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Conoco Profit Meets Estimates as Production Declines

ConocoPhillips, the largest independent U.S. oil and natural gas producer, reported first-quarter profit that met analysts’ estimates as output fell while the company continues to sell assets.

Per-share profit excluding one-time items matched the $1.42 average of 20 estimates compiled by Bloomberg. Net income declined to $2.14 billion, or $1.73 a share, from $2.94 billion, or $2.27, a year earlier, the Houston-based company said in a statement today.

For more than three years, ConocoPhillips has been selling assets to focus on its most profitable exploration and production businesses. The company has announced about $12 billion in planned asset sales since the start of last year. Today’s results don’t include earnings from refining, chemical and pipeline assets that were spun off in April 2012 to create Phillips 66.

“It looks like everything’s on track to me,” Philip Weiss, an analyst with Argus Research in New York who rates the company a buy and doesn’t own the shares, said in a phone interview. “Results came in as I expected. Production’s really close to where I thought it would be.”

Sale Proceeds

ConocoPhillips rose 0.2 to $58.37 at the close in New York. The shares have gained 7.8 percent in the past year.

The company said today it expects proceeds of about $8.5 billion in 2013 from agreements to sell assets in Algeria, Nigeria and its stake in the Kashagan project in Kazakhstan.

ConocoPhillips hasn’t found suitable buyers for all of the stakes it has considered selling.

A liquefied natural gas project in Australia needs to mature more before the company attempts to reduce its stake further, Chief Financial Officer Jeff Sheets said in a phone interview today. A process of exploring options for the company’s oil sands holdings may stretch into 2014, he said.

“This is a portfolio balance question,” Sheets said. “These are both good projects, but we just have a bit more of it than we want. So it’s not really a fundraising question.”

Shrinking the company may help with future growth, said Fadel Gheit, an analyst with Oppenheimer & Co. in New York.

“The smaller the company, usually the higher the probability that they can increase production” meaningfully, Gheit, who has an outperform rating on ConocoPhillips’ shares, said in a phone interview before the results were released.

Declining Production

Production fell 2.5 percent to the equivalent of 1.596 million barrels of oil a day in the quarter, near the top end of a January forecast. Sales dropped 8.9 percent to $14.7 billion as it sold output at a lower price. ConocoPhillips narrowed its 2013 production forecast to a range of 1.485 million to 1.52 million barrels a day from continuing operations.

In January, the company said oil and gas production may reach a low point this year as it completes a multi-year restructuring and asset sale program.

Output is expected to be lower in the second and third quarters, compared with the first three months of the year, as projects undergo maintenance and the company prepares to add production, according to presentation slides posted today. The company sees production starting to rise again in the fourth quarter.

The company reiterated today its plans to boost production by 3 percent to 5 percent in future years.

ConocoPhillips is the largest U.S. oil and gas producer that doesn’t own refineries or a chemical business, based on market value.

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