The first of the big three majors, third-ranked ConocoPhillips, swung to a profit in the fourth quarter after a year-ago loss, unhindered by the special charges from its mega merger in 2002. Meanwhile, Kerr McGee Corp. and Amerada Hess Corp. also reversed their losses from a year ago on higher commodity prices.
ConocoPhillips, headquartered in Houston, reported a 43% increase in operating earnings on the strength of its exploration and production (E&P) businesses. In the final quarter of 2002, ConocoPhillips was still moving through its merger-related special charges for restructuring that crippled its results. Wednesday, the company posted fourth quarter net income of $1.02 billion ($1.48/share), compared with a loss of $428 million (minus 63 cents/share) one year ago. Total revenue rose 11% to $26 billion from $23.5 billion.
Upstream improved 23% to $991 million. Downstream income of $2002 million was up 93% from 4Q2002, however, it was off 58% from 3Q2003.
“Operationally, we performed well overall during the fourth quarter, and there remains opportunity for improvement,” said CEO Jim Mulva. “We produced 1.61 million boe/d and ran our refineries at 94% of capacity,” but he added that lower U.S. refining margins and higher turnaround expenses “significantly reduced downstream earnings.”
Mulva told analysts in a conference call Wednesday that ConocoPhillips has sold $3.4 billion in assets since its merger and plans to sell about $1 billion more this year. Most of the merger-related assets have been completed, and going forward, the company will concentrate on debt reduction. Mulva said no acquisitions were on the horizon, but added that the company may consider joint ventures.
Kerr-McGee Corp., based in Oklahoma City, turned around its losses from a year ago, boosted by strong commodity prices and lower exploration expenses. Income from continuing operations was $50.5 million (50 cents/share), compared with a loss of $345 million (minus $3.43/share) for 4Q2002.
“During 2003, we capitalized on our expertise, technology and supply chain initiatives to strengthen our overall performance,” said CEO Luke R. Corbett. “We met our production estimates of 271,000 boe/d, completed a major deepwater development early and within budget, lowered lease operating expense by 13% on a unit basis, and maintained strong cash flow that funded a successful exploration program. In addition, we reduced debt while continuing to return a substantial dividend to our shareholders.”
Fourth quarter daily sales of natural gas averaged 742 MMcf/d, compared with 792 MMcf/d a year earlier. The average sales price for the 2003 fourth quarter, including the effects of the company’s hedging program, was $4.25/Mcf, 22% higher than a year earlier. Daily oil production averaged 139,900 bbl in the quarter, versus 178,400 bbl in 4Q2002. Kerr-McGee replaced 135% of its 2003 worldwide production from continuing operations of 99 MMboe at an average finding, development and acquisition cost of $9.14/boe.
Integrated energy company Amerada Hess Corp. on Wednesday also reversed its year-ago losses, reporting net income of $68 million, compared with a net loss of $371 million a year earlier. Net income was $643 million for the year, compared with a loss of $218 million in 2002.
The New York City-based company’s oil and gas production was 356,000 boe/d in the fourth quarter, compared with 434,000 boe/d a year earlier. Nearly 70% of the decline in production was blamed on asset sales and exchanges. The company’s average U.S. natural gas selling price, including the effect of hedging, was $3.96/Mcf in the quarter, a drop of 41 cents from 4Q2002. The average U.S. price for the full year was $4.02/Mcf, a 30 cent increase over 2002.
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