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ConocoPhillips Reports Operating Results (10-Q)

May 04, 2010 | About:

10qk

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ConocoPhillips (COP) filed Quarterly Report for the period ended 2010-03-31.

Conocophillips has a market cap of $88.76 billion; its shares were traded at around $59.7 with a P/E ratio of 13.3 and P/S ratio of 0.6. The dividend yield of Conocophillips stocks is 3.4%. Conocophillips had an annual average earning growth of 18.2% over the past 10 years.COP is in the portfolios of Donald Yacktman of Yacktman Asset Management Co., Tweedy Browne of Tweedy Browne CO LLC, Michael Price of MFP Investors LLC, Steven Romick of FPA Crescent Fund, Warren Buffett of Berkshire Hathaway, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Richard Snow of Snow Capital Management, L.P., Wallace Weitz of Weitz Wallace R & Co, David Williams of Columbia Value and Restructuring Fund, NWQ Managers of NWQ Investment Management Co, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, First Pacific Advisors of First Pacific Advisors, LLC, David Dreman of Dreman Value Management, Bill Frels of MAIRS & POWER INC, Jeremy Grantham of GMO LLC, Chris Davis of Davis Selected Advisers, Brian Rogers of T Rowe Price Equity Income Fund, PRIMECAP Management, Tom Russo of Gardner Russo & Gardner, Third Avenue Management, Manning & Napier Advisors, Inc, George Soros of Soros Fund Management LLC, Charles Brandes of Brandes Investment, Bruce Kovner of Caxton Associates, Dodge & Cox, Murray Stahl of Horizon Asset Management, Steven Cohen of SAC Capital Advisors, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

Earnings in the first quarter of 2010 were positively impacted by an increase in crude oil prices. Crude oil prices steadily trended upward during 2009 and into the first quarter of 2010, as expectations of a global economic recovery stimulated the resumption of global oil demand growth. Industry crude oil prices for West Texas Intermediate averaged $78.67 per barrel in the first quarter of 2010, or $2.61 higher than the fourth quarter of 2009, and $35.70 per barrel higher than the first quarter of 2009.

Henry Hub natural gas prices averaged $5.30 per million British thermal units in the first quarter of 2010, or $1.14 higher compared with the fourth quarter of 2009, and $0.39 higher than first quarter 2009. The improvement in natural gas prices resulted from increased demand from colder-than-normal temperatures across the U.S., moving storage levels from five year highs to closer to the five year average. However, the current, robust level of domestic natural gas production has constrained the improvement in natural gas prices.

As a result, our Exploration and Production (E&P) segment had earnings of $1,832 million in the first quarter of 2010. This compares with E&P earnings of $1,201 million in the fourth quarter of 2009 and $700 million in the first quarter of 2009.

Global refining margins began to improve in the first quarter of 2010. The N.W. Europe benchmark was $9.25 per barrel in the first quarter of 2010, or $1.11 higher than the fourth quarter of 2009, and $1.56 lower than the first quarter of 2009. Although domestic refining margins also improved, U.S. demand remained lackluster, despite evidence of economic recovery. Weak demand led domestic refiners to reduce runs in order to bring supply more in line with demand. The U.S. benchmark 3:2:1 crack spread was $7.68 per barrel in the first quarter of 2010, or $1.73 higher than the fourth quarter of 2009, and $3.20 lower than the first quarter of 2009.

International E&P earnings were $1,075 million in the first three months of 2010, compared with earnings of $527 million for the same period in 2009. Higher crude oil, natural gas liquids and bitumen prices, in addition to foreign currency gains, were partially offset by higher export and petroleum taxes, as a result of higher prices, and the $83 million after-tax write-off of project costs resulting from our decision to cease participation in the Shah Gas Field Project in Abu Dhabi.

Our R&M segment reported a loss of $4 million during the first quarter of 2010, compared with earnings of $205 million in the corresponding quarter of 2009. The decrease was primarily due to lower domestic and international refining and marketing margins, lower international refining and marketing volumes and negative foreign currency impacts. In addition, we recorded an impairment of $25 million after tax in the first quarter of 2010, which resulted from our decision to end participation in the Yanbu Refinery Project. These decreases were partially offset by lower domestic operating expenses and improved U.S. refining and marketing volumes. See the Business Environment and Executive Overview section for additional information on industry refining margins.

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