Conoco News - 2008

News summaries from company press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.

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January

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• Downstream news:

- ConocoPhillips [NYSE:COP] and TransCanada Corporation [TSX, NYSE:TRP] announced that ConocoPhillips acquired a 50 per cent ownership interest in the Keystone Oil Pipeline. A previously signed Memorandum of Understanding committed ConocoPhillips to ship crude oil on the pipeline and gave the right to acquire up to 50 per cent ownership interest.

• Business/Finance news: ­

- ConocoPhillips [NYSE:COP] will release its fourth-quarter earnings January 23, at 8:30 a.m. Eastern. The news release will be issued through Business Wire.

- ConocoPhillips [NYSE:COP] reported fourth-quarter net income of $4,371 million, or $2.71 per share. This compared with $3,197 million, or $1.91 per share, for the same quarter in 2006. Revenues were $52.7 billion, versus $41.5 billion a year ago. For 2007, net income was $11,891 million, or $7.22 per share, including a second-quarter, after-tax impairment of $4,512 million in the Exploration and Production segment related to the expropriation of the company’s Venezuelan oil projects. Earnings for 2007 adjusted for the Venezuela impairment were $16,403 million, or $9.97 per share, versus net income of $15,550 million, or $9.66 per share, for 2006. Revenues were $187.4 billion, versus $183.7 billion a year ago.

- ConocoPhillips [NYSE:COP] announced it is partnering with the National Energy Education Development (NEED) Project to provide America’s teachers with training and resources on key energy topics.

February

• Upstream news: ­

- ConocoPhillips [NYSE:COP] announced 2007 preliminary net proved reserve additions of 1.338 billion barrels of oil equivalent (BOE), including equity affiliates. The company’s reserve replacement ratio was 159 percent, based on 842 million BOE of production. The amounts above exclude 16 million BOE of 2007 Venezuelan production and 1.089 billion BOE of reserves associated with the expropriation of the company’s Venezuelan oil projects. The reserve replacement ratio including the impact of the expropriation was 29 percent. ConocoPhillips’ total proved reserves at year-end 2007 were 10.6 billion BOE. ConocoPhillips’ organic reserve replacement ratio, which excludes sales, acquisitions, and the Venezuela impacts noted above, was 122 percent. Sales of reserves during the year were related to producing assets sold as part of the company’s asset rationalization program. Acquisitions were mainly Canadian oil sands reserves associated with the upstream EnCana business venture. Year-end proved reserves exclude 0.2 billion barrels associated with the company’s Canadian Syncrude operations. U.S. Securities and Exchange Commission (SEC) regulations define the company’s Syncrude operations as mining related; therefore, these operations are not reported as part of the company’s oil and gas proved reserves. Total reserve additions, including revisions, improved recovery, purchases, and extensions and discoveries, were 1.433 billion BOE. Costs incurred, as defined by Statement of Financial Accounting Standards No. 69 (SFAS No. 69), are expected to be $16.292 billion. The company’s five-year average reserve replacement was 176 percent and its estimated five-year average finding and development cost per BOE was $10.11.

• Downstream news: ­

- ConocoPhillips [NYSE:COP] announced a license agreement with Angola LNG Limited for the application and use of ConocoPhillips’ proprietary natural gas liquefaction technology. The agreement provides a license to utilize the ConocoPhillips Optimized CascadeSM Process in the development of Angola LNG Limited’s liquefied natural gas (LNG) facility, which will be the first gas liquefaction facility to be built in Angola and will be located near Soyo in the Zaire Province. The facility is expected to have a nominal LNG capacity of 5.2 million tonnes per year, and include storage for LNG, liquefied petroleum gas (LPG) and condensate, and a loading jetty sized to accommodate ships up to 210,000 cubic meters. The plant will be constructed by a subsidiary of the Bechtel group of companies.

- ConocoPhillips [COP: NYSE] has entered into an agreement with Suez LNG Trading SA which provides ConocoPhillips with long-term access to the Northwest Europe LNG market through Suez’s regasification capacity at the Zeebrugge LNG terminal in Belgium starting in October 2008. This arrangement will diversify ConocoPhillips’ market access position in the Atlantic Basin by adding access in Northwest Europe to the company’s expected regasification capacity in the Freeport and Golden Pass terminals in the U.S. Gulf of Mexico. Under a separate agreement, ConocoPhillips will also provide Suez with market access through ConocoPhillips’ planned regasification capacity in the Freeport LNG terminal in Texas, starting in mid-2010.

- ConocoPhillips [NYSE:COP] announced that it is reassessing how best to advance the Alaska North Slope gas pipeline project as a result of the lack of engagement by the State of Alaska on the company’s proposal submitted Nov. 30, 2007. In its proposal to advance the gas pipeline project, ConocoPhillips addressed many of the State’s primary objectives specified in the Alaska Gasline Inducement Act. “ConocoPhillips remains dedicated to developing Alaska’s North Slope gas resources as we re-evaluate the best path forward for advancing this pipeline project,” said Jim Mulva, ConocoPhillips chairman and chief executive officer.

• Business/Finance news: ­

- ConocoPhillips [NYSE:COP] announced a quarterly dividend of 47 cents per share, payable March 3, 2008, to stockholders of record at the close of business February 25, 2008. This represents an increase of approximately 15 percent in the dividend rate for the company's common stock over the previous quarter's rate of 41 cents per share.

- ConocoPhillips [NYSE:COP] and Rice University today announced a plan to expand Rice’s Elementary Model Science Lab (REMSL) program. This nationally renowned program promotes science education by training elementary school teachers to deepen their professional knowledge, explore the latest science concepts and learn new teaching methods aimed at students in Kindergarten through fifth grade. Research shows that if students do not develop an interest in science by the fifth grade, they are unlikely to develop an interest in science at all.

- The University of Texas Medical Branch at Galveston announced that it has received a multi-year, $250,000 contribution from ConocoPhillips to support the expansion of the Truman G. Blocker Burn Unit. The contribution supports a planned $6 million expansion for the burn unit that will increase the number of specialized patient beds available to eight from four. More than $5.2 million has been raised to date as part of a $10 million endeavor to augment UTMB’s burn care treatment and translational research, support related educational training programs for nurses — including nurse recruitment and retention — and enhance the comfort of patients’ families who spend extended periods of time in the unit. The Sealy & Smith Foundation is matching all contributions to the expansion project. ConocoPhillips presented its first contribution to the expansion during a tour of the facility, located in UTMB’s John Sealy Hospital. Named in honor of the university’s first chief executive to hold the title of president and a leader in burn research and care, the Blocker Burn Unit is one of the foremost adult burn treatment facilities in the nation. It was the first to be certified as a burn center by the American College of Surgeons/American Burn Association in 1996. The Blocker Burn Unit is the only burn center to offer a surgical critical care fellowship program approved by the Residency Review Committee of the Accreditation Council for Graduate Medical Education. The fellowship is managed by UTMB’s Department of Surgery. More than 100 of the world’s most prominent burn specialists have received their training at UTMB.

March

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- More than 8,500 participants took part in the 21st annual ConocoPhillips Rodeo Run, setting a new race record with a 21 percent increase over last year’s event. This year’s race raised $220,000 for the Houston Livestock Show and Rodeo™ Educational Fund. Since the race began in 1988, the company has donated more than $2 million toward college scholarships for Texas youth. Former Houston Astro Craig Biggio joined Houston Livestock Show and Rodeo™ President Skip Wagner at this year’s start line.

- ConocoPhillips [NYSE:COP] will hold its annual analyst meeting March 12, 2008, from 8:30 a.m. to 12 p.m. Eastern in New York City. The meeting will feature presentations by ConocoPhillips executives, including Chairman and Chief Executive Officer Jim Mulva.

- ConocoPhillips [NYSE:COP] held its annual analyst meeting in New York. The company’s Chairman and Chief Executive Officer Jim Mulva outlined how ConocoPhillips’ strategic objectives and operating plans will enable the company to utilize its portfolio of high-quality assets in delivering growth and enhancing value for shareholders, while overcoming a variety of challenges inherent to the current business environment.

- James J. Mulva, the chairman and chief executive of ConocoPhillips, got a pay package valued at approximately $15.1 million in 2007, only slightly higher than his compensation a year earlier, the company said in its annual proxy statement. Mr. Mulva, who has been chairman since October 2004, received a salary of $1.5 million, a performance bonus of $3,442,500 and other compensation of $387,647. The biggest increase to his pay package was from stock options and awards, which the company valued at about $9.8 million on the date they were granted early last year. Mr. Mulva's 2006 compensation was $15 million. (AP)

- ConocoPhillips [NYSE:COP] announced that it has been notified of an unsolicited “mini-tender offer” by TRC Capital Corporation to purchase up to 1.5 million shares, or approximately 0.09 percent, of ConocoPhillips’ outstanding common stock. TRC Capital’s offer price of $73.00 per share is 4.33 percent below ConocoPhillips’ closing share price of $76.31 on March 26, 2008, the day prior to the date of the offer. ConocoPhillips recommends that stockholders not tender their shares in response to TRC Capital's unsolicited mini-tender offer. ConocoPhillips is in no way associated with TRC Capital Corporation, its mini-tender offer or the offer documentation. The TRC Capital offer is at a price below the market price of ConocoPhillips’ stock and its obligation to purchase shares tendered is not required if certain conditions exist, including any decrease in the company’s share price or the unavailability of financing for the purchase on terms satisfactory to TRC Capital. In addition, TRC Capital may amend its offer, including the reduction of its offering price.

- ConocoPhillips [NYSE:COP] and the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), headquartered in Golden, CO, announced a strategic research alliance with Iowa State University (ISU) to identify promising cellulosic biomass conversion technologies to further diversify the nation’s energy sources and help meet growing energy demand. The collaboration will bring three independently established programs together to help identify the most efficient and cost-effective methods for making liquid transportation fuels from plants. Transportation fuels today primarily come from petroleum, corn grain or food crops. The collaboration between ConocoPhillips, NREL and ISU will develop conversion technologies that will use cellulosic materials such as corn stalks, stems, leaves, other non-food agricultural residues, hardy grasses and fast-growing trees as feedstocks for future transportation fuels. The processes that will be examined in this collaboration include gasification, pyrolysis and fermentation.

- ConocoPhillips [NYSE: COP] and Penn State announced they are launching the ConocoPhillips Energy Prize, an awards program that seeks to recognize new ideas and original, actionable solutions that can help improve the way the United States develops and uses energy. In its inaugural year, the program will award up to $300,000 in cash prizes and focus on generating innovative ideas and solutions

April

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- ConocoPhillips [NYSE: COP], and GE Water & Process Technologies, a unit of General Electric Company [NYSE:GE], announced that GE has become an equal co-venturer in ConocoPhillips’ Water Sustainability Center (WSC) in Qatar. Set within the Qatar Science & Technology Park (QSTP) in Doha and expected to open in late 2008, the WSC will research and develop water solutions primarily for the petroleum and petrochemical sectors, but also will focus on municipal and agricultural solutions. On average, approximately three barrels of water are produced for every barrel of oil produced worldwide. However, this water may contain residual components that limit its use without extensive treatment. ConocoPhillips and GE will work to develop more efficient and cost-effective treatment technologies at the WSC. The collaboration will leverage GE’s global scale and broad water portfolio with ConocoPhillips’ understanding of the petroleum and petrochemicals industries to deliver innovative water solutions to customers in the Middle East region and around the globe.

- BP [NYSE: BP] and ConocoPhillips [NYSE: COP] announced they have combined resources to start Denali – The Alaska Gas Pipeline. The pipeline will move approximately four billion cubic feet of natural gas per day to markets, and will be the largest private sector construction project ever built in North America. The project combines the financial strength, arctic experience and technical resources of two of the most capable and experienced companies in the world. BP and ConocoPhillips plan to spend $600 million to reach the first major project milestone, an open season, commencing before yearend 2010. Following a successful open season, a process during which the pipeline company seeks customers to make long-term firm transportation commitments to the project, the companies intend to obtain Federal Energy Regulatory Commission (FERC) and National Energy Board (NEB) certification and move forward with project construction. The FERC and NEB certificates are the critical permits that provide government authorization to construct a pipeline.

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• Business/Finance news: ­

- This update is intended to give an overview of market and operating conditions experienced by ConocoPhillips [NYSE:COP] during the first quarter of 2008. The market indicators and company estimates may differ considerably from the company’s actual results scheduled to be reported on April 24, 2008. First-quarter production on a barrel-of-oil equivalent (BOE) per day basis, including Syncrude and excluding LUKOIL, is anticipated to be slightly below 1.8 million BOE per day. The reduction from the prior quarter is primarily due to the unplanned shutdown of a non-operated natural gas processing plant in the San Juan Basin of the U.S. Lower 48, further complicated by cold weather in the region. Exploration expenses are expected to be approximately $325 million before-tax for the quarter. ConocoPhillips’ debt balance is expected to be approximately $21.5 billion at the end of the first quarter. The company anticipates first-quarter repurchases under the share repurchase program to be approximately $2.5 billion. The number of weighted-average diluted shares outstanding during the first quarter is expected to be approximately 1,582 million.

- ConocoPhillips [NYSE:COP] will release its first-quarter earnings on Thursday, April 24, at 8:30 a.m. Eastern. The news release will be issued through Business Wire. A follow-up conference call with Chairman and Chief Executive Officer Jim Mulva and Investor Relations General Manager Gary Russell will be held Thursday, April 24, at 10 a.m. Eastern.

- ConocoPhillips [NYSE:COP] reported first-quarter net income of $4,139 million, or $2.62 per share. This compared with $3,546 million, or $2.12 per share, for the same quarter in 2007. Revenues were $54.9 billion, versus $41.3 billion a year ago.

- ConocoPhillips said on that its first-quarter earnings rose 17 percent as soaring oil and natural gas prices outweighed weak profits from gasoline production. Oil prices have increased nearly sixfold since 2002 on surging demand from emerging economies, supply concerns and the weak dollar. Net income in the quarter rose to $4.14 billion, or $2.62 a share, from $3.55 billion, or $2.12 a share, in the same period a year ago. Revenue in the quarter rose 33 percent, to $54.88 billion. Excluding one-time items, the company earned about $2.56 a share. Analysts, on average, had expected it to bring in about $2.41 a share, according to Reuters Estimates. Gene Pisasale, who helps manage $12 billion at PNC Capital Advisors, said the company’s exploration and production results were a “blowout,” and made up the difference between the reported results and analyst estimates. Benchmark oil prices in the United States averaged a record of nearly $98 a barrel during the quarter, up almost 70 percent from a year earlier. But margins to produce gasoline have plummeted as refiners have struggled to push through the higher crude costs to customers. According to federal data, first-quarter gasoline prices rose only 33 percent year over year, less than half the increase in the price of crude. Profits from the company’s exploration and production business rose 24 percent, to $2.89 billion, in the quarter. ConocoPhillips said earnings from its refining and marketing business fell nearly 55 percent, to $520 million. Net income from the company’s 20 percent stake in the Russian oil company Lukoil stake nearly tripled, to $710 million. Oil and gas production, excluding the Lukoil stake, was down more than 11 percent, to 1.79 million barrels of oil equivalent a day, mostly because of the loss of projects that were taken over by the Venezuelan government. Shares of ConocoPhillips fell $1.59, or 1.9 percent, to $82.89 on the New York Stock Exchange.

- Two of the world’s biggest oil companies, BP and ConocoPhillips, joined forces to try to break a longstanding deadlock over Alaska’s vast reserves of natural gas. They said they would spend billions to build a pipeline from the North Slope to feed energy-hungry markets in the United States and Canada. The proposal won praise from Alaska’s governor, Sarah Palin. “It’s a good day,” she told reporters in Alaska. The announcement comes at a time when consumption of natural gas in the United States is increasing and conventional production is declining. Natural gas is cleaner than other power sources, like coal, and analysts say it is becoming increasingly critical to the nation’s energy needs. BP and Conoco will initially spend $600 million in the next three years to drum up support for the project, seek state and federal approval, and secure gas supplies for the pipeline. BP and Conoco said the project would be the largest-ever private sector construction project in North America. The project, which would include a $5 billion gas-processing facility on the North Slope, would cost about $30 billion and take at least 10 years to complete. At a time when both energy prices and construction costs are soaring, the endeavor would dwarf the 800 mile trans-Alaska oil pipeline, a momentous project completed in 1977 and that brought jobs and revenue to Alaska. As oil production from the Prudhoe Bay field declines, Alaskans are hoping that natural gas will take over from oil. An Alaska gas pipeline has long been sought as a critical component of the nation’s energy security. The planned pipeline would have a daily capacity of 4 billion cubic feet of natural gas, or almost 7 percent of current United States consumption. But the companies will have to overcome some huge hurdles, said Christopher Ruppel, an energy analyst at Execution, a brokerage and research firm. The companies will need to secure more than 1,000 permits from local, state and federal authorities in both the United States and Canada, a process that will most likely take years. They need to negotiate with native tribes along the pipeline’s route to secure the right of way. If the oil pipeline is any guide, the gas line will also require vast engineering feats. But with higher prices, and a growing appetite for natural gas, the economics of such a large project are starting to make sense for oil companies. The companies said the initial plan is to build a 2,000-mile pipeline from Alaska’s North Slope to the Canadian province of Alberta; that would add to the total North American gas supply, freeing some Canadian gas for export to the United States. Eventually, the pipeline might be extended 1,500 miles, to Chicago. The plan to build a natural gas pipeline to export the state’s vast gas resources has been tangled in Alaskan politics for years. Today, Alaska’s estimated 35 trillion feet of gas reserves are either re-injected into oil fields or left dormant because of a lack of export facilities to bring them to consumers. When Governor Palin took office in late 2006, she interrupted pipeline negotiations that her predecessor, Frank H. Murkowski, had been pursuing with the North Slope oil operators, BP, Conoco and Exxon Mobil. She started from scratch after criticizing the previous talks as not being competitive enough, and sought to bring in new operators in order to secure better terms for Alaska. Her administration is evaluating a proposal made by a Canadian pipeline operator, TransCanada. But the oil companies complained about the delays and said the governor’s procedure was unrealistic. Eschewing $500 million in potential subsidies from the state, BP and ConocoPhillips declared that the economics of natural gas have reached the point that they can finance the pipeline on their own. James L. Bowles, the president of Conoco Alaska, said that while the companies would seek no state subsidies, they will try to meet requirements outlined by Alaskan authorities, like offering local delivery points on the pipeline to meet the state’s natural gas requirements. “This project is moving forward on its own,” he said. Ms. Palin welcomed BP’s and Conoco’s proposal, while stopping short of formally endorsing it. She told reporters that she would meet with executives from the companies to find out more about the joint project. Still, she added, “it sounds great for the state of Alaska.” The plan came as a surprise to Exxon, which said it had been invited to participate only a few days ago. The company will now “evaluate all options,” according to Margaret Ross, an Exxon spokeswoman. BP and Conoco said they would welcome Exxon’s participation. Many analysts have voiced concerns that natural gas prices would keep rising as domestic demand grows and Canada’s exports fall because of increased consumption there. Without a natural gas pipeline, the United States will increasingly depend on imports of natural gas in liquefied form, a source that is costly and potentially vulnerable to political instability in the Middle East, Africa and Latin America. Greater demand is already pushing prices higher, and adding to pressure to open deeper waters off the country’s coast for exploration. Amy Myers Jaffe, an energy analyst at Rice University, said a gas pipeline was badly needed, in addition to the liquefied natural gas projects under consideration. “In the long term it’s not going to mean we are not going to need L.N.G., but we would need a lot more L.N.G. if Alaska does not happen,” she said. Natural gas consumption rose by 6.2 percent in 2007, to 23 trillion cubic feet, from 21.7 trillion cubic feet in 2006, according to the Energy Information Administration. Natural gas prices, which averaged $2 a thousand cubic feet in the 1990s, have soared in the last decade. It recently traded at $9.74 a thousand cubic feet on the New York Mercantile Exchange.

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May

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- The Saudi Arabian Oil Company (Saudi Aramco) and ConocoPhillips [NYSE: COP] announced they have approved continued funding for the development of the Yanbu Export Refinery Project. The Saudi Aramco and ConocoPhillips project would construct a grassroots, 400,000 barrel-per-day, full-conversion refinery in the Yanbu Industrial City, in The Kingdom of Saudi Arabia. The refinery is being designed to process Arabian heavy crude which would be supplied by Saudi Aramco. The refinery would produce high-quality, ultra-low sulfur refined products that will meet current and future product specifications. Saudi Aramco and ConocoPhillips would each be responsible for marketing one half of the refinery's production. The refinery is targeted to start up in 2013. The companies have completed the initial evaluation and front end engineering and design (FEED) outlined in the May 2006 Memorandum of Understanding (MOU). The next phase will include the solicitation of bids, commitment of long lead items and site preparation work.

• Business/Finance news:

- The first year of ConocoPhillips’ [NYSE:COP] eight-year, $22.5 million research program at Iowa State University (ISU) has supported 26 research projects and helped establish new research collaborations to further diversify America’s sources of energy and help meet growing energy demand.

- ConocoPhillips [NYSE:COP] will webcast its 2008 Annual Meeting of Stockholders on Wednesday, May 14, at 10:30 a.m. Eastern.

- ConocoPhillips [NYSE:COP] held its 2008 Annual Meeting of Stockholders, where the company’s stockholders voted on the election of board members, a proposal to declassify the Board of Directors, the ratification of the appointment of Ernst & Young LLP as ConocoPhillips’ independent registered public accounting firm, and eight proposals presented by the company’s stockholders. The preliminary results, reported by the Inspector of Elections, were as follows: Approximately 97 percent of stockholders who cast votes elected three directors: Harold W. McGraw III, James J. Mulva, and Bobby S. Shackouls. In addition, ConocoPhillips stockholders approved a proposal to declassify the Board of Directors, with 98 percent of votes cast in favor of such proposal. Stockholders also ratified the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2008, with 98 percent of votes cast in favor of such appointment.

- ConocoPhillips [NYSE:COP] announced a quarterly dividend of 47 cents per share, payable June 2, 2008, to stockholders of record at the close of business May 27, 2008.

- Texas Children’s Hospital announced a $3 million gift from ConocoPhillips in support of two of the hospital’s Vision 2010 initiatives: its new West Campus, Houston’s first community children’s hospital and one of the nation’s largest suburban pediatric hospitals; and the Jan and Dan Duncan Neurological Research Institute, the nation’s first facility designed to use multidisciplinary research to study pediatric brain disorders. ConocoPhillips has designated $1.5 million of the gift for each initiative.

- ConocoPhillips [NYSE:COP] announced that Ryan Lance, president, Exploration & Production – Europe, Asia, Africa and the Middle East, will speak to investors and securities analysts at the UBS Global Oil & Gas Conference on Thursday, May 22, at 11:55 a.m. Central. The event will be held at the Barton Creek Resort & Spa in Austin, Texas.

- ConocoPhillips [NYSE:COP] announced that John Lowe, executive vice president, Exploration & Production, will speak to investors and securities analysts at the Sanford C. Bernstein & Co. Strategic Decisions Conference on Thursday, May 29, at 9 a.m. Eastern. The event will be held at The Waldorf-Astoria in New York.

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June

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- Gov. Steve Beshear announced that the state is partnering with the newly created Western Kentucky Carbon Storage Foundation to advance the science of long-term carbon storage opportunities in the commonwealth. Peabody Energy, ConocoPhillips and E.ON U.S. formed the non-profit Foundation to work with the Kentucky Geological Survey in a project that includes drilling a well to test the Knox and Mount Simon geological formations at a site in Hancock County.

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July

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- ConocoPhillips [NYSE: COP] and Abu Dhabi National Oil Company (ADNOC) signed an Interim Agreement to develop the Shah Gas Field in Abu Dhabi. Under the Interim Agreement ConocoPhillips and ADNOC will jointly share the ongoing cost of front-end engineering and design (FEED) and project mobilization for the Shah Gas Field development. Final project agreements are expected to be completed by year-end.

- ConocoPhillips [NYSE:COP] announced the successful startup of Qannik, the third Alpine satellite oil field, approximately two months ahead of schedule. The Qannik accumulation is located near the CD-2 drill site two miles west of the main Alpine processing facility in the Colville River Unit on Alaska’s North Slope. Qannik is expected to have annual peak production of approximately 4,000 barrels of oil per day gross in 2009. The Qannik discovery was announced in 2006 and approved for development prior to the recent oil tax increases. It is being developed exclusively with horizontal well technology and employs water injection to enhance oil recovery. The current approved plan for the Qannik development will entail drilling a total of approximately eight wells. Qannik joins the Fiord and Nanuq satellites, which began production in August 2006 and November 2006 respectively.

• Downstream news:

- ConocoPhillips [NYSE:COP] announced that it has signed a $5 million, multi-year sponsored research agreement with the Colorado Center for Biorefining and Biofuels (C2B2), a research center of the Colorado Renewable Energy Collaboratory, to develop new ways to convert biomass into low-carbon transportation fuels. The Collaboratory, a joint venture of the University of Colorado at Boulder, Colorado State University, the Colorado School of Mines, and the National Renewable Energy Laboratory (NREL) formed C2B2 in March 2007, to conduct research at all four institutions. The new collaboration will build on a variety of active research projects being conducted by Colorado scientists and students to develop new sources of transportation biofuels. The first project will involve converting algae into renewable fuel.

• Business/Finance news:

- Iraq’s oil minister announced the start of bidding by foreign companies for contracts to boost the production of eight underperforming oil and gas fields. The contracts, to be executed in about 18 months, would open Iraq’s oil fields to foreign companies for the first time since former dictator Saddam Hussein nationalized foreign concessions in the 1970s. Oil Minister Hussein Shahristani said 35 companies had been selected to bid. Among them were seven from the U.S. and four each from China and Japan. The bidding will proceed even though parliament has not yet ratified a national oil law to regulate foreign contracts. The measure has been stalled by disagreements over how to divide oil revenues among Iraq’s regions. Shahristani said there had already been too long a delay in upgrading depleted fields, which require new technology and foreign expertise to tap hard-to-reach reserves. Iraq has been unable to invest sufficiently in its oil operations over the last two decades because of international sanctions and war. Insurgents have frequently attacked oil sites since the U.S.-led invasion in 2003, though overall violence is down throughout the country since an increase in American troop levels last year. The work put up for bid Monday would increase production by 1.5 million barrels per day by 2013, approaching the prewar level of 4.5 million barrels a day, Shahristani said. At a sometimes testy news conference, Shahristani renewed his criticism of the Kurdish regional government for signing deals with foreign companies that offer them a share of the oil they extract. In contrast, he said, the national government was only offering contracts to service existing fields. Development of new resources would come later. To further protect Iraqi interests, Shahristani said, companies bidding for the contracts would be required to set up offices in Baghdad. Those winning the bids would be required to open branches in Baghdad and to establish partnerships providing Iraqi companies at least a 25% ownership share, he said. The Oil Ministry itself has faced criticism over its efforts to retain four major oil companies as consultants. The no-bid contracts were viewed as offering a foot in the door for those companies, which would then be in a good position to win contracts for larger projects. Last week, three U.S. senators urged the Bush administration to try to stop the deals, which they said could lend credence to the perception that the U.S. went to war in Iraq over oil and could inflame sectarian tensions in Iraq. “Iraq does not need their advice,” Shahristani said of the senators. “If they really had the interests of Iraq in mind then they would have said something about the profit-sharing agreements that have been signed” in Kurdistan. Nonetheless, he said the no-bid contracts had not been signed and indicated that he was not sure they would be. Their purpose was to raise production by 500,000 barrels a day in the short-term, but Iraqi engineers had been able to do that without help, he said. A spokesman for Chevron Corp. said the company, which is also among those bidding on the service contracts, was still negotiating with the ministry and still hoped to close the deal for the no-bid contract. The 35 companies invited to bid on the service contracts were chosen from 120 applicants based on a rating system that included technical, financial and legal tests. In addition to Chevron, the American companies bidding on the contracts include several other major corporations – Occidental Petroleum, ExxonMobil and Conoco Phillips. But any firm that has signed agreements with Kurdistan was automatically disqualified. One disappointed potential bidder learned this after the news conference when he asked an oil official why his company, IGI Group, was spurned. “I received your papers, but I didn’t look at them,” Abdul Hahdy Ameedi, deputy director general for licensing, told the man. “If you get out of your contract with Kurdistan, we will consider you.” Iraq faces no pressing need to increase its oil revenues, which support 95% of the national budget. Even though dilapidated equipment and insurgent attacks have kept production below prewar levels, oil exports are generating more revenue than Baghdad’s bureaucracy can spend. Nonetheless, oil production is seen as essential to creating employment, stimulating the economy and funding the huge public works projects needed to restore the country’s infrastructure. Meanwhile, the government said violent deaths were down slightly in June. The 510 Iraqis killed included 41 police officers and 21 soldiers. The May total was 563 people slain, including 27 police and 32 soldiers

- Highlights – Second-Quarter 2008 vs. First-Quarter 2008: Exploration and Production - Higher crude oil prices. Higher natural gas prices. Lower worldwide production, as previously communicated; Refining and Marketing - Realized worldwide refining margins adversely impacted by secondary product prices. Lower worldwide marketing margins. Improved domestic refining capacity utilization rate; Midstream, Chemicals and LUKOIL Investment - Midstream results anticipated to be higher than the previous quarter. Chemicals results expected to be lower than the previous quarter. LUKOIL Investment segment results to include a $120 million after-tax negative adjustment to align ConocoPhillips’ first-quarter estimate to LUKOIL’s first-quarter 2008 actual results reported in June; Corporate and Other - Corporate expenses anticipated to be similar to the previous quarter. Debt balance of approximately $22.0 billion. Share repurchases of approximately $2.5 billion.

- ConocoPhillips [NYSE:COP] announced a quarterly dividend of 47 cents per share, payable September 2, 2008, to stockholders of record at the close of business July 31, 2008.

- ConocoPhillips [NYSE:COP] will release its second-quarter earnings on Wednesday, July 23, at 8:30 a.m. Eastern. The news release will be issued through Business Wire. A follow-up conference call with Chairman and Chief Executive Officer Jim Mulva and Investor Relations General Manager Gary Russell will be held Wednesday, July 23, at 11 a.m. Eastern.

- ConocoPhillips [NYSE:COP] reported second-quarter net income of $5,439 million, or $3.50 per share. This compared with $301 million, or $0.18 per share, for the same quarter in 2007, which included a $4,512 million impairment associated with the company’s Venezuelan operations. Second-quarter 2007 earnings adjusted for the Venezuela impairment were $4,813 million, or $2.90 per share. Revenues were $71.4 billion, versus $47.4 billion a year ago.

- ConocoPhillips posted its highest quarterly earnings ever on Wednesday as crude prices topped out above $140 a barrel, but it still lagged analyst expectations as expensive oil sapped results at its refining business. The oil company said that profit rose 13 percent from last year, excluding a $4.5 billion charge taken in the year-earlier quarter related to Venezuela’s takeover of Conoco’s operations there. Net income in the quarter rose to $5.44 billion, or $3.50 a share, from $301 million, or 18 cents a share, last year. Excluding the charge from Venezuela, ConocoPhillips earned about $4.81 billion in the year-earlier quarter. Analysts, on average, had expected the company to earn $3.53 a share in the quarter, according to Reuters Estimates. Revenue in the quarter rose more than 50 percent, to $71.4 billion. Oil companies have been reporting record or near record earnings for the last several years as oil prices have surged nearly fivefold. Prices have moderated in the last two weeks, dropping back to around $125 a barrel. Shares of ConocoPhillips fell $2.48, or 2.9 percent, to $81.83 as lower oil prices weighed on the whole sector. Although oil prices in the United States in the second quarter were nearly double those of a year earlier, gasoline prices rose only 25 percent in the same period. That resulted in weak product margins for companies like ConocoPhillips that not only produce oil, but also refine it to make gasoline and other products. Production fell to the equivalent of 2.2 million barrels of oil a day, from 2.38 million barrels last year, mostly because of the loss of production in Venezuela. ConocoPhillips expects third-quarter production in line with second-quarter levels.

August

• Upstream news:

­- OAO LUKOIL President Vagit Alekperov and ConocoPhillips Chairman and CEO Jim Mulva participated in a special ceremony on the occasion of the startup of the Yuzhno Khylchuyu (YK) field located in the Nenets Autonomous District. One of the biggest fields in the north of the Timan Pechora oil and gas province, this field is developed by OOO Naryanmarneftegaz, a LUKOIL and ConocoPhillips joint venture (70% and 30%, respectively). The field was discovered in 1981. Oil quality there surpasses the Russian Urals export blend quality: its density is 35.5 API (Urals, 32.0 API), and sulfur content is 0.71% (Urals, 1.3%).

• Downstream news:

- ConocoPhillips said that it would sell 600 company-owned gasoline stations in the United States to PetroSun West for $800 million, completing the oil major’s exit from the low-margin, highly competitive retail business. ConocoPhillips, which operates the Phillips 66, Conoco and 76 brands in the western and central United States, is the latest big oil company to sell its service stations. Service stations have struggled with shrinking margins even as gasoline prices topped $4 a gallon because they have not been able to keep pace with soaring crude oil prices. In June, Exxon Mobil announced it planned to leave the retail gasoline business by selling the remaining 2,220 stations it owns. BP is also selling its American retail business. Privately held PetroSun, the largest independent gasoline and convenience store operator on the West Coast, said the deal would leave it with operations in 10 states and annual petroleum sales of more than a billion gallons. The service stations will still carry one of ConocoPhillips’ brand names, a ConocoPhillips spokeswoman said. Conoco will continue to produce gasoline and sell fuel on a wholesale basis to stations. Shares of Houston-based ConocoPhillips rose 1.5 percent, or $1.20, to $83.58 in midday trading on the New York Stock Exchange.

• Business/Finance news:

- ConocoPhillips [NYSE:COP] announced that Jim Gallogly, executive vice president, Refining, Marketing and Transportation, will speak to investors and securities analysts at the Lehman Brothers CEO Energy/Power Conference on Wednesday, Sept. 3, at 9:45 a.m. Eastern. The event will be held at the Sheraton New York Hotel and Towers.

September

• Upstream news:

- ConocoPhillips [NYSE:COP] and Origin Energy [ASX:ORG] announced their plan to create a long-term Australasian natural gas business focused on coal bed methane production and liquefied natural gas (LNG) processing and sales. The transaction is conditioned upon approval from Australia’s Foreign Investment Review Board and, if required as a result of an outstanding offer from BG to purchase all outstanding shares of Origin Energy stock, the approval of Origin Energy's shareholders. Under the plan, ConocoPhillips would initially contribute US$5 billion to the joint venture and would carry Origin Energy for their first AU$1.15 billion in joint venture expenses. ConocoPhillips would make up to four additional payments of US$500 million to the joint venture based on project milestones, for a total possible cash acquisition investment of approximately US$8 billion at current exchange rates.As a result of these investments, ConocoPhillips would receive 50 percent equity in Origin Energy CSG Limited, which holds Origin Energy’s Queensland, Australia, coal bed methane assets. The 50/50 joint venture would be comprised of coal bed methane development, operated by Origin Energy, and a liquefied natural gas project, operated by ConocoPhillips.As planned, the joint venture would market the LNG, primarily targeted to Asian markets, with ConocoPhillips leading the marketing venture for the first 10 years.The joint venture would be managed by a board of directors composed evenly of ConocoPhillips and Origin Energy representatives.The project director would be supplied by ConocoPhillips.

• Downstream news:

• Business/Finance news:

- ConocoPhillips [NYSE:COP] announced that John Carrig, executive vice president, Finance, and chief financial officer, will speak to investors and securities analysts at Bank of America’s 38th Annual Investment Conference on Wednesday, Sept. 17, at 8 a.m. Pacific Daylight Time. The event will be held at The Ritz-Carlton Hotel in San Francisco.

- ConocoPhillips [NYSE:COP] announced it will contribute $5 million to provide assistance to those affected by Hurricane Ike. ConocoPhillips’ contribution is being directed to the American Red Cross, the United Way, the Salvation Army and the Texas Disaster Relief Fund, established by Gov. Rick Perry.

- Origin Energy, fending off an $11 billion hostile bid from Britain’s BG Group, is to spin off its coalbed methane assets into a joint venture with U.S. oil major ConocoPhillips. Origin and Conoco said in statements on Monday that Conoco would contribute up to $8 billion toward a joint venture that will develop the massive coal-seam gas assets and build a liquefied natural gas project. Analysts told Reuters that the move could force the BG to raise its 15.50 Australian dollars per share bid, which was aimed at growing UK gas producer’s Asia-Pacific liquefied natural gas production arm to feed its booming Asian sales business in the market. Origin’s shares rose nearly 28 percent to a record high of A$19.99 on news of the venture. “Obviously, ConocoPhillips’ joining is a positive. I suppose it shows that there is good market out there for what Origin has got,” Peter Chilton, a fund manager with Constellation Capital Management, which does not own Origin shares, told Reuters. Conoco said it would pay $5 billion to the joint venture and would carry Origin Energy for their first 1.15 billion Australian dollars ($950 million) in joint venture expenses. It will also pay $500 million into the venture when the partners agree to proceed with each train or phase of the planned four-train project to convert coal-seam gas into liquefied natural gas. The deal would take the financial burden of developing the reserves off Origin, whose main business currently is retailing power and gas. Origin said after the completion of the transaction, it would pay a dividend of 25 Australian cents, doubling the 2008 dividend, and commence a 1.275 billion Australian dollar buy-back of shares. After its board rejected a friendly approach from BG at 15.50 Australian dollars per share on May 30, Origin invited proposals as to how best exploit its coal-steam gas reserves, with options ranging from the sale of its gas assets to partnership in a liquefied natural gas export project. The deal is conditional on approval by Australia’s Foreign Investment Review Board and Conoco said it expects it to be completed in October. BG’s offer closes on Sept. 26. If Origin’s shareholders reject the bid and BG fails to increase it, Origin management can proceed without consulting shareholders, a company spokesman said. Origin, which holds the largest CSG reserves in Australia, also said an independent expert, Grant Samuel & Associates, has valued its shares at between 28.55 Australian dollars to 30.71 Australian dollars a piece.

- When Gov. Sarah Palin of Alaska took center stage at the Republican convention, she sought to burnish her executive credentials by telling how she had engineered the deal that jump-started a long-delayed gas pipelne project. Stretching more than 1,700 miles, it would deliver natural gas from the North Slope of Alaska to the lower 48 states and be the largest private-sector infrastructure project on the continent. “And when that deal was struck, we began a nearly $40 billion natural gas pipeline to help lead America to energy independence,” said Ms. Palin, the Republican vice-presidential nominee. “That pipeline, when the last section is laid and its valves are opened, will lead America one step farther away from dependence on dangerous foreign powers that do not have our interests at heart.” The reality, however, is far more ambiguous than the impression Ms. Palin has left at the convention and on the campaign trail. Certainly she proved effective in attracting developers to a project that has eluded Alaska governors for three decades. But an examination of the pipeline project also found that Ms. Palin has overstated both the progress that has been made and the certainty of success. The pipeline exists only on paper. The first section has yet to be laid, federal approvals are years away and the pipeline will not be completed for at least a decade. In fact, although it is the centerpiece of Ms. Palin’s relatively brief record as governor, the pipeline might never be built, and under a worst-case scenario, the state could lose up to $500 million it committed to defray regulatory and other costs. Contributing to the project’s uncertainty is Ms. Palin’s antagonistic relationship with the major oil companies that control Alaska’s untapped gas reserves. Ms. Palin won the governor’s office in part by capitalizing on populist distaste for the political establishment’s coziness with Big Oil, and her pipeline strategy was intended to blunt its power over the process. Her willingness to take on the oil companies has allowed the McCain campaign to portray her as a scourge of special interests. Now, though, she will need the industry’s cooperation if her plan is to succeed, and just this week, her office said she intended to reach out to the North Slope oil companies. As Ms. Palin takes to the road to campaign with Mr. McCain, invoking the pipeline as a major victory, some Alaska lawmakers who initially endorsed her plan now believe it was a mistake. State Senator Bert Stedman, a Republican who is co-chairman of the finance committee, said that in its contract with the chosen developer, TransCanada, the state bargained away too much leverage with little guarantee of success. “There is no requirement to lift one shovel of dirt or lay down one inch of steel,” he said. A spokesman for Ms. Palin, Bill McAllister, denied that her recent statements about the pipeline were misleading. He said they should be viewed within the context of the project’s long and frustrating history, dating back to the Carter administration. “When the governor signed the legislation giving her administration the authority to grant the gas line license to TransCanada, Alaska came closer than it has ever been to seeing the project actually happen,” Mr. McAllister said. “There is no denying that a major milestone in the project has been reached.” Ms. Palin’s pipeline plan has its roots in longstanding efforts to access the trillions of cubic feet of natural gas under the North Slope, where some of the world’s major oil companies, including BP, Exxon Mobil and ConocoPhillips, have exploration and development rights. Congress has prodded all parties involved to develop a plan to tap the gas since at least the 1970s, but the private sector has been unwilling to assume the huge cost of building a pipeline without considerable government tax breaks and other concessions. Ms. Palin’s push for a pipeline is central to her view that Alaska, with its North Slope gas resources, is a key to helping the United States develop an energy policy that embraces increased domestic production of gas and oil and the development of renewable and alternative energy sources. Her predecessor, Frank H. Murkowski, had negotiated an exclusive pipeline deal with the major oil producers that proved unpopular with lawmakers and was never acted on. In the 2006 Republican primary, Ms. Palin wielded Mr. Murkowski’s pipeline proposal against him, calling it a sweetheart deal for Big Oil, which treated Alaska like a colony and faced little resistance from past governors.Once elected, Ms. Palin set about fashioning an alternative that was essentially a 180-degree turn, intended to open up the bidding process to other companies. It also did away with incentives that a consultant for the Legislature estimated would have saved the oil companies an estimated $10 billion over 30 to 40 years. Ms. Palin also rehired key state oil and gas officials, including Marty K. Rutherford, who had quit, and Tom Irwin, who had been fired, after opposing Mr. Murkowski’s approach. Mr. Irwin said Ms. Palin wanted to create an environment for a larger number of companies in the energy industry to openly compete to build the pipeline, rather than just handing a favorable deal to the North Slope oil producers. Ms. Palin’s objectives were enshrined in the Alaska Gasline Inducement Act, introduced just months into her governorship. “We were going nowhere; the producers were holding us hostage,” said Ms. Rutherford, who heads Ms. Palin’s gas pipeline team. “They were demanding great value from the state with no guarantee to do anything for us.” While Ms. Palin’s legislation did away with the concessions to the oil companies that she considered to be excessive, it committed the state to paying the winning bidder up to $500 million in matching money to offset costs of obtaining regulatory approvals and other expenses. Ms. Rutherford, whose team recommended the subsidy, said the governor was reluctant but eventually agreed that the state had to share in the risk to that degree; the $500 million amounts to about 10 percent of the projected state budget surplus this year. The bill sailed through the Legislature in May 2007. Only a single lawmaker, the House majority leader, Ralph Samuels, a Republican, voted against it. When the state solicited proposals from interested companies, it soon became apparent that the big oil companies would not participate. One of them, ConocoPhillips, submitted a proposal outside the process, but it was swiftly rejected by the Palin administration. Of the five companies that eventually bid, Ms. Palin’s administration chose TransCanada Pipelines, which operates 36,500 miles of pipeline across North America. TransCanada had previously tried to negotiate a pipeline deal with the Murkowski administration, but was sidelined by the governor in favor of the big oil companies, some officials who were involved in the talks said. That contributed to the rift that led to the departures of Mr. Irwin, Ms. Rutherford and five others from the state Department of Natural Resources. The proposal that TransCanada negotiated with the Murkowski administration was structured differently from the current one and had no provision for a $500 million state subsidy, said two people who reviewed it and who spoke on condition of anonymity because the proposal remains confidential. Of the Palin aides familiar with TransCanada from those earlier negotiations, Ms. Rutherford had an unusually close connection. For 10 months in 2003, she was a partner in a consulting and lobbying firm whose clients included Foothills Pipe Lines Ltd., a subsidiary of TransCanada. Ms. Rutherford said in an interview that after TransCanada submitted its pipeline proposal to the Palin administration, she and the governor never discussed whether her role on the team might be viewed as improper or give the appearance of a conflict of interest. Ms. Rutherford, who said she had not lobbied for Foothills but had done research and analysis, stated that she was not one of the pipeline team members who recommended a developer to Ms. Palin. That was done by Mr. Irwin and Patrick S. Galvin, the commissioner of the Department of Revenue, she said. “At the end of the day, I was not a decider,” said Ms. Rutherford, who acknowledged reading the proposals and discussing them with others on the team. Mr. McAllister, the spokesman for Ms. Palin, said that Ms. Rutherford was not in a position to gain anything from her past association with TransCanada and that her role posed no conflict.When the Legislature ratified the choice of TransCanada this summer, Ms. Palin called a news conference to hail the deal, saying that the state had finally obtained a commitment to build the pipeline. But after some of her aides offered a more restrained assessment, she dialed back her exuberance, saying, “We’re not turning dirt yet.” Under the most optimistic circumstances, dirt is not expected to be turned for years. TransCanada’s plan calls for it to file an application with the Federal Energy Regulatory Commission by the end of 2011, and to have the pipeline operational by late 2018. The company is not obligated to proceed with the project even if it clears all the financial and regulatory hurdles. In assessing the state of the project, Mr. Galvin, the state revenue commissioner, avoided the characterization that Ms. Palin employed in her convention speech. A number of important decisions remain in the relationship between the state and TransCanada, he said, including whether the state will ultimately endorse the company’s application to the federal government. “We’ve started to build the framework for this project to move forward,” he said. The state’s commitment to match some start-up expenses, up to $500 million, is among several aspects of the deal that have prompted some legislators to second-guess their initial support. Lyda Green, a Republican and president of the State Senate, voted for Ms. Palin’s Alaska Gasline Inducement Act but said that in the interim, it has not “shown itself to be open and competitive, and it is a very expensive risk.” “I regret the vote now,” she said last week. Mr. Stedman, the Senate finance committee co-chairman, said he now believes that the Legislature was overly eager to support a new governor and see a pipeline project move forward. He contended that Ms. Palin’s bill seemed intentionally written to keep the three major Alaska oil producers from submitting proposals. Demonizing Big Oil, he added, could come back to haunt the state.“It’s a sad state of affairs, but it’s true: if you look at the politics of the state and you want to have a devil, you can point at Exxon, as well as at BP and Conoco,” Mr. Stedman said. “It is good politics.” Beyond the $500 million subsidy, a central criticism of the deal is that for it to succeed, TransCanada needs to secure shipping commitments from the oil companies, which control most of the North Slope gas resources. Those pledges are far from certain. State officials have pointed out that they have the authority to revoke the oil and gas leases if the companies act unreasonably by refusing to extract the gas from the ground. Indeed, last month the state sought to pull 44 of Exxon’s leases at Point Thomson, arguing that the company had not moved on any of its nearly two dozen plans submitted over the years to develop the area, and that the last well Exxon drilled there was in the early 1980s, Mr. Irwin said. Tony Palmer, vice president in charge of Alaska operations for TransCanada, said he was confident that shipping arrangements could be worked out with the North Slope companies, saying TransCanada had long had other agreements with them. He praised Ms. Palin for providing “impressive leadership to move this project forward,” and said TransCanada had already begun preliminary fieldwork. Meanwhile, the oil companies seem to be charting a course of their own. A month before Ms. Palin announced the selection of TransCanada, BP and ConocoPhillips unveiled a partnership to construct their own pipeline, and started the process of seeking federal certification. Publicly, Ms. Palin welcomed the producers’ involvement, calling it a validation of her overall effort to galvanize interest in a pipeline. But it is unclear whether the oil companies are seriously pursuing it or are simply trying to throw a wrench into the TransCanada plan. Bud Fackrell, the president of the BP-Conoco venture, called Denali-The Alaska Gas Pipeline, said the companies were committed to spending about $600 million to line up customers. “This not a bluff,” he said. “Six hundred million dollars is not chump change.” Mr. Fackrell raised one of the critical issues for the North Slope producers: taxes. He said that for Denali to attract customers, they “need to know what the tax regime is going to be or they will be hesitant to sign up” for 25-year shipping commitments. They are asking the state for “fiscal certainty,” Mr. Fackrell added. Mr. Fackrell contended that among the virtues of the joint venture was BP and Conoco’s more than 30 years of experience on the North Slope, building the infrastructure and operating most of the facilities there. He left open the possibility that TransCanada could become part of the venture.

- Days after she was sworn in as governor, Sarah Palin began to clean house at the department of natural resources, firing and demoting several top officials and eventually appointing a new director at the agency that oversees the energy companies that provide the state with 85% of its revenue. The shake-up was an early sign that this newly elected Republican governor was not like any of her predecessors -- she was determined not to cave in to the energy industry, the state's lifeblood. "The governor is not a negotiator. She is a non-negotiator. She draws lines in the sand," said Tim Bradner, an oil industry analyst for Platts Oilgram and the Alaska Journal of Commerce. Palin, in her inaugural speech, had another way of putting it: "I will unambiguously, steadfastly and doggedly guard the interests of this great state as a mother naturally guards her own," she said. Palin's willingness to take on powerful interests in her state drew the attention of Sen. John McCain, who has praised his running mate as a reformer. Since becoming governor in December 2006, Palin has tripled production taxes on oil and seized control of a proposed $30-billion natural gas pipeline from the traditional oil giants. The Palin administration now stands in a nerve-racking faceoff with the multibillion-dollar oil industry interests that have for 40 years been the bedrock of the state's politics and economy. Who blinks first -- Palin, or companies like BP Alaska, ConocoPhillips and ExxonMobil -- will determine who controls transport of Alaska's massive untapped gas resources and future tax revenues for a state dependent on petroleum revenues for 85% of its budget. Most analysts are predicting that it won't be Palin who yields. "She has been more adversarial with the producers than any previous governor," said Democratic state Rep. Mike Doogan, whom Palin courted -- with cupcakes -- to power her oil program through the Legislature this year. Palin's showdown with the oil companies has earned her enormous public acclaim but alienated her from all but a handful of Republican legislators and forced her to develop working alliances with Democrats. She has taken on the leadership of the state Republican Party at a time when a growing number of Alaskan politicians are being indicted on corruption charges because of their ties to the oil industry. "I'm a Democrat. She's a Republican. But she and I have a larger alliance with each other than we do with our own parties," said Ray Metcalfe, a former state legislator who has long complained about corruption. "We have a Republican governor who is not part of the system, and she has set out to reform the party." Palin's independent approach to politics recalls the kind of Republicanism championed, at least rhetorically, by another maverick: McCain. "She came into office with a single focus, and that was to undo everything the previous governor had done, and to do as much as she could to prevent Alaska's oil producers from having any participation in any development of an Alaska natural gas line," said Republican state Rep. Mike Hawker, who chairs the state House budget committee. At least 40 Republicans were opposed to the enormous oil production tax increase crafted in the Legislature, he said, but Palin "cut a deal with the Democratic caucus." "She rode the tide of vindictive populism against the oil and gas industry in this state," he said. The connections between oil and power go back to the earliest days of Alaskan statehood. Four of the 10 largest oil fields in North America are on the North Slope, contributing an estimated $5 billion to the state's economy, according to the Alaska Oil and Gas Assn. Palin is a strong supporter of expanding drilling across the North Slope and in some other environmentally sensitive regions. Unlike McCain, she favors opening the Arctic National Wildlife Refuge to oil production. But her hard line on expanding state control has flummoxed oil executives. They have warned that the higher taxes will discourage investment in oil production at a time when Alaska must compete with other fields around the world for oil capital. "The governor pushed for an increase in taxes and the Legislature went along. That was totally their right to do so, but we were pretty clear going in what the long-term consequences would be," said Steve Rinehart, spokesman for BP Exploration. He said the company has decided to place one of its North Slope projects on hold as a result of the tax increase. "It was a bread-and-butter oil field development, and a billion dollars' worth of work. We decided it doesn't make sense in the current tax environment," Rinehart said. The showdown comes at a crucial time, when oil flows from the North Slope down the Trans-Alaskan Pipeline are barely half what they were at their peak in 1988. Palin not only wants a greater share of what's left for state coffers, but has also told oil companies they must develop the leases they have or give them up -- a challenge to producers who may have been waiting for marginal oil and gas fields to become economical before investing millions more in them. Last month, the Palin administration revoked 13 ExxonMobil leases on the North Slope project known as Point Thomson, a field believed to hold up to 7 trillion cubic feet of gas, or about a quarter of the North Slope's known reserves. Palin's administration has also squared into an epic standoff with North Slope producers over a proposed $30-billion, 1,700-mile pipeline that would for the first time allow gas to be transported to markets in the Lower 48. ExxonMobil, BP and ConocoPhillips own rights to most of the gas on the North Slope, and have sought long-term tax guarantees before signing on to build the transit facility, which would be the largest private enterprise project in North American history. Palin's negotiators have offered only medium-term tax promises and do not want the gas producers holding monopoly control over the facility. The dispute came to a showdown in the Legislature last month, when Palin succeeded in offering the license -- accompanied by a state subsidy of $500 million -- to Canada-based Trans-Canada Corp. She cut the North Slope producers out of the loop. But in a stunning war of nerves, ConocoPhillips and BP have launched a private pipeline project of their own, announcing they will spend $600 million to begin construction within five years. "We're trying to break this logjam and move the project forward," said Bud Fackrell, president of Denali, the company formed to build the pipeline. The Republican governor's hard line on the oil companies has stirred concern among energy executives across the country. In Washington, energy lobbyists have prepared reports on Palin's record. Her pro-drilling stance "reminds me a lot of Dick Cheney," said Scott Segal, a prominent D.C. energy lobbyist. But her policy of taxing windfall energy profits is disconcerting, he said. "That approach is anathema to oilmen."

- BG Group, the British gas producer, admitted defeat in its hostile bid for Australian coal-bed methane producer Origin Energy, but analysts said BG may shift its focus to another target or become a target itself. BG said in a statement it would not increase or extend its 15.50 Australian dollar per share offer, which closes on September 26, and said it expected the offer to lapse, after Origin formed an $8 billion joint venture with U.S. oil major ConocoPhillips. Origin said it had agreed to spin off its massive coal-seam gas assets in Queensland into a joint venture in which ConocoPhillips would inject up to $8 billion. BG had hoped to use the reserves to expand a liquefied natural gas export terminal it plans to build with Queensland Gas. Some analysts had predicted BG would abandon its bid after the Origin-Conoco tie-up, prompting BG’s shares to rally 6 percent. The shares traded up 1.5 percent at pence at 4:02 a.m. EDT, outperforming a 0.2 percent rise in the DJ Stoxx European oil and gas index. Origin shares closed down 1.42 percent at 17.40 Australian dollars before the announcement. But BG could now shift its sights to another Australian gas producer, analysts said. In February, BG said it had agreed to acquire a 20 percent interest in Queensland’s coal-seam gas assets and a 9.9 percent stake in Queensland and to build an LNG production facility to export the gas from Queensland’s fields. Some analysts said energy firm Santos, which has also proposed a LNG project using coal-seam gas in Queensland, could also become a target for BG once the government lifts its 15 percent shareholding restriction on Santos in November. However, any approach would complicated by the fact Santos already has a partnership with Malaysia’s Petronas to build an LNG facility. One analyst said he expected BG and the Santos/Petronas venture to work together on building a single LNG facility. The decision to give up on Origin could make BG a more attractive takeover target itself, one dealer said. Traders told Reuters that a recent rumor of U.S. oil major ExxonMobil bidding for BG resurfaced, although no one who heard it said they believed it. BG is frequently the subject of takeover rumors. Coal-seam gas or coal bed methane is gas extracted from coal fields by drilling into the coal seams. It is a more complex procedure than producing from traditional gas reservoirs but as oil and gas companies face difficulties in making new finds, Australia’s CSG has become a hot area for investment.

October

• Upstream news:

­- JSC National Company KazMunayGas (KMG), ConocoPhillips [NYSE: COP] and Mubadala Development Company PJSC (Mubadala) announced that they have signed a Memorandum of Understanding (MOU) to negotiate terms for the exploration and development of the “N” Block, located in offshore Kazakhstan, under a new subsoil use contract. The parties will now have until Dec. 31, 2008 to negotiate the definitive agreements for the assignment by KMG of a 49 percent interest in the subsoil use contract to be shared equally between ConocoPhillips and Mubadala. KMG will remain the majority partner in the venture. The “N” Block is located 30 kilometers south-southwest offshore Aktau, Kazakhstan in the Caspian Sea. The Block covers approximately 8,100 square kilometers and is considered highly prospective for both oil and gas.

• Downstream news:

• Business/Finance news:

- ConocoPhillips [NYSE:COP] announced the following actions concerning the company's senior management. Unless otherwise noted, these changes are effective immediately. John Carrig, currently executive vice president, Finance, and chief financial officer, will become president and chief operating officer. He will continue to report to Jim Mulva, chairman and chief executive officer. Jim Gallogly, currently executive vice president, Refining, Marketing & Transportation, will become executive vice president, Exploration & Production. Willie Chiang, currently senior vice president, Commercial, will become senior vice president, Refining, Marketing & Transportation. Greg Goff, currently president, Strategy, Integration and Specialty Businesses for Refining, Marketing & Transportation, will become senior vice president, Commercial. Ryan Lance will remain president, Exploration & Production – Europe, Asia, Africa and the Middle East.

- ConocoPhillips [NYSE:COP] announced a quarterly dividend of 47 cents per share, payable December 1, 2008, to stockholders of record at the close of business October 31, 2008.

- ConocoPhillips [NYSE:COP] and Penn State have awarded the first ConocoPhillips Energy Prize to David A. Gonzales II to further develop the Layered MagWheel, a new technology to provide magnetic acceleration and frictionless braking for vehicles, increasing energy conversion and efficiency. 2008 marks the inaugural year of the ConocoPhillips Energy Prize, which recognizes new ideas and original, actionable solutions that can help improve the way the United States develops and uses energy. The Prize focuses on innovative ideas and solutions in three areas: developing new energy sources; improving energy efficiency; and combating climate change.

- Oil prices are continuing their downward slide. A moment ago, the price of a barrel of light, low-sulfur crude dipped below $70, falling to nearly $69 per barrel before rebounding slightly. It’s oil’s lowest price in more than a year, and down more than 50 percent from its high of $148 per barrel. Gas companies like Exxon Mobil and Chevron saw their profits balloon as oil prices surged over the summer, and their stocks have fallen along with crude prices. Shares in energy producers are trading mixed today. Exxon Mobil, Hess and Marathon are all up slightly, but Chevron, Total, Royal Dutch Shell and Conoco Phillips are all down.

- ConocoPhillips [NYSE:COP] will release its third-quarter earnings on Wednesday, October 22, at 8:30 a.m. Eastern. The news release will be issued through Business Wire. A follow-up conference call with Chairman and Chief Executive Officer Jim Mulva; President and Chief Operating Officer John Carrig; Senior Vice President, Finance, and Chief Financial Officer Sig Cornelius; and Investor Relations General Manager Gary Russell will be held Wednesday, October 22, at 11 a.m. Eastern.

- ConocoPhillips [NYSE:COP] reported third-quarter net income of $5,188 million, or $3.39 per share. This compared with $3,673 million, or $2.23 per share, for the same quarter in 2007. Revenues were $70.0 billion, versus $46.1 billion a year ago.

November

• Upstream news:

• Downstream news:

- The Saudi Arabian Oil Company (Saudi Aramco) and ConocoPhillips [NYSE: COP] have agreed to halt the bidding process associated with the construction of the planned 400,000 barrel-per-day export refinery at the Yanbu Industrial City, in the Kingdom of Saudi Arabia, citing uncertainties in the financial and contracting markets. The current bidding process requested bids to be submitted during December 2008. Instead, it is planned that the project will be re-bid in the second quarter of 2009. The companies will maintain joint engineering, start-up planning and other preparatory activities to ensure project continuity while accommodating the delay.

• Business/Finance news:

- ConocoPhillips [NYSE:COP] announced that it will contribute $2 million over the next four years to the endowment fund for The Academy of Medicine, Engineering and Science of Texas (the Academy). The Academy brings the state's top scientific, academic and corporate minds together to further position Texas as a national research leader. The Academy also hopes to foster the next generation of scientists, and to increase the awareness and communication among the state's best and brightest about research priorities for the future.

- Investors were calling it the Geithner rally. Shares on Wall Street soared after reports that President-elect Barack Obama would name Timothy F. Geithner, the president of the New York Federal Reserve, to be his Treasury secretary. After listing between positive and negative territory for most of the day, markets shot up on the news and ended dramatically higher, paring some of the losses that had dragged them to 11-year lows. Skittish investors who had cashed out of the market or retreated into safe investments like Treasuries stampeded back, lifting financial markets more than 6 percent in the final hour of trading. All sectors ended higher, but energy companies and producers of basic materials like aluminum or steel booked the sharpest gains, closing up 11 percent on an increase in commodity prices. While some applauded the choice of Mr. Geithner, analysts said the markets were cheering the selection of anyone at all to succeed Treasury Secretary Henry M. Paulson Jr. and take over the administration of the $700 billion bailout. Mr. Paulson has been criticized for declaring that the government would not use taxpayer money to buy troubled assets but would instead directly purchase stock in financial institutions. The Dow Jones industrial average soared 494.13 points, or 6.54 percent, to 8,046.42. The broader Standard & Poor’s 500-stock index swung 6.32 percent higher, or 47.59 points, to 800.03. The Nasdaq composite index gained 68.23 points, or 5.18 percent, to 1,384.35. Still, the gains were not enough to wipe away the losses of the last two days, which brought Wall Street to its lowest levels since 1997. The Dow ended the week down 5 percent, and the S.& P. 500 was 8 percent lower. And with jobless numbers rising, corporate profits plummeting and Citigroup teetering, no one was willing to say that the worst of the economic crisis had passed. No major economic reports, which have jolted markets all week, were released, and the Congressional lame-duck session paused as automakers retooled their case for a bailout. Then the news of Mr. Geithner leaked out, and shares raced skyward. A bounce in the price of commodities like metals, oil and gold after months of declines helped to push up shares in basic-materials companies. The aluminum manufacturer Alcoa led gains among the Dow’s 30 stocks, closing 23 percent higher, at $8.44. Mining companies posted double-digit gains. Crude oil prices, which retreated in early trading, settled 51 cents higher, at $49.93. Energy shares, which have tumbled 50 percent this year, rebounded on Friday, with Exxon Mobil, Marathon, Sunoco and Conoco Phillips ending more than 10 percent higher. The average price for gasoline fell below $2 a gallon nationwide, according to AAA, the auto association. But as demand for goods continues to crumble and factories scale back, analysts expect that the price of commodities will not recover until the larger economy stabilizes. The lift in prices could have been little more than bargain-hunting, they said. Battered technology stocks, which are down more than 50 percent since the beginning of the year, rode the rally. But shares of Dell fell 5 percent, to $9.30, after the computer maker reported that its third-quarter sales had dropped. Shares of Citigroup also lagged amid growing uncertainty about the fate of the bank. The company’s stock dropped 20 percent, to $3.77, after the bank denied reports that it would auction units, or put itself up for sale. Citigroup and JPMorgan Chase were the only two Dow components to close lower. JP Morgan fell 66 cents, to $22.72. As buyers dipped their toes into equity markets, the price of safe-haven government debt ebbed. The Treasury’s 10-year bill fell 1 20/32, to 104 22/32. The yield, which moves in the opposite direction from the price, rose to 3.2 percent from 3.01, a record low, late Thursday. Many analysts still expect Wall Street’s current downward trend to continue.

December

• Upstream news:

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• Downstream news:

- ConocoPhillips [NYSE: COP] and Peabody Energy [NYSE: BTU] announced the filing of an air permit with the Commonwealth of Kentucky to site a state-of-the-art coal-to-natural-gas facility near Central City in Muhlenberg County. The filing is a major step toward advancing development of the project into the next phase of evaluation. The facility, to be known as Kentucky NewGas, is expected to produce enough energy to provide for nearly three quarters of a million Midwest homes. If approved, the project could also re-energize the regional economy by creating 1,200 skilled jobs during a four-year construction process, 500 long-term jobs and nearly $100 million in regional economic benefits each year.

- ConocoPhillips [NYSE: COP] announced that the company has acquired its first LNG cargo for the Zeebrugge liquefied natural gas (LNG) terminal in Belgium. The cargo was delivered in mid-December, 2008. In February 2008, ConocoPhillips entered into an agreement with an affiliate of GDF SUEZ which provides ConocoPhillips long-term access to the Northwest Europe LNG market through GDF SUEZ’s regasification capacity at the Zeebrugge terminal. This arrangement has diversified ConocoPhillips’ LNG market access position in the Atlantic Basin by adding access in Northwest Europe to the company’s existing regasification capacity in the Freeport LNG terminal and planned capacity in the Golden Pass LNG terminal, both located in the U.S. Gulf of Mexico. Under a separate earlier agreement, ConocoPhillips also agreed to provide GDF SUEZ market access through ConocoPhillips’ regasification capacity in the Freeport LNG terminal in Texas, expected to start in mid-2010.

• Business/Finance news:

- ConocoPhillips [NYSE:COP] and the University of Kansas (KU) announced a three-year collaborative nanotechnology research program which will focus on the development and testing of new technologies for oilfield stimulation to enhance recovery to help meet growing energy demand. ConocoPhillips will contribute $400,000 per year to the program. Nanotechnology – engineering on the scale of atoms and molecules – is commonly used in a number of industries, and its application in the oil and gas industry represents a major prospect for substantial and sustained benefits. KU is not only viewed as an innovation leader in nanotechnology research, but the University also has been examining and developing enhanced oil recovery (EOR) techniques through its Tertiary Oil Recovery Project since 1974. While EOR techniques that use injected fluids to stimulate hydrocarbon recovery have been employed for decades, inclusion of nanoparticles may lead to more efficient and environmentally sensitive technologies.

- ConocoPhillips [NYSE:COP] announced it will communicate its 2009 capital spending plans in January. The company continues to evaluate its capital and operating plans in light of the significant uncertainties associated with the outlook for crude oil, natural gas, and refined product prices, as well as the effects on service and other costs related to the integrated oil sector.




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