ConocoPhillips Shows Boost in First-Quarter 2010 After Prices Rise

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oil and gas giant ConocoPhillips (NYSE:COP) (Houston, Texas) reported significant overall improvements for the first quarter of 2010, with higher crude oil and natural gas liquids prices boosting earnings in the company's Exploration and Production segment. Net income for the quarter was $2.1 billion, compared with only $800 million in the same period last year.

Total revenues from sales and other income stood at $45.76 billion, a 46.5% increase year-over-year. Higher prices and lower operating costs were cited as the major reasons for the gains, although the company was negatively affected by lower production volumes; lower realized refining and marketing margins; and after-tax charges of $110 million for ending participation in the Shah and Yanbu projects in the United Arab Emirates and China, respectively.

The Exploration and Production segment made up the bulk of the net income gains, with two of the four other segments reporting significant improvement as well:

• Exploration and Production reported net income of $1.83 billion, compared with only $700 million in the same period last year.
• The Midstream segment reported $77 million, a 37.4% decline year-over-year.
• The Refining and Marketing segment reported a loss of $4 million, compared with a gain of $205 million in the same period last year.
• Investments in the Russian company LUKOIL Group (OTC:LUKOY) (Moscow, Russia) resulted in $387 million, compared with only $8 million in first-quarter 2009.
• The Chemicals segment reported $110 million, compared with only $23 million in the same period last year.

The Refining and Marketing segment was affected by a $25 million after-tax impairment for the Yanbu project; excluding this, the segment reported $21 million for the quarter. ConocoPhillips plans to reduce its equity ownership in LUKOIL from 20% to 10% by the end of 2011, and execute a $5 billion share repurchasing program.

Clayton Reasor, the company's vice president of corporate affairs, said in a conference call that normal decline and seasonal maintenance will lower production in the Exploration and Production segment for the rest of 2010.

"We're targeting 2010 production levels to be flat with 2008, normalizing for the impact of asset dispositions," Reasor said. "New production is expected to partially offset these declines."

Industrial Info is tracking more than $22 billion in active ConocoPhillips projects worldwide, including the $2.5 billion expansion at the Sweeny Cogeneration plant in Old Ocean, Texas, which involves the construction of three Siemens F-Class combustion turbine/generators and two gasifiers using ConocoPhillips' E-Gas Technology to gasify petroleum coke and produce synthetic gas for combustion turbines, with the addition of 400 megawatts net power to the grid. For more information, visit Industrial Info's North American Oil and Gas Production Database.

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