January 27, 2010 / 3:11 PM / in 8 years

WRAPUP 4-Conoco, Valero results top Street; refining hurts

* Conoco Q4 adj EPS $1.16 vs Wall St view $1.12

* Valero slashing dividend

* Conoco shares down 1.2 pct, Valero off 1.7 pct

* Conoco sees lower 2010 production

* Q4 output at Hess up 10 pct; up 13 pct at Murphy

(Adds Murphy Oil, updates share prices)

By Anna Driver

HOUSTON, Jan 27 (Reuters) - ConocoPhillips (COP.N) and Valero Energy (VLO.N) reported quarterly results that topped Wall Street expectations even as the sluggish economy continues to depress demand for fuel, hurting refining margins.

While expecting some improvement in the refining sector as industrial demand returns, they do not see a dramatic rebound any time soon, both companies said on Wednesday.

Crude oil prices climbed nearly 30 percent in the fourth quarter from a year earlier. While that helped boost profits at Conoco and other companies with exploration arms, they hurt refiners that use the crude as input to make fuel.

“While 2009 may have been the bottom for refining profitability, there’s too much inventory and spare refining capacity in the industry right now for margins to rebound quickly,” Valero Chief Executive Bill Klesse said.

Valero, the largest U.S. refining company, reported a quarterly loss, but Klesse said it will be profitable in 2010.

Conoco and Valero, the first large energy companies to report earnings, have more than 20 percent of total U.S. refining capacity between them.

Valero has closed unprofitable plants and put some up for sale. On Wednesday, the company slashed its dividend to 5 cents per share from 15 cents. [ID:nN27200611].

Its reduced dividend and smaller-than-expected cash position of $825 million are negatives that will outweigh the better-than-expected results, Simmons & Co International said in a note to clients. The stock fell 1.7 percent.

Its fourth-quarter net loss narrowed to $1.4 billion, or $2.51 per share, from $3.3 billion, or $6.36 per share, a year ago. Excluding one-time items, the loss per share of 28 cents beat analysts’ consensus forecast of a 47 cent loss, according to Thomson Reuters I/B/E/S.

NO ALARMS, SLIGHT UPSIDE SURPRISE

Conoco’s profit was $1.2 billion, or 81 cents per share, compared with a year-earlier loss of $31.8 billion, or $21.37 per share. Excluding one-time items, it earned $1.16 per share, better than the Wall Street consensus estimate of $1.12.

“It was a nice solid quarter without any alarming news,” Edward Jones analyst Brian Youngberg said of Conoco. “Overall, I think operations seem to be running well, and the cost-cutting is working.”

For 2010, the third-largest U.S. oil company expects its oil and gas output to decline, hurt by reduced North American drilling and lower production growth from new projects, Conoco said on its earnings conference call. [ID:nWEN9084]

The Houston-based company’s exploration arm had a quarterly profit of $1.2 billion. The refining arm lost $215 million, but it said on the conference call not to expect losses of that magnitude to continue. Conoco shares fell 1.2 percent.

New York-based Hess Corp (HES.N) reported a fourth-quarter profit as higher oil output and energy prices offset refinery troubles. It earned $358 million, or $1.10 a share, versus a year-earlier loss of $74 million, or 23 cents a share.

Hess’s oil and gas output was 415,000 barrels of oil equivalent per day, up 9.5 percent from a year earlier [ID:nN27121496] and more than some analysts had forecast.

Shares of Hess, the sixth-largest U.S. integrated oil company, fell 0.3 percent. Shares of smaller rival Murphy Oil Corp (MUR.N) dropped 1.6 percent in after-hours trading when it posted fourth-quarter profit growth but said first-quarter earnings would fall short of expectations. [ID:nN27197836]

Murphy said its quarterly production grew 13 percent.

Chevron Corp (CVX.N) releases earnings on Friday, and Exxon Mobil (XOM.N) on Monday. BP Plc (BP.L) will report on Tuesday, and Royal Dutch Shell Plc (RDSa.L) on Feb. 4.

Reporting by Anna Driver, with writing by Braden Reddall in San Francisco; Editing by Dave Zimmerman, Lisa Von Ahn, Phil Berlowitz

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