining and marketing margins. R&M’s reported earnings were $521 million higher than the prior year, and include charges of $407 million primarily from asset impairments and losses on dispositions. The U.S. refining crude oil capacity utilization rate was 92 percent and the international rate was 93 percent. Pre-tax turnaround expenses for the quarter were $44 million, reflecting a lighter turnaround schedule. The current quarter included earnings of approximately $120 million primarily related to hedges on inventory positions. The cumulative net impact of these hedges year to date is near zero, and no fourth-quarter hedge impact is expected as these inventories are liquidated.

During the quarter, ConocoPhillips sold the Wilhelmshaven Refinery and announced it was seeking a buyer for its Trainer Refinery and associated pipelines and terminals. The Trainer facility has now been idled and will permanently close by the end of the first quarter of 2012 if a sales transaction is unsuccessful. These efforts are consistent with the company’s stated strategic objective to rationalize low-return refining assets. Since 2009, the company has decreased its refining capacity by almost 500,000 barrels per day, from 2.7 million barrels per day to 2.2 million barrels per day, and continues to progress plans to further reduce capacity over the next couple of years.

At the Wood River Refinery, Coker and Refinery Expansion (CORE) project construction remains on schedule for completion in October, with total gross capital spend for the project at $3.8 billion. Project startup activities continue as planned and are expected to be completed by mid-November. The CORE project increases the refinery’s crude capacity by 50,000 barrels per day, enhances its ability to process heavy Canadian crude, and improves its clean product yield by 5 percent, resulting in a 50,000 barrel per day increase in gasoline and distillate production capacity.

The Chemicals and Midstream segments posted strong earnings for the third quarter. Chemicals earnings of $197 million increased 49 percent over the prior year, primarily due to higher ethylene margins. Midstream earnings of $137 million were significantly higher than a year ago, reflecting improved natural gas liquids prices.

Corporate expenses for the quarter were $267 million after-tax, compared with $276 million for the third quarter of 2010. Adjusted corporate expenses were $105 million higher than a year ago, primarily due to the absence of foreign exchange gains recognized in 2010. Third-quarter 2010 reported expenses also included a $114 million debt retirement premium.

During the third quarter of 2011, ConocoPhillips repurchased approximately 46 million of its own shares, or 3 percent of shares outstanding, for $3.2 billion. This brings the company’s total shares repurchased to 12 percent of the shares outstanding at the inception of the repurchase program in 2010.

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Source: ConocoPhillips, October 26, 2011