Earnings Roundup: ConocoPhillips, BP and Hess

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Earnings Roundup: ConocoPhillips, BP and Hess

NEW YORK -- Financial results for the second quarter of fiscal 2007 are coming in from the big oil companies, and so far, it looks like it will be another profitable quarter. Stellar refining margins helped boost company results, however, some one-time charges and refinery problems kept a few companies from attaining even better results.

ConocoPhillips' second quarter was hurt by a hefty charge related to the company's exit from Venezuela, Reuters reported. Net income in the quarter fell to $301 million, from $5.19 billion a year ago. The charge for its Venezuelan assets cost the company $4.5 billion, according to the report. Earnings adjusted for the impairment were $4.8 billion.

In addition, the company's exploration and production earnings fell 36 percent due to lower crude oil prices and sales volumes, as well as higher taxes, the company stated. That figure excludes the effect of the Venezuela impairment.

On the other hand, earnings in ConocoPhillips' refining and marketing segment rose 38 percent, to a net income of $2.35 billion -- helped by higher margins to process and sell oil-based products and lower costs, the Reuters report stated.

Looking ahead to the company's third quarter, its exploration and production segment will be impacted by its exit from Venezuela, among other planned maintenance activities, ConocoPhillips' chairman and CEO, Jim Mulva, said in a written statement.

"We continue negotiations with the Venezuela government concerning appropriate compensation for the expropriation of the company's oil projects and have preserved all legal rights, including international arbitration."


Meanwhile, improving performance was a topic of discussion during BP's release of its financial results by CEO Tony Hayward, who has held the top spot for 95 days, the Houston Chronicle reported.
Analysts are uncertain when those improvements will arrive. "The operational recovery, which we believe is required for a full rebound, is still some way off in our view," Citigroup analyst James Neale said in a note to investors.

Hayward assured that BP will improve its financial performance by improving operations. He said the company's top executives are in London this week, "to review where we are and get very clear on us going forward."

BP saw a modest 1.5-percent increase in second-quarter profit, reaching $7.4 billion, due to large refining margins and the sale of a British refinery, the Chronicle report stated. Refining segment profits jumped 48 percent to $2.7 billion, compared to the $1.8 billion in the second quarter of 2006.

The main cause of the company's financial underperformance is missing revenue from refineries in Texas City and Whiting, Ind., which are operating below capacity, along with the delayed restarts of two key Gulf of Mexico oil platforms, said Hayward.

Once refining capacity is restored, revenue will increase, he added.
"Some of you will want me to give a precise timetable, to say exactly when we can expect to see a recovery in BP's performance," Hayward told analysts. "What I will say is that I am determined that we should see progress by the end of the year, and that the momentum will build steadily through 2008."

While Hayward is enjoying a "honeymoon" period with analysts, he'll need to stick to his projections, noted John Parry, an analyst with John S. Herold. "The market knows what the issues are," Parry told the Chronicle. "He stuck his neck out today. He has determined and decided that by the end of the year, some of these issues will be rectified. If they are, he'll be credited. If they aren't, he'll start to take some heat."

Hess Corp.

Second-quarter earnings for Hess Corp. fell 2 percent, as a result of revenue lost from a temporary refinery shutdown, The Associated Press reported.

Earnings for Hess totaled $557 million, compared to $566 million in the year-ago quarter. Revenue increased 7 percent from the comparable period to $7.4 billion, the report stated.

Hess refining earnings suffered from turnaround costs at an oil refinery processing unit that was shut down for about 30 days during the quarter. The company saw those earnings fall to $87 million in the quarter, compared to $107 million a year ago, the AP reported.


Meanwhile, ExxonMobil's second-quarter financial results have not been released yet, but that hasn't stopped analysts from speculating that it could be the best quarter ever for the oil giant, reported BusinessWeek.

The company is expected to have profited greatly from this spring's historic high gas prices, and this will be evident when it reports its earnings later today, the report stated. ExxonMobil is expected to beat its own record for the most-profitable quarter in history for any U.S. company, which was $10.71 billion reached in 2006's fourth quarter.
Analysts said the company could report upwards of $11 billion for the second quarter of 2007, and may even eclipse its own record for annual earnings, set in 2006 at $39.5 billion, the report stated.

"Exxon has a successful recipe, and continues to use it," Fadel Gheit, senior energy analyst for Oppenheimer & Co. in New York, told BusinessWeek. "Good exposure to refining, a strong chemical business, record levels of share buybacks, and a relentless focus on cost-effective operations set it apart."

Bank of America analyst Daniel Barcelo expects Exxon's refining and marketing profits to reach $3.27 billion for the second quarter, far exceeding the $1.91 billion seen last quarter, the report stated.
However, with gas prices leveling off in recent weeks, some analysts predict Exxon will see profits peak in the second quarter. "To call refining margins excessive is to use tremendous understatement," Tom Kloza, chief oil analyst for the Oil Price Information Service, told BusinessWeek. "No one can possibly project that what they saw in the second quarter will continue to the third and fourth."