ConocoPhillips second quarter profit jumped 65% over the year-ago period, according to figures announced by the company Wednesday.

Indicative of the company’s sensitivity to consumer anger over $3.00 gasoline, the first paragraph of its earnings release touted ConocoPhillips’ reinvestment of profits into exploration and production (E&P). “Year-to-date excluding the first-quarter acquisition of Burlington Resources, the company reinvested 97% of net income into the growth and development of oil and gas resources and its global refining business,” the release said.

And in a call with industry analysts, CEO Jim Mulva said ConocoPhillips is experiencing “dramatically” higher costs across the board.

Second quarter net income was $5,186 million, or $3.09/share, compared to $3,138 million, or $2.21/share, for the same quarter in 2005. Revenues were $47.1 billion, versus $41.8 billion a year ago.

“We delivered solid results in the second quarter and are pleased with the progress made integrating the Burlington Resources operations with ConocoPhillips’ global portfolio,” Mulva said. “However, we experienced unplanned downtime in both our upstream and downstream businesses, which impacted our operating performance.”

For the first six months of 2006, net income was $8,477 million, or $5.49/share, versus $6,050 million, or $4.26/share, for the same period a year ago. Revenues were $94.1 billion, versus $79.4 billion a year ago.

Second quarter E&P net income was $3,304 million, up from $2,553 million in the first quarter of 2006 and $1,929 million in the second quarter of 2005. The increase from the first quarter of 2006 primarily was due to the inclusion of Burlington’s results and benefits associated with new tax legislation in Canada, partially offset by a new production tax enacted in Venezuela. Higher realized crude oil prices, partially offset by lower realized natural gas prices, also contributed to higher earnings. Improved results from the second quarter of 2005 primarily were due to higher realized crude oil prices, the inclusion of Burlington Resources’ results and net benefits associated with recently enacted tax legislation.

Daily production from the E&P segment, including Canadian Syncrude and excluding the company’s LUKOIL investment segment, averaged 2.13 MMboe/d, improved from 1.61 MMboe/d in the previous quarter and 1.54 MMboe/d in the second quarter of 2005. The increase from the first quarter of 2006 primarily was due to the addition of the Burlington Resources assets and initial crude oil liftings from Libya, partially offset by lower volumes from the United Kingdom due to planned maintenance. The increase from the second quarter of 2005 primarily was due to the addition of the Burlington Resources assets, initial crude oil liftings from Libya and higher production from the Timor Sea, partially offset by lower production in Alaska due to unplanned downtime at Prudhoe Bay. Before-tax exploration expenses were $134 million in the second quarter of 2006, versus $112 million in the previous quarter and $121 million in the second quarter of 2005.

E&P net income for the first six months of 2006 was $5,857 million, up from $3,716 million in 2005, primarily from higher realized crude oil and natural gas prices, the inclusion of Burlington results and net benefits associated with recently enacted tax legislation.

In the midstream segment — which includes a 50% interest in Duke Energy Field Services LLC (DEFS) — the second quarter saw net income of $108 million, down from $110 million in the previous quarter and up from $68 million in the second quarter of 2005. The decrease from the previous quarter primarily was due to a reduction of the gain on a third quarter 2005 Canadian asset sale and negative impacts from recent tax legislation, partially offset by higher natural gas liquids prices. The increase from the second quarter of 2005 primarily was due to higher natural gas liquids prices and increased ownership in DEFS, partially offset by a reduction of the gain on a third quarter 2005 Canadian asset sale and negative impacts from recent tax legislation.

Midstream net income for the first six months of 2006 decreased to $218 million from $453 million in 2005. The decrease primarily was due to the 2005 restructuring of ConocoPhillips’ ownership in DEFS and negative impacts from recent tax legislation, partially offset by higher natural gas liquids prices.

“ConocoPhillips is committed to working proactively with consumers and governments around the world to find solutions to both short-term and long-term energy challenges,” Mulva said. “During the past three years, we have invested more capital into energy development than we have earned in net income. Our 2006 $18 billion capital program represents a 50% increase from last year, and it is three times what we spent just three years ago. This level of capital investment will enable us to develop new oil and natural gas supplies, expand our refining capabilities, and bring to fruition such major new projects as Arctic gas pipelines and liquefied natural gas production and transportation — projects that will help address the world’s future energy needs.”

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