ConocoPhillips , the third-largest U.S. oil company, reported a better-than expected quarterly profit on Wednesday and said it will sell its entire stake in Lukoil.

The Houston company, which has a plan to shrink debt by selling $10 billion in assets, said it will sell 40 percent of its stake in Lukoil back to the Russian oil major for $3.44 billion.

Conoco will sell the balance of its stake by the end of 2011. Previously, Conoco said it would sell half of its shares.

Conoco reported second-quarter adjusted earnings of $2.5 billion, or $1.67 per share. Analysts on average had expected a profit of $1.56 per share, according to Thomson Reuters I/B/E/S.

Shares rose 1.3 percent to $55.13 in premarket trading

(Reporting by Anna Driver in Houston, editing by Dave Zimmerman)