2nd UPDATE: Conoco 3Q Profit To Be Hit By Lower Gas Prices
October 02 2009 - 11:09AM
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.
Conoco's estimates sent its shares up 2% to $46.41 Friday
morning as some analysts improved its outlook for the company's
third-quarter results.
UBS, for example, increased Conoco's earnings per share estimate
to 80 cents from 73 cents to reflect better-than-expected
production results, according to a note to clients.
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.
Refining could remain a problem for Conoco's profits in the
fourth quarter, as its 275,000 barrels a day Wilhelmshaven refinery
in Northern Germany will be shut for planned maintenance in early
October, according to traders in Europe. The maintenance is
expected to last until December.
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.
Conoco will report third quarter results Oct. 28.
-By Isabel Ordonez; at Dow Jones Newswires; 713.547.9207;
isabel.ordonez@dowjones.com