By the OGJ Online Staff
HOUSTON, May 7 -- Phillips Petroleum Co., Bartlesville, Okla., expects rising demand for oil and natural gas, but the industry faces the challenge of sustaining fossil fuels as the fuels of choice, Phillips CEO Jim Mulva told shareholders Monday.
High oil and gas prices along with environmental concerns have prompted some questions about the future desirability of oil and gas, Mulva said, adding he considers this to be the biggest challenge the industry faces.
"The challenges are great, but the opportunities are even greater for companies like Phillips that can redefine themselves and adapt quickly to a rapidly changing business environment," Mulva said. "We don't consider our task complete. We see enormous opportunities to continue to profitably grow and compete."
For the first quarter, Phillips reported net income of $490 million, or $1.91/share diluted, compared with $250 million, or 98¢/share, compared with the same period last year. Revenues for the first quarter were $4.9 billion compared with $4.8 billion for the same period last year.
During the last year, Phillips transformed itself through four major transactions: joint ventures in the midstream and chemicals businesses, the acquisition of Atlantic Richfield Co.'s exploration and production assets in Alaska (OGJ, Apr. 24, 2000, p. 26); and the pending $7.5 billion stock acquisition of Tosco Corp., which is expected to close by the end of the third quarter (OGJ Online, Feb. 5, 2001).
"With each passing day, we're more convinced than ever that our strategy for growth is the right one," he said.
Phillips expects rising oil and gas demand to open opportunities for its gas resources in the Timor Sea and Alaska's North Slope. Phillips expects to add more than 1 billion bbl of reserves over the next 3 years through exploration prospects or acquisitions.
Downstream, Phillips sees strong margins and continued demand for cleaner-burning fuels. The acquisition of Tosco's nine refineries with 1.3 million b/d of capacity will provide a larger venue for leveraging Phillips' clean fuels technologies, Mulva said.
He also expects continued growth of Duke Energy Field Services, the midstream business owned 30% by Phillips and 70% Duke Energy.
Phillips' 50:50 joint venture with Chevron Corp. in Chevron Phillips Chemical Co. is expected to tap into the fastest-growing chemical markets worldwide, especially in the Far East, Mulva said.
