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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