ConocoPhillips's (COP) third-quarter earnings fell 71% on
sharply lower commodity prices as well as while significantly lower
margins at its refining business.
Shares were up 0.8% at $51.30 in premarket trading as the profit
still topped analysts' estimates.
Chairman and Chief Executive Jim Mulva said, "We operated very
well during the third quarter," noting that its utilization rates
rose to 90%. However, he noted results were hurt by the years-low
North American natural gas prices as well as global refining
margins which led to gas production cuts in late August and reduced
refinery runs.
The third largest U.S. oil company by market value expects
fourth-quarter cash from operations to continue to improve amid
improved demand, based on current commodity prices and margins.
ConocoPhillips reported a profit of $1.5 billion, or $1 a share,
down from $5.19 billion, or $3.39 per share, a year earlier. The
latest period included $700 million from asset sales. Analysts
polled by Thomson Reuters most recently forecast earnings of 94
cents.
The company didn't provide a revenue figure.
ConocoPhillips said earlier this month that average realized
prices for natural gas fell 67% while oil prices dropped 40%. It
expected output would be up 1.7%.
Major oil companies are facing a tough quarter, partly because
comparisons with the prior-year period will be brutal as prices
remain far below last year's peaks, but Conoco could be harder hit
as it is more exposed to natural gas prices and has fewer
international assets. Though oil prices have rallied recently, the
rise may not be sustainable because of high inventories and weak
demand.
On the refining side, industry margins are getting squeezed as
U.S. refiners' strategy in past years to process cheaper, dirtier
heavy crude oil to boost margins has backfired as prices for heavy
and light grades have moved closer together. The sector also has
been hurt by weak demand for gasoline and diesel products and low
utilization rates.
This month ConocoPhillips unveiled plans to reduce capital
spending to $11 billion next year and sell $10 billion of assets
over the next two years to improve its balance sheet, a reversal
from its debt-fueled growth during the boom years.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com