This excerpt taken from the COP 8-K filed Jan 27, 2010.
ConocoPhillips Reports Fourth-Quarter Earnings of $1.2 Billion
HOUSTON--(BUSINESS WIRE)--January 27, 2010--ConocoPhillips (NYSE:COP):
ConocoPhillips (NYSE:COP) today reported fourth-quarter adjusted earnings of $1.7 billion. For the quarter, cash from operations was $5.1 billion, which was used to fund capital of $3.1 billion and pay dividends of $0.7 billion. Debt was reduced to $28.7 billion, resulting in a year-end debt-to-capital ratio of 31 percent.
“Our upstream business performed well during this quarter and throughout 2009,” said Jim Mulva, chairman and chief executive officer. “E&P full-year production was 65,000 BOE per day higher than 2008 production due to project ramp-ups and high operating efficiency. North American natural gas prices were improved slightly from the third quarter but for the year still lagged behind 2008 levels, negatively impacting both 2009 production volumes and earnings. In downstream, our utilization rates were significantly impacted by reduced run rates due to low worldwide refining margins.”
Full-year 2009 production in Exploration and Production (E&P) was 1.85 million barrels of oil equivalent (BOE) per day, compared with 1.79 million BOE per day in 2008. The increase was mainly due to approximately 125,000 BOE per day of new production from major oil project developments in the United Kingdom, China, Canada, Norway, Vietnam and Russia. Production also increased due to lower unplanned downtime and reduced impacts from production sharing arrangements, partially offset by base field decline and increased planned downtime. For the year, total production including the company’s share of LUKOIL was 2.29 million BOE per day.
For 2009, the company achieved cost reductions of $1.9 billion, or $1.7 billion adjusted for severance accruals. This is a decrease of approximately 12 percent for the year, exceeding the original target of $1.4 billion, or 10 percent. Market factors such as foreign currency and lower energy costs contributed about 60 percent of the reductions. In addition, savings were realized through the renegotiation of service and supply contracts, work force reductions and an ongoing focus on costs.
“With respect to exploration, we had three potentially significant discoveries in 2009, including the company-operated Poseidon discovery in the Browse Basin off the northwest coast of Australia. In the Gulf of Mexico, we participated in two Lower Tertiary discoveries, Tiber and Shenandoah. In addition, as recently announced, we added to our Lower Tertiary position by acquiring interest in 21 blocks in exchange for a share of our Chukchi Sea acreage offshore Alaska. Elsewhere, the company continues to see good results from our Eagle Ford shale gas play activities, and we have commenced drilling on our Muskwa shale gas acreage in British Columbia, Canada.”
The company recently announced plans to expand the Surmont heavy oil project in Canada, in which ConocoPhillips holds a 50 percent ownership. The Phase 2 Project, slated to begin initial construction in 2010, is expected to increase the company’s Surmont production from 10,000 to 50,000 net barrels per day, with plateau production expected in 2017. In China, production from the company-operated Bohai Bay facilities increased to approximately 45,000 net barrels of oil per day as the company progresses toward final completion of the Phase 2 development project. In addition, ConocoPhillips’ North Belut Field in Indonesia achieved first production during fourth-quarter 2009.
“In our downstream segment, we are responding to a difficult market by lowering utilization, reducing discretionary capital expenditures, managing costs and optimizing turnaround timing. In the fourth quarter our worldwide refining crude oil capacity utilization rate was 76 percent,” Mulva added. “As announced earlier, the upgrade project at the Wilhelmshaven, Germany refinery has been deferred.”
Consistent with plans to increase returns and improve its financial position, the company also announced a two-year, $10 billion asset disposition initiative and an $11.2 billion 2010 capital program. Approximately 86 percent of the 2010 capital program will be in support of the company’s E&P segment, while the Refining and Marketing segment represents 12 percent of the program. More information on the company's plans will be presented on March 24 when ConocoPhillips holds its annual analyst meeting.