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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 3, 2006
ConocoPhillips
(Exact name of registrant as specified in its charter)
Delaware 001-32395 01-0562944
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
600 North Dairy Ashford
Houston, Texas 77079
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 293-1000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On October 3, 2006, ConocoPhillips issued a press release providing a third
quarter 2006 interim update. A copy of the press release is furnished herewith
as Exhibit 99 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99. -- Press release issued by ConocoPhillips on October 3, 2006.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONOCOPHILLIPS
/s/ Rand C. Berney
-----------------------------
Rand C. Berney
Vice President and Controller
October 3, 2006
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EXHIBIT INDEX
Exhibit
No. Description
- --- -----------
99. -- Press release issued by ConocoPhillips on October 3, 2006.
4
Exhibit 99
ConocoPhillips Third-Quarter 2006 Interim Update
HOUSTON--(BUSINESS WIRE)--Oct. 3, 2006--This update is intended to
give an overview of market and operating conditions experienced by
ConocoPhillips (NYSE:COP) during the third quarter of 2006. The market
indicators and company estimates may differ considerably from the
company's actual results scheduled to be reported on October 25, 2006.
Highlights - Third-Quarter 2006 vs. Second-Quarter 2006
-- Exploration and Production
-- Crude oil prices similar to second quarter.
-- Lower U.S. natural gas prices.
-- Lower worldwide production.
-- Results negatively impacted by recent tax legislation and
revised depreciation, depletion and amortization rates.
-- Refining and Marketing
-- Significantly lower worldwide refining margins.
-- Significantly higher worldwide marketing margins.
-- Improved refining capacity utilization rate in the
mid-90-percent range.
-- Significantly lower turnaround activity.
-- Loss from impairment of certain assets held for sale.
-- LUKOIL Investment
-- Ownership of approximately 19 percent at quarter end.
-- Midstream and Chemicals
-- Midstream and Chemicals results expected to be improved
from the previous quarter.
-- Corporate and Other
-- Corporate expenses anticipated to be lower than the
previous quarter.
-- Debt balance of approximately $27.8 billion.
-- Benefit from hurricane-related insurance impacts.
Exploration and Production (E&P)
The table below provides market price indicators for crude oil and
natural gas. The company's actual crude oil and natural gas price
realizations may vary from these market indicators due to quality and
location differentials, as well as the effect of pricing lags.
Market Indicators
3Q 2006
vs.
3Q 2006 2Q 2006 2Q 2006 3Q 2005
- ---------------------------------------------------------------------
Dated Brent ($/bbl) $69.49 $69.62 $(0.13) $61.54
- ---------------------------------------------------------------------
WTI ($/bbl) 70.38 70.40 (0.02) 63.05
- ---------------------------------------------------------------------
ANS USWC ($/bbl) 68.95 68.78 0.17 60.79
- ---------------------------------------------------------------------
Henry Hub first of month
($/mmbtu) 6.58 6.80 (0.22) 8.53
- ---------------------------------------------------------------------
Source: Platts
Third-quarter production on a barrel-of-oil equivalent (BOE) per
day basis, including Syncrude and excluding LUKOIL, is expected to be
approximately five percent lower than the previous quarter. More than
half of the decrease was associated with the partner-operated Prudhoe
Bay oil field in Alaska. Planned seasonal maintenance in the United
Kingdom and Venezuela also contributed to the third-quarter decline in
production.
During the third quarter, the United Kingdom enacted higher income
tax rates retroactive to the beginning of the year. A charge of
approximately $440 million, including $270 million related to the
revaluation of deferred taxes and $170 million related to the
company's operations for the first nine months of 2006, is expected to
be recorded in the third quarter.
Also during the third quarter, the state of Alaska enacted new
production tax legislation retroactive to April 1, 2006. A
third-quarter, after-tax charge of approximately $180 million is
anticipated related to the company's operations for the second and
third quarters of 2006.
While the purchase price allocated to properties, plants and
equipment has not changed materially, the application of purchase
accounting for the Burlington Resources acquisition at the
operating-area level affects the mix of depreciation, depletion and
amortization (DD&A) rates and the timing of expense. As a result,
third-quarter DD&A is expected to be $170 million (before-tax) higher
than second quarter, reflecting the effect for the second and third
quarters of 2006.
Exploration expenses are expected to be approximately $215 million
before-tax for the quarter.
Refining and Marketing (R&M)
The table below provides market indicators for regions where the
company has significant refining operations. The Weighted U.S. 3:2:1
margin is based on the geographical location and capacity of
ConocoPhillips' U.S. refineries. Realized refining margins may differ
due to the company's specific locations, configurations, crude oil
slates or operating conditions. The company's refining configuration
generally yields somewhat higher distillate volumes and lower gasoline
volumes than those implied by the market indicators shown below. In
addition, marketing margins may differ significantly from the U.S.
wholesale gasoline marketing indicator due to the product mix,
distribution channel and location of the company's refined product
sales.
Market Indicators ($/bbl)
3Q 2006
vs.
3Q 2006 2Q 2006 2Q 2006 3Q 2005
- ---------------------------------------------------------------------
Refining Margins
- ---------------------------------------------------------------------
East Coast WTI 3:2:1 $10.54 $15.21 $(4.67) $14.81
- ---------------------------------------------------------------------
Gulf Coast WTI 3:2:1 11.00 17.26 (6.26) 17.42
- ---------------------------------------------------------------------
Mid-Continent WTI 3:2:1 17.75 19.60 (1.85) 17.06
- ---------------------------------------------------------------------
West Coast ANS 3:2:1 21.70 32.47 (10.77) 26.61
- ---------------------------------------------------------------------
Weighted U.S. 3:2:1 14.86 20.39 (5.53) 18.51
- ---------------------------------------------------------------------
NW Europe Dated Brent
3:1:2 14.18 15.20 (1.02) 16.53
- ---------------------------------------------------------------------
WTI/Maya Differential (trading
month) 14.87 15.69 (0.82) 15.48
- ---------------------------------------------------------------------
U.S. Wholesale Gasoline
Marketing 5.75 1.83 3.92 0.70
- ---------------------------------------------------------------------
Source: Platts, Lundberg Survey and OPIS
Worldwide refining margins for the third quarter are expected to
be significantly lower than the second quarter, as indicated in the
table above. Worldwide marketing margins are expected to be
significantly higher than the second quarter. Turnaround activity
decreased in the third quarter with costs expected to be approximately
$40 million before-tax. The company's average crude oil refining
capacity utilization rate for the third quarter is expected to be in
the mid-90-percent range.
Although the company continues to expect the previously announced
asset rationalization program to result in an overall net gain to the
company, R&M expects to record an impairment of approximately $250
million after-tax in the third quarter related to assets held for
sale.
Corporate and Other
The company expects corporate expenses to be lower, reflecting
favorable foreign currency impacts in the third quarter compared to
negative foreign currency impacts in the second quarter.
The company's debt balance is expected to be approximately $27.8
billion at the end of the third quarter. The number of
weighted-average diluted shares outstanding during the third quarter
is expected to be 1,676 million shares.
During the third quarter, the company expects to benefit from
hurricane-related insurance impacts of approximately $170 million
before-tax. The anticipated benefit primarily impacts the company's
R&M segment.
The company's effective tax rate for the third quarter is expected
to be approximately 50 percent, reflecting the impact of recently
enacted tax legislation in the United Kingdom.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This update contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as "anticipate,"
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," "objective,"
"projection," "forecast," "goal," "guidance," "outlook," "effort,"
"target" and other similar words. However, the absence of these words
does not mean that the statements are not forward-looking. The
statements in this update are based on activity from operations for
the first two months of the third quarter of 2006 and include
estimated results for September and, as such, are preliminary and are
estimates. All of the forward-looking data is therefore subject to
change. Actual results, which will be reported in the company's
earnings release for the third quarter of 2006 on October 25, 2006,
may differ materially from the estimates given in this update.
Where, in any forward-looking statement, the company expresses an
expectation or belief as to future results, such expectation or belief
is expressed in good faith and believed to have a reasonable basis.
However, there can be no assurance that such expectation or belief
will result or be achieved. The actual results of operations can and
will be affected by a variety of risks and other matters including,
but not limited to, crude oil and natural gas prices; refining and
marketing margins; potential failure to achieve, and potential delays
in achieving expected reserves or production levels from existing and
future oil and gas development projects due to operating hazards,
drilling risks, and the inherent uncertainties in interpreting
engineering data relating to underground accumulations of oil and gas;
unsuccessful exploratory drilling activities; lack of exploration
success; potential disruption or unexpected technical difficulties in
developing new products and manufacturing processes; potential failure
of new products to achieve acceptance in the market; unexpected cost
increases or technical difficulties in constructing or modifying
company manufacturing or refining facilities; unexpected difficulties
in manufacturing, transporting or refining synthetic crude oil;
international monetary conditions and exchange controls; potential
liability for remedial actions under existing or future environmental
regulations; potential liability resulting from pending or future
litigation; general domestic and international economic and political
conditions, as well as changes in tax and other laws applicable to our
business. Other factors that could cause actual results to differ
materially from those described in the forward-looking statements
include other economic, business, competitive and/or regulatory
factors affecting our business generally as set forth in our filings
with the Securities and Exchange Commission (SEC). Unless legally
required, ConocoPhillips undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Cautionary Note to U.S. Investors -- The SEC permits oil and gas
companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or
conclusive formation tests to be economically and legally producible
under existing economic and operating conditions. Production is
distinguished from oil and gas production because SEC regulations
define Syncrude as mining-related and not part of conventional oil and
natural gas reserves. The company uses certain terms in this release,
such as "includes Syncrude," that the SEC's guidelines strictly
prohibit us from including in filings with the SEC. U.S. investors are
urged to consider closely the disclosure in the company's periodic
filings with the SEC, available from the company at 600 North Dairy
Ashford Road, Houston, Texas 77079 and the company's Web site at
www.conocophillips.com/investor/sec. This information also can be
obtained from the SEC by calling 1-800-SEC-0330.
CONTACT: ConocoPhillips