HOUSTON - ConocoPhillips' said Wednesday its fourth-quarter earnings rose 66% compared with a year earlier thanks to higher oil prices and despite a drop in production and weak refining profits.
The Houston-based company reported a profit $3.4 billion, or $2.56 a share, up from $2 billion, or $1.39 a share, a year earlier. Excluding gains on asset sales and other items, earnings were up at $2.02 a share from $1.32 a share. Adjusted earnings bested analysts' expectations of $1.76 a share thanks to better-than-anticipated exploration and production results and a smaller-than-estimated drop in refining profits, said Brian Youngberg, an analyst at Edward Jones.
Revenue rose 17% to $62.39 billion.
ConocoPhillips' fourth-quarter results marked the end of a year in which major oil companies' earnings soared, driven by high oil prices due to improved energy demand in emerging markets. The average price at which Conoco sold a barrel of oil in the fourth-quarter jumped 22.4% to $96.42 from the same period a year earlier.
But Conoco's results also showed that high oil prices can be a double-edged sword for the majors--potentially weighing the profits of their huge refining arms at a time of weak demand for fuel. While Conoco's exploration and production arm's fourth-quarter adjusted earnings were 26.7% up from the same period a year earlier, its downstream business--which purchases crude to process into petroleum products such as gasoline and diesel--posted a 2.9% drop in profits.
The trend of rising fourth-quarter earnings on the back of high oil prices and regardless of weak refining results is expected to be repeated by rivals Chevron Corp. and ExxonMobil Corp. when they report earnings Friday and Tuesday, respectively.
Higher crude prices helped ConocoPhillips more than offset a 7.6% declined in fourth-quarter production to 1.6 million barrels of oil equivalent per day. The company said its total 2011 annual production was also 1.6 million barrels of oil equivalent per day, down 7.6% down from 2010.
Quarterly and annual production were hit by asset sales and the company's decision to limit its natural-gas production in the U.S. and Canada due to low commodity prices, and curtailment of its Libyan production due to political unrest. The decrease was partially offset by new production from major projects, the company said.
Excluding the impact of dispositions and the suspension of operations in Libya, Conoco's fourth-quarter production was 1% lower compared with the fourth quarter of 2010.
The company is in the midst of a three-year restructuring plan that comprises the sale of up to $20 billion in assets in order to shore up finances and make itself more attractive to investors.
Conoco also said its plans to split into two companies is on track to be completed in the second quarter.
ConocoPhillips said it ran its refineries nearly full-out, despite what is considered a stagnant fuel market in most of the world. Conoco reports its overseas refineries ran at 98% of their capacity during the quarter, while its U.S. refineries ran at 93%, well above the national average of 85% for fourth-quarter.
Copyright (c) 2012 Dow Jones & Company, Inc.
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