USA: ConocoPhillips Q4 Earnings at USD 3.4 Billion

ConocoPhillips today reported fourth-quarter earnings of $3.4 billion, compared with fourth-quarter 2010 earnings of $2.0 billion.

Fourth-quarter 2011 earnings excluding $723 million of special items were $2.7 billion. Special items were primarily related to gains on asset dispositions, partially offset by impairments and costs related to the Bohai Bay incidents.

“We operated well during the fourth quarter,” said Jim Mulva, chairman and chief executive officer. “Production and refinery utilization met expectations. For the year, we replaced 120 percent of our 2011 production with organic reserves across our asset base. We continued execution of our 2010-2012 repositioning plan, including $4.8 billion of asset sales and $11.1 billion of share repurchases during the year. We are also progressing plans to create two leading energy companies during the second quarter of 2012.”

Exploration and Production’s (E&P) fourth-quarter 2011 adjusted earnings were higher, compared with the same period in 2010, primarily due to stronger crude oil and liquefied natural gas (LNG) prices, partially offset by higher taxes. Excluding the impact of dispositions and the suspension of operations in Libya and China, production was lower by 21,000 barrels of oil equivalent (BOE) per day, or 1 percent, compared with the fourth quarter of 2010. The decrease was primarily from natural decline, partially offset by new production from major projects and other field exploitation.

In January 2012, the company’s Australia Pacific LNG (APLNG) joint venture announced an amendment to its existing LNG sales agreement with Sinopec for the supply of an additional 3.3 million tonnes per annum (MTPA) of LNG through to 2035 from its world-class LNG project in Queensland. The joint venture partners also agreed to terms for Sinopec to raise its ownership interest in APLNG to 25 percent. An agreement was also signed in November with Kansai Electric Power Company for the supply of approximately 1 MTPA of LNG commencing with the startup of the second train. These two agreements complete the marketing of the second train, with sanctioning of train construction expected during the first quarter of 2012.

ConocoPhillips said it continues to pursue frontier exploration opportunities around the world. During the quarter, the company signed production sharing agreements for deepwater blocks 36 and 37 in Angola’s emerging subsalt play trend. The company also acquired more than 100,000 acres in North American liquids-rich shale plays, bringing its 2011 shale acquisitions to more than 500,000 acres. In addition, ConocoPhillips added to its position in the deepwater Gulf of Mexico, successfully bidding on 75 blocks in the Paleogene play in December’s western Gulf of Mexico lease sale.

The company’s North American unconventional assets were a source of high-margin production growth during the quarter and the year. Fourth-quarter production from Eagle Ford, Bakken and Barnett shale plays and Canadian oil sands assets averaged 153,000 BOE per day, an increase of 53,000 BOE per day from a year ago. At Eagle Ford, production exceeded 50,000 BOE per day in late December and is expected to grow to 100,000 BOE per day by the end of 2012.

The Refining and Marketing (R&M) segment operated well in the fourth quarter. The worldwide capacity utilization rate and clean product yield were at the highest levels of the year at 94 percent and 84 percent, respectively. In addition, unplanned downtime was at the lowest level of the year. R&M’s reported earnings for the quarter were $1,714 million, including gains on asset dispositions.

R&M’s fourth-quarter 2011 adjusted earnings were $201 million, including $180 million related to liquidating inventory associated with portfolio changes during the year. Adjusted earnings were lower compared with a year ago, primarily due to less favorable crude differentials partially offset by improved market crack spreads, higher volumes and marketing margins, as well as lower costs.

The U.S. refining capacity utilization rate was 93 percent and the international rate was 98 percent. Pre-tax turnaround expenses for the quarter were $90 million, in line with expectations. For the full year of 2011, pre-tax turnaround expenses were $297 million.

During the quarter, the company disposed of its interests in the Colonial, Seaway Crude and Seaway Products pipelines for a total of $2.4 billion in sales proceeds. In addition, Wood River’s Coker and Refinery Expansion (CORE) project started up operations in mid-November, resulting in a 5 percent increase in clean product yield at the refinery.

The Chemicals and Midstream segments posted solid earnings for the fourth quarter. Chemicals earnings of $156 million increased over the prior year, primarily due to higher volumes related to the startup of international projects late in 2010. Midstream earnings of $118 million were higher than a year ago reflecting higher natural gas liquids prices.

For the company, full-year 2011 controllable costs were in line with 2010. Higher costs from foreign currency impacts and increases in market prices for goods and services were offset by reduced costs as a result of asset dispositions. Corporate expenses for the quarter were $199 million after-tax, compared with $305 million for the fourth quarter of 2010. Adjusted corporate expenses were $151 million improved compared with a year ago, primarily due to lower net interest expense and benefit-related expenses, as well as higher foreign exchange gains.

During the fourth quarter of 2011, ConocoPhillips repurchased approximately 46 million of its shares, or 3 percent of shares outstanding, for $3.1 billion. This brings the company’s total shares repurchased to approximately 15 percent of the shares outstanding at the inception of the repurchase program in 2010. At Dec. 31, 2011, 1,292 million basic shares were outstanding. In December, ConocoPhillips also announced a program to repurchase up to an additional $10 billion of the company’s common stock from 2012 onwards.

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LNG World News Staff, January 25, 2012