ConocoPhillips (ConocoPhillips),

ConocoPhillips (ConocoPhillips),

 

ConocoPhillips (ConocoPhillips),

 

ConocoPhillips (ConocoPhillips), incorporated on November 16, 2001, is an international, integrated energy company. The Company's business is organized into six operating segments. Exploration and Production (E&P) segment primarily explores for, produces and markets crude oil, natural gas and natural gas liquids on a worldwide basis. Midstream segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, primarily in the United States and Trinidad. The Midstream segment primarily consists of the Company's 50% equity investment in DCP Midstream, LLC, formerly named Duke Energy Field Services, LLC. Refining and Marketing (R&M) segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia. LUKOIL Investment segment consists of its equity investment in the ordinary shares of OAO LUKOIL (LUKOIL), an international, integrated oil and gas company. The Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Chemicals segment consists of ConocoPhillips' 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). Emerging Businesses segment includes the development of new technologies and businesses outside the Company's normal scope of operations. On March 31, 2006, ConocoPhillips completed the acquisition of Burlington Resources Inc.

 

In March 2007, Petrobras Energia Participations SA's subsidiary, Petrobras Energia S.A., purchased 25.67% and 52.37% interest in Sierra Chata and Parva Negra, respectively, from ConocoPhillips. The transaction was structured through the purchase of Burlington Resources Argentina Holdings Limited, the company entitled to the stock purchased. Prior to the acquisition, Petrobras Energia S.A. was a stockholder and operator of both entities. As a result of the transaction, the interest of Petrobras Energia S.A. in Sierra Chata increased to 45.5523% and in Parva Negra to 100%. Sierra Chata is a natural gas producer and Parva Negra is a lot containing two gas wells adjacent to the north of Sierra Chata block.

Exploration and Production

The E&P segment explores for, produces and markets crude oil, natural gas and natural gas liquids on a worldwide basis. It also mines deposits of oil sands in Canada to extract the bitumen and upgrade it into a synthetic crude oil. Operations to liquefy and transport natural gas are also included in the E&P segment. At December 31, 2006, E&P operations were producing in the United States, Norway, the United Kingdom, the Netherlands, Canada, Nigeria, Venezuela, Ecuador, Argentina, offshore Timor Leste in the Timor Sea, Australia, China, Indonesia, Algeria, Libya, the United Arab Emirates, Vietnam and Russia.

During the year ended December 31, 2006, E&P's worldwide production, including its share of equity affiliates' production other than LUKOIL, averaged 1,936,000 barrels of oil equivalent (BOE) per day. During 2006, 808,000 BOE per day were produced in the United States. Production from the Company's international E&P operations averaged 1,128,000 BOE per day in 2006. In addition, its Canadian Syncrude mining operations had net production of 21,000 barrels per day in 2006. In 2006, United States E&P operations contributed 40% of E&P's worldwide liquids production and 44% of natural gas production. ConocoPhillips has a 36.1% non-operator interest in all fields within the Greater Prudhoe Area. Its net crude oil production from the Prudhoe Bay field averaged 78,800 barrels per day, while natural gas liquids production averaged 16,700 barrels per day in 2006. The Greater Point McIntyre Area (GPMA) primarily includes the Point McIntyre, Niakuk, and Lisburne fields. The fields within the GPMA generally produce through the Lisburne Production Center. Net crude oil production for GPMA averaged 11,400 barrels per day, while natural gas liquids production averaged 800 barrels per day in 2006. ConocoPhillips operates the Greater Kuparuk Area, which consists of the Kuparuk field and four satellite fields: Tarn, Tabasco, Meltwater, and West Sak. The Greater Kuparuk Area also includes the West Sak heavy-oil field. The Company's net crude oil production from West Sak averaged 8,400 barrels per day in 2006. The Alpine satellite fields, Nanuq and Fiord began production in 2006. The fields produced at a net rate of 4,300 barrels of oil per day.

ConocoPhillips has a 100% interest in the North Cook Inlet field. Net production in 2006 averaged 88 million cubic feet per day of natural gas. Its interest in the Beluga River field is 33%. Net production averaged 49 million cubic feet per day of natural gas in 2006. ConocoPhillips has a 70% interest in the Kenai liquefied natural gas (LNG) plant, which supplies LNG to two utility companies in Japan, utilizing two LNG tankers for transport. At December 31, 2006, the Company's portfolio of producing properties in the Gulf of Mexico included four operated fields and five fields operated by its co-venturers.

The Company operates and holds a 75% interest in the Magnolia field in Garden Banks Blocks 783 and 784. Net production from Magnolia averaged 17,800 barrels per day of liquids and 44 million cubic feet per day of natural gas in 2006. It holds a 16% interest in the Ursa field located in the Mississippi Canyon area. It also owns a 16% interest in the Princess field, a northern, subsalt extension of the Ursa field. Total net production from the unitized area in 2006 averaged 14,400 barrels per day of liquids and 18 million cubic feet per day of natural gas.

In 2006, E&P operations in Europe contributed 23% of E&P's worldwide liquids production. Europe operations contributed 21% of natural gas production in 2006. The Company's European assets are principally located in the Norwegian and United Kingdom sectors of the North Sea. The Greater Ekofisk Area, located approximately 200 miles offshore Norway in the center of the North Sea, is composed of four producing fields: Ekofisk, Eldfisk, Embla and Tor. The Company has a 58.7% interest in the Britannia natural gas and condensate field, and owns 50% of Britannia Operator Limited, the operator of the field. It has a 75% interest in the Brodgar field and an 83.5% interest in the Callanish field.

ConocoPhillips has varying ownership interests in three licenses, 4/98, 5/98 and 01/06, in the Danish sector of the North Sea. In 2006, E&P operations in Canada contributed 5% of E&P's worldwide liquids production (excluding Syncrude production). Canadian operations contributed 20% of E&P's worldwide natural gas production in 2006. During 2006, E&P operations in South America were focused on the Company's operations in Venezuela. It also acquired interests in Ecuador, Argentina, Peru and Colombia, as a result of the Burlington Resources acquisition. South American operations contributed 10% of E&P's worldwide liquids production in 2006. Petrozuata is a Venezuelan Corporation formed under an Association Agreement between a wholly owned subsidiary of ConocoPhillips that has a 50.1% non-controlling equity interest and a subsidiary of Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela. In Ecuador, the Company acquired an interest in two producing blocks as part of the Burlington Resources acquisition. It holds a 42.5% interest in Block 7 and a 46.25% interest in Block 21. During 2006, ConocoPhillips acquired a 100% ownership interest in exploration blocks 123 and 124 in northern Peru's Maranon Basin, covering more than 5.5 million acres. In Colombia, it acquired an exploration contract for a 100% interest in the Orquidea area of the Middle Magdalena Basin as part of the Burlington Resources acquisition.

In 2006, E&P operations in the Asia Pacific area contributed 11% of E&P's worldwide liquids production and 12% of natural gas production. It operates nine production sharing contracts (PSCs) in Indonesia and has a non-operator interest in two others. ConocoPhillips' assets are concentrated in two core areas: the West Natuna Sea and onshore South Sumatra. It operates three offshore PSCs: South Natuna Sea Block B, Ketapang and Amborip VI. In January 2007, ConocoPhillips sold its 50% working interest in the Block A PSC in North Sumatra. The Xijiang development consists of two fields located approximately 80 miles south of Hong Kong in the South China Sea. Its combined net production of crude oil from the Xijiang fields averaged 10,100 barrels per day in 2006.

With the acquisition of Burlington Resources in 2006, the Company acquired a 50% non-operated interest in a concession in Egypt that includes the development of the Tao gas field and its associated facilities. At December 31, 2006, ConocoPhillips was producing from four onshore Oil Mining Leases (OMLs), in which it has a 20% non-operator interest. These leases produced a net 24,500 barrels of liquids per day and 138 million cubic feet of natural gas per day in 2006. In May 2006, ConocoPhillips sold its ownership interest in license PH77, located offshore Cameroon. Qatargas 3 is an integrated project, jointly owned by Qatar Petroleum ( 68.5%), ConocoPhillips (30%) and Mitsui & Co., Ltd. (1.5%). The project comprises upstream natural gas production facilities to produce approximately 1.4 billion gross cubic feet per day of natural gas from Qatar's North field over the 25-year life of the project. The project also includes a 7.8-million-gross-ton-per-year LNG facility.

Midstream

The Company's Midstream business is primarily conducted through its 50% equity investment in DCP Midstream, LLC, formerly named Duke Energy Field Services, LLC (DEFS). DCP Midstream is a joint venture with Spectra Energy, the natural gas business formerly owned by Duke Energy Corporation (Duke). Effective January 2, 2007, Spectra Energy became a separate legal entity from Duke, and the name of the joint venture was changed from DEFS to DCP Midstream to reflect this change in ownership.

DCP Midstream markets a portion of its natural gas liquids to ConocoPhillips and Chevron Phillips Chemical Company LLC (a joint venture between ConocoPhillips and Chevron Corporation) under a supply agreement that continues until December 31, 2014. This purchase commitment is on an if-produced, will-purchase basis. At December 31, 2006, DCP Midstream owned or operated 52 natural gas liquids extraction plants, 10 natural gas liquids fractionation plants, and its gathering and transmission systems included approximately 56,000 miles of pipeline. In 2006, DCP Midstream's raw natural gas throughput averaged six billion cubic feet per day, and natural gas liquids extraction averaged 360,000 barrels per day. DCP Midstream's assets are primarily located in producing regions, such as Rocky Mountains, Midcontinent, Permian, East Texas/North Louisiana, South Texas, Central Texas and the Gulf Coast.

At December 31, 2006, Outside of DCP Midstream, the Company's United States natural gas liquids business included a 50% interest in a natural gas liquids extraction plant in San Juan County, New Mexico, with a gross plant inlet capacity of 500 million cubic feet per day; a 25,000-barrel-per-day capacity natural gas liquids fractionation plant in Gallup, New Mexico; a 22.5% equity interest in Gulf Coast Fractionators, which owns a natural gas liquids fractionation plant in Mont Belvieu, Texas, and a 40% interest in a fractionation plant in Conway, Kansas. It also owns a 39% equity interest in Phoenix Park Gas Processors Limited (Phoenix Park), a joint venture primarily with the National Gas Company of Trinidad and Tobago Limited. Phoenix Park processes gas in Trinidad and markets natural gas liquids throughout the Caribbean and into the United States Gulf Coast. Its facilities include a 1.35-billion-cubic-feet-per-day gas processing plant and a 70,000-barrels-per-day natural gas liquids fractionator. Its share of natural gas liquids extracted averaged 6,400 barrels per day in 2006.

Refining and Marketing

R&M operations encompass refining crude oil and other feedstocks into petroleum products (such as gasoline, distillates and aviation fuels); buying, selling and transporting crude oil, and buying, transporting, distributing and marketing petroleum products. In the United States, R&M markets gasoline, diesel fuel and aviation fuel through approximately 10,600 outlets in 49 states. The majority of these sites utilize the Conoco, Phillips 66 or 76 brands. In its wholesale operations, the Company utilizes a network of marketers and dealers operating approximately 9,600 outlets. Its refined products are marketed on both a branded and unbranded basis. In addition to automotive gasoline and diesel fuel, ConocoPhillips produces and markets aviation gasoline, which is used by smaller, piston-engine aircraft. Aviation gasoline and jet fuel are sold through independent marketers at approximately 580 Phillips 66-branded locations in the United States.

In its retail operations, ConocoPhillips owns and operates approximately 330 sites under the Phillips 66, Conoco and 76 brands. Company-operated retail operations are focused in 10 states, mainly in the Midcontinent, Rocky Mountain and West Coast regions. Most of these outlets market merchandise through the Kicks, Breakplace, or Circle K brand convenience stores. At December 31, 2006, CFJ Properties, the Company's 50/50 joint venture with Flying J, owned and operated 100 truck travel plazas that carry the Conoco and/or Flying J brands.

The Company manufactures and sells a variety of specialty products, including petroleum cokes, lubes (such as automotive and industrial lubricants), solvents and pipeline flow improvers to commercial, industrial and wholesale accounts worldwide. Lubricants are marketed under the Conoco, Phillips 66, 76 Lubricants and Kendall Motor Oil brands. Excel Paralubes is a joint venture hydrocracked lubricant base oil manufacturing facility, located adjacent to Lake Charles refinery, and is 50% owned by ConocoPhillips. Excel Paralubes' lube oil facility produces approximately 20,000 barrels per day of clear hydrocracked base oils. The Company has a 50% interest in Penreco, which manufactures and markets refined specialty petroleum products, including solvents, waxes, petrolatums and white oils, for global markets. It also manufactures graphite and anode-grade cokes in the United States and Europe for use in the global steel and aluminum industries.

LUKOIL Investment

In September 2004, ConocoPhillips made a joint announcement with LUKOIL, an international integrated oil and gas company headquartered in Russia. Outside of Russia, LUKOIL has oil production in Kazakhstan and Egypt, and has exploratory or other projects under way in Kazakhstan, Colombia, Azerbaijan, Uzbekistan, Iran, Saudi Arabia and Iraq. Downstream, LUKOIL has seven refineries with a net crude oil throughput capacity of approximately 1.2 million barrels per day. In addition, LUKOIL has a marketing network which extends to 18 countries, with the majority of wholesale and retail sales in Russia, the United States and Europe.

Chemicals

Chevron Phillips Chemical Company LLC (CPChem) is a 50/50 joint venture with Chevron Corporation. CPChem's business is structured around three primary operating segments: Olefins & Polyolefins, Aromatics & Styrenics and Specialty Products. The Olefins & Polyolefins segment produces and markets ethylene, propylene and other olefin products, which are primarily consumed within CPChem for the production of polyethylene, normal alpha olefins (NAO), polypropylene and polyethylene pipe. The Aromatics & Styrenics segment manufactures and markets aromatics products, such as benzene, styrene, paraxylene and cyclohexane. This segment also manufactures and markets polystyrene, as well as styrene-butadiene copolymers. The Specialty Products segment manufactures and markets a variety of specialty chemical products, including organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals and high-performance polyphenylene sulfide polymers and compounds.

Emerging Businesses

Emerging Businesses encompass the development of new technologies and businesses outside the Company's normal scope of operations. The focus of its power business is on developing integrated projects to support the Company's E&P and R&M strategies and business objectives. The Immingham combined heat and power (CHP) plant, a 730-megawatt, gas-fired facility in North Lincolnshire, United Kingdom, was placed in commercial operations in October 2004. This wholly owned facility provides steam and electricity to the Humber refinery and steam to a neighboring refinery, as well as merchant power into the United Kingdom market. The Company's Technology Solutions businesses develop both upstream and downstream technologies and services that can be used in its operations or licensed to third parties.