ConocoPhillips reported a 71 percent decline in third-quarter profit on Wednesday as weak demand for fuel hurt its refining business and oil prices fell from a year earlier, but the results exceeded Wall Street estimates.
The global recession has taken a serious toll on demand for both natural gas and crude oil. And fuel inventories like diesel remain high, hurting refining margins.
Although we operated well, we were adversely impacted by low North American natural gas prices and worldwide refining margins, Conoco Chief Executive Officer Jim Mulva said in a statement.
Natural gas prices were depressed in the quarter as the slowdown in demand also caused those supplies to swell to all-time highs.
We know the earnings came down because of the gas prices, said Fred Burke, president of Johnston Lemon Asset Management. That's been known. You've got to starting looking at when the natural gas element and refining margins will turn around.
Conoco, the third-largest U.S. oil company, reported a profit of $1.5 billion, or $1.00 per share, down from $5.2 billion, or $3.39 per share, a year earlier.
Analysts on average had expected earnings of 94 cents per share, according to Thomson Reuters I/B/E/S.
Production from the company's exploration and production arm, excluding its 20 percent stake in Lukoil , averaged 1.79 million barrels of oil equivalent per day in the quarter, up from 1.75 million BOE a year earlier, but below 1.87 million BOE in the prior quarter.
Revenue fell sharply to $40 billion from $70 billion a year earlier, but was higher than the $35 billion that analysts had expected.
Investors and analysts are eagerly awaiting details of Conoco's planned $10 billion asset sale. The company announced the plan, aimed at reducing debt, on October 7, but provided no specifics.
Analysts have since speculated assets that may go on the block include the company's North American natural gas operations and part of its 20 percent stake in Russian oil major Lukoil.
Looking ahead, Conoco said it expected fourth-quarter cash from operations to continue to improve, based on current commodity prices and margins.
In addition, the Houston-based company expects the liquidation of inventory built during the year in response to market conditions to benefit fourth-quarter cash flow by about $1.5 billion and earnings by $150 million.
Conoco shares were down 1 percent at $50.39 in morning New York Stock Exchange trading. That decline was in line with a drop in the Chicago Board Options Exchange index of oil companies <.OIX>.
(Reporting by Anna Driver, editing by Gerald E. McCormick)