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Refining margin weakness sends Conoco profit lower

A ConocoPhillips gas station in Boulder, Colo.


ConocoPhillips Co. , which is splitting into two standalone companies at the end of the month, has reported a lower-than-expected quarterly profit, hurt by weak refining margins, and says its oil and gas output will slip in the second quarter.

Profit for the first quarter was $2.9-billion or $2.27 a share, compared with $3-billion or $2.09 a year earlier.

Excluding $330 million of net special gains, earnings were $2.02 a share. That fell short of the analysts' average forecast of $2.08, according to Thomson Reuters IBES.

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Refining and marketing profit fell to $452-million from $482-million a year earlier, while the oil and gas exploration and production arm's earnings, excluding one-time items, declined to $2.13-billion from $2.2-billion.

Revenue rose slightly to $58.35-billion.

The company said its share buybacks, which totalled $1.9-billion in the first quarter, will rise to about $5-billion in the second quarter.

Oil and gas production totalled 1.64 million barrels of oil equivalent per day (boe/d) in the quarter, down 65,000 from a year earlier, but above the 1.62 million it had said earlier this month that it produced.

The decline was due largely to assets sales and the shutdown of a field in Bohai Bay, China, after a leak there, the company said.

Production would continue to decline in the current quarter from the first quarter, chief financial officer Jeff Sheets said in a conference call, largely because of maintenance at 50,000 to 60,000 boe/d at projects in Australia, Britain, Alaska and a joint venture in Canada.

Weak natural gas prices in the United States also weighed on profit during the quarter, and Mr. Sheets said the company was considering shutting in production above the 9,000 boe/d it had already halted.

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Last week, ConocoPhillips said output from its oil and gas production arm would rise 3 to 5 per cent annually, reaching 1.8 million barrels of oil a day by 2016.

The company's refining and marketing operations will be spun off into a standalone business named "Phillips 66."

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