NEW YORK, N.Y. – ConocoPhillips said Monday that its first-quarter profit dropped 3 per cent because it produced less oil and natural gas from a shrinking pool of assets.
America’s third-largest oil company has been selling pieces of its global operation. It plans split into two smaller companies on May 1. One company will keep the ConocoPhillips name and focus on exploration and production. The other, Phillips 66, will specialize in refineries and pipelines.
CEO Jim Mulva will retire following the split.
Since 2010, ConocoPhillips has moved in the opposite direction of its Big Oil peers, shedding oil fields and investments in companies like Russian oil giant Lukoil. Overall, it has sold more than $20 billion in assets and investments since 2010, and it expects to divest another $8-$10 billion over the next 12 months.
With fewer producing assets, ConocoPhillips’ oil and natural gas production dropped by 3.8 per cent to 1.64 million barrels of oil equivalent per day in the first quarter. The company’s oil platforms also were temporarily suspended off the coast of China because of an oil spill.
ConocoPhillips expects overall production in 2012 to continue to lag last year’s pace.
From January to March, ConocoPhillips reported earnings of $2.94 billion, or $2.27 per share. The exploration and production business contributed $2.55 billion of that amount.
A year earlier, the company earned $3.03 billion, or $2.09 per share.
Revenue was flat at $58.4 billion.
Excluding special items, ConocoPhillips said adjusted earnings were $2.02 per share. Analysts, who typically exclude such items, were expecting earnings of $2.08 per share on revenue of $60 billion, according to FactSet.
Morningstar Inc. analyst Allen Good said a number of hurdles will remain following the split. Both companies will struggle to grow as swiftly as their peers, and they’ll continue to be saddled with unprofitable assets.
More than a third of ConocoPhillips’ natural gas production comes from fields in the United States, where prices have plunged to 10-year lows. The company has reduced natural gas production this year in hopes that prices will eventually rebound. But Good said overall U.S. production continues to rise, which will keep the value of ConocoPhillips’ natural gas assets low.
The refining business continues to look for suitors for a Trainer, Pa. refinery that has struggled to generate profits as oil prices rose this year.
During the quarter, ConocoPhillips’ refineries also sold less gasoline, diesel and other petroleum products. Total refining sales dropped by 11.2 per cent. Refining profit fell by 6.2 per cent overall. Its midstream business, which includes pipelines, increased profits 27.4 per cent, and its chemicals business boosted profits by 13 per cent.
Exxon Mobil Corp., Royal Dutch Shell, Chevron Corp. and Occidental Petroleum Corp. are expected to report their first-quarter results this week.
Shares fell by 48 cents to $72.40 in afternoon trading.
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