NEW YORK – Soaring oil and gasoline prices boosted second-quarter earnings at major U.S. energy companies ConocoPhillips (COP) and Amerada Hess Corp. (AHC), though some analysts said Wednesday results could have been even better.
Global political tensions and supply worries pushed commodity prices to new highs during the quarter, while U.S. gasoline demand surged. Integrated energy companies benefited as record oil and gasoline prices and improved chemicals results generated exceptional results in every business line.
But lower energy production and maintenance downtime took some of the shine off the quarter.
Houston-based ConocoPhillips Wednesday said its quarterly earnings nearly doubled to $2.08 billion, or $2.97 a share, from $1.19 billion, or $1.73 a share, last year.
Excluding special items and contributions from discontinued businesses, earnings doubled to $2.01 billion, or $2.88 a share, roughly in line with Wall Street expectations.
Yet the third-largest U.S. energy company said oil and gas production fell as a result of asset sales and downtime at some drilling sites in the North Sea and Alaska. Unscheduled downtime at three refineries also prevented the company from running at full capacity when gasoline prices were soaring.
"I think the market expected a better quarter. It appears they didn't maximize the refining situation," said Sanford C. Bernstein energy analyst Neil McMahon. "People were secretly hoping for an upside surprise, but they didn't get it."
ConocoPhillips Chief Executive James Mulva acknowledged "there were opportunities to do better," even as quarterly revenue surged 25 percent to $31.9 billion.
Conoco shares fell 5 cents to $76.42 as a U.S. government energy report sent oil futures to a 14-year high of $43 a barrel.
Amerada Hess, an integrated producer and refiner, said quarterly earnings rebounded from last year after two disappointing acquisitions did not lead to production gains. Hess, which does business largely on the East Coast, rose 14 percent to $288 million, or $2.84 a share, from $252 million, or $2.83.
If one-time gains last year are excluded, the New York-based oil company said operating earnings surged four-fold. On that basis the company earned $2.77 a share, handily beating the average analyst forecast of $2.46.
Hess later told analysts it had raised its full-year production forecast to 340,000 bpd, suggesting the company had turned a corner.
Meanwhile independent producer Kerr-McGee Corp. (search) said quarterly profit climbed 59 percent on energy prices, cost-cutting efforts and higher chemicals results, though output fell 9 percent.
The Oklahoma City company said net income rose to $110.6 million, or $1.01 a share, from $69.6 million, or 68 cents a share. Excluding items, the company earned $1.09 a share, exceeding the Wall Street consensus by 4 cents.
All three companies have been selling older properties to free capital for potentially more lucrative projects in Africa and Asia and for business ventures such as LNG.
In the past two years ConocoPhillips shed $4.7 billion of assets, but property sales and downtime cut second-quarter output 4.9 percent to 1.56 million barrels a day.
Conoco said production would slip further in the third quarter, citing seasonal factors and maintenance, though it affirmed full-year output would average 1.56 million bpd.
As the largest U.S. oil refiner, Conoco also benefited from record gasoline prices and demand as downstream earnings doubled to $818 million. But again, operational issues tempered what might have been unprecedented results.
Domestic refineries ran at 98 percent capacity, though Pennsylvania and Louisiana refineries suffered downtime. Conoco also saw longer-than-expected downtime at its Humber refinery in Great Britain.
Last week Mulva met with Russian President Vladimir Putin (search) and Lukoil President Vagit Alekperov. The meeting, hours after Russia announced plans to auction off its 7.6 percent stake in the country's No. 2 oil company, fueled market talk that ConocoPhillips is the favored suitor.