This summary is based on the first quarter fiscal 2008 earnings call conducted by ConocoPhillips (COP) on April 24, 2008.
Management:
Chairman and CEO: Jim Mulva
EVP and CFO: John Carrig
General Manager, Investor Relations: Gary Russell
Key Investor Issues:
- Q1 EPS was $2.62 compared with $2.12 in the last year quarter.
- Quarterly revenues increased from $41.3 billion in Q1 of 2007 to $54.9 billion.
- The management expects Q2 share buybacks to be in the range $2 billion to $3 billion.
First-Quarter Financial Highlights
During the quarter, the company generated $6.6 billion of cash from operations and $400 million in proceeds from asset disposals.
- This enhanced the management’s ability to purchase $2.5 billion of company common stock.
- The management was also able to fund $3.5 billion of the capital program and to pay $700 million in dividends.
- The company ended the quarter with debt of $21.5 billion, a debt-to-capital ratio of 19% and a cash balance of $1.4 billion.
- The company recorded $88 million improvement from the results of the asset rationalization program.
- The Q1 of 2008 return on capital employed was 15%, 1% higher than the annual number in the previous year of 2007.
- The management reported the formation of a strategic research alliance with Iowa State University and the U.S. Department of Energy’s National Renewable Energy Laboratory in order to identify promising cellulosic biomass conversion technologies.
The quarter corporate expenses were $179 million after tax.
This is in comparison with $271 million in the previous quarter and $341 million in the first quarter of 2007. The decreases from the previous quarter and Q1 of 2007 were due to lower net interest expense and reduced foreign exchange losses.
The company’s effective tax rate for the quarter was 45.2%.
This compares with 40.3% in the previous quarter and 41.5% in the first quarter of 2007.
Business Segment Analysis
Exploration and Production (E&P)
- The realized crude oil price was $92.88 a barrel and the realized natural gas price was $8.03 an MCF.
- The segment reported net income of $2.887 million, an increase from $2.608 million in the previous quarter and $2.329 million in the first quarter of 2007. The increase from the fourth quarter of 2007 was due to higher commodity prices partly offset by reduced volumes and the absence of Q4 2007 benefits related to a Canadian federal tax rate change and the extinguishment of the Hamaca project financing.
- The increase from the Q1 of 2007 was a result of higher commodity prices, partially offset by higher taxes, lower volumes, reduced net benefit from asset rationalization efforts and increased operating costs.
- The daily production from the E&P segment, including Canadian Syncrude and excluding the LUKOIL Investment segment averaged 1.79 million barrels of oil equivalent (BOE) per day. This represents a decrease from 1.84 million BOE per day in the previous quarter and 2.02 million BOE per day in the first quarter of 2007.
- The production decrease from the previous quarter was due to unplanned downtime in the U.S. Lower 48, largely as a result of the shutdown of a non-operated natural gas processing plant in the San Juan Basin.
- The volumes were negatively impacted by the absence of one-time, Q4 natural gas liquids volume adjustments in the Lower 48. These decreases were partly offset by higher production in the Timor Sea as a result of less planned downtime.
- The management reported that the decrease from the first quarter of 2007 was due to the expropriation of the company’s Venezuelan oil projects and the company’s exit from Dubai as well as normal field decline and unplanned downtime in the Lower 48.
- The decrease was partly offset by production from new developments in Canada, the U.K. and Norway.
- Before the tax, expropriation expenses were $309 million in the Q1 of 2008 versus $268 million in the previous quarter and $262 million in the first quarter of 2007.
Midstream
- The segment posted Q1 net income of $137 million, a decrease from $162 million in the previous quarter and an increase from $85 million in the first quarter of 2007.
- The decrease from the previous quarter was a result of lower realized natural gas liquid prices.
- The increase from Q1 of 2007 was due to significantly higher realized natural gas liquid prices.
