ConocoPhillips Promises Happier Days Ahead

URL: www.thestreet.com By Melissa Davis Staff Reporter 01/29/2003 04:32 PM EST

The marriage of Conoco and Phillips is off to a bit of a rocky start.

The Houston-based energy giant, now known as ConocoPhillips (COP:NYSE - news - commentary) , recorded a slew of restructuring charges during its first full quarter as a united entity. The company also weathered setbacks in Venezuela, where a crippling oil strike continues to chomp away at the company's bottom line.

After taking more than $1 billion in restructuring charges -- part of a big-picture plan to capitalize on synergies -- ConocoPhillips posted a fourth-quarter loss of $410 million, or 60 cents a share. Excluding special items, ConocoPhillips reported fourth-quarter profits of $1.10 a share that fell a penny shy of analysts' lowest expectations.

Nevertheless, ConocoPhillips CEO Jim Mulva declared the company's honeymoon quarter an overall success, and investors appeared to agree, boosting the stock 4%.

"We're making good progress executing our strategic plan," Mulva told analysts during a conference call on Wednesday. "We're building a new company with very high expectations to improve our competitive positions."

But for now, the company must fight through some unexpected challenges as it pursues that long-term bliss. Namely, it's trying to overcome a Venezuela strike that could slash future earnings by up to $50 million a month.

ConocoPhillips expects to make no money in Venezuela -- normally a top international producer -- during the first quarter of this year. Even if the strike there ends shortly, as some are optimistically predicting, the company would need a month or two to ramp up production to normal levels. In the meantime, the company's refinery margins -- tied to oil supplies and prices -- could also take a hit.

Analysts on Wednesday were fixated on the situation in Venezuela. But more broadly, they were hunting for signs that the ConocoPhillips merger will prove to be a successful one.

In spite of the challenges -- and some lingering skepticism from analysts -- ConocoPhillips promised to deliver.

"We are moving forward with our plan to improve the returns of each of our business lines," Mulva stated. "We will report our progress in capturing synergies beginning in our first-quarter 2003 results."

Mulva promised an initial update next month.

In the meantime, shares of ConocoPhillips surged ahead $2.10, to $48.01 in Wednesday trading. The stock is selling at the low end of its 52-week range of $44.03 to $64.10.