ConocoPhillips Q2 profit "solid", 18% drop on 2010

Profits beat expectations as dip attributed to asset sales in 2010

ConocoPhillips CEO James Mulva: "We have had a solid quarter". GETTY IMAGES
ConocoPhillips CEO James Mulva: "We have had a solid quarter". GETTY IMAGES

ConocoPhillips reported $3.4 billion second-quarter earnings and $3.4 billion adjusted earnings. This compares with second-quarter 2010 earnings of $4.2 billion and adjusted earnings of $2.5 billion.

The Q2 report follows the comapny's announcement that it will split it's upstream and downstream businessness, with the downstream side spun off into a new, independent, publicly-listed company.

Highlights from ConocoPhillips's Q results:

- Production of 1.64 million BOE per day

- Worldwide refining capacity utilization rate of 91 percent

-Repurchased 3 percent of ConocoPhillips shares

-Improved E&P and R&M margins

- Annualized ROCE of 15 percent

- Announced plan to create two leading energy companies

"We had a solid quarter," said James Mulva, chairman and chief executive officer. "Higher adjusted earnings and cash flow were driven by better commodity prices and refining margins. Production performance was strong and capacity utilization of our refineries exceeded 90 percent." During the second quarter, ConocoPhillips repurchased 42 million of its own shares, or 3 percent of shares outstanding, for $3.1 billion. This brings the company's total shares repurchased to 9 percent of the shares outstanding at the inception of the repurchase program in 2010.

ConocoPhillips recently announced its Board had approved pursuing the separation of the company's Exploration & Production (E&P) and Refining & Marketing (R&M) businesses into two leading energy companies. "This is consistent with our strategy to create differentiated value for our shareholders," said Mulva. "Both companies will be uniquely positioned in their respective industries, with the management focus, financial strength and technical capability to successfully invest in the industry's highest returning projects."

The upstream company will be the largest U.S. pure-play E&P business, positioned for profitable growth from a rich resource base and a portfolio of quality investment opportunities. Production growth will come from investments in unconventional liquids-rich resource plays, SAGD oil sands, LNG, and ultimately from the company's vast natural gas position as that market recovers. The new downstream company will be a low-cost, integrated refining, marketing and transportation organization, with complex refining assets, an investment grade credit rating and significant financial flexibility. "We believe our investors will see significant long-term benefit from this repositioning, and we look forward to providing additional information about the transaction in September," added Mulva.

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