ConocoPhillips reported first-quarter net income of $4,139 million, or $2.62 per share. This compared with $3,546 million, or $2.12 per share, for the same quarter in 2007. Revenues were $54.9 billion, versus $41.3 billion a year ago.
"Although we delivered solid financial results during the first quarter, unplanned downtime negatively impacted our performance," said Jim Mulva, chairman and chief executive officer. "Our upstream business produced 2.25 million BOE per day, including our estimated share of LUKOIL's production, and we benefited from higher commodity prices. In the downstream business, our worldwide refining crude oil capacity utilization rate was 89 percent and we were impacted by significantly lower realized margins.
"During the quarter, we generated $6.6 billion of cash from operations and $0.4 billion in proceeds from asset dispositions. This enabled us to repurchase $2.5 billion of ConocoPhillips common stock, fund $3.5 billion of our capital program, and pay $0.7 billion in dividends. We ended the quarter with debt of $21.5 billion, a debt-to-capital ratio of 19 percent and a cash balance of $1.4 billion."
Exploration and Production (E&P)
E&P first-quarter net income was $2,887 million, up 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 primarily due to higher commodity prices, partially offset by reduced volumes and the absence of fourth-quarter 2007 benefits related to a Canadian federal tax-rate change and the extinguishment of the Hamaca project financing.
The increase from the first quarter of 2007 was primarily due to higher commodity prices, partially offset by higher taxes, lower volumes, a reduced net benefit from asset rationalization efforts, and increased operating costs.
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, 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 primarily 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. In addition, volumes were negatively impacted by the absence of one-time, fourth-quarter natural gas liquids volume adjustments in the Lower 48. These decreases were partially offset by higher production in the Timor Sea as a result of less planned downtime.
The production decrease from the first quarter of 2007 was primarily due to the expropriation of the company's Venezuelan oil projects and ConocoPhillips' exit from Dubai, as well as normal field decline and unplanned downtime in the Lower 48. This decrease was partially offset by production from new developments in Canada, the United Kingdom and Norway.
Before-tax exploration expenses were $309 million in the first quarter of 2008, compared with $268 million in the previous quarter and $262 million in the first quarter of 2007.
The LUKOIL Investment segment had first-quarter net income of $710 million, up from $649 million in the previous quarter and $256 million in the first quarter of 2007. The results include ConocoPhillips' estimated equity share of OAO LUKOIL's (LUKOIL) income for the first quarter based on market indicators and LUKOIL's publicly available operating results. The increases in net income from the previous quarter and the first quarter of 2007 were primarily due to higher estimated realized prices, partially offset by higher estimated taxes.
For the first quarter of 2008, ConocoPhillips estimated its equity share of LUKOIL production was 459,000 BOE per day.
Mr. Mulva concluded, "We expect to achieve our strategic objectives for 2008, and we are focused on continuous improvement in all of our operations. We will continue to supply crude oil, natural gas and refined product volumes to meet the world's energy needs through the disciplined development and efficient operation of our portfolio of high-quality assets.
"We are strengthening distributions to shareholders through increased dividends and continued share repurchases. During the first quarter, we repurchased $2.5 billion of ConocoPhillips common stock and increased our dividend by approximately 15 percent. The number of weighted-average diluted shares outstanding during the first quarter was 1,582 million.
"In addition, we were the successful bidder on several prospective leases located in Alaska's Chukchi Sea and the U.S. Gulf of Mexico.
"We are pleased to be working with BP to construct a pipeline that will move natural gas from Alaska's North Slope through Canada to the U.S. Lower 48. This pipeline will move approximately 4 billion cubic feet of natural gas per day to markets, and it will be the largest private sector construction project ever built in North America.
"Looking ahead to the second quarter, we expect the company's E&P segment production will be lower than the first quarter as a result of scheduled maintenance. We anticipate full-year 2008 production will be consistent with our operating plan. We expect exploration expenses to be approximately $250 million for the quarter."
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