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 ConocoPhillips, the largest U.S. oil company without refining
operations, said its profits were helped by the sale of its Algerian
business and by higher crude oil production in North America.
The company shed its refining business in 2012 and has sold billions
of dollars of lower-yielding assets to focus on more profitable oil
production from North American shale basins such as the Eagle Ford
in south Texas.
Analysts said Conoco's plan is beginning to pay off at a time when
the industry faces pressure from shareholders to lift returns
despite flat oil prices and rising costs for risky exploration work
designed to replace reserves.
Conoco's profit in the fourth quarter was $2.5 billion, or $2.00 a
share, compared with $1.4 billion, or $1.16 a share, a year earlier.
Excluding special items, profits inched down, though analysts
characterized Conoco's reserve replacement ratio, a measure of a
company's ability to find new oil and gas reserves to replace what
is produced, as strong.
On a preliminary basis, Conoco's proved reserves rose 3 percent from
a year earlier to 8.9 billion barrels of oil equivalent (BOE).
Proved organic reserve additions are expected to be about 1.1
billion BOE for a replacement ratio of 179 percent of 2013
production.
In a note to clients, Ed Westlake of Credit Suisse dubbed Conoco the
best performing large oil company, citing 7 percent growth in cash
flow despite asset sales, a reduced share count and more cash on the
balance sheet.
"I think we're seeing pretty good evidence that the strategy is
working," Jeff Sheets, Conoco's chief financial officer, said,
citing cash margin growth and expected gains in production.
Conoco's shares rose slightly, while those of Occidental Petroleum
Corp <OXY.N>, the fourth-largest U.S. oil and gas company, edged
lower even though it reported a quarterly profit that beat
expectations.
At $2.04 per share, Occidental's earnings were significantly higher
than the 42 cents per share earned a year earlier, when the company
wrote down the value of gas properties in the U.S. midcontinent by
$1.1 billion.
SHELL, EXXON
At Shell, Chief Executive Ben van Beurden, just a month on the job,
set out plans to make the world's No. 3 investor-owned oil company
leaner, putting a new focus on increasing cash, while scrapping an
Arctic drilling program.
"Our overall strategy remains robust, but 2014 will be a year where
we are changing emphasis, to improve our returns and cash flow
performance," van Beurden said. "Our returns are at this point in
time too low to be considered competitive."
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This year, Shell plans to slash spending to $37 billion from $46
billion and to increase asset dispositions to $15 billion — about
6.5 percent of its $228 billion market capitalization — from $1.7
billion in 2013.
The promises, along with a higher dividend, helped lift Shell's
shares 1 percent to 2,147 pence.
Shell's fourth-quarter earnings, excluding identified items and
on a current cost of supply basis, came in at $2.9 billion, 48
percent lower than in the year-before quarter but in line with the
downgraded forecast Shell gave on January 17, making the quarter its
least profitable for five years.
Shares of Exxon, the world's largest publicly traded oil company by
market value, were down 0.5 percent at $94.60 after the company
posted a lower-than-expected quarterly profit and failed to offset
declining production with fresh reserves.
The results reflected a "mediocre quarter" for Exxon, especially in
international production, Edward Jones analyst Brian Youngberg said.
"They've lost momentum already, reverting back to declining
production and stagnant earnings."
Exxon's oil and natural gas production fell 1.8 percent from
year-before levels, with natural gas production falling around the
world and oil output slipping in half the regions in which the
company operates.
Still, Exxon executives said they were confident new projects in the
Middle East, Asia and the United States would help boost production.
The blip in fourth-quarter results doesn't change Exxon's investment
appeal, or for that matter the sector's, said Oliver Pursche of Gary
Goldberg Financial Services, who manages Exxon shares for clients.
"There's nothing in this report that's overly alarming," he said.
"Exxon to us is a core, long-term holding."
(Reporting by Anna Driver in Houston,
Ernest Scheyder in New York and Sarah Young in London; editing by
Terry Wade and Peter Galloway)
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