Because of lower commodity prices, ConocoPhillips and Marathon Oil Corp. both expect to report lower oil and natural gas output for 1Q2007 than in the final three months of 2006.
ConocoPhillips, the third largest U.S. integrated producer behind ExxonMobil Corp. and Chevron Corp., is coming off its most profitable year on record. It will report 1Q2007 results on April 27. Marathon is scheduled to report its results on May 1.
ConocoPhillips said benchmark West Texas Intermediate crude oil was down about $2/bbl ($57.76) in 1Q2007 from 4Q2006 ($59.68) and down more than $5/bbl from 1Q2006 ($61.75). Gas prices in 1Q2007 were down more than $2/MMBtu ($6.77) from 1Q2006 ($9.01), but up about 20 cents/MMBtu from 4Q2006 ($6.56).
The Houston-based producer said the anticipated lower production in the first three months of 2007 was due primarily to decreased production from the Organization of Petroleum Exporting Countries and unplanned refinery downtime in the Lower 48 states. The production estimates include ConocoPhillips’ Canadian Syncrude operations but not its Russian Lukoil business. Results in ConocoPhillips’ midstream gas gathering and pipeline business and its chemicals segment also are expected to be lower sequentially over the final quarter of 2006. Debt was projected to be about $23.7 billion at the end of the quarter, a reduction of about $3.4 billion from the end of the 2006.
Marathon, also based in Houston, estimated production in the first three months to be 338,000 boe/d. Revenues are reported based on production sold during the period, which can vary from production available for sale primarily as a result of the timing of international crude oil liftings and natural gas sales. Oil and natural gas production available for sale is expected to be 343,000 boe/d, within the guidance of 335,000-355,000 boe/d.
The Henry Hub prompt-month natural gas futures market price indicator strengthened 50 cents/MMBtu in the quarter, while the bidweek indicator was up 20 cents/MMBtu over the same period, Marathon said. Quarterly exploration expense for the first three months is now estimated to be $70-90 million. U.S. exploration expense is estimated to be $40-50 million, while international exploration expense is estimated to be $30-40 million.
Marathon continued its share repurchase program during the quarter, purchasing five million shares of its common stock at a cost of approximately $452 million. At the end of 1Q2007, Marathon estimated it had repurchased almost 25.8 million shares at a total cost of approximately $2.2 billion. The company’s board initially authorized a $2 billion share repurchase program in January 2006 and extended this program to $2.5 billion early this year.
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