ConocoPhillips sees lower 2008 output; shares fall

HOUSTON (Reuters) - ConocoPhillips (COP.N) forecast 2008 exploration and production output below year-ago levels on disruptions from Gulf of Mexico hurricanes, and its shares fell 9 percent as the price of crude continued dropping.

The third-largest U.S. oil company also struck a cautious tone on share buybacks, saying repurchases for the balance of the year will depend on market conditions and the Houston company's capital needs.

"I understand why they are doing it, but it is kind of perverse logic to not buy back your stock when it is this cheap," Phil Weiss, oil analyst at Argus Research, said. "In general, though, I would rather see them invest in projects than buy back shares."

Investors are waiting for any signs that the global credit crisis may have on the spending plans of the world's largest oil companies. Conoco said it will provide an update in mid-December on its share buybacks for the fourth quarter along with its 2009 capital expenditure plan.

Net income in the third quarter increased to $5.2 billion or $3.39 per share, from $3.7 billion, or $2.23 per share, a year earlier, the company said on Wednesday. Revenue climbed to $70 billion from $46 billion.

Analysts on average had expected the Houston company to report a profit of $3.08 per share and revenue of $73 billion, according to Reuters Estimates.

Including results from its stake in Lukoil, production in the third quarter was 2.2 million barrels of oil equivalent per day.

Conoco said it expects output in its exploration and production unit--excluding Lukoil--in the fourth quarter will be higher than its third-quarter output of 1.75 million boed, but its full-year production will be slightly less than 1.8 million boed.

In 2007, the company's exploration and production unit had output of 1.88 million boed.

Hurricanes Gustav and Ike, which swept through the Gulf of Mexico and battered the coast in September, reduced Conoco's output and cost its refining and marketing arm in the third quarter. The production impact from hurricane disruptions was approximately 17,000 boe per day, the company said.

Net income in the company's refining and marketing arm was $849 million in the third quarter, down from $1.3 billion a year earlier.

Worldwide, the company's crude oil capacity utilization rate was 87 percent in the third quarter, down from 94 percent in the prior year. For the fourth quarter, Conoco said it expects that rate to be in the mid-90-percent range.

Shares of Conoco fell $4.91 to $49.05 in morning New York Stock Exchange Trading. That compared with a 7.7 percent decline in the Chicago Board Options Exchange index of oil companies .OIX. Oil companies were under pressure from a sharp drop in crude oil prices.

(Reporting by Anna Driver in Houston, editing by Dave Zimmerman)