HOUSTON (Reuters) - ConocoPhillips , the largest U.S. independent oil producer, reported a better-than-expected quarterly profit on Thursday, helped by rising crude prices, although it slashed its capital budget by 10 percent to further cut costs.
Shares of the Houston-based company rose 2.9 percent to $51.43 in afternoon trading. The stock has gained about 2 percent this year.
Other North American oil producers, like MEG Energy Corp and Husky Energy Inc, have also moved to control spending and focus on shareholder returns, with crude prices not expected to rise markedly before the end of the decade.
On a conference call with investors, Conoco’s executives stressed their approach to maximizing shareholder returns, regardless of whether commodity prices improve.
“We don’t require a pathway, or market help, to get to cash flow neutrality,” Don Wallette, the company’s chief financial officer, said on a conference call.
Analysts said the results reflected Conoco’s increasing focus on controlling costs and focusing on improving operations, though the company’s unexpected $600 million contribution to its U.S. pension program zapped cash flow.
Pension funding is often based on future assessments of reserve levels, taking into account interest rates and other factors. Companies occasionally do have to inject cash into pensions to meet minimum funding requirements if investments do not keep pace.
Conoco reported third-quarter earnings of $420 million, or 34 cents a share, compared to a loss of $1.04 billion, or 84 cents per share, a year earlier.
Excluding one-time items such as asset sales and costs to exit Nova Scotia operations, Conoco earned 16 cents per share. By that measure, analysts expected earnings of 8 cents per share, according to Thomson Reuters I/B/E/S.
The company also lowered its 2017 capital budget by 10 percent to $4.5 billion.
Production fell 23 percent to 1.2 million barrels of oil equivalent per day (boepd). Some of Conoco’s output in the U.S. Gulf of Mexico and the Eagle Ford shale of Texas was pushed offline by hurricanes in the U.S. Gulf Coast region earlier this year, denting profit.
In the aftermath of Hurricane Harvey, which battered Houston region in August, Conoco was unable to reach its global headquarters, forcing the company to run all of its operations remotely.
Conoco said it still expects to end the year pumping about 1.4 million boepd, despite the budget cuts, largely due to efficiency and new technology.
Conoco plans to hold an investor day in New York in early November to discuss its 2018 spending plans.
Editing by Marguerita Choy and David Gregorio