ConocoPhillips Profit Up 7.7%, Despite Lower Commodity Prices

ConocoPhillips, the nation's third-largest oil and gas producer, said Wedneday first-quarter profit rose 7.7%, as one-time gains from asset sales offset the negative impact of lower crude oil prices.

Still, earnings fell short of forecasts from analysts.

Net income rose to $3.55 billion, or $2.12 a share, from $3.29 billion, or $2.34 a share, last year.

Earnings in the latest period, included gains of 29 cents a share from the asset sales. Excluding these items, the company posted earnings of $1.83 a share in the quarter. Analysts, on average, had expected the company to earn $1.86 a share, according to Thomson Financial.

"We achieved another quarter of strong financial results, and we continue to build shareholder value through operating excellence and project execution, capital discipline, debt reduction and increased share repurchases and dividends," ConocoPhillips Chairman and Chief Executive Jim Mulva said in a statement.

Still, lower year-over-year oil prices hurt results at the company's exploration and production arm, where income fell to $2.33 billion from $2.55 billion to start 2006. In addition to lower commodity prices -- the market price of oil was off more than $5 a barrel in the first quarter versus a year ago -- the company cited higher operating costs and taxes as hindrances. The market price for natural gas also was down from a year ago.

Daily production for the quarter averaged 2.02 million barrels of oil equivalent per day, a big rise from the 1.61 million barrels a day in the first quarter of 2006. The company said the jump was due in part to the addition of assets from its $35.6 billion purchase of Burlington Resources, completed last spring. Production results include ConocoPhillips' Canadian Syncrude operations but not its Russian Lukoilbusiness.

The gains were partially offset by decreased production from the Organization of Petroleum Exporting Countries, normal field decline and asset sales.

Earnings were better at ConocoPhillips' refining and marketing arm, which saw net income nearly triple to $1.14 billion from $390 million a year ago.

The company's refining margins improved slightly, but came in behind U.S. indicators during the quarter as it paid higher prices for oil at its refineries than the benchmark U.S. crude price indicated. Other factors also hurt U.S. refining margins, ConocoPhillips said.

Total revenue in the quarter fell more than 10% to $42.87 billion.

The company said it reduced debt in the quarter by $3.5 billion to $23.7 billion.

"Their results came in a little bit behind consensus and very slightly behind what I was expecting," said James Halloran, an analyst with National City Private Client Group, told Reuters.

"They made a ton of money from refining and marketing. Still, I thought they should have done a teeny bit better than they did. And their production volumes were just a teeny bit light," he said.

The company's larger rivals, Exxon Mobil and Chevron, are expected to announce earnings later this week.

Oil producer and refiner Hess on Wednesday said its first-quarter earnings fell 47% on lower prices for crude oil.

Since the beginning of the year, ConocoPhillips shares are down 3.5%, underperforming the Chicago Board Options Exchange's oil index, which rose about 5% in the same period. ConocoPhillips shares fell 21 cents to $69.43 in New York Stock Exchange trading on Wednesday morning.