Beat ?: Yes (reported $3.50 cents/share vs estimates of $3.33/share...21% earnings per share growth over 2Q07's normalized $2.90 per share)
Profits --> Up 13% to $5.4 Billion (from a normalized $4.8 Billion)
Sales --> Up 51% to $71.4 Billion (from $47.4 Billion)
-------------------------------------------------------------------
COP's Earnings by Business Segment:
1.) ENERGY EXPLORATION + PRODUCTION OPS:
E+P Profits: Up 90% to $4.0 Billion (from 2Q07's $2.1 Billion)
E+P Profit Per BOE: Up 273% to $25.12 per BOE (vs. 2007's Avg of $6.73)...BOE or Barrel of Oil Equivalent: a unit of energy based on the approx amount of energy released by burning One Barrel of Crude Oil)
Avg Realized International Oil Price: Up 83% to $119 per barrel (from 2Q07's $65)
Avg Realized International Nat Gas Price: Up 45% to $10.94 per BTU (from 2Q07's $7.55)
Total Energy Production: Down 8% to 2.2 million BOE per day from 2Q07's 2.38 million BOE per day
Energy Production Ex Lukoil: 1.75 million BOE (vs. 2Q07's 1.91 million BOE...a year over year drop of 8%...decrease in yoy production mainly due to the Venezuelan government's expropriation of the company's Venezuelan oil projects - this resulted in COP taking a $4.5 Billion charge in 2Q07)
Natural Gas Sales: 4.8 Billion cubic feet per day during 2Q08 (vs. 2Q07's 5.1 Billion)
Exploration Expenses: $288 million (vs. $259 million in 2Q07)
2.) MIDSTREAM OPS:
Midstream Profits: Up 59% to $162 million (from 2Q07's $102 million)
3.) REFINING + MARKETING OPS:
R + M Profits: Down 72% to $664 million (from 2Q07's $2.4. Billion)
R+M Profits Per Barrel: Down 53% to $2.33 per BOE (from 2007's Avg of $5.00)
U.S. Refinery Margins: $10.29 per barrel
International Refinery Margins: $6.70 per barrel
WW Refinery Capacity Utilization Rate: 93% (vs. 2Q07's 93%)
U.S. Domestic Refinery Capacity U-Rate: 94%
International Refinery Capacity U-Rate: 88%
R+M Expenses: $170 million (up 193% from 2Q07's $58 million)
4.) LUKOIL OPS:
Lukoil Profits: Up 47% to $774 million (from 2Q07's $526 million)
COP's Lukoil Daily Production: 448,000 BOE per day (equivalent to 215K Barrels of Crude Oil per day)...20% of COP's 2Q08 Energy Production came from Lukoil
* COP's 2Q08 Lukoil earnings include a $120 million adjustment in costs to reflect lower than estimated Lukoil earnings during the previous quarter (1Q08)
5.) CHEMICALS OPS:
Chemicals Profits: Down 74% to $18 million (from 2Q07's $68 million)
-------------------------------------------------------------------
Other Highlights + Guidance:
* 2008 Production Guidance: Excluding Lukoil, full year 2008 Production will average about 1.8 million BOE per day...Conoco's 3Q08 E+P Expenses will be around $375 million
* Free Cash Flow: COP generated $5.4 Billion in Cash during 2Q08...With this money COP: 1.) Repurchased $2.5 Billion of Conoco Phillips company stock, 2.) Funded $3.6 Billion of its capital spending program, and 3.) Paid $0.7 Billion back to shareholders in dividends.
* Stock Buyback Program: As part of its $10 Billion authorized Stock Repurchase program for 2008, COP plans to spend about $5 Billion buying back company stock during the 2nd half of 2008 (the company has already spent $5 Billion buying back stock during the first half of 2008)
* Shares Outstanding: COP's 'Float' or Shares Outstanding decreased by 6% year over year to 1.56 Billion shares (from 2Q07's 1.66 Billion shares)...Conoco's repurchase of company stock contributed 33% or 20 cents to 2Q08's year over year EPS growth of 60 cents. Since the beginning of 2008 COP has spent $5 Billion purchasing its own stock.
* Effective Tax Rate: 44% (vs. 2Q07's 41%)
* Cash On Hand: $787 million
* Return On Capital: 20%
* Debt To Capital Ratio: COP ended 2Q08 with $21.9 Billion in Debt and a 19% Debt to Capital Ratio
--------------------------------------------------------------
Conference Call Quotes:
* COP CEO on 2008 Capital Spending + Stock Buyback Plan: "On share repurchase...(the) market can expect we are going to do $10 Billion share repurchase in 2008 and going at a rate of $2.5 Billion a quarter. Capital spending is going to be around $15 billion, maybe a little bit more, but $15 billion, $16 billion."
* COP CEO Jim Mulva on COP's International Projects: "See now, we recently signed interim agreement with Abu Dhabi National Oil Company (ADNOC) to develop the Shah gas field in Abu Dhabi and elsewhere in the Middle East, we approved the continued funding, moving forward for the development of the Yanbu Export Refinery project with Saudi Aramco. We’re pleased to be working with both ADNOC and Saudi Aramco on these world-class projects. It helps meet the growing demand for energy not only in the old Middle East but also around the world. We recently signed a MoU ('Memorandum of Understanding') with Petrobras (PBR), as you know the largest Brazilian Energy company, and with this agreement we hope to sort through opportunities to work together in our core businesses, upstream and downstream, as well as energy opportunities such as ethanol in Brazil."
* COP CEO on COP's North American Pipeline Project (Keystone): "In North America, our joint venture with TransCanada, we plan to expand the Keystone crude oil pipeline system, providing additional capacity of 500,000 barrels per day from Western Canada to the U.S. Gulf Coast...we expect to use it by taking Canadian crude all the way down to the Gulf Coast because there's good optionality to be in our refineries in Mid-Continent and Gulf Coast, both from Canada as well as from say Venezuela and other crudes that we can get from Mexico and other places around the world.
* COP CEO on Partnership with Brazil's Petrobras: "We’re merely looking at the opportunities on how we can participate in exploration and production both in Brazil as well as outside Brazil and then we also, with our large refining segment in North America, we kind of explore and ultimately, we’re having more crude oil production when there is an opportunities for us to be working with each other in the downstream part of the company and then for both companies...We need a lot of ethanol ultimately to blend into our gasoline and so we’re looking at the opportunities of being such large ethanol producer in Brazil and how Petrobras participates in that and whether there’s opportunities for us to be working with each other. So to go any further than that, we are really in initial phases of this study work of the MoU but we‘re really pleased to be working with Petrobras.
----------------------------------------------------------------------
Additional Misc. Conoco Phillips Info:
* COP is currently the 3rd Largest U.S. Oil Producer by marketcap
* Conoco purchased Burlington Resources in 2006 for $35 Billion to become the U.S.'s Largest Natural Gas Producer
* In addition to being the U.S.'s largest natural gas producer, COP is also the 2nd Largest Oil Refiner in the country (Valero or VLO owns the largest refining capacity in the United States)
* COP owns and operates 12 Refineries in the U.S. - 2 of which are part of a joint venture with Canada's Encana (ECA)...COP also owns refineries in Europe (Germany and the United Kingdom)
* COP has previously stated it earns $130 million, or 8 cents a share, for EACH $1 increase in Oil prices, and $33 million, or 2 cents, for EACH 25 cent gain in Natural Gas prices per thousand cubic feet.
Full Disclosure: I own shares of COP.
Posts
