Conoco Reports Record Earnings, Advances in Carbon Fibers

Contact: Sondra Fowler

• Fourth Consecutive Quarter of Record Earnings
• Earnings up 77 percent to $.91 per share
• Production up 5 percent
• Major Discoveries Made and Projects Completed

HOUSTON (Jan. 22, 2001) - Conoco (NYSE: COC.A) (NYSE: COC.B) today said that higher prices, increased production and strong refining margins produced record-setting results for the fourth consecutive quarter.

Net income before special items for the quarter totaled $574 million, or 91 cents per diluted share, 77 percent above the $324 million, or 51 cents per share, earned last year. Before special items, net income for the year totaled $1.9 billion, or $3.08 per diluted share, 149 percent above 1999. Revenues exceeded $39 billion, 44 percent higher than last year.

“It was another spectacular quarter,” said Conoco Chairman and CEO Archie W. Dunham, “appropriately capping the best year in the company’s 125-year history. The quarter’s strong earnings were driven by higher natural gas and crude oil prices, robust refining and natural gas liquids margins, and higher production volumes.

“During 2000, we significantly accelerated our growth objectives with another year of major discoveries; higher production; the completion of key projects in Venezuela, the U.S., and the Far East; and synergistic acquisitions in North America and the North Sea,” he said. “We also strengthened the company’s balance sheet by further reducing our debt."

Dunham said major discoveries were made in Vietnam, the Gulf of Mexico and the U.K. “And, we acquired additional reserves and acreage in Vietnam and the U.K., while capturing highly prospective exploration blocks in Norway, Malaysia and the Caspian Sea,” he said.

Dunham said the company now expects to exceed the high-end of the range for reserve replacement in 2000, which he earlier estimated to be between 125 to 135 percent of oil and gas produced.

“We reached important milestones by completing the $1.1 billion Petrozuata heavy oil upgrading facility in Venezuela and the corresponding modifications to our Lake Charles, La., refinery,” Dunham noted. “We also completed early the subsea pipeline for the West Natuna Transportation System, enabling the first Indonesian export of natural gas to Singapore.

“Great strides were made in our emerging, high-technology carbon fibers and natural gas refining businesses by bringing them closer to commercial realization,” he said.

Business highlights for the quarter included:

• Major discoveries were made in Vietnam, the Gulf of Mexico and the U.K.
  -- In Vietnam, a step-out well significantly extended the producing area of the Rang Dong field, testing at 8,500 barrels per day (bpd) from one zone. This was in addition to a significant discovery in Vietnam announced in September.

  -- In the Gulf of Mexico, commerciality was confirmed on the Magnolia deep-water prospect, which could yield more than 150 million gross barrels of oil equivalent (BOE) in future production. In September, Conoco and Shell announced the Princess sub-salt discovery near the Ursa field, with potential reserves estimated in excess of 200 million BOE.

  -- In the U.K., appraisal wells confirmed two North Sea discoveries that could yield gross reserves of more than 100 million BOE.

• Conoco acquired major interests in two exploration and production blocks spanning 1.5 million acres offshore Malaysia, and will drill at least four wells in an area where reserves of 13 billion BOE have already been discovered.

• Petrozuata, the company’s joint venture in Venezuela, completed construction of its $1.1 billion upgrader facility. Start-up of the upgrading facility is in progress. Production at the Petrozuata field is approaching its target of 120,000 bpd. In Lake Charles, the new acidic crude unit was commissioned in December and is processing 60,000 bpd of heavy crude. The unit will switch to Petrozuata syncrude early in 2001.

• The company’s extensive operations in the Far East expanded significantly with the completion of the West Natuna Gas Transportation System’s new subsea pipeline, which carried the first natural gas exports from Indonesia to Singapore, months ahead of schedule.

• In the natural gas-rich U.S. Permian Basin, Conoco acquired three natural gas processing plants, a storage facility and 1,200 miles of pipeline that will increase the company’s processing capacity in the region by more than 40 percent.

• Construction continues on the 8-million-pound carbon fibers plant in Ponca City, Okla., with mechanical completion expected in late 2001. Plans are under way to scale-up future larger plant design to the commercial production levels required for anticipated customer demand. In December, the company opened its first international carbon fibers sales office in Tokyo to assist customers in their evaluation of the new carbon fiber.

• The company announced plans to acquire a 6-percent interest in the giant Grane Field in the North Sea offshore Norway. The acquisition, expected to be completed in the current quarter, is projected to yield about 50 million BOE of production over its economic life. Grane is Norway’s largest oil field currently under development.

• NRG Energy has joined the SRW Cogeneration Limited Partnership by taking a 50-percent interest. SRW owns and will operate the 420-megawatt natural gas-fired cogeneration plant under construction at the DuPont Company’s Sabine River Works petrochemical facility near Orange, Texas.

• Conoco and Sonatrach, the national oil company of Algeria, signed a memorandum of understanding to evaluate the potential use of Algerian natural gas reserves to fuel power generation projects in Algeria, Spain and Turkey.

• Conoco won the prestigious “Environment Award” from the United Kingdom Institute of Petroleum for the company’s Deir Ez Zor integrated natural gas project (DEZ Gas) in Syria. The 100-year-old institute encourages and facilitates best practices and technical innovation in the international petroleum industry.

Special Items

Fourth quarter net income, including special items, totaled $550 million or $.87 per diluted share. The only special item was a $24 million write-down of inventories in an international refinery venture. The adjustment was necessitated by the reduction in crude oil and petroleum product prices in December. There were no special items in the same period in 1999.

Full-year net income, including special items, totaled $1.9 billion or $3.00 per diluted share. Including the inventory write-down, special items for the year were a charge of $46 million. Special items for 1999 amounted to a charge of $38 million.

The following commentary compares segment results for fourth quarter and full year 2000 with the fourth quarter and full year 1999, after excluding the earnings impact of special items.

FOURTH QUARTER 2000

Upstream

Upstream had record earnings of $562 million, 62 percent higher than last year, driven by strong natural gas and crude oil prices and increased production volumes. Natural gas and gas processing operations also significantly improved, reflecting higher processed volumes and stronger margins. Exploration expenses increased $18 million to $103 million for the quarter. U.S. upstream earnings were $226 million, up 67 percent, while international upstream earnings increased 58 percent to $336 million.

The company’s worldwide net realized crude oil price increased 24 percent to $29.15 per barrel. The worldwide net realized natural gas price was up 65 percent to $4.11 per thousand cubic feet (mcf). U.S. natural gas prices rose 102 percent to $5.06 per mcf, while international gas prices were 36 percent higher at $3.37 per mcf.

Overall, total production of 676,000 BOE per day for the quarter rose 5 percent. Sequentially, production climbed 9-percent above third quarter levels. Worldwide petroleum liquids production of 383,000 bpd was up 7 percent versus the previous year, primarily in Vietnam and the U.K. Domestic production increased 4 percent to 79,000 bpd as a result of higher production from the Ursa field in the Gulf of Mexico.

Worldwide natural gas production rose 4 percent to 1.8 billion cubic feet (bcf) per day. U.S. natural gas volumes fell 7 percent to 779 million cubic feet per day due to natural decline and the sale of the company’s interest in the Grand Isle field late in 1999. International natural gas production averaged 976 million cubic feet per day, up 15 percent, primarily in the North Sea and Canada.

Net natural gas liquids processed increased 65 percent to 102,000 bpd, driven by the acquisition earlier this year of the Empress natural gas processing plant in Alberta, Canada.

Downstream

Downstream earned $90 million during the quarter, up $18 million, or 25 percent. U.S. downstream earnings of $11 million were down $8 million from last year. Earnings were impaired $45 million, or 7 cents a share, due to the downtime needed to commission the Lake Charles refinery’s acidic crude unit. Otherwise, improved refinery margins were partially offset by weaker co-product margins and higher refinery energy costs.

International downstream earnings increased 49 percent to $79 million on stronger refining margins. Throughputs fell 6 percent to 340,000 bpd, largely because of planned turnaround activity at the Melaka refinery in Malaysia.

Corporate and Other

Corporate and Other operating and non-operating expenses totaled $78 million, 18 percent below last year on lower overhead costs and exchange gains.

FULL YEAR 2000

Upstream

For the year, Upstream earned a record $1.8 billion, up 116 percent on higher crude oil and natural gas prices, increased volumes and lower dry hole costs. U.S. earnings were $679 million, up 118 percent, due to strong prices. International upstream earned $1.1 billion, up 115 percent, as a result of higher prices and accretive acquisitions in Vietnam, Canada and the U.K., plus increased production from the U.K.’s Britannia field.

Worldwide net realized crude oil prices increased 58 percent for the year to $27.67 per barrel. Worldwide net realized natural gas prices of $3.06 per mcf were 44 percent above last year.

Overall, the company’s total production was up 3 percent to 654,000 BOE per day, helped by various acquisitions, additional production from the Ursa field in the Gulf of Mexico and the Vampire field in the U.K., partially offset by downtime at the U.K.’s Banff field. Worldwide natural gas production rose to 1.7 bcf per day, as international gas volumes jumped 14 percent, with increased Canadian and U.K. production. Net petroleum liquids production was up 3 percent to 370,000 bpd, with U.S. production rising 8 percent.

Downstream

Downstream earned $437 million, up 71 percent on stronger refining margins partly offset by weaker co-product margins, lower European marketing earnings, and higher energy costs. U.S. downstream earnings rose 45 percent to $183 million, while international earnings were $254 million, up 97 percent. Worldwide refinery inputs were 871,000 bpd, essentially flat versus last year despite significant downtime at the Lake Charles refinery.

Corporate and Other

Corporate and Other operating and non-operating expenses were $316 million for the year, essentially flat versus 1999, as higher corporate charges were offset by exchange gains.

Other Financial Highlights

During the year, the company generated $3.6 billion of cash provided by operations, $1.4 billion more than last year. Capital expenditures totaled $2.8 billion, an increase of $1 billion over last year, including the acquisition of Saga assets in the North Sea. Debt was reduced to $4.4 billion, while the debt ratio decreased from 51 percent to 44 percent.

Near-Term Outlook

“The first quarter of 2001 is expected to be another very strong quarter for earnings,” Dunham said. “Upstream volumes are expected to increase slightly, and downstream refinery runs should return to normal levels following the fourth quarter downtime. If prices and margins remain at current levels, we estimate first quarter earnings could be in the range of $.80 to $.95 per share, compared to 62 cents per share in 2000. Earnings could vary based on actual prices, margins and volumes, including the rate at which Petrozuata’s upgrader in Venezuela is brought on-line. For the quarter, no significant turnarounds are scheduled, and five exploration wells are currently drilling or planned,” he said.

Conoco is a major, integrated energy company based in Houston and active in more than 40 countries. For more information, the company’s financial teleconference will be broadcast live today on the Internet at www.conoco.com at 1:30 p.m. Central Standard Time. Additional financial and operating results are available on the company’s website.

This release contains forward-looking statements about Conoco’s exploration, production, refining, marketing, power and other operating and financial plans and earnings results. These statements are not guarantees of future performance, involve certain risks, uncertainties, and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed herein. Among the factors that could cause such differences are crude oil and natural gas prices; refining and marketing margins; potential failure to achieve, and potential delays in achieving, expected reserve or production levels from existing and future oil and gas development projects due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas; unsuccessful exploratory drilling activities; failure of new products and services to achieve market acceptance; unexpected cost increases or technical difficulties in constructing or modifying company manufacturing and refining facilities; unexpected difficulties in manufacturing, transporting or refining synthetic crude oil; general domestic and international economic and political conditions; the ability to meet government regulations; potential disruption or interruption of the Company’s facilities due to accidents or political events and other matters detailed in Conoco’s publicly available filings with the Securities and Exchange Commission.

Cautionary Note to U.S. Investors -- The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this press release, such as “potential reserves,” “future production,” “could yield…production,” and “could yield…reserves,” that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K, File No. 1-14521, available from us at 600 North Dairy Ashford Road, Houston, Texas 77079. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

01/22/01

www.conoco.com

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