ConocoPhillips 3Q profit tumble; production jumps

ConocoPhillips on Wednesday became the latest major oil company to report that its profit plunged in the third quarter while at the same time announcing a sharp uptick in production.

The performances of all major producers are being skewed by the unprecedented spike in energy prices last year during the same three months, when corporate profit records were shattered from Europe to the U.S.

How those companies rode out the ensuing plunge in prices and what may be ahead as far as demand for energy is more important now.

ConocoPhillips, however, is unique among the oil companies because of what it did during the run-up in energy prices several years ago.

While Exxon Mobil and other companies paid out dividends to shareholders and built up huge reserves of cash, ConocoPhillips reinvested an enormous amount of its cash flow and built itself into a major player. That included a $35 billion deal for Burlington Resources in 2006.

ConocoPhillips is now scaling back and confirmed Wednesday that it would shed $10 billion in assets and scale down capital expenditures next year by 12 percent.

"Some will say that what we are doing is essentially shrinking to grow," said Chairman and CEO Jim Mulva. "That can be a fair assessment."

Production this year has grown for every major oil company even as profits fell year-on-year.

BP PLC's said Wednesday that profits fell 34 percent to $5.3 billion, but production rose 7 percent. Part of the reason for that increase is related to hurricanes last year, but even stripping that out, BP production rose 4 percent.

Occidental Petroleum said last week it produced more oil and gas during the past three months than it did in the same part of 2008, even as profits tumbled.

Still, ConocoPhillips says it will slim down and among the assets getting some outside interest is its stake in Syncrude Canada, Mulva said. Syncrude is an oil sands project in northeastern Alberta.

The company also will consider selling a small portion of its exploration and production operations, pipelines and terminals in North America along with assets in the southern North Sea.

There are no plans to unload the company's refineries, which are getting hit hard because of high oil prices and weak demand for fuel. But that could change in the next few years, the company said.

ConocoPhillips's stake in Russian oil company Lukoil is not on the for-sale list.

The asset sales will help pay down debt and Mulva said the company, while still an international player, will be smaller.

"This is the right approach for us over the next number of years, and I think international oil companies are going to have to really look at a somewhat different model," he said.

The nation's third-largest oil company behind Chevron and Exxon Mobil said it made $1.5 billion, or $1 per share, for the quarter ended Sept. 30 compared with profit of $5.2 billion, or $3.39 per share, in the year-ago third quarter when oil and natural gas prices had peaked at record levels.

Revenue totaled $41.3 billion, down from $71.4 billion in the year ago quarter.

The economic downturn, particularly at home, continues to drag on operations.

ConocoPhillips cut natural gas production in North America because of low prices. Refinery production has been scaled back.

Still, oil production was up, primarily in the United Kingdom, Russia, China, Canada as prices rose.

The company said through September that daily production increased nearly 100,000 barrels to 1.86 million barrels a day. For the quarter, total production, including the company's share of Lukoil, was 2.2 million barrels a day.

ConocoPhillips shares fell $1.45, or 2.5 percent, to $49.45 Wednesday. The shares have traded between $34.12 and $57.44 over the past year.