Conoco reverses loss with Q1 profit. Higher energy prices, refining margins helped results

By Deborah Adamson, <a href=cbs.marketwatch.com>CBS.MarketWatch.com Last Update: 5:32 PM ET April 30, 2003

HOUSTON (CBS.MW) -- ConocoPhillips reported a first-quarter profit and a dramatic jump in revenue on Wednesday, reversing last year's loss as higher energy prices and improved refining margins boosted results.

The integrated oil company (COP: news, chart, profile) said net income totaled of $1.4 billion, or $2.10 a share, compared with a loss of $102 million, or 27 cents, in the year-ago period.

Income from continuing operations came to $1.27 billion, or $1.86 a share; analysts polled by Thomson First Call had been expecting $1.72 a share in profit. The figure excludes discontinued operations and the impact of an accounting change. Last year, ConocoPhillips posted a loss of $98 million, or 26 cents a share.

Revenue was $27.1 billion, more than triple last year's $8.5 billion.

Average worldwide crude oil sales price topped $30.72 compared with $25.31 in the fourth quarter.

U.S. mainland natural gas prices averaged $5.47 per thousand cubic feet while worldwide prices topped $4.49. They compare with $3.43 and $3.27 in the prior period, respectively.

The company also decreased debt by $1.5 billion to $18.2 billion.

Upstream production came to $1.6 million barrels of oil equivalent per day. A decline in upstream activity -- which encompasses exploration, development and production -- in Venezuela was offset by higher output in Alaska, China and Indonesia.

Exploration and production income from continuing operations came to $1.14 billion, up from last year's $142 million. Higher crude oil and natural gas prices, increased production and its synergies from the Conoco and Phillips merger boosted performance.

Midstream income, which pertains to storage and transportation of energy, was $31 million, up from $12 million. Higher equity earnings from its stake in Duke Energy Field Services LLC plus an increase in Conoco's midstream operations enhanced the business.

In downstream operations, which encompass the refining and marketing of oil, capacity was at 92 percent in the quarter, up from 89 percent a year ago. Income from continued operations rose to $371 million vs. $87 million.

Higher refining margins and full quarter of operations at a U.K. refinery more than offset higher energy and turnaround expenses.

"Consistent with the integrated oil group, ConocoPhillips outpaced our (estimates) on a strong downstream quarter," said Tyler Dann, an analyst at Banc of America Securities, in a note to clients.

In the chemicals segment, ConocoPhillips lost $23 million from its 50 percent stake in Chevron Phillips Chemical Company LLC due to higher fuel and feed stock costs. Last year, it lost $11 million.

Dann maintained his "buy" rating on the company and views the stock as a "top pick" within integrated oils. The analyst's 12-month price target is $56.40.

Shares of ConocoPhillips rose 25 cents to finish the trading day at $50.30. Deborah Adamson is a reporter for CBS.MarketWatch.com in Los Angeles.