He added, "We are pleased to announce agreement with LUKOIL for the sale of [image-nocss] a 7.6% interest in LUKOIL. This, along with our Syncrude and CFJ divestments, is consistent with our strategy to enhance returns."
ConocoPhillips and LUKOIL have reached an agreement under which approximately 64.6 million Russian registered shares will be purchased by LUKOIL for $3.44 billion. These shares represent a 7.6% interest in LUKOIL, or 40% of ConocoPhillips' 163.3 million shares currently owned. This transaction is expected to close in third-quarter 2010. The remaining 60% owned by ConocoPhillips are depositary receipts and are expected to be sold in open-market transactions or to LUKOIL by the end of 2011.
Refining and marketing (R&M) benefited from improved market conditions, with global refining market crack spreads improving more than 15%, compared with the same period last year. Realized refining margins improved more than $550 million and primarily reflect stronger distillate market cracks, as well as increased premium coke production. In the United States, distillate market cracks almost doubled from the low levels experienced a year ago, while internationally they improved nearly 50%. Realized marketing margins improved approximately $150 million, compared with a year ago, largely due to favorable market conditions.
The U.S. refining crude oil capacity utilization rate for second-quarter 2010 was 96%, compared with 93% for the same period in 2009. The increase primarily reflects less unplanned downtime and turnaround activity.
"As previously announced, we have cancelled our plans to upgrade Wilhelmshaven and will explore other options to improve shareholder value, including operating the facility as a terminal and pursuing the sale of the asset," added Mulva. "These moves are consistent with our strategy of improving returns through capital discipline and reducing our downstream presence over time."
Second-quarter 2010 adjusted earnings were $2.5 billion, or $1.67 per share, compared with adjusted earnings of $1 billion, or 66 cents per share, for the same period in 2009. Adjusted earnings increased versus the prior year, primarily due to higher commodity prices and global refining and marketing margins, partially offset by lower production volumes. For second-quarter 2010, ConocoPhillips reported earnings of $4.2 billion, or $2.77 per share, compared with earnings of $900 million, or 57 cents per share, for the same period in 2009.
ConocoPhillips' adjusted earnings for the first six months of 2010 were $4.7 billion, compared with adjusted earnings of $1.7 billion in the corresponding period of 2009. Adjusted earnings for 2010 were higher than 2009, primarily due to higher commodity prices and global refining and marketing margins, partially offset by higher taxes and lower production volumes. Six-month 2010 earnings were $6.3 billion, compared with $1.7 billion for the same period of 2009.
During second-quarter 2010, the company generated $3.5 billion in cash from operations and $5.8 billion in cash proceeds from asset dispositions. This cash was used to pay $2.7 billion of debt, fund a $2.2 billion capital program, repurchase $400 million of ConocoPhillips common stock and pay $800 million in dividends. The company had a cash balance of $4.1 billion at quarter end, the majority of which will be used to pay down debt. As of June 30, 2010, debt was $26.3 billion and the debt-to-capital ratio was 28%. After considering the ending cash balance, the second-quarter 2010 net-debt-to-capital ratio was 25%.
ConocoPhillips is an integrated energy company with interests around the world. Headquartered in Houston, the company had approximately 29,900 employees, $151 billion of assets and $181 billion of annualized revenues as of June 30, 2010.
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