ConocoPhillips previews lower earnings

ConocoPhillips expects a possible loss in first-quarter exploration and production earnings in the lower 48 states because of low natural gas prices.
The Houston-based oil major said in its interim update today that production will be 30,000 barrels of oil equivalent higher than the 1.87 million BOE in the fourth quarter last year, but results will reflect lower crude and natural gas prices.
Crude entered triple digits for the first time ever in the first quarter last year, but prices have hovered in the $40-$50 range amid the recession and lower demand so far this year.
Natural gas also plummeted to less than $5 per thousand cubic feet–and more recently less than $4–compared to a range of $7-$10 a year ago.
The fall in natural gas prices stems from the recession and lower demand as well as a supply glut following a boom in U.S. gas shale production last year.
In response, producers have curtailed spending and production. The U.S. rig count has fallen to 1,039 rigs–most of those gas–from last year’s high of 2,031 rigs, according to Houston oil field services firm Baker Hughes.
“ConocoPhillips’ U.S. exploration and production comments are concerning for those integrateds with large U.S. gas exposure, we think,” Credit Suisse analyst Mark Flannery said in a report to investors today.
ConocoPhillips’s exposure to natural gas prices rose significantly with its $36 billion acquisition of Burlington Resources in 2006.
The company also said that refining and marketing results are expected to be lower because worldwide marketing margins have fallen by more than half and international refining margins also have declined.
ConocoPhillips also said its refineries ran at an average rate in the lower-80 percent range, or comparable to the industry. The company is the nation’s second-largest refiner behind Valero Energy.

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