WRAPUP 3-Conoco, Oxy profits shrink, but beat Wall Street

* Conoco, Occidental profits drop 80 pct, but top views

* Drillers Diamond Offshore, Ensco top expectations

* Conoco, Diamond shares up; Ensco down (Adds analyst comment, executive quote, updates share prices)

By Matt Daily

NEW YORK, April 23 (Reuters) - The steep drop in oil prices hammered ConocoPhillips (COP.N) and Occidental Petroleum Corp (OXY.N) earnings down 80 percent, but they still managed to outshine Wall Street's dreary expectations.

Global economic weakness has cut demand for oil and ample amounts of crude in storage has helped send oil prices down 56 percent in the first quarter from the previous year.

The International Energy Agency expects global oil demand will fall by 3 percent in 2009, to 2.4 million barrels.

Still, Conoco's earnings of $840 million, or 56 cents per share, were welcomed by the market, which sent its shares 4.9 percent higher. Excluding charges, those earnings were 50 cents per share, topping analysts' forecast of 39 cents per share.

Helping earnings at the third-largest U.S. oil company was growth in production to 1.93 million barrels of oil equivalent per day, up 58,000 BOE from the fourth quarter.

"I understand that production is up a little bit, but in this environment I don't know that the company is positioned the right way," Argus Research analyst Phil Weiss said, noting Conoco's debt level and cash balance. "I'd certainly rather be in Exxon (XOM.N) and Chevron (CVX.N) right now."

ConocoPhillips said its oil and gas production would drop in the second quarter, and its refineries would operate well below year-ago levels.

Conoco, which has said it had cut jobs and was reducing spending, reiterated its focus on cutting costs.

Occidental, predicting production growth of 9 percent to 12 percent this quarter over last year, said it was negotiating to cut costs by 20 percent to 25 percent, a downward pressure that oilfield service companies will continue to resist.

Shares of Occidental, which also reported earnings ahead of analyst estimates, closed 0.7 percent higher. [ID:nN23269211]

DRILLERS HOLD FAST

Diamond Offshore Drilling Inc (DO.N), the world's number-two offshore driller, topped analysts' forecast with a 20 percent jump in quarterly profit as its fleet of floating rigs that operate in deep waters saw earnings rise, offsetting weakness in its shallow-water jack-up rig business.