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ConocoPhillips Reports 1Q Net Income of $2.9 Billion

Hess net income down

HOUSTON -- ConocoPhillips has reported first-quarter net income of $2.912 billion, or $4.10 per share, compared with $1.616 billion, or $2.33 per share, for the same quarter in 2004. Total revenues were $38.9 billion, versus $30.2 billion a year ago.

Income from continuing operations for the first quarter was $2.923 billion, or $4.12 per share, compared with $1.603 billion, or $2.31 per share, for the same period a year ago.

Overall, our performance for the quarter was good, and would have been stronger without unplanned downtime, [image-nocss] said Jim Mulva, chairman and CEO of the Houston-based company. In our Exploration & Production segment, oil and gas production was negatively impacted by planned and unplanned downtime. This resulted in total production of 1.80 million BOE per day, including our share of estimated Lukoil production of 0.2 million BOE per day. In the Refining & Marketing segment, higher turnaround activity and unplanned downtime during the quarter reduced our crude oil capacity utilization to 92% and lowered our clean product yield.

He added, We continued to strengthen our financial position. Our return on capital employed remains strong and competitive, and our debt-to-capital ratio declined from 26% to 23% during the quarter. We generated $4.1 billion in cash from operations, and spent $1.8 billion on capital projects and investments, including the purchase of an additional 1.3% of Lukoil. Also, we announced a restructuring of DEFS that ultimately will increase our equity ownership to 50%. We were pleased to recently announce a 24% increase in our dividend and a 2-for-1 stock split. In addition, we continue to acquire company stock consistent with the goal of bringing our diluted shares outstanding to approximately 700 million shares. As of the end of the first quarter of 2005, the company had purchased 2.1 million shares under this program.

E&P income from continuing operations in the first quarter was $1.787 billion, up from $1.671 billion in fourth-quarter 2004 and from $1.257 billion in first-quarter 2004. Higher realized crude oil and natural gas prices, increased crude oil sales and gains on asset sales, partially offset by reduced tax benefits, contributed to the improvement from fourth-quarter 2004. Improved results from first-quarter 2004 primarily were due to higher realized crude oil prices.

Midstream income from continuing operations was $385 million, up from $100 million in fourth-quarter 2004 and $55 million in first-quarter 2004.

R&M income from continuing operations was $700 million, down from $753 million in the previous quarter and up from $464 million in first-quarter 2004. Higher U.S. refining margins during first-quarter 2005 were more than offset by lower worldwide marketing margins, lower international refining margins, and higher turnaround activity and unplanned downtime. The improved results from first-quarter 2004 were attributable to increased worldwide refining margins, partially offset by lower worldwide marketing margins, reduced volumes and higher turnaround and utility costs.

Domestically, realized refining margins benefited from continued strong light-heavy crude differentials. The company experienced planned turnaround activity at its Borger, Lake Charles, San Francisco, Sweeny and Wood River refineries. In addition, unplanned downtime at the company's Alliance and Borger refineries reduced processed inputs by approximately 60,000 barrels per day. As a result, first-quarter domestic refinery crude oil capacity utilization averaged 90% and clean products yield was two percentage points lower than that of fourth-quarter 2004. Also, U.S. marketing margins fell sharply from the previous quarter.

Internationally, lower refining and sharply lower marketing margins significantly reduced first-quarter results. First-quarter international crude oil capacity utilization was 100%.

Overall, R&M's refinery crude oil capacity utilization rate averaged 92%, compared with 94% in the previous quarter and 96% in first-quarter 2004. Before-tax turnaround costs were $108 million, versus $73 million in fourth-quarter 2004.

Income from continuing operations in first-quarter 2005 was $110 million, compared with $74 million in the prior quarter. This represents ConocoPhillips' estimate of the company's 10.6% weighted average equity share of Lukoil's income for the first quarter based on market indicators and historical production trends of Lukoil. The increase from fourth-quarter 2004 primarily was attributable to higher realized price estimates and an increased equity ownership position. At the end of first-quarter 2005, the company's equity ownership in Lukoil was 11.3%.

ConocoPhillips' share of estimated BOE production was 201,000 per day. The company's share of estimated daily refining crude oil throughput was 92,000 bpd.

First-quarter 2005 losses from discontinued operations were $11 million, compared with $48 million in fourth-quarter 2004 and income of $13 million in first-quarter 2004. The losses in first-quarter 2005 primarily were due to the continued completion of various marketing asset sales.

Mulva also offered this outlook: Downstream, execution of our extensive 2005 clean-fuels initiative is progressing as planned. We expect the second quarter to be another period of significant turnaround activity; however, we anticipate our full-year crude oil capacity utilization rate to be in the upper 90% range. In addition to our announced capital program, we are planning to spend an additional $3 billion over the period 2006 through 2010 to increase our refining system's ability to process heavy-sour crude oil and other low-quality feedstocks. These investments, primarily domestic, are expected to incrementally increase refining capacity and clean products yield at our existing facilities, while providing competitive returns.

As previously announced, capital spending for 2005 is expected to be $7.4 billion, excluding capitalized interest and minority interest, as well as the ConocoPhillips share repurchase program and additional equity investment in Lukoil.

Separately, New York City-based Amerada Hess Corp. reported net income of $219 million for first-quarter 2005 compared with income of $281 million for first-quarter 2004.

E&P earnings were $263 million in first-quarter 2005 compared with $207 million in first-quarter 2004. Pretax exploration expenses increased by $55 million to $133 million in first-quarter 2005. In first-quarter 2005, the Corporation's average worldwide crude oil selling price, including the effect of hedging, was $31.31 per barrel, an increase of $4.48 per barrel from first-quarter 2004.

R&M earnings were $63 million in first-quarter 2005 compared with $112 million in first-quarter 2004. The fluid catalytic cracking units at HOVENSA and Port Reading, N.J., were each shutdown for approximately 30 days for scheduled maintenance in first-quarter 2005. Refining earnings decreased by $32 million, primarily as a result of these maintenance activities and increased HOVENSA taxes. Lower gasoline margins reduced results from retail gasoline operations and income from trading activities was lower by $7 million.

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