Hess' Second-Quarter Net Surges 62% On High Oil Prices

- Hess' Second-Quarter Net Surges 62% On High Oil Prices

Wednesday, July 27, 2011
Dow Jones Newswires
by Tess Stynes & Ryan Dezember

Hess' second-quarter earnings soared 62% thanks to sharply higher oil prices and despite a wider loss for its marketing and refining operations.

Hess' performance in recent quarters has been boosted by high oil prices, as well as improved demand for gasoline and diesel products. However, its marketing and refining business has continued to lag.

Hess reported a profit of $607 million, or $1.78 a share, up from $375 million, or $1.15 a share, a year earlier. Revenue climbed 27% to $9.81 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.94 a share on revenue of $10.08 billion.

Pearce Hammond, an analyst with Houston investment bank Simmons & Co., said that Hess' trading losses as well as those from its refining joint venture with Venezuela's state oil company were "major disappointments." Overall, the results "will likely weigh on the stock today," Hammond wrote in a note to clients.

Shares recently traded 3.13% lower at $70.80.

Earnings at the exploration-and-production segment, which accounts for most of Hess' profit, surged 53% despite lower production. Average prices, excluding hedging impacts, jumped 46% for oil and 6.5% for natural gas.

In the marketing and refining business, losses widened in the refining-and-trading segments, while marketing income strengthened by 65%.

Copyright (c) 2011 Dow Jones & Company, Inc.

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ConocoPhillips Reports 'Solid' 2Q Earnings of $3.4B

- ConocoPhillips Reports 'Solid' 2Q Earnings of $3.4B

Wednesday, July 27, 2011
ConocoPhillips

ConocoPhillips reported $3.4 billion second-quarter earnings and $3.4 billion adjusted earnings. This compares with second-quarter 2010 earnings of $4.2 billion and adjusted earnings of $2.5 billion.

Second-Quarter Highlights

• Production of 1.64 million BOE per day
• Worldwide refining capacity utilization rate of 91 percent
• Repurchased 3 percent of ConocoPhillips shares
• Improved E&P and R&M margins
• Annualized ROCE of 15 percent
• Announced plan to create two leading energy companies

"We had a solid quarter," said Jim Mulva, chairman and chief executive officer. "Higher adjusted earnings and cash flow were driven by better commodity prices and refining margins. Production performance was strong and capacity utilization of our refineries exceeded 90 percent." During the second quarter, ConocoPhillips repurchased 42 million of its own shares, or 3 percent of shares outstanding, for $3.1 billion. This brings the company's total shares repurchased to 9 percent of the shares outstanding at the inception of the repurchase program in 2010.

ConocoPhillips recently announced its Board had approved pursuing the separation of the company's Exploration & Production (E&P) and Refining & Marketing (R&M) businesses into two leading energy companies. "This is consistent with our strategy to create differentiated value for our shareholders," said Mulva. "Both companies will be uniquely positioned in their respective industries, with the management focus, financial strength and technical capability to successfully invest in the industry's highest returning projects."

The upstream company will be the largest U.S. pure-play E&P business, positioned for profitable growth from a rich resource base and a portfolio of quality investment opportunities. Production growth will come from investments in unconventional liquids-rich resource plays, SAGD oil sands, LNG, and ultimately from the company's vast natural gas position as that market recovers. The new downstream company will be a low-cost, integrated refining, marketing and transportation organization, with complex refining assets, an investment grade credit rating and significant financial flexibility. "We believe our investors will see significant long-term benefit from this repositioning, and we look forward to providing additional information about the transaction in September," added Mulva.

E&P's second-quarter 2011 adjusted earnings were higher, compared with the same period in 2010, primarily due to stronger commodity prices, partially offset by higher taxes. Production for the second quarter of 2011 was 1.64 million barrels of oil equivalent (BOE) per day, a decrease of approximately 90,000 BOE per day versus the same period in 2010. Excluding the impact of dispositions and the civil unrest in Libya, production exceeded levels from the second quarter of 2010 as new projects and lower downtime more than offset decline. Production per share, adjusted for Libya, increased 4 percent over the same period a year ago.

"Upstream operated well and we are seeing the benefits of our focus on margins and returns," said Mulva. “While our production fell, the earnings impact was limited as we shifted production from North American natural gas toward higher margin production of oil sands, Lower 48 liquids and LNG."

The company continues to expand its footprint in emerging exploration regions. ConocoPhillips signed a new deepwater production sharing contract in Bangladesh, was a successful bidder on acreage in the Canol shale play in northern Canada, and signed an agreement for a potential interest in the Goldwyer project in the Canning shale basin, onshore Western Australia. Year to date, the company added a total of 340,000 acres in North America resource plays.

R&M's second-quarter 2011 adjusted earnings were slightly higher than the same period of 2010, primarily due to improved U.S. refining margins. However, international refining margins were lower and costs were slightly higher driven by foreign exchange impacts. In the quarter, the U.S. refining crude oil capacity utilization rate was 90 percent and the international rate was 96 percent.

The Chemicals and Midstream segments posted strong earnings for the second quarter. The Chemicals segment's record earnings of $199 million were primarily due to higher margins, mostly in olefins and polyolefins, and higher volumes. Midstream earnings of $130 million were more than double that of a year ago, primarily due to improved natural gas liquids prices.

Corporate expenses for the quarter of $203 million after-tax were improved compared with the second quarter of 2010, primarily due to foreign exchange impacts and lower net interest expense. In addition, for the total company, controllable costs were flat through the second quarter compared with a year ago.

ConocoPhillips Contributions to Economic Growth

In addition to generating shareholder value, ConocoPhillips activities contribute substantially to job creation and economic growth in the communities in which we operate. During the first half of 2011, the company spent $6.5 billion on operating expenses, which supported jobs at ConocoPhillips and its suppliers. A further $6.1 billion was invested in capital projects helping to create new energy supplies and fuel additional job creation. ConocoPhillips distributed $6.6 billion to its wide shareholder base, which includes numerous state and local pension and investment funds that benefit millions of individual investors and retirees. In addition, $7.7 billion was paid to governments in the form of income, production and severance taxes.
Second-Quarter Financial Highlights

For the second quarter of 2011, ConocoPhillips reported earnings of $3.4 billion, or $2.41 per share, compared with earnings of $4.2 billion, or $2.77 per share, for the same period in 2010. Second-quarter 2011 earnings included an impairment for the Denali pipeline project cancellation, offset by gains from asset dispositions.

Second-quarter 2011 adjusted earnings were $3.4 billion, or $2.41 per share, compared with adjusted earnings of $2.5 billion, or $1.63 per share, for the same period in 2010. Adjusted earnings for the quarter increased compared with the prior year, primarily due to the impact of higher commodity prices and global refining margins, partially offset by the absence of equity earnings from LUKOIL and higher taxes.

During the second quarter of 2011, ConocoPhillips generated $6.3 billion in cash from operations. The company funded a $3.1 billion capital program, repurchased $3.1 billion of ConocoPhillips common stock and paid $0.9 billion in dividends. At June 30, 2011, the company's cash and short-term investments were $8.1 billion, including cash and cash equivalents of $5.5 billion. ConocoPhillips ended the quarter with debt of $23.2 billion and a debt-to-capital ratio of 25 percent.
Six-Months Financial Highlights

ConocoPhillips' six-month 2011 earnings were $6.4 billion, compared with $6.3 billion for the same period in 2010.

Adjusted earnings for the first six months of 2011 were $6.0 billion, compared with adjusted earnings of $4.7 billion in the corresponding period of 2010. Adjusted earnings were higher than a year ago, primarily due to the impact of higher commodity prices and global refining margins. The increase was partially offset by the absence of equity earnings from LUKOIL, higher taxes and lower production volumes.

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Petroceltic-Hess JV to Explore Iraqi Blocks

- Petroceltic-Hess JV to Explore Iraqi Blocks

Wednesday, July 27, 2011
Petroceltic International Inc.

Petroceltic announced that, in partnership with Hess Middle East New Ventures, a subsidiary of Hess Corporation ("Hess"), it has executed two Production Sharing Contracts ("PSCs") with the Kurdistan Regional Government of Iraq ("KRG"). The PSCs are in respect of the Dinarta and Shakrok exploration blocks ("Dinarta" and "Shakrok") in the central north of the Kurdistan Region of Iraq.

Dinarta

Dinarta is a highly prospective undrilled block in a proven but largely unexplored area along trend from existing discoveries in the Kurdistan Region of Iraq. The block, which covers an area of 1319 sq km, is located approximately 75 kms north of Erbil and along trend from the significant Shaikan, Atrush and Swara Tika oil discoveries.

The block itself contains a number of identified surface structures, the largest of which, the Chinara Anticline, is 25 kms along strike from the Swara Tika-1 well, currently reported to be testing a significant new oil discovery. The other structures on the block also have significant potential surface closure areas with multiple reservoir targets believed to be likely to be present in the Jurassic and Triassic strata preserved in this block. The resource potential of the identified structures is considered by Petroceltic to be very significant.

Shakrok

Shakrok is a highly prospective undrilled block in a proven but largely unexplored area along trend from existing discoveries in the Kurdistan Region of Iraq. The block, which covers an area of 418 sq km, is located approximately 50 kms north east of Erbil and is along trend from the nearby Taq Taq oil field and the recently announced Bina Bawi oil discovery.

The block itself contains significant surface anticlines, and, similar to Dinarta, multiple reservoir targets are believed to be likely to be present in the Jurassic and Triassic strata preserved in the block. The resource potential of the identified structures and the Shakrok Anticline in particular is considered by Petroceltic to be significant and in line with other discoveries that have recently been made in the region.

PSC Commitments and Work Program

Each PSC has an initial 3 year exploration period during which the joint venture plans to acquire 2D seismic and drill a minimum of one exploration well. Based on the anticipated work programs, Petroceltic's total financial commitment during the first license period is expected to be approximately $72 million, the majority of which will be incurred over the next 6 months. These amounts are inclusive of all signature and capacity building bonuses payable to the KRG under the terms of the PSC's.

Petroceltic holds its 16% participating interest (20% paying interest) in the PSCs, through a wholly owned subsidiary, Petroceltic Kurdistan Limited ("PKL"). Both blocks will be operated by Hess and the KRG has a carried interest of 20% in each PSC through all phases of operations.

Commenting, Brian O'Cathain, Chief Executive of Petroceltic, said, "The signature of the Dinarta and Shakrok PSCs represents Petroceltics entry into an exciting new region and with an outstanding partner in Hess. These highly prospective blocks add further high impact exploration potential to our portfolio and complement our ongoing exploration and appraisal activities in Algeria and Italy.

"While significant discoveries have already been made, the Kurdistan Region of Iraq remains, a vastly under explored area with huge potential. Our exploration activities in the region are already progressing and we plan to open an office in Erbil in the coming months.

"We have worked closely with the KRG and our co-venturer Hess to conclude these agreements, and are now delighted to have signed the PSCs. We are committed to continuing to work closely with the KRG to maximize the value of these blocks for both the Government and people of the Kurdistan Region of Iraq, and our shareholders."

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Ophir's Kora-1 Well Disappoints

- Ophir's Kora-1 Well Disappoints

Wednesday, July 27, 2011
Ophir Energy plc

Ophir announced the completion of drilling operations on the Kora-1 well in the AGC Profond Production Sharing Contract (PSC). Final wireline logging is now being carried out and the well will be plugged and abandoned as an unsuccessful exploration well.

Kora-1 was a frontier exploration well drilled by the Maersk Deliverer semisubmersible in 2,600m of water and targeting a salt-cored, dip-closed anticline. The well was drilled to a total depth of 4447.5m subsea.

Formation Evaluation While Drilling (FEWD) data shows that the primary (Albian) and secondary (Coniacian and Barremian) reservoir intervals were penetrated close to their anticipated depths, but the well encountered a predominantly claystone and thinly‑bedded limestone sequence rather than the prognosed sandstone reservoir facies. In the absence of reservoir facies it is difficult to immediately assess the potential presence of hydrocarbons on the available FEWD data. A fuller analysis of the data will be required before the wider implications for the prospectivity of the Senegal-Guinea Bissau portion of the MSGBC Basin can be determined.

In June 2011, Ophir completed the last of a series of farm outs on the asset. After the farm outs, Ophir's costs on the Kora-1 well have effectively been carried by the other partners. The beneficial interests in the AGC Profond PSC and the Kora-1 well are as follows:

• Ophir (Operator) 44.2%
• Noble 30.0%
• l'Entreprise (State company) 12.0%
• FAR 8.8%
• Rocksource 5.0%

The Kora-1 well has fulfilled the work commitment for the current phase of the AGC Profond PSC.

Ophir's Managing Director, Nick Cooper commented, "The failure to find viable reservoir facies has been a disappointment at this location. However, Kora-1 was a frontier, playfinder well and represented the first exploration test of the deepwater Senegal-Guinea Bissau portion of the MSGBC Basin. As such, the well has provided important data with which to calibrate the stratigraphy of this extensive basin.

"The Joint Venture partners will now undertake a full review of the well results and their implications for the plays and significant remaining prospect inventory within the AGC Profond PSC.

"In parallel, Ophir is now preparing for an acceleration in drilling activity, with a 2011-2012 campaign of at least 11 high‑impact wells across Ophir's Tanzania, Equatorial Guinea and Gabonese acreage."

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