ConocoPhillips Reports $2B for 4Q Earnings, Up 60%
ConocoPhillips reported fourth-quarter earnings of $2.0 billion, compared with fourth-quarter 2009 earnings of $1.3 billion. Excluding gains from asset dispositions, impairments and other items, fourth-quarter 2010 adjusted earnings were $1.9 billion, or $1.32 per share. For 2010, the company had earnings of $11.4 billion, compared with earnings of $4.4 billion in 2009. Excluding gains from asset dispositions, impairments and other items, 2010 adjusted earnings were $8.8 billion.
"We are pleased with our operating and financial performance, both for the fourth quarter and the full year," said Jim Mulva, chairman and chief executive officer. "We improved our returns, reduced debt, and increased shareholder distributions. In addition to meeting our financial objectives, we improved our portfolio and exceeded our goal to replace our 2010 production with new organic reserves. Our upstream and downstream businesses delivered against their operating targets, and our midstream and chemicals joint ventures both had a successful year."
Production from the Exploration and Production (E&P) segment for the fourth quarter of 2010 was 1.73 million barrels of oil equivalent (BOE) per day, compared with 1.83 million BOE per day in the same period in 2009. The decrease was due mainly to normal field decline, primarily in North America and Europe, and asset dispositions. Initial gas and liquids production from the company's Qatargas 3 (QG3) project, as well as production from major projects in China, North America and Australia, partially offset the decrease.
"Our E&P business met its production target while improving capital efficiency and returns," said Mulva. "The sale of certain non-strategic assets allows us to reallocate capital to higher margin projects such as Canadian oil sands, LNG and unconventional resource plays."
The company continued its appraisal and drilling programs in the Eagle Ford, Bakken and North Barnett shale plays. During the quarter, ConocoPhillips increased holdings in the North Barnett area and acquired new acreage positions in other emerging North American shale plays.
As previously announced, in late November the first cargo of liquefied natural gas (LNG) was shipped from the QG3 joint venture. By the end of the quarter, train 6 was fully operational and performing well. Elsewhere, drilling was completed on the Rak More wildcat well in Kazakhstan, with additional assessment and further exploration planned to evaluate the discovery.
For the year, ConocoPhillips generated $15.4 billion in proceeds from dispositions, $8.3 billion from LUKOIL share sales and $7.1 billion from asset sales. The company funded a $10.7 billion capital program, with 86 percent directed to E&P, and spent $3.9 billion to repurchase 65 million of its own shares.
During 2010, the company reduced its ownership interest in OAO LUKOIL from 20 percent to approximately 2 percent at year end. Proceeds from LUKOIL share sales will continue to be used primarily for ConocoPhillips share repurchases. The company expects to dispose of its remaining interest in LUKOIL during the first quarter of 2011.
Full-year 2010 controllable costs normalized for market factors and portfolio changes were approximately $550 million lower, or 4 percent, compared with 2009. The improvement was equally split between the E&P and R&M segments. Unadjusted controllable costs for 2010 were $13.3 billion, compared with $12.7 billion in 2009.
"We made significant progress in 2010 on our two-year plan," said Mulva. "We look forward to providing additional information about our plans at our annual analyst meeting with the financial community in March."
Fourth-Quarter Financial Highlights
For the fourth quarter of 2010, ConocoPhillips reported earnings of $2.0 billion, or $1.39 per share, compared with earnings of $1.3 billion, or $0.86 per share, for the same period in 2009. Fourth-quarter 2010 earnings included $718 million in gains from North America E&P asset sales and LUKOIL share dispositions. These gains were partially offset by $638 million of non-cash impairments, primarily related to the company's investment in the Naryanmarneftegaz joint venture.
Fourth-quarter 2010 adjusted earnings were $1.9 billion, or $1.32 per share, compared with adjusted earnings of $1.8 billion, or $1.20 per share, for the same period in 2009. Adjusted earnings for the quarter increased versus the prior year, primarily due to the impact of higher commodity prices and global refining margins. This increase was partially offset by the absence of equity earnings from the LUKOIL investment, lower production volumes and higher costs.
During the fourth quarter of 2010, the company generated $6.2 billion in cash from operations, including $2.1 billion of working capital improvements, and received $3.1 billion in proceeds from asset dispositions. This cash was used to fund a $3.6 billion capital program, repurchase $2.6 billion of ConocoPhillips common stock, pay $0.8 billion in dividends, and increase cash and short-term investments by $2.4 billion.
Full-Year Financial Highlights
ConocoPhillips' full-year 2010 adjusted earnings were $8.8 billion, compared with full-year 2009 adjusted earnings of $4.9 billion. Adjusted earnings for 2010 were higher than 2009, primarily due to higher commodity prices and global refining margins, partially offset by lower production volumes. Full-year 2010 earnings were $11.4 billion, compared with $4.4 billion for 2009.
At year end, the company had $10.4 billion in cash and short-term investments. A significant portion of these funds are expected to be used for additional share repurchases. As of December 31, 2010, debt was $23.6 billion and the debt-to-capital ratio was 25 percent.
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