ConocoPhillips, the third-biggest US oil company by market capitalisation, reported a 16 per cent drop in third-quarter earnings, citing a range of factors, including suspended operations in Libya and offshore China.
The company, which next year will split its exploration and production and its refining operations into two separate companies, on Wednesday reported earnings of $2.6bn, or $1.91 a share, down from $3.1bn, or $2.05 a share, in the same quarter a year earlier.
Excluding those special items, Conoco’s adjusted earnings were $3.5bn, or $2.52 per share. Analysts had forecast $2.19 earnings per share.
The company is in the midst of a major restructuring, which includes selling up to $20bn in assets and splitting its exploration and production business from its refining operations in two separate companies. The split, which is planned for next year, will mean one division can no longer offset a poor performance in another, making it crucial that both divisions perform well on their own.
Yet Conoco said political instability in Libya and a leak in Bohai Bay, offshore China, led to a drop in production to 1.54m oil equivalent barrels per day. Conoco's production was 1.72m barrels of oil equivalent per day in the third quarter of 2010.
This erosion in production volumes is expected to be a key theme from international oil companies as they report earnings this week.
Also weighing down Conoco’s production was unplanned downtime in Alaska, longer downtime than planned in the North Sea and a decline in Russian production.
Yet the exploration and production segment’s third-quarter earnings were higher because of rising commodity prices. Conoco reported exploration and production earnings of $1.8bn, up from $1.6bn in the third quarter of last year.
Conoco’s other main division – refining – performed well, with a global refining capacity utilisation rate of 92 per cent, enabling ConocoPhillips to capture stronger refining margins. That division reported earnings of $789m, up from $268m in the year-earlier period.
Conoco’s share price was 0.5 per cent higher at $71 in mid-morning trade.
(Source: Financial Times)