Lower natural gas prices and reduced margins from refining contributed to a 13 percent decline in fourth-quarter profit for ConocoPhillips, but the results still helped the nation's third-largest oil company post its most profitable year on record.
The company _ the first of the major oil players to report fourth-quarter and full-year earnings _ also said Wednesday it expects oil and gas production to be down slightly in the first quarter from the October-December 2006 period.
"We achieved another year of strong financial results that allowed us to provide value to our shareholders by selectively investing in projects to deliver energy to consumers worldwide, reducing debt, increasing dividends and repurchasing our shares," said Chairman and Chief Executive Jim Mulva.
Net income in the most-recent quarter dropped to $3.2 billion, or $1.91 per share, from $3.68 billion, or $2.61 per share, in the year-ago quarter, when oil and gas prices soared amid supply fears after hurricanes Katrina and Rita. The recent quarter includes impairment charges of 17 cents per share.
On average, analysts polled by Thomson Financial forecast earnings of $1.95 per share.
Revenue declined 19 percent to $42.54 billion from $52.17 billion in the prior-year period.
Full-year earnings rose to $15.55 billion, or $9.66 per share, from its previous best-ever result of $13.53 billion, or $9.55 per share, in 2005. Phillips Petroleum Co. and Conoco Inc. combined in 2002.
Last year's revenue grew to $188.52 billion from $183.36 billion in 2005.
Because oil and gas prices were so high at the end of 2005, the year-over-year decline in income for ConocoPhillips was not unexpected. Financial services company UBS predicts fourth-quarter earnings for the major oil companies to fall by an average of 20 percent from the year-ago period and 25 percent from the third quarter of 2006.
ConocoPhillips shares rose 65 cents to close at $65.62 on the New York Stock Exchange. They have traded in a 52-week range of $54.90 to $74.89.
ConocoPhillips is the nation's third-largest integrated oil company behind Exxon Mobil Corp. and Chevron Corp. _ both of which are scheduled to report results next week.
Mulva said the company continued to experience "operational challenges" on the exploration and production side of the business. Weather-related transportation delays in Alaska hurt quarterly production, as did unplanned downtime related to maintenance at a North Sea field.
Earnings from ConocoPhillips' exploration and production segment slipped year-over-year, as did profit from its refining operations. The company cited lower natural gas prices and increased exploration expenses as two reasons for lower E&P income, which fell to $2.1 billion from $2.4 billion a year ago.
Daily production during the quarter averaged 2.05 million barrels of oil equivalent, up from 1.59 million barrels in the year-ago period. However, the market price of oil fell in the fourth quarter to an average of $59.94 a barrel _ down sharply from an average of $70.38 in the third quarter and slightly below the $59.99 per-barrel price averaged in the fourth quarter of 2005.
UBS estimates natural gas prices averaged $6.57 per 1,000 cubic feet in the fourth quarter, down 49 percent from an average of $13 in the year-ago quarter and off a penny from the third quarter of 2006.
The company said it expects first-quarter production to be off about 30,000 barrels from the most recent quarter for a variety of reasons, including the sale of some U.S. and Canadian assets and the effect of OPEC quota reductions on operations in Venezuela and Libya.
ConocoPhillips said it ended the year with $27.1 billion in debt and a debt-to-capital ratio of 24 percent. It said it reduced debt by $700 million in the most recent quarter.
The company said earlier this month it plans to repurchase up to $1 billion in stock, including about $750 million in the first quarter of 2007. COP estimated it had 1.67 billion shares outstanding in the fourth quarter.
Source: AP News