NEW YORK (Reuters) - Profits at oil major ConocoPhillips (COP.N) dropped sharply as crude prices tumbled from last year, and both it and Hess Corp (HES.N) saw their refineries sink into the red as the recession continued to sap demand for gasoline and diesel fuel.
The drop in oil prices from their peak at $147 a barrel in July 2008 has sliced profits across the energy sector, forcing producers to pare their spending plans and cancel new projects.
But oil prices have also firmed from the early 2009 levels and with inventories of fuels like heating oil and diesel at 25-year highs, many refineries have seen their profits vanish.
The weak earnings from Conoco, although in line with Wall Street forecasts, helped pushed energy company share prices lower.
The sagging global economy has also hit demand for natural gas, knocking Britain’s BG Group BG.L profits down 31 percent and prompting it to lower its 2009 production target.
Conoco’s net profit fell 76 percent in the second quarter to $1.3 billion, or 87 cents per share, slightly above the 86 cents per share analysts had forecast, according to Reuters Estimates.
The nation’s third biggest refiner also posted a $52 million loss at its refining and marketing arm.
Hess earnings fell 89 percent to $100 million, largely because of the drop in its average selling price for crude oil to $49.27 per barrel from $104.29 a year ago. Its refining operations posted a loss of $26 million.
On Tuesday, BP Plc (BP.L) said its quarterly profit fell by half, and it raised its cost-cutting target by 50 percent to $3 billion as part of its effort to control costs.
Despite the weak current market conditions, an economic recovery would likely send oil and gas usage back up, boosting energy companies’ fortunes.
“I not worried about the long-term outlook. The supply and demand fundamentals will be there,” Peter Anderson, portfolio manager at Congress Asset Management in Boston, said, adding that he believed investors were too focused on short-term swings in energy prices.
Total U.S. oil products demand was down 4.1 pct from a year-ago for the four week period ended July 24, according to the latest data provided by the U.S. government.
Also on Wednesday, Canada’s Talisman Energy Inc TLM.TO, the country’s third largest independent oil explorer, said its earnings sank 85 percent because of the lower prices to C$63 million ($58.1 million).
U.S. EQT Corp (EQT.N) said its earnings fell by more than half to $26.6 million, or 20 cents per share.
Shares in Conoco fell 3.9 percent to $42.70 per share, while Hess was off 2.1 percent to $52.46. EQT shares slipped 1 percent and Talisman shares fell 3.2 percent. BG shares closed down 2.7 percent.
Reporting by Matt Daily, Anna Driver, Tom Bergin and Ajay Kamalakaran; Editing by Tim Dobbyn