By the OGJ Online Staff
HOUSTON, July 23 -- Conoco Inc. said strong refining margins, good natural gas prices, and higher production boosted net income to $606 million (before special items) for the second quarter, up 32%.
Net income increased to $552 million, or 87¢/share, up 21% from $456 million, or 72¢/share, earned during the same period last year. Revenue for the quarter totaled $10.4 billion, up 10% from $9.5 billion last year.
Archie Dunham, Conoco chairman and CEO, said, "In the single step of acquiring Gulf Canada Resources Ltd., we greatly expanded Conoco's natural gas production and reserves in North America and solidified Southeast Asia as a major operating area. Importantly, an impressive inventory of long-term growth opportunities was added to our portfolio."
He said the Conoco board has approved a plan to convert Conoco's two classes of common stock into a single class of common, increasing liquidity.
Dunham said Conoco's 230,000-b/d refinery at Humber in the UK was back on stream following a fire in April (OGJ Online, Apr. 17, 2001). The company said repairs and other costs associated with the incident were $54 million.
Dunham said despite the refinery problem, the downstream division produced record earnings in the quarter on exceptionally strong US refining margins.
Upstream operations earned $493 million, 24% higher than last year, driven by strong worldwide natural gas prices and margins, as well as higher international crude oil volumes.
Conoco said gas and oil hedges initiated with the Gulf Canada acquisition announcement generated a $24 million gain during the period. Currently, the hedging program covers about 85% of the acquired production through the end of 2002.
The company's worldwide net realized crude oil price decreased 5% to $23.82/bbl. The worldwide net realized natural gas price was up 52% to $3.89/Mcf, driven by a 68% increase in US gas prices to $4.47/Mcf. International gas prices were 35% higher at $3.33/Mcf.
Oil production of 670,000 boe/d for the quarter rose 4%, from 645,000 boe/d during the same period in 2000. Petroleum liquids production of 384,000 b/d was up 6% on higher production from Indonesia, Viet Nam, and the UK.
Worldwide natural gas production was 1.7 bcfd, up slightly from last year. US natural gas volumes fell 1% to 831 MMcfd. International gas production was 885 MMcfd, up 2% on strong UK production.
Conoco said third quarter production (including Gulf Canada) is expected to be up about 35%, including syncrude, but earnings will not be as strong due to lower prices and refining margins.
Dunham said, "Nevertheless, prices and margins remain relatively robust from a historical perspective, and we still believe 2001 earnings will exceed last year's record."
