8-KOther Events

CONOCOPHILLIPS 8-K Report (Jan 30, 2003)

Filed January 30, 2003For Securities:COP

Summary

ConocoPhillips reported its fourth-quarter and full-year 2002 results, highlighting a significant increase in net operating income for Q4 2002 compared to Q4 2001, driven by the combined operations post-merger. However, the reported net income for Q4 2002 shows a substantial loss due to significant "special items" primarily related to a large-scale rationalization of its downstream marketing assets. This strategic move involves asset disposals, including the planned sale of refineries and retail sites, aimed at optimizing the company's portfolio mix and meeting return targets. The company also provided updates on its full-year 2002 performance, noting strong operating cash flows and a reduction in total debt, despite capital spending increases. The report also addresses the ongoing impact of the Venezuelan crude oil supply disruption on its operations.

Key Highlights

  • 1Fourth-quarter 2002 net operating income (excluding special items) was $747 million ($1.10 per share), a significant increase from $212 million ($0.55 per share) in Q4 2001.
  • 2The company reported a net loss of $410 million ($0.60 per share) for Q4 2002, largely due to $1.2 billion in special items, primarily from marketing asset rationalization.
  • 3ConocoPhillips is actively divesting over $600 million in upstream assets and plans to dispose of a substantial portion of its downstream marketing assets to optimize its portfolio.
  • 4Total revenues for Q4 2002 were $23.5 billion, a substantial increase from $8.7 billion in Q4 2001, reflecting the first full quarter of combined operations post-merger.
  • 5Full-year 2002 net operating income (excluding special items) was $1.5 billion ($3.11 per share), compared to $1.7 billion ($5.68 per share) in 2001.
  • 6Operating cash flow for the twelve months of 2002 was approximately $5 billion, up from $3.6 billion in 2001, with total debt decreasing to $19.8 billion.
  • 7The ongoing Venezuelan crude oil supply disruption is expected to impact earnings by $30 million to $50 million per month, though refinery utilization is anticipated to remain near 90%.

Frequently Asked Questions

The net loss of $410 million in the fourth quarter of 2002 is primarily due to $1.2 billion in "special items." These charges are largely associated with a strategic rationalization plan for the company's downstream marketing assets, which involves asset impairments, restructuring losses, and the expected disposal of retail sites and exit from certain geographic markets.

The merger between Conoco and Phillips was consummated on August 30, 2002. The fourth quarter of 2002 represents the first full quarter of operations for the combined company. Consequently, revenue and expense figures for Q4 2002 are substantially higher than the prior year, reflecting the integration of both entities. Prior periods presented have been restated for discontinued operations related to merger-mandated divestitures.

ConocoPhillips is actively evaluating its asset portfolio to identify and dispose of assets that do not meet its return targets. This includes selling over $600 million in upstream assets during Q4 2002 and planning the disposal of a substantial portion of its downstream marketing assets, including refineries and retail sites, as part of its business plan to optimize the mix of its operations.

The ongoing shutdown of Venezuelan crude oil supply is expected to impact ConocoPhillips by approximately $30 million to $50 million per month, assuming current prices and margins persist and production remains shut-in. The company anticipates a slight reduction in refinery crude oil capacity utilization but expects it to remain near 90% for the first quarter of 2003.