A brutal winter in North American sapped supplies of natural gas and
boosted prices at key delivery point Henry Hub by more than 50
percent in the quarter, propping up profit at both companies,
Both Conoco and Exxon have increased investment in North American
shale fields that produce crude oil and natural gas liquids. On
Wednesday, Royal Dutch Shell reported better-than-expected quarterly
results that were also boosted by gas earnings.
Jeff Sheets, chief financial officer of Conoco, said the company was
unlikely to see a similar benefit from natural gas prices in the
current quarter because markets had returned to a more normal state.
"It was a very unusual quarter because of weather. What you saw in
our results is that we had the ability to supply some of the markets
where prices were higher than supply based on Henry Hub," Sheets
Conoco also said it plans to ship the first of six cargoes of
liquefied natural gas (LNG) from its Kenai plant in Alaska this
month since renewing its export license in April.
The companies appear to have had better luck in U.S. shale plays
than BP PLC, which on Tuesday reported a 24 percent drop in
quarterly profit and wrote off $521 million as it scrapped a shale
project in the Utica basin.
Exxon remains the largest U.S. producer of natural gas and spent $30
billion in 2010 to acquire gas producer XTO Energy.
Since the XTO deal closed, horizontal drilling and hydraulic
fracturing in shale unlocked vast supplies of natural gas that had
depressed prices until this winter.
"I think that (Exxon's) finally beginning to derive some benefit
from the XTO acquisition even though volumes were lower," Brian
Youngberg, analyst at Edward Jones said, adding that Conoco also
reaped the benefit of higher commodity prices.
Shares of Exxon Mobil fell 96 cents, or 0.9 percent, to $101.45 in
afternoon trading, while Conoco's stock was up 70 cents at $75.01,
or nearly 1 percent.
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The past winter, which affected much of the country in January and
February, lifted Exxon Mobil's average U.S. natural gas sale price
by 49 percent, helping offset a dip in global production.
Prices for natural gas rose around the world as well, even as the
price that the Irving, Texas company receives for its crude oil
slipped both in the U.S. and internationally.
Exxon Mobil reported first-quarter net income of $9.10 billion, or
$2.10 per share, compared with $9.50 billion, or $2.12 per share, in
the year-ago quarter.
The results surpassed analysts' expectation for profit of $1.88 per
share, according to Thomson Reuters I/B/E/S.
Total production fell about 6 percent to 4.2 million barrels of oil
equivalent per day (boepd).
Conoco's first-quarter profit was flat at $2.1 billion, or $1.17 per
share. Excluding items, the Houston company earned $1.81 a share,
beating analysts' estimates for $1.56 per share, according to
Thomson Reuters I/B/E/S.
Conoco's oil and gas output from continuing operations excluding
Libya edged up to 1.53 million boepd in the three months through
March 31 from a year earlier, in line with analysts' expectations.
(Editing by Terry Wade, Bernadette Baum and Marguerita Choy)
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