10-QPeriod: Q1 FY2008

CONOCOPHILLIPS Quarterly Report for Q1 Ended Mar 31, 2008

Filed April 30, 2008For Securities:COP

Summary

ConocoPhillips reported strong first-quarter 2008 financial results, driven primarily by elevated crude oil and natural gas prices. Net income increased to $4.14 billion from $3.55 billion in the first quarter of 2007. The Exploration and Production (E&P) segment was the main contributor, accounting for 70% of total net income, with its net income rising due to higher commodity prices. The company also saw improved earnings from its LUKOIL investment. However, the Refining and Marketing (R&M) segment experienced a significant decline in net income to $520 million from $1.14 billion year-over-year. This was attributed to lower domestic crack spreads, reduced volumes, and the absence of inventory benefits seen in the prior year's fourth quarter. Despite the R&M segment's performance, the overall increase in commodity prices and strong E&P results led to a positive quarter for ConocoPhillips.

Key Highlights

  • 1Net income increased by 16.7% to $4.14 billion in Q1 2008 compared to $3.55 billion in Q1 2007.
  • 2Exploration & Production (E&P) segment net income surged 23.9% to $2.89 billion, driven by significantly higher crude oil, natural gas, and natural gas liquids prices.
  • 3Average crude oil prices (WTI) in Q1 2008 were $97.94 per barrel, up from $58.00 per barrel in Q1 2007.
  • 4Refining and Marketing (R&M) segment net income decreased by 54.1% to $520 million from $1.14 billion in the prior year's quarter.
  • 5The company's investment in LUKOIL yielded a 177% increase in net income to $710 million, primarily due to higher estimated realized prices.
  • 6Cash flow from operating activities decreased slightly by 4% to $6.59 billion, impacted by higher inventory builds.
  • 7ConocoPhillips repurchased $2.5 billion of its common stock in Q1 2008, with plans for $2 billion to $3 billion in repurchases for Q2 2008.

Frequently Asked Questions

The primary drivers were significantly higher crude oil, natural gas, and natural gas liquids prices, which boosted the Exploration and Production (E&P) segment's performance. Additionally, increased earnings from the LUKOIL investment contributed positively.

The R&M segment's net income decreased due to lower domestic realized refining margins and volumes, coupled with lower worldwide marketing volumes. The absence of inventory benefits realized in the fourth quarter of 2007 also played a role.

For the second quarter of 2008, production is expected to be lower due to scheduled maintenance. Capital expenditures totaled $3.32 billion in Q1 2008, with significant investments in E&P projects across various geographies and R&M upgrades. The company also announced a new Alaska Natural Gas Pipeline project with BP.

The company relies on cash generated from operating activities as its primary funding source. It also utilizes its cash balance, commercial paper programs, and revolving credit facilities. During Q1 2008, it raised $370 million from asset dispositions and repurchased $2.5 billion of its stock.