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Conoco Raises Output Forecast at Profit Beats Estimates

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Aug. 1 (Bloomberg) -- ConocoPhillips, the largest independent U.S. oil and natural gas producer, raised its full-year production forecast as it reported second-quarter profit that surpassed analysts’ estimates.

Excluding one-time gains from asset sales and settlements, profit was $1.41 a share, 12 cents more than the average of 21 estimates compiled by Bloomberg. Net income dropped 9.6 percent to $2.05 billion, or $1.65 a share, from $2.27 billion, or $1.80, a year earlier, Houston-based ConocoPhillips said in a statement today.

Daily production, which the company had projected to fall, was the equivalent of 1.55 million barrels of oil in the quarter, compared with 1.54 million a year earlier. Output during the quarter from properties ConocoPhillips isn’t selling totaled 1.51 million barrels a day, surpassing an April projection. The company boosted its full-year forecast on that basis to as much as 1.53 million barrels a day, citing gains in areas such as Texas’ Eagle Ford Shale.

“Production volumes were surprisingly up,” Brian Youngberg, an analyst with Edward Jones in St. Louis, said in a phone interview today. “Their unconventional portfolio is delivering very strong growth, most notably the Eagle Ford,” said Youngberg, who has a hold rating on ConocoPhillips shares and owns none.

Asset Sales

The global explorer has been selling assets for more than three years as it seeks to focus on its most profitable holdings. The company said today it expects proceeds of about $9 billion this year from agreements to sell properties in Algeria, Nigeria and its stake in the Kashagan project in Kazakhstan.

ConocoPhillips had said previously that project maintenance and preparations to boost oil and gas production would lower output in the second and third quarters compared with the year’s first three months. Today, in an online presentation, the company said daily production from continuing operations may decline in the third quarter compared with the second quarter, before rising in the fourth quarter.

Second-quarter results don’t include earnings from refining, chemical and pipeline assets that were spun off to form Phillips 66 in 2012. The year-earlier quarter included $534 million from that business.

Revenue Decline

ConocoPhillips said it agreed in July to end a long-term import capacity deal with the Freeport liquefied natural gas terminal in Texas, pending certain conditions. The agreement may be effective by early 2014, and ConocoPhillips expects a non-cash charge of about $540 million, while potentially saving $50 million to $60 million a year in operating costs over the next 19 years.

ConocoPhillips will continue to look at its portfolio over time, possibly selling $1 billion to $2 billion of assets a year, Chief Financial Officer Jeff Sheets said in a phone interview today. The company may reduce its oil-sands holdings, he said.

Revenue fell 4.7 percent from a year earlier to $14.1 billion in the quarter.

Brent crude futures, a global benchmark, declined 5 percent from a year earlier to average $103.35 a barrel in the second quarter. Gas futures traded in New York averaged $4.018 per million British thermal units in the quarter, a 71 percent rise from a year earlier.

ConocoPhillips said its 2013 capital spending plan will be about $16.5 billion, up from the $15.8 billion capital budget announced in December. About half of the increase in capital is related to operations ConocoPhillips is selling, amounts that will be restored to the company through adjustments as sales close, Daren Beaudo, a company spokesman, said in an e-mail today.

ConocoPhillips rose 1.9 percent to $66.09 at the close in New York.

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

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

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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