ConocoPhillips's (COP) said Wednesday its third-quarter earnings declined 71% compared to the same period last year on sharply lower oil and natural gas prices and poor refining margins, even as its quarterly production rose 2.5%.

The Houston-based company reported profits of $1.5 billion, or $1 a share, down from $5.19 billion, or $3.39 per share, a year earlier. Revenue dropped 42% to $41.3 billion. The results, however, bested analysts' estimates, which expected the third-largest U.S. oil company by market value to report earnings of 94 cents a share.

Major oil companies are facing a tough quarter as oil and natural gas prices remain far below last year's peaks and refining margins are still tight. Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) are expected to also report significantly lower earnings Thursday and Friday, respectively.

ConocoPhillips, however, is expected to be the hardest hit among all majors as the oil giant is more exposed to lower natural gas prices, which recently recovered from a seven-year low, and the one with the higher debt. In its earnings release, ConocoPhilliips didn't provide more details about its recently announced restructuring, but the oil giant confirmed it's planning to sell $10 billion in assets in the next two years and reduced its 2010 capital expenditure to $11 billion from this year's $12.5 billion.

"Investors are not going to focus on these earnings, but in which assets the company is planning to sell," said Fadel Gheit, analysts with Oppenheimer & Co. Inc. Analysts expect company executives to disclose more details on the restructuring during a conference call to be held at 11 a.m. EDT.

ConocoPhillips said quarterly production excluding its share in Russia's OAO Lukoil (LKOH.RS) was 1.8 million barrels of oil equivalent per day, or 2.5% higher than the same period in 2008. The company's year-to-date production increased 4% mainly due to new production from major project developments in the U.K., China, Canada, Vietnam and Norway. Conoco said its worldwide utilization rate for the quarter was 90%.

ConocoPhillips' shares were recently trading 1.06%, or 54 cents, lower at $50.30.

The company said it expects fourth-quarter cash from operations to improve due to higher oil and natural gas prices and rising refining margins. In addition, ConocoPhillips expects its fourth-quarter revenue and earnings to benefit by approximately $1.5 billion and $150 million, respectively, from the liquidation of positions built during the year in response to contango market conditions.

-By Isabel Ordonez, Dow Jones Newswires; 713.547.9207; isabel.ordonez@dowjones.com

(Tess Stynes in New York contributed to this article)