More strong second quarter earnings were released on Wednesday, with ConocoPhillips, the third largest integrated major reporting a 75% increase in profit. Amerada Hess Corp. and Kerr-McGee Corp. also benefited from high prices, but only Kerr-McGee reported respectable production gains over the second quarter of 2003.

Houston-based Conoco’s higher earnings resulted from gains in its refining business, despite the fact that three of its refineries had unscheduled or unexpectedly long shutdowns that increased maintenance costs. It reported earnings of $2.1 billion ($2.97/share), which was well ahead of 2Q2003’s $1.2 billion ($1.73/share). Revenue was up 25% to $31.9 billion from $25.6 billion.

“Overall, our operating performance for the quarter was good, but there were opportunities to do better,” said CEO Jim Mulva. “Due to unscheduled downtime, we did not realize the full potential of our assets in a high price and high margin environment.” Mulva will take over as chairman of the company with the retirement of Archie Dunham at the end of September (see Daily GPI, July 16).

“We made further progress in strengthening our balance sheet, with our debt-to-capital ratio declining from 32% to 29% during the quarter,” said Mulva. “In addition to operating cash flows of $2.3 billion, we received proceeds of $905 million from asset sales. This brings the company’s total proceeds realized from all asset dispositions since the merger to approximately $4.7 billion. Cash generation during the quarter allowed us to invest $1.6 billion in capital projects, pay $296 million in dividends and reduce balance sheet debt by approximately $1.5 billion.”

The company also is working to improve its falling production levels. In the second quarter, Conoco produced 913,000 bbl/d of oil, which was down 5.6% from 2Q2003, and it produced 3.3 Bcf/d of gas, which was off 5.5% from a year earlier. Declines in existing oil fields and sales of production assets contributed to the declines. To reverse this trend, Conoco said it is close to a transaction with Russian-based OAO Lukoil that would give Conoco a 7.6% stake. It also would commit another $3 billion in a joint exploration deal.

Kerr-McGee, headquartered in Oklahoma City, reported net income of $110.6 million ($1.01/diluted share), up 59% from 2Q2003’s $69.6 million (68 cents). Adjusted after-tax net income from continuing operations was $119.8 million ($1.09/share), compared with $113.0 million ($1.07) for 2Q2003. Adjusted after-tax net income from continuing operations was determined by excluding net income results from discontinued operations and the effect of special items.

“During the second quarter, we met our production projections, continued to control costs and experienced improving performance by our chemical operations, while completing the merger with Westport Resources, which adds significant depth, breadth and balance to our oil and gas exploration and production program,” said CEO Luke R. Corbett.

“We expect total oil and gas volumes to increase by more than 25% in the third quarter, as we ramp up production from new developments in the deepwater Gulf of Mexico at the Red Hawk and Gunnison fields and our new core area in Bohai Bay, China; bring on additional volumes from our successful exploitation programs; and realize the full impact of the merger with Westport Resources.”

Kerr-McGee’s daily oil production from continuing operations averaged 140,500 bbl/d in the second quarter, down 9% from 154,800 bbl/d for the same period a year ago. However, natural gas sales averaged 740 MMcf/d, up 6% from a year ago. The average natural gas sales price, including the effects of the company’s hedging program, was $4.70/Mcf a 10% increase over the 2003 second quarter. In the United States, Kerr-McGee sold 684 MMcf/d for the quarter, up from 617 MMcf/d in 3Q2003.

New York-based Amerada Hess reported its quarterly production fell 7% to 351,000 boe/d, mostly on the sales of older, higher-cost fields worldwide. Still, Hess reported that the first six months performance would allow it to exceed its previous production forecast by 4.6% by the end of the year. Hess now expects output to average 340,000 boe/d, up from a previous forecast of 325,000 boe/d.

On the gas side, Hess produced 160 Bcf in the quarter, well off of the 264 Bcf it produced in 2Q2003, and also down from the 183 Bcf it produced in 1Q2004. Worldwide, the company produced 601 Bcf in the quarter, down from 695 Bcf a year ago, and flat sequentially.

Hess’s reported net income beat the Street’s forecast, with $288 million ($2.84/share), up slightly from 2Q2003’s $252 million ($2.83). Wall Street had forecast on average earnings of $2.46/share in the quarter.

In related news, ChevronTexaco Corp. on Wednesday declared a quarterly dividend of 80 cents/share, payable Sept. 10, 2004, to stockholders of record as of Aug. 19. The board also declared a two-for-one stock split, which will be in the form of a 100% stock dividend. Stockholders will receive one additional share for each share held on Aug. 19, and the additional shares will be distributed in September.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.