By Edward Klump
Oct. 22 (Bloomberg) -- ConocoPhillips, the third-largest U.S. oil company, posted a 41 percent profit increase after gains in energy prices made up for a drop in production. The company's shares fell as New York oil futures tumbled.
Third-quarter net income climbed to $5.19 billion, or $3.39 a share, from $3.67 billion, or $2.23, a year earlier, the Houston-based company said today in a statement. Excluding such items as a divestiture gain, per-share profit was about $3.32, 13 cents higher than the average of 14 analyst estimates compiled by Bloomberg.
Revenue jumped 52 percent to $70 billion after oil futures surged above $147 a barrel in July to a record. ConocoPhillips is the biggest natural-gas producer in the U.S., so it benefited as gas traded 44 percent higher, on average, than in last year's third quarter. Oil dipped below $70 for the first time since August 2007 last week.
``Oil prices are coming down so fast and so furious that you can report all the great earnings you want,'' said Robbert Van Batenburg, head of research at Louis Capital Markets in New York. ``But it reminds me a little bit of in the tail end of 2000, all these tech companies reporting these phenomenal earnings, but their share prices just kept on going down.''
ConocoPhillips fell $4.11, or 7.6 percent, to $49.85 at 10:05 a.m. in New York Stock Exchange composite trading, sliding along with other oil producers as crude futures dropped.
Exxon Mobil, Chevron
ConocoPhillips is the first among the major U.S. oil producers to report third-quarter earnings. Exxon Mobil Corp. of Irving, Texas, is scheduled to release its results on Oct. 30, and San Ramon, California-based Chevron Corp. reports the following day.
``The third quarter is going to be the last hurrah of high oil prices for these companies, at least for the time being,'' said Brian Youngberg, an analyst at Edward Jones & Co. in Des Peres, Missouri, who has a ``buy'' rating on ConocoPhillips shares and doesn't own any. ``Now that earnings are going to come back down a little bit, the market's anticipating that already.''
Hurricanes Gustav and Ike idled and damaged wells in the Gulf of Mexico during the third quarter as the storms headed toward the Louisiana and Texas coasts. The storms reduced third- quarter production at ConocoPhillips by about 20,000 barrels of oil equivalent a day, according to an Oct. 2 statement.
Output Declines
Production averaged the equivalent of 1.75 million barrels of oil a day, ConocoPhillips said, down 0.6 percent from a year earlier. Output will be higher in the current quarter and will average slightly below 1.8 million barrels a day for the full year, Chief Executive Officer Jim Mulva said in the statement.
ConocoPhillips said it earned $3.93 billion from producing oil and gas, up 89 percent from last year's third quarter.
International oil producers are struggling to shore up production and reserves as countries from Venezuela to Russia reduce foreign access to their resources and established fields become depleted.
``They all remain growth-challenged, and they have the challenge now of lower commodity prices,'' Youngberg said.
Third-quarter net income from refining and selling fuels like gasoline and diesel fell 35 percent to $849 million. Profit from the segment, called downstream, was 28 percent higher than in this year's second quarter.
Margins Narrow
``The downstream was stronger than I might have thought, given what's been happening,'' said John Parry, an analyst with IHS Herold in Norwalk, Connecticut.
Market indicators for fuel prices and crude costs show third-quarter profit margins for U.S. refiners narrowed by 4.5 percent from a year earlier to $14.07 per barrel of oil processed, ConocoPhillips said Oct. 2. The company got almost half of its profit from refining last year.
ConocoPhillips ranks behind only San Antonio-based Valero Energy Corp. in U.S. oil-processing capacity.
To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.
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