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ConocoPhillips, Hess Report Quarterly Increases

NEW YORK -- No. 3 U.S. oil company ConocoPhillips reported quarterly profit surged 51 percent, beating Wall Street forecasts, driven by record energy prices and strong refining and marketing results.

The Houston company also sounded an upbeat note on its outlook for the year, according to Reuters, and said it expected stronger oil and gas production in the second half. Full-year output is expected to rise 3 percent from last year, excluding the impact of its investment in Russian oil giant Lukoil.

Net income was $3.14 billion, or $2.21 per share in the second quarter, compared to $2.08 billion, or $1.48 per share, in the year-earlier quarter. The results were well above the average analysts' estimate of $2 per share, according to Reuters Estimates.

Surprisingly strong performance at its U.S. refining and marketing operations pushed results above forecasts, Credit Suisse First Boston analysts said in a research note.

The company produced 1.76 million barrels of oil equivalent per day in the second quarter, including the impact of its Lukoil investment.

Total revenue jumped to $42.6 billion from $31.9 billion a year earlier.

Meanwhile, oil producer and refiner Amerada Hess Corp. posted a 4 percent increase in quarterly profit, but the results fell short of Wall Street forecasts, hurt by poor refining results and a program to hedge oil prices.

Amerada Hess, whose shares fell 2 percent, said second-quarter net income rose to $299 million, or $2.89 per share, from $288 million, or $2.84 per share, a year earlier. Analysts on average expected $2.96 per share, according to Reuters Estimates.

Although profit at its exploration and production unit jumped, Amerada was unable to benefit fully from the sharp rise in oil prices because of a hedging program under which it agreed to sell oil at prices fixed in advance.

As a result, the oil prices Amerada booked were more than $5 per barrel weaker than expected, Credit Suisse First Boston analysts said in a research note.

The company's crude oil selling price averaged $32.47 per barrel in the quarter, up $6.71 from a year earlier. Oil prices have been climbing steadily for more than a year and are now hovering around $60 a barrel due to strong demand from Asia and tight global supplies.

"Any earnings miss in a $50-plus oil price quarter is bound to raise eyebrows, but it appears not to be a result of the underlying business, which is performing as we expected," CSFB analysts wrote. "The hedging program is continuing, but by the end of the year it will be over."

Oil and gas production in the quarter was 355,000 barrels per day, up from 351,000 a year earlier.

Refining and marketing earnings fell to $98 million from $160 million a year earlier, hurt by lower refining results and a drop in income from trading activities.

Revenue grew to $4.96 billion from $3.80 billion a year earlier.
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