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ConocoPhillips Reports Gains in Lower 48 Gas Production

Gains in the U.S. onshore and new international projects lifted ConocoPhillips' natural gas production in the first three months of this year from a year ago, the company reported Thursday.

Total U.S. gas production in the quarter for the company was 2,119 MMcf/d, up from 2,063 MMcf/d in the year-ago period. From the Lower 48 states gas output was 2,027 MMcf/d versus 1,963 MMcf/d in 1Q2008. ConocoPhillips' Alaska gas production dropped to 92 MMcf/d from 100 MMcf/d. Kenai, AK liquefied natural gas sales were down at 43 MMcf/d from 63 MMcf/d a year earlier. In Canada ConocoPhillips' 1Q2009 gas production fell slightly to 1,066 MMcf/d from 1,101 MMcf/d a year earlier.

For consolidated operations and equity affiliates worldwide, ConocoPhillips' quarterly gas output averaged 5,087 MMcf/d, up from 4,900 MMcf/d in 1Q2008. Quarterly gas and oil production worldwide increased 131,000 boe/d from 1Q2008, mostly from growth in Canada and overseas.

The Houston-based major also reported a profit -- but one well below that from a year earlier. The company said it earned $840 million (56 cents/share) in 1Q2009, about 80% below the $4.14 billion ($2.62) reported in 1Q2008. Revenues in the period declined to $30.7 billion from $54.9 billion. In the first three months of this year the company generated $1.9 billion in cash from operations, and it spent $3.1 billion on its capital program. Total debt at the end of March was estimated at $29.4 billion, and the company carried a debt-to-capital ratio of 34% with a cash balance of $800 million.

"Although we delivered solid operational performance in our upstream business during the first quarter, lower commodity prices and realized margins negatively impacted our financial results," said CEO Jim Mulva. "Our upstream business produced 2.4 million boe/d, including our share of LUKOIL's production [in Russia]."

The exploration and production (E&P) segment reported a quarterly profit of $700 million, which was about half of what it earned for the same period of 2008: $1.39 billion. U.S. E&P profits plunged to $173 million from $1.349 billion a year ago. Daily production from the E&P segment, including Canadian Syncrude, averaged 1.93 MMboe/d, which was 58,000 boe/d higher than the previous quarter. The increase, said ConocoPhillips, came from new developments, primarily in Russia, Vietnam and China. Production also increased because of the impact of production sharing contracts, and less planned and unplanned downtime, partially offset by field decline.

"ConocoPhillips remains focused on maintaining operational excellence, implementing identified cost reduction initiatives, optimizing our capital program and progressing major development projects," said Mulva. "Our strategy has enabled us to perform well during the current economic downturn, and we are well positioned to attain our long-term plans when the global economy recovers in the future."

ConocoPhillips is forecasting 2Q2009 production to fall sequentially from 1Q2009 because of planned maintenance and seasonal activity. "However, full-year production is expected to be slightly higher than 2008," said the CEO.

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