UPDATE: Conoco 3Q Profit To Be Hit By Lower Gas Prices
October 02 2009 - 10:22AM
Dow Jones News
ConocoPhillips (COP) third-quarter earnings will be hit by lower
natural gas prices and weak refining profits, the company said
Friday.
The third-largest U.S. oil company by market value after Exxon
Mobil Corp. (XOM) and Chevron Corp. (CVX) said in its interim
update that quarterly output will increase about 1.7% to 1.78
million barrels of oil equivalent per day compared with the same
period last year. Production - which excludes Conoco's 20% stake in
Russia's Lukoil Holdings (LKOH.RS) - was reduced by seasonal
planned maintenance activities in the U.K. and Alaska, the company
said.
Natural gas prices pulled down earnings as the average market
price the company realized for the quarter was $3.39 a million
British thermal units, or 67% lower than in the same period last
year. Conoco said its realized market price for crude oil for the
quarter was $68.19 a barrel, 40% lower than in 2008.
After a multi-year boom in commodity prices and skyrocketing
prices, energy companies have seen earnings tumble after oil and
gas prices collapsed last year. While oil prices have rebounded
from this year's low of $33 a barrel in February, natural gas
prices have continued to recede, reaching a seven-year low on Sept.
4, before bouncing back recently above $4 a million British thermal
units.
Conoco's third-quarter refining profits are expected to be
significantly lower than in 2008 on poor margins, or the difference
between the crude oil refiners buy and the products they sell, and
an increase in the price of heavy crude compared to light
crude.
ConocoPhillips said the company's average worldwide refining
capacity utilization rate for the third quarter will be in the
upper 80% range, with domestic refineries running in the lower 90%
range and international facilities in the upper 70% range.
Third-quarter turnaround costs are anticipated to be approximately
$80 million before-tax.
Some analysts see Conoco preliminary quarterly report as the
bellwether for other major oil companies as all of them have
experienced lower oil and natural prices and tighter refining
margins. However, analysts said ConocoPhillips might be the hardest
hit as it's more exposed to natural gas prices and has less
international leverage than other majors such as ExxonMobil,
Chevron, Royal Dutch Shell (RDSA) or BP PLC (BP), which have a
larger global presence.
Shares were recently down 0.9% at $45.08.
Conoco will report third quarter results Oct. 28.
-by Isabel Ordonez; at Dow Jones Newswires; 713.547.9207;
isabel.ordonez@dowjones.com