ConocoPhillips 2Q profit soars

Record crude prices helped oil giant ConocoPhillips' second-quarter profit climb 13 percent from adjusted results a year ago, beginning what is expected to be a string of robust earnings announcements from major oil companies.

The Houston-based company said Wednesday net income rose to $5.44 billion, or $3.50 a share, for the April-June period, from $301 million, or 18 cents a share, in the year-ago quarter. A year ago, ConocoPhillips incurred a $4.5 billion charge related to its former assets in Venezuela.

Second-quarter revenue increased to $71.4 billion from $47.4 billion a year ago.

On average, Wall Street analysts surveyed by Thomson Financial expected earnings per share of $3.40.

ConocoPhillips shares fell $2.48, or 2.9 percent, to $81.83 Wednesday. They have traded in a range of $67.85 to $95.96 in the past year.

Brian Youngberg, an analyst with Edward Jones, said overall results were decent, but he noted production volumes again were below the prior-year period _ a disturbing pattern for the past several quarters related to maturing fields, planned and unplanned maintenance and other factors.

Youngberg said the company might have to increase production by 5 percent to 7 percent in the final months of the year to meet full-year goals.

"After the third quarter, they're going to be enough behind their 2008 guidance that the fourth quarter better be good," he said. "They've said it would be better, and I think people will hold them to that."

ConocoPhillips, the third-largest U.S. oil company, is the first of the oil majors to report second-quarter earnings. Exxon Mobil Corp. and Chevron Corp., among others, are scheduled to report results next week. Like ConocoPhillips, most are expected to post huge profits because of triple-digit oil prices.

ConocoPhillips' one-time charge in the year-ago quarter was linked to its refusal to sign deals last spring with the Venezuelan government to keep pumping oil under tougher terms posed by President Hugo Chavez's government.

Excluding that impairment, earnings from the most-recent quarter easily topped those of a year ago, driven by profits from its exploration and production arm.

As expected, however, spiking crude prices in the second quarter were a drain on earnings at ConocoPhillips' refining and marketing operations.

The company said net income from its E&P sector amounted to $4 billion, about 85 percent higher than adjusted earnings from a year ago. Far higher prices for crude and natural gas lifted results, which were somewhat offset by higher production taxes, lower volumes and increased operating costs.

Oil prices have retreated in recent trading sessions to below $130 after climbing above $147 a barrel earlier this month. Still, prices remain about 70 percent above where they were a year ago and up about 35 percent from the start of the year.

ConocoPhillips' daily production in the most-recent quarter averaged 1.75 million barrels of oil equivalent a day, down from 1.91 million barrels a year ago. The company attributed the decline to the expropriation of its Venezuelan oil projects last year and normal field decline.

Production results include ConocoPhillips' Canadian Syncrude operations but not its Russian Lukoil business.

Looking ahead, the company said it expects third-quarter production to be similar to the second quarter.

Earnings fell sharply on the refining and marketing side, to $664 million from $2.36 billion a year ago _ a decline ConocoPhillips said earlier this month was not unexpected.

The root of the problem was refining margins, which were squeezed by higher crude prices. Those margins reflect the difference between the cost of crude and what the company makes on refined products such as gasoline.

The company said it generated $5.4 billion of cash from operations in the quarter, which enabled it to repurchase $2.5 billion shares of its own stock _ part of a plan to repurchase $10 billion worth of shares for all of 2008. It also paid $700 million in dividends.

Exploration expenses before taxes amounted to $288 million in the second quarter, up from $259 million in the year-ago period.

Net income for the first six months of 2008 was $9.6 billion, or $6.11 a share, versus $3.85 billion, or $2.31 a share, a year ago, including the Venezuelan charge. Revenue rose to $126.3 billion from $88.7 billion.