ConocoPhillips’ earnings decline

HOUSTON —  Lower natural gas prices and reduced margins from refining contributed to a 13% decline in fourth-quarter profit for ConocoPhillips, but the results still helped the nation’s third-largest oil company post its most profitable year.

The Houston-based company -- the first of the major oil players to report fourth-quarter and full-year earnings -- also said Wednesday that it expected oil and gas production to be down slightly in the first quarter from the October-December 2006 period.

Net income in the most recent quarter dropped to $3.2 billion, or $1.91 a share, from $3.68 billion, or $2.61 a share, a year earlier, when oil and gas prices soared amid supply fears after hurricanes Katrina and Rita. The recent quarter includes impairment charges of 17 cents a share. Revenue declined 19% to $42.54 billion.

On average, analysts polled by Thomson Financial forecast earnings of $1.95 a share.

Full-year earnings rose to $15.55 billion, or $9.66 a share, from its previous-best result of $13.53 billion, or $9.55 a share, in 2005. Phillips Petroleum Co. and Conoco Inc. combined in 2002.

Last year’s revenue grew to $188.52 billion from $183.36 billion in 2005.

Because oil and gas prices were so high at the end of 2005, the year-over-year decline in income for ConocoPhillips was not unexpected. Financial services company UBS predicts fourth-quarter earnings for the major oil companies to fall by an average of 20% from the year-earlier period and 25% from the third quarter of 2006.

ConocoPhillips shares rose 65 cents to $65.62.

The company said it expected first-quarter production to be off about 30,000 barrels from the most recent quarter for a variety of reasons, including the sale of some U.S. and Canadian assets and the effect of quota reductions by the Organization of the Petroleum Exporting Countries on operations in Venezuela and Libya.