UPDATE 1-ConocoPhillips Q1 production down 2 pct

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NEW YORK, April 3 (Reuters) - ConocoPhillips (COP.N) said on Thursday its first-quarter oil and natural gas production would be down more than 2 percent from fourth quarter levels, hurt by an unplanned shutdown of a natural gas processing plant.

The third-largest U.S. oil company produced slightly less than 1.8 million barrels of oil equivalent (BOE) per day in the quarter, including synthetic crude oil but excluding its interest in Russia's Lukoil (LKOH.MM).

The company previously forecast production of 1.8 million BOE.

ConocoPhillips said that besides the the outage at the plant -- located in the San Juan Basin in Colorado and New Mexico -- cold weather in that region also hurt production.

As expected in a quarter in which benchmark oil prices hit record levels, the third-largest U.S. oil company said it realized higher oil and natural gas prices than the previous quarter.

But margins from its refining and marketing operations were significantly lower than in the fourth quarter of 2007, ConocoPhillips said.

The company also said its refinery utilization rate for the quarter fell below 90 percent due to run reductions at some plants for economic reasons, maintenance and unplanned outages.

Conoco said profits at its midstream natural gas gathering and processing business, as well as its chemicals business, would be below fourth quarter levels.

Oil prices hit a record high of more than $111 a barrel and averaged close to $98 a barrel during the quarter. But those sharply higher prices also cut into margins to produce gasoline, as oil companies were unable to pass the increases on to customers.

Independent refiner Valero already warned that its quarterly profits would be much lower than last year due to the weak refining margins.

ConocoPhillips shares rose 8 cents to $78.82 in early trading on the New York Stock Exchange on Thursday. (Reporting by Michael Erman, editing by Gerald E. McCormick and Derek Caney)