April 2, 2009 / 4:50 PM / in 9 years

UPDATE 3-Conoco sees Q1 hurt by natgas, marketing margins

* Conoco Q1 takes hit from weak natgas prices

* Worldwide marketing margins drop 50 pct

* Output slightly up, chemicals earnings to rise

* Shares rise 6 pct

(Updates share prices, adds details on production, price background, analysts’ estimates)

NEW YORK, April 2 (Reuters) - ConocoPhillips (COP.N) said on Thursday its first-quarter earnings would be hurt by weakness in North American natural gas prices and its worldwide marketing margins would be significantly lower.

But overall oil and gas output, excluding its partnership in Russia, is expected to rise about 30,000 barrels per day of oil equivalent (BOE) from the fourth quarter and its earnings from its chemicals operations will also rise.

Conoco said in January it expected first quarter production to be near the 1.87 million BOE per day it produced in the fourth quarter.

The third largest U.S. oil company said its exploration and production results are expected to be hit by losses in the U.S. Lower 48 and Canada mainly due to lower realized natural gas prices. Exploration expenses are expected to be about $275 million before tax for the quarter.

U.S. spot natural gas prices averaged about $4.73 per million British thermal units in the first quarter, down from 44 percent from a year earlier. Hefty supplies and waning industrial demand hurt prices.

The company’s midstream operations would see lower earnings due to a decrease in natural gas liquids prices, but that business would record an $85 million after-tax gain from a deferred gain on shares issued by a subsidiary.

Refining and marketing results for the first quarter are expected to be lower due to a decrease of more than 50 percent in worldwide marketing margins and the decline in international refining margins.

As expected, the worldwide crude oil refinery utilization rate for the quarter would be in the low 80 percent range, Conoco said, with its U.S. refineries operating at about 80 percent because of maintenance at the plants.

First-quarter maintenance costs are expected to be about $200 million before-tax, Conoco said.

Analysts on average had expected Conoco to report a first-quarter profit of 67 cents per share. That estimate compares with a profit of $2.52 a year ago, according to data from Reuters Estimates.

The Houston-based company’s debt balance is expected to be about $29.4 billion, up $1.9 billion from fourth quarter, due to its increase in working capital.

Conoco Chief Executive James Mulva said last month the company would seek to bring down its debt-to-capital ratio from about 33 percent to its target range of between 20 percent and 25 percent in the coming years.

The company’s effective tax rate is expected to be 65 percent to 70 percent in the first quarter as earnings from higher-tax rate jurisdictions rose.

Conoco shares rose 6 percent to $42.23 per share in late morning trading on the New York Stock Exchange. Conoco and other energy companies were lifted by an 7 percent gain in crude oil futures CLc1. (Reporting by Matt Daily; Additional reporting by Anna Driver in Houston; editing by Derek Caney and Andre Grenon)

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