HOUSTON Jan 30 Oil producer ConocoPhillips
outshone larger competitors on Thursday with a quarterly
profit that beat expectations as it moved to overcome the
problems of high costs and lack of fresh reserves that have
nagged at Exxon Mobil Corp and Royal Dutch Shell
ConocoPhillips, the largest U.S. oil company without
refining operations, said its profits were helped by the sale of
its Algerian business and by higher crude oil production in
The company shed its refining business in 2012 and has sold
billions of dollars of lower-yielding assets to focus on more
profitable oil production from North American shale basins such
as the Eagle Ford in south Texas.
Analysts said Conoco's plan is beginning to pay off at a
time when the industry faces pressure from shareholders to lift
returns despite flat oil prices and rising costs for risky
exploration work designed to replace reserves.
Conoco's profit in the fourth quarter was $2.5 billion, or
$2.00 a share, compared with $1.4 billion, or $1.16 a share, a
Excluding special items, profits inched down, though
analysts characterized Conoco's reserve replacement ratio, a
measure of a company's ability to find new oil and gas reserves
to replace what is produced, as strong.
On a preliminary basis, Conoco's proved reserves rose 3
percent from a year earlier to 8.9 billion barrels of oil
equivalent (BOE). Proved organic reserve additions are expected
to be about 1.1 billion BOE for a replacement ratio of 179
percent of 2013 production.
In a note to clients, Ed Westlake of Credit Suisse dubbed
Conoco the best performing large oil company, citing 7 percent
growth in cash flow despite asset sales, a reduced share count
and more cash on the balance sheet.
"I think we're seeing pretty good evidence that the strategy
is working," Jeff Sheets, Conoco's chief financial officer,
said, citing cash margin growth and expected gains in
Conoco's shares rose slightly, while those of Occidental
Petroleum Corp, the fourth-largest U.S. oil and gas
company, edged lower even though it reported a quarterly profit
that beat expectations.
At $2.04 per share, Occidental's earnings were significantly
higher than the 42 cents per share earned a year earlier, when
the company wrote down the value of gas properties in the U.S.
midcontinent by $1.1 billion.
At Shell, Chief Executive Ben van Beurden, just a month on
the job, set out plans to make the world's No. 3 investor-owned
oil company leaner, putting a new focus on increasing cash,
while scrapping an Arctic drilling program.
"Our overall strategy remains robust, but 2014 will be a
year where we are changing emphasis, to improve our returns and
cash flow performance," van Beurden said. "Our returns are at
this point in time too low to be considered competitive."
This year, Shell plans to slash spending to $37 billion from
$46 billion and to increase asset dispositions to $15 billion -
about 6.5 percent of its $228 billion market capitalization -
from $1.7 billion in 2013.
The promises, along with a higher dividend, helped lift
Shell's shares 1 percent to 2,147 pence.
Shell's fourth-quarter earnings, excluding identified items
and on a current cost of supply basis, came in at $2.9 billion,
48 percent lower than in the year-before quarter but in line
with the downgraded forecast Shell gave on Jan. 17, making the
quarter its least profitable for five years.
Shares of Exxon, the world's largest publicly traded oil
company by market value, were down 0.5 percent at $94.60 after
the company posted a lower-than-expected quarterly profit and
failed to offset declining production with fresh reserves.
The results reflected a "mediocre quarter" for Exxon,
especially in international production, Edward Jones analyst
Brian Youngberg said. "They've lost momentum already, reverting
back to declining production and stagnant earnings."
Exxon's oil and natural gas production fell 1.8 percent from
year-before levels, with natural gas production falling around
the world and oil output slipping in half the regions in which
the company operates.
Still, Exxon executives said they were confident new
projects in the Middle East, Asia and the United States would
help boost production.
The blip in fourth-quarter results doesn't change Exxon's
investment appeal, or for that matter the sector's, said Oliver
Pursche of Gary Goldberg Financial Services, who manages Exxon
shares for clients.
"There's nothing in this report that's overly alarming," he
said. "Exxon to us is a core, long-term holding."