This summary is based on the fourth quarter fiscal 2007 earnings call conducted by ConocoPhillips (COP) on January 23, 2008
Management:
Chairman and CEO: Jim Mulva
EVP of Finance and CFO: John Carrig
GM of Investor Relations: Gary Russell
Key Investor Issues:
- Net income rose 36% to $4.4 billion or $2.75 a share.
- Revenues increased 27% to $52.7 billion from $41.5 billion a year ago.
- The firm repurchased $2.5 billion of the common stock, and paid $652 million as dividends.
Full Year Highlights:
- Net income adjusted for the Venezuela impairment was $16.4 billion, or $9.97 per share, up 5.5% from $15.6 billion, or $9.66 per share, for 2006.
- Revenues rose marginally to $187.4 billion, from $183.7 billion a year ago.
- Total capital expenditures dropped 24% to $11.8 billion, on reduced investments in Midstream.
Fourth Quarter Highlights:
Net income was $4.4 billion or $2.75 a share, up 36% from $3.2 billion or $1.94 a share as prices, margins and other market impacts improved income by $1.4 billion
- The firm realized lower gains from the asset rationalization program, which reduced net income by $211 million as compared to the third quarter.
- Higher volumes in E&P were more than offset by lower volumes in LUKOIL and Chemicals, thereby reducing net income $57 million sequentially.
- Operating costs, higher turnaround costs, utilities and higher environmental accruals reduced income by $129 million
Operations generated $6.9 billion of cash, an increase of 22% from $5.6 billion in the prior-year period.
- The firm reduced its debt-to-cap ratio to 19%, slightly below the bottom of the targeted range at 20% to 25%, and purchased $2.5 billion of the common stock, with $652 million as dividends.
- It ended the year with $90 billion of equity and $21.7 billion of debt.
The upstream business produced 2.26 million BOE a day, including 426,000 BOE per day from the LUKOIL Investment segment, resulting in revenues rising 27% to $52.7 billion from $41.5 billion a year ago.
- The firm realized $515 million in proceeds from assets sales, and $243 million in other sources leaving it with a cash balance of $1.4 billion.
- Less than half of the funds were directed toward the capital program, and a little more than half was debt reduction, share repurchase and dividends.
- A total of $10 billion remains in the previously announced share repurchase program.
- Crude oil price realized was $84.53 a barrel which is, $13.19 a barrel higher and realized natural gas price was $6.66 per MCF, and that was a $1.10 per MCF higher.
Exploration and Production:
- Production from the E&P segment was 1.84 million BOE a day and that was 76,000 BOE a day higher than the third quarter due to seasonality and lower planned and unplanned downtime.
- E&P net income was $2.6 billion, approximately $500 million higher than the prior period as crude sales volumes in the US were about 40,000 barrels a day lower than the prior quarter due to timing of shipments in Alaska.
- Realized worldwide refining margins were higher, but the US margin stood at $11.56 a barrel, up 70 cents.
Realized refining margins in the US, were higher than the previous quarter in spite of lower US market indicators.
- Crude differentials, higher clean product yield and commercial trading and transactions contributed to the improvement.
- In the first quarter of 2008, the firm will likely be building inventories in anticipation of the switch over to summer grade gasoline.
- The refining business is expected to return to a more normalized market capture, which for the US is around 75%.
- The inventory impacts experienced as a result of the EnCana joint venture and market movements that took place in 2007 are not expected to have the same impacts as we go into the first quarter in 2008.
Refining and Marketing:
Net income was $1,122 million, up from $919 million in 2006 due to higher realized worldwide refining margins and net benefits from the company’s asset rationalization efforts. This increase was partially offset by lower volumes due to the contribution of assets to the downstream business venture with EnCana and foreign currency impacts.
