July 29 (Bloomberg) -- ConocoPhillips, the third-biggest U.S. oil company, said second-quarter profit fell 76 percent after the recession spurred a collapse in energy prices.

Net income dropped to $1.3 billion, or 87 cents a share, from $5.44 billion, or $3.50, a year earlier, Houston-based ConocoPhillips said today in a statement. Excluding such one- time items as a gain from the company’s Lukoil investment, profit was about 85 cents share, 1 cent higher than the average of 15 analyst estimates compiled by Bloomberg.

ConocoPhillips was paid $56.11 per barrel of oil in the quarter, less than half its average a year earlier. Its average natural-gas price plunged 62 percent. The company is cutting capital spending 37 percent this year and said in January that it would reduce its workforce by 4 percent. Energy prices surged through the first half of 2008, then tumbled after oil futures crested at an all-time high above $147 a barrel in July.

“They’re having to manage their costs quite significantly, and they would benefit probably the most of the larger peers from prices improving and the economy rebounding,” said Brian Youngberg, an analyst at Edward Jones in Des Peres, Missouri, who rates ConocoPhillips shares at “buy” and owns none.

ConocoPhillips fell $1.57, or 3.5 percent, to $42.86 in New York Stock Exchange composite trading. The stock has dropped 17 percent this year.

Revenue Falls

Second-quarter revenue tumbled 50 percent to $35.4 billion, ConocoPhillips said. Profit from oil and gas wells dropped 82 percent to $725 million, even as output climbed almost 7 percent to the equivalent of 1.87 million barrels of crude a day.

“I think production growth is important for them, probably more so than some of the others, just because their portfolio is relatively weak,” said Philip Weiss, an analyst at Argus Research in New York who has a “hold” rating on ConocoPhillips shares and owns none.

ConocoPhillips is first among the three biggest U.S. oil producers to report second-quarter earnings. Exxon Mobil Corp. of Irving, Texas, is scheduled to announce its results tomorrow. San Ramon, California-based Chevron Corp. plans to report earnings July 31.

ConocoPhillips was the No. 6 producer of gas in the U.S. in the first quarter, ahead of both Chevron and Exxon Mobil, according to the Natural Gas Supply Association. The company agreed to buy gas producer Burlington Resources Inc. in 2005, the day before prices hit a record at $15.78 per million British thermal units. Gas traded as low as $3.225 this month.

Gas Emphasis

“Relative to its peers, it is one of the most levered companies to both crude and natural gas, in particular natural gas in North America given the Burlington acquisition,” said Greg McCullough, an analyst at Loomis Sayles & Co. in Boston.

ConocoPhillips also has the largest U.S. refining capacity among integrated oil companies. The company’s second-quarter refining profit margin in the U.S. declined 53 percent from a year earlier to $4.85 per barrel of crude processed.

The company had a second-quarter loss of $52 million from refining and marketing, compared with profit of $664 million a year earlier. Earnings from DCP Midstream, a pipeline and gas- processing venture with Spectra Energy Corp., fell 81 percent to $31 million. ConocoPhillips’s chemicals business, held in a joint venture with Chevron, earned $67 million, up from $18 million.

A $192 million gain from the company’s stake in OAO Lukoil came because the Russian company’s first-quarter profit was higher than ConocoPhillips estimated when it determined the amount to include in its own earnings.

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

Last Updated: July 29, 2009 16:12 EDT