USA: ConocoPhillips Reports 1Q Earnings of USD 2.9 bln

ConocoPhillips Reports Earnings of USD 2.9 bln

ConocoPhillips today reported first-quarter earnings of $2.9 billion, compared with first-quarter 2011 earnings of $3.0 billion. Excluding $330 million of special items, first-quarter 2012 adjusted earnings were $2.6 billion.

Special items were primarily related to gains on asset dispositions, partially offset by impairments and repositioning costs.

 “We operated according to plan during the first quarter of 2012, achieving production and refinery utilization targets,” said Jim Mulva, chairman and chief executive officer. “We continued to progress our asset divestment program and execution of our major projects and growth plans. We also accomplished several repositioning milestones, including obtaining a favorable IRS ruling and final board of directors’ approval. Beginning May 1, 2012, our company will become two leading, independent energy companies, ConocoPhillips and Phillips 66.”

Exploration & Production (E&P)

E&P’s first-quarter 2012 earnings were $2,548 million, compared with $2,352 million a year ago. Excluding special items, first-quarter 2012 adjusted earnings were $2,131 million, compared with $2,197 million for the first quarter of 2011. The slight decrease of $66 million was primarily due to reduced volumes, higher taxes and lower natural gas prices, partially offset by higher crude oil and liquefied natural gas (LNG) prices.

In the first quarter, E&P results benefited from strong crude oil prices. However, this strength in crude oil prices was offset by weakness in North American natural gas markets and natural gas liquids (NGL) prices, as well as a widening spread between crude oil and bitumen prices.

E&P’s first-quarter 2012 earnings were $2,548 million, compared with $2,352 million a year ago. Excluding special items, first-quarter 2012 adjusted earnings were $2,131 million, compared with $2,197 million for the first quarter of 2011. The slight decrease of $66 million was primarily due to reduced volumes, higher taxes and lower natural gas prices, partially offset by higher crude oil and liquefied natural gas (LNG) prices.

Strong crude price

In the first quarter, E&P results benefited from strong crude oil prices. However, this strength in crude oil prices was offset by weakness in North American natural gas markets and natural gas liquids (NGL) prices, as well as a widening spread between crude oil and bitumen prices. First-quarter results were also adversely impacted by approximately $85 million after-tax from differences between production and sales volumes and other timing impacts.

Production for the quarter was 1.64 million barrels of oil equivalent (BOE) per day, 65,000 BOE per day lower compared with a year ago. Excluding the decrease in production from dispositions and the suspension of operations at the Peng Lai Field in Bohai Bay, production was 9,000 BOE per day higher than a year ago. The company’s continuing development of U.S. shale plays and Canadian oil sands, combined with lower downtime and improved well performance, more than offset normal field decline.

Libyan operations resumed, with average production of 36,000 BOE per day for the quarter. By quarter-end, gross production from Peng Lai was 40,000 barrels per day under an approved interim reservoir management plan. This plan is designed to prepare Peng Lai for a safe return to normal operations. The company continues its administrative discussions with the State Oceanic Administration to resolve outstanding claims.

Second- and third-quarter production is expected to be impacted by major turnarounds, scheduled maintenance, seasonality and dispositions. Consistent with previous guidance, full-year production for 2012 is expected to be 1.55-1.60 million BOE per day, dependent on the timing of dispositions.

ConocoPhillips continues to execute compelling near-term growth opportunities on high-margin projects. In the United States, Eagle Ford, Bakken and Permian are currently contributing about 135,000 BOE per day. In the company’s Canadian oil sands operations, first-quarter production increased by approximately 5,000 BOE per day from year-end 2011. Production in all these areas is expected to grow throughout the year.

North Sea: High-margin growth projects

In the North Sea, development continues across a number of high-margin growth projects. At the Jasmine Field, subsurface results are exceeding expectations as the development progresses toward first production in 2013. Development continues at the Ekofisk South and Eldfisk II expansion projects toward startup in 2013 and 2014, respectively. In Malaysia, platforms were lifted into place at the Gumusut Project during the quarter, with first production expected in late 2012. At the Australia Pacific LNG Project, final investment decision on the second LNG train is expected during the second quarter of 2012.

During the quarter, the company completed the acquisition of two deepwater blocks in Angola’s emerging subsalt play trend; and in the deepwater Gulf of Mexico, the company was awarded 74 blocks from lease sale 218 held in the fourth quarter of 2011. In the Browse Basin, offshore northwest Australia, the appraisal program has resumed with the drilling of the Boreas well. The well should reach its targeted depth in the third quarter. Later in 2012, the company expects to drill additional opportunities in the Gulf of Mexico, including the Tiber and Shenandoah appraisals.

Multibillion Capex

For the quarter, E&P invested in a $4.2 billion capital program, which included approximately $500 million for the leasehold acquisitions described above. For the full year of 2012, E&P expects its capital program to be approximately $15 billion.

ConocoPhillips remains committed to delivering leading shareholder distributions and maintaining financial discipline. The company is on pace to complete approximately $5 billion of share repurchases by the end of the second quarter of 2012. Further share repurchases will be tied to ongoing asset dispositions as the company completes its portfolio optimization.

“As an exclusive E&P company, with a strong and substantial asset base, ConocoPhillips will have the size and scale, financial strength, capabilities and competencies to pursue opportunities around the world,” said Ryan Lance, designated chairman and CEO of ConocoPhillips. “We will offer a secure, sector-leading dividend, 3 to 5 percent annual production growth, 3 to 5 percent annual margin improvement and a continued focus on returns. We have the portfolio and the plans to deliver these results through our pipeline of captured opportunities.”

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Source: ConocoPhillips, April 23, 2012