ConocoPhillips 2Q production falls as planned

ConocoPhillips, the third-largest U.S. oil company, said Tuesday its global production fell as expected in the second quarter because of planned maintenance, but it benefited from higher oil and natural gas prices.

In an overview of market conditions for the April-June period, ConocoPhillips also said its worldwide refining margins in the second quarter likely improved from the first quarter. But the company said the improvement was offset somewhat by lower margins for "secondary" refined products such as fuel oil, natural gas liquids and petroleum coke.

Higher utility costs to run its plants were a drag on results too, the company said.

Global marketing margins for the second quarter are expected to be lower than the first, primarily due to market prices lagging increases in expenses.

In recent quarters, higher crude costs have squeezed profits at the refining arms of companies like ConocoPhillips, which don't produce enough crude themselves to satisfy their refining operations and have to buy supplies at market prices.

Those margins reflect the difference between the cost of crude and what the company makes on refined products such as gasoline.

ConocoPhillips is scheduled to report second-quarter earnings July 23. Its shares fell $1.21, or 1.3 percent, to $89.15 Tuesday. The shares have traded in a range of $67.85 to $95.96 in the past year.

In its overview, ConocoPhillips said second-quarter production declined by about 60,000 barrels of oil equivalent from the first quarter. The company didn't provide a comparison from the year-ago quarter. Those results include ConocoPhillips' Canadian Syncrude operations but not its Russian Lukoil business.

The market price for oil _ based on the benchmark West Texas Intermediate _ was up more than $26 from the first three months of 2008, and nearly double what it was in the second quarter a year ago, the company said in its report, citing figures from Platts, a division of McGraw-Hill Cos. The market price for natural gas also rose significantly from the first quarter and the year-ago period.

ConocoPhillips noted its actual crude oil and natural gas prices may vary greatly from the price indicators because of quality, pricing lags and other factors.

Oil prices fell more than $6 a barrel in morning futures trading Tuesday, bringing crude down $10 this week. The retreat erases the effect of a rally that pushed prices past $145 in a string of record-setting sessions before the Fourth of July.

ConocoPhillips said its exploration expenses amounted to about $275 million before-tax in the quarter, while share repurchases came to about $2.5 billion.

Also Tuesday, ConocoPhillips said it signed an interim agreement with Abu Dhabi National Oil Co. to develop the Shah Gas Field in Abu Dhabi.

The project includes construction of a natural gas processing plant, natural gas and liquid pipelines and sulfur-exporting facilities, the companies said. Final project agreements are expected to be finished by year's end.