ConocoPhillips 3Q Profit Falls 71% On Price Slump

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; [e-mail]