ConocoPhillips Co.: Barreling Ahead With Record Revenue, Partnership Agreements

Aug. 16, 2006
The numbers are good, but ConocoPhillips still has to deal with Mother Nature.

The second quarter was a good one for ConocoPhillips. Indeed, net income was $5.2 billion, or $3.09 per share, compared with $3.1 billion, or $2.21 per share, for the same quarter in 2005. Revenues were $47.1 billion, vs. $41.8 billion a year ago. Year-to-date excluding a first-quarter $35.6 billion acquisition of Burlington Resources -- a Houston-based independent oil and gas company -- the company reinvested 97% of its net income into the growth and development of oil and gas resources and its global refining business.

"We delivered solid results in the second quarter and are pleased with the progress made integrating the Burlington Resources operations with ConocoPhillips' global portfolio," said Jim Mulva, chairman and CEO, in a July 26, 2006, statement. "However, we experienced unplanned downtime in both our upstream and downstream businesses, which impacted our operating performance."

According to the release, ConocoPhillips produced 2.54 million barrels of oil equivalent (BOE) per day, including an estimated 400,000 BOE per day from its LUKOIL Investment segment. In the downstream business, the worldwide refining crude oil capacity utilization rate of 91% reflects the impact of an extended full plant turnaround at the Trainer, Pa., refinery and other unplanned downtime.

ConocoPhillips also suffered a weeklong shut down at its 306,000 barrel-per-day Wood River refinery in Illinois. A storm caused a power outage on July 19. The company said operations have been restored to all the operating units at the state's largest refinery, located in Roxana, Ill.

However, ConocoPhillips wants area levees upgraded to avoid future disasters -- specifically the Mississippi River flooding the refinery.

Noting the levee troubles that plagued Louisiana and the impact it had on refineries and surrounding communities, ConocoPhillips will donate $8 million (in addition to the $7 million it already donated last year) to build a new community center in Belle Chasse, La., and to support educational programs in the Belle Chasse and Lake Charles, La., areas which were damaged by Hurricane Rita.

ConocoPhillips has extensive operations in both areas, including the 255,000 barrel-per-day (BD) Alliance refinery in Belle Chasse and the 239,000 BD Lake Charles refinery.

At A Glance

ConocoPhillips Co.
Houston, Texas
Primary Industry: Petroleum and Coal Products
Number of employees: 38,000
2005 In Review
Revenue: $179.9 billion
Profit Margin: 7.52%
Sales Turnover: 1.68
Inventory Turnover: 36.13
Revenue Growth: 32.89%
Return On Assets: 14.57%
Return On Equity: 31.67%

The SOWELA Technical Community College in Lake Charles will receive $2 million from ConocoPhillips. The funds will be used to build a new industrial technology building to house the process technology, instrument technology and allied technical programs.

Another issue: The unprecedented shutdown of the Prudhoe Bay, Alaska, oil field.

According to the Houston Chronicle, ConocoPhillips informed its crude oil customers that deliveries may come up short.

In declaring a force majeur, the company is telling its customers an event out of its control could cause it to breach its contracts. Thus, ConocoPhillips avoids incurring financial penalties when it can't fulfill its deliveries.

A ConocoPhillips spokesman said only one of its three West Coast refineries would be affected by the shutdown and that the company should be able to get ample supplies for the facility elsewhere.

BP, ConocoPhillips and Exxon Mobil jointly own the massive oil field.

In other news, ConocoPhillips and Anadarko Petroleum Corp. recently announced the startup of the first Alpine satellite oil field, known as the Fiord field. The Fiord oil field is located five miles north of the Alpine oil field on Alaska's North Slope. Fiord is expected to have peak production of approximately 22,500 barrels of oil per day gross in 2008.

The company also recently signed an agreement with the Saudi Arabian Oil Co. to conduct a detailed evaluation for the proposed development of a 400,000 barrel-per-day, full-conversion refinery in Yanbu, Saudi Arabia, as well as an agreement with the International Petroleum Investment Company to study the development of a 500,000 barrel-per-day refinery in Fujairah, United Arab Emirates.

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