ConocoPhillips Reveals First Quarter Blues (COP)

ConocoPhillips Corporation (NYSE:COP) has released its interim update for the first quarter of 2009. The news is mixed at best.  Exploration and production was hit by low prices for both crude oil and natural gas. Production is expected to be higher by about 30,000 barrels/day.

Conoco provided a chart of crude and natural gas prices that really sums up the problem. In the first quarter of 2008, WTI crude sold for $97.94; this quarter the price was $42.97. Dated Brent crude sold for $96.90 in the first quarter of 2008, and $44.40 in the first quarter of 2009.  Natural gas prices were just as bad. In 2008 natural gas prices were $8.03/thousand cubic feet, and in 2009 the price had fallen to $4.91/thousand cubic feet.

Refining and marketing is also forecast to be lower because marketing margins are off more than 50% worldwide and refining margins are also in decline. Worse for Conoco is the fact that refining margins have recovered somewhat in the first quarter of 2009, but the company missed the opportunity due to “significant decreases in distillate margins and sour crude differentials, as well as regional impacts from planned turnarounds that occurred in the early part of the quarter.”

Global refinery utilization is expected be in the low 80%-range, and about 80% in the US. These rates are quite low, but they reflect the global economic miseries.

We knew there were  problems with this one all along, but we still noted Conoco as one of the energy stocks which could double by the time we have started to see an economic recovery.  Conoco is chasing the higher price of oil this morning rather than chasing its own bad news.  Shares are up more than 3% at $41.00.

Paul Ausick
April 2, 2009