Conoco net slides 77 percent for quarter; rising production offset by lower prices

Allen Baker

Conoco Inc. posted sharply lower profits for the fourth quarter as lower prices offset higher production gained by the company’s Gulf Canada acquisition. Conoco plans to merge with Phillips Petroleum Co. later this year.

For the quarter, Conoco’s profits were $127 million, down 77 percent from the $550 million posted by the Houston-based company in the fourth quarter of 2000. For the year, Conoco earned $1.59 billion, down 16 percent from 2000’s $1.90 billion.

Special items weren’t a major factor in the quarterly decline, with a net $70 million charged against operations in the 2001 quarter, compared with $24 million in the same period of 2000.

Prices, however, did have a big impact. The net crude price for the quarter was $16.88 a barrel, down 36 percent. Average gas price in the United States dropped by half, to $2.54 per thousand cubic feet.

Production rose 32 percent as a result of the acquisition of Gulf Canada, to 891,000 barrels of oil equivalent daily. Gulf Canada added 224,000 daily barrels, while overall production from wells elsewhere in the company dropped slightly. Liquids accounted for 485,000 barrels of the daily total.

Exploration provided some good news, according to Conoco Chairman Archie Dunham, with Conoco discoveries of 440 million barrels of oil equivalent replacing 425 percent of its 2001 production. The new reserves are in Vietnam, Indonesia, the United Kingdom, Norway, The Netherlands and Canada.

The company plans $2.8 billion in capital spending for 2002, about the same as 2001, with about $500 million set aside to drill more than 40 new wells.

Upstream earnings for the fourth quarter totaled $302 million, down 47 percent from a year earlier. U.S. upstream earnings were just short of half that figure at $141 million. Exploration spending was $176 million, up 71 percent, but that included Gulf Canada operations in the 2001 quarter.

Refining and other downstream operations brought in $23 million for the quarter, a 76 percent drop from 2000 as costs rose and refining margins dropped. Refinery throughput was up in both the domestic and international operations.

Revenues slid 18 percent to $8.49 billion for the fourth quarter, from $10.39 billion a year earlier. For all of 2001, revenues were $39.54 billion, an increase of one percent.