- The Washington Times - Wednesday, January 25, 2006

HOUSTON (AP) — Thanks to soaring oil and gas prices, ConocoPhillips posted a 51 percent surge in fourth-quarter profits yesterday, providing a glimpse of what is expected to be an earnings-season bonanza for the entire industry.

The Houston company’s earnings reached $3.68 billion ($2.61 per share), compared with $2.43 billion ($1.72) a year ago despite production problems left over from Hurricanes Katrina and Rita. Full-year profits jumped to $13.53 billion from $8.13 billion in 2004.

ConocoPhillips is the nation’s third-largest integrated oil company behind Exxon Mobil Corp. and Chevron Corp.

The company reported income from continuing operations of $3.78 billion ($2.69). On that basis, analysts surveyed by Thomson Financial expected earnings of $2.62 per share.

ConocoPhillips shares fell 94 cents to close at $63.54 on the New York Stock Exchange on a day when stock prices for many in the industry fell in response to declining oil prices. That left its shares on the high end of their 52-week range of $43.95 to $71.48.

Analysts were not concerned.

“They’re on the right track. They’re doing a good job; stay tuned,” said Oppenheimer & Co. analyst Fadel Gheit. “As long as we have $60-plus oil, I think they’re all going to do well.”

Oil futures settled at $65.85 per barrel yesterday, down $1.21 on the New York Mercantile Exchange.

Howard Weil Inc. analyst Gene Gillespie said oil prices are expected to remain high in 2006, but not substantially higher, leading to more solid profits for the industry. In 2005, Nymex oil futures averaged $56.70, an increase of 37 percent from 2004, when they averaged $41.47.

Chevron is slated to release fourth-quarter and full-year 2005 results tomorrow, followed by Exxon Mobil on Monday.

ConocoPhillips’ fourth-quarter revenues surged to $50.2 billion from $40.1 billion in the year-earlier quarter. Full-year revenues increased to $183.4 billion from $136.9 billion in 2004.

The company spent $11.6 billion on capital expenditures and investments, reflecting an 86 percent reinvestment of 2005 income. Mr. Gheit said ConocoPhillips maintains an aggressive capital-spending plan, unlike its larger counterparts.

ConocoPhillips Chairman and CEO Jim Mulva “is definitely building the pieces of a very solid, integrated oil company,” Mr. Gheit said. “This company is not Exxon, Royal Dutch or BP. It’s not mature; it’s a growing company.”

Mr. Mulva told analysts yesterday that ConocoPhillips aims to invest about $14 billion in 2006, including an increase in its 16.1 percent stake in Lukoil, Russia’s No. 1 oil company, to 20 percent.

ConocoPhillips expects to complete its $35.6 billion acquisition of Houston oil and gas producer Burlington Resources Inc. in the first half of 2006, Mr. Mulva said.

Also, ConocoPhillips, Marathon Oil Corp. and New York oil and gas producer Amerada-Hess Corp. plan to end a 19-year absence in Libya and pay $1.83 billion to resume oil production after the U.S. government lifted economic sanctions against the North African country last year.

Amerada-Hess yesterday reported that its fourth-quarter profits nearly doubled to $452 million ($4.31) on stronger revenue fueled by sharply higher prices. Oklahoma City oil and gas producer Kerr-McGee Corp. said its fourth-quarter profit skyrocketed to $2.16 billion ($18.46) on a gain from selling its North Sea energy business. Excluding the gain, its net income actually fell to $125.7 million ($1.07) from $133.8 million (86 cents) the year before.

Amerada-Hess shares rose $1.86 to close at $148.47 on the NYSE. Kerr-McGee shares fell $3.39 to close at $101.63.

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