ConocoPhillips posts $410 million 4th-quarter loss

Associated Press
January 29, 2003

ConocoPhillips, the No. 3 U.S. oil company, today posted a fourth-quarter loss, reversing a year-ago profit, after taking $1.2 billion in charges to account primarily for planned gas station sales.

The Houston company -- formed by the combination of Conoco and Phillips last year -- is in the process of selling assets in both its upstream exploration and production business and its downstream refining and marketing business as part of a plan to shed properties that do not bring in adequate returns.

ConocoPhillips reported a net loss of $410 million, or 60 cents a share, compared with net income of $162 million, or 42 cents a share, in the year-ago quarter. The year-ago figures are for Phillips as a stand-alone company.

Shares of ConocoPhillips were up more than 4 percent after the results were announced, following a nearly 5-percent rise during a fourth quarter that saw crude oil prices rise more than 40 percent due to fears of a potential war in Iraq, a strike in Venezuela and increasing U.S. demand for petroleum products.

But the troubles in Venezuela, the world's fifth-largest exporter of oil, have proved a double-edged sword.

The company, which said its operations there are currently shut down, forecast an impact of about $30 million to $50 million a month as long as the shutdown continues.

Friedman, Billings, Ramsey analyst Jacques Rousseau, who rates the company an "outperform" and does not own any of its shares, said the figure is less than many had expected. "People had been fearful the impact would be greater."

But he added: "The key thing is they provided some flavor on what's going on in Venezuela, with an estimate of what the strike is costing them."

STILL "SIGNIFICANTLY" SMALLER

The $15.4 billion deal creating ConocoPhillips catapulted it into the ranks of the largest U.S. oil companies, though it remains well behind Exxon Mobil Corp. and ChevronTexaco Corp. in terms of both stock market value and revenue.

The merger, which closed last August, is making good progress, Chief Executive Jim Mulva said in a statement, with $1.25 billion a year in cost savings expected by the end of this year. He also said he doesn't expect anymore "substantial" large charges stemming from the merger.

"We're building a new company with very high expectations to improve our competitive position as we compare ourselves to the largest companies in our industry," Mulva said on a conference call.

But whether ConocoPhillips is set to join the ranks of the biggest oil companies in the world remains a question.

"That'll take some time," Rousseau said. "We're still looking at a company significantly smaller than its peers. The key is making sure they get the synergies they promised."

Excluding special items, the company posted earnings per share of $1.10, a penny below the Thomson First Call consensus estimate.

Exploration and production operating income more than tripled from a year-ago, to $824 million, due to increased production with the addition of the Conoco assets, as well as higher crude oil and natural gas prices.

The company's first-quarter production forecast of about 1.55 million barrels of oil and gas a day is in line with previous guidance, even after assuming that production from Venezuela will not resume in the first quarter.

Refining and marketing results more than doubled, to $193 million, with the addition of the Conoco assets and higher refining margins that offset a shutdown at a U.K. refinery.

As part of its plan to identify assets that do not meet return targets, ConocoPhillips -- which already sold more than $600 million of properties in its exploration and production business during the quarter -- is looking to sell a substantial portion of its 3,700 company-owned service stations and exit some regions of the world.

Revenue for the quarter rose to $23.5 billion from $8.7 billion for Phillips in the prior-year quarter.

Shares of ConocoPhillips were up $1.84, or just over 4 percent, to $47.75 in Wednesday afternoon trade on the New York Stock Exchange, after climbing as high as $47.90 earlier in the session.