ConocoPhillips declares successful independence after strong quarterly profit

Houston ChronicleJanuary 30, 2014 

ConocoPhillips completed its first full year as an independent producer with a 74 percent hike in fourth-quarter earnings, driven largely by sales of overseas assets as the company turns its focus to North American shale.

The Houston-based independent recorded earnings of $2.5 billion, or $2 per share, during the October-December period, up from $1.4 billion, or $1.16 cents per share, in the fourth quarter of 2012.

Revenue for the quarter was $13.99 billion, down from $16.37 billion a year ago. Sales of properties in Algeria and the Caspian Sea's Kashagan play brought in $7 billion.

Full-year 2013 net income was $9.2 billion, or $7.38 per share, up from $8.4 billion or $6.72 per share in 2012.

The 2012 earnings included $1.2 billion from downstream operations before ConocoPhillips spun off that business into Phillips 66 in April 2012.

"I hope there's no doubt that 2013 was a successful year for the company," CEO Ryan Lance said in a conference call with analysts. "We delivered on our commitments, but perhaps more importantly, we positioned the company for a strong 2014."

Excluding special items such as the asset sales, fourth-quarter adjusted earnings were $1.7 billion, or $1.40 per share, compared with $1.8 billion, or $1.43 per share, for the fourth quarter of 2012.

Full-year adjusted net income for 2013 was $7.1 billion, or $5.70 per share, up from $6.7 billion and $5.37 per share in 2012.

The company highlighted a 31 percent fourth-quarter increase in production from the Bakken Shale in North Dakota and Texas' Eagle Ford Shale and Permian Basin.

Matt Fox, the company's executive vice president for exploration and production, said during the conference call that the company has tapped into only about 30 percent of its potential resources in the Bakken and Eagle Ford.

He also highlighted increased investment planned for the company's operations in Alaska, where its increased its 2014 budget by $600 million following the passage last year of a state law designed to encourage production in the state.

Reserve additions of 1.1 billion barrels of oil equivalent equated to organic reserve replacement of 179 percent, the company said.

Brian Youngberg, a senior energy analyst with Edward Jones & Co. in St. Louis, said ConocoPhillips has increased its focus on its U.S. production since spinning off Phillips 66. "They basically looked to simplify their strategy for the size of the company they were," Youngberg said.

The asset sales are part of that strategy as the company unloads riskier investments abroad in order to focus more closely on U.S. shale. The strategy has resulted in less growth potential but also less volatility for investors, Youngberg said.

Overall fourth-quarter production from ConocoPhillips' continuing operations was down 93 million barrels of oil equivalent a day, or about 5.9 percent. Jeff Sheets, the company's executive vice president and chief financial officer, attributed that decline to unusually bad weather in the U.S. and the North Sea, as well as instability in Libya.

Still, Lance said the company met its production goals.

"Operationally, we hit we hit the milestones we set for ourselves in 2013, and we have positioned the company for growth," Lance said.

While overall production was down about 1.5 percent in 2013, the company said production is up about 2 percent when adjusting for dispositions, downtime at some facilities and the situation in Libya.

Company officials said they anticipate 3 percent to 5 percent growth in production this year. Fox projected the company will produce 1.49 million to 1.53 million barrels per day in the first quarter of 2014.

ConocoPhillips shares fell 7 cents to $65.75 in trading Thursday on the New York Stock Exchange.

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