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ConocoPhillips Profit Down 3% On Lower Output, Refining Margins

ConocoPhillips Profit Down 3% On Lower Output, Refining Margins
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4/23/2012 9:25 AM ET

ConocoPhillips (COP: Quote) on Monday reported its last quarterly results as an integrated oil company, pending the spin-off of its refining segment.

First-quarter profit declined 3 percent from last year as benefits from higher crude oil prices were offset by weak refining margins and lower production volumes due to asset sales. However, earnings per share increased, reflecting the company's ongoing share repurchase program.

Earlier this month, ConocoPhillips' board approved the spin-off of its downstream unit, paving the way for the oil company to join a host of firms that have separated their refining business to unlock shareholder value. The spinoff of the refining business, Phillips 66, is slated to close by the end of April.

The company's first-quarter earnings were $2.94 billion, compared to $3.03 billion in the prior-year quarter. Earnings per share rose to $2.27 from $2.09 in the year-ago period.

The latest quarter's results include gains from asset sales of $987 million, largely from the Vietnam business unit sale, as well as noncash impairments of $562 million primarily related to the Mackenzie Gas Project and associated leaseholds.

Excluding items, adjusted earnings were flat with the year-ago period at $2.6 billion, as impacts from lower production volumes and refining margins were offset by improvements from higher oil prices and marketing margins.

Adjusted earnings per share grew to $2.02 from $1.82 in the year-ago quarter. On average, 16 analysts polled by Thomson Reuters expected earnings of $2.08 per share. Analysts' estimates typically exclude one-time items.

Total revenues and other income for the quarter edged up to $58.35 billion from $58.25 billion in the year-ago period.

Exploration and Production segment's adjusted earnings declined 3 percent from last year, primarily due to reduced volumes, higher taxes and lower natural gas prices. These were partially offset by higher crude oil and liquefied natural gas prices.

Refining & Marketing segment quarterly earnings declined 6 percent from last year due to lower refining margins, partially offset by higher marketing margins.

ConocoPhillips' production for the quarter declined about 65,000 barrels of oil equivalent or BOE per day from last year to 1.64 million BOE per day, reflecting the decrease in production from dispositions and the suspension of operations at the Peng Lai Field in Bohai Bay.

Looking ahead, ConocoPhillips expects second- and third-quarter production to be impacted by major turnarounds, scheduled maintenance, seasonality and dispositions.

Consistent with previous guidance, the company projects full-year production for 2012 to be 1.55 to 1.60 million BOE per day, dependent on the timing of dispositions.

ConocoPhillips said it is on pace to complete approximately $5 billion of share repurchases by the end of the second quarter of 2012. The company noted that further share repurchases will be tied to ongoing asset dispositions as it completes its portfolio optimization.

COP closed Friday's trading at $72.88, down $0.01 on 7.09 million shares. In Monday's pre-market, the stock is down $1.18 or 1.62 percent to $71.70.

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by RTT Staff Writer

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