ConocoPhillips’ top boss offered no good news to North America’s natural gas bulls — or to the global economy — on Wednesday.

Speaking to investment analysts during a conference call to discuss ConocoPhillips’ 4Q2008 earnings report, CEO Jim Mulva was asked what the company was forecasting for North American gas prices this year.

The remarkable output from onshore gas basins, which is growing as market demand has fallen, doesn’t create a scenario for prices to rise anytime soon, Mulva said.

“In the next short period, two years or so, we’re certainly looking at having plentiful supply,” he said. “The real question is what’s taking place with demand, and with the economy…and on that, we don’t know for sure what’s going to happen. We look at natural gas prices today with somewhat surprise,” which also has forced the company to revise its outlook on commodity prices. Mulva said he would not divulge internal company forecasts, but “our plans going forward over the next year or two are based on some improvement in natural gas prices from where they are today, but not a lot more than $5/Mcf…”

The drastic pullback in U.S. gas drilling since September has been “helpful” to the markets, Mulva said. Smaller drilling programs “will lead to slightly less investment, and that should lead to some correction in demand.”

However, “we don’t really know what’s taking place in demand because of the economy,” he told analysts. “That’s the real question. And because of that, we see prices as maybe a little bit better than $5/Mcf, but not much…”

The Houston-based major reported a $31.8 billion loss in the final three months of 2008 because of one-time charges to write down oil and gas properties that have lost value as prices have slumped. Net losses for the period totaled minus $21.37/share, compared with a profit of $4.4 billion ($2.71) for the same period of 2007. Revenue dropped 16% to $44.5 billion from $52.7 billion. Excluding the one-time charges, adjusted earnings in 4Q2008 were $1.9 billion ($1.28/share), compared with $4.1 billion ($2.55) in 4Q2007.

“Our financial performance for the quarter reflects the depressed economic conditions and business environment impacting not only our industry, but domestic and global markets as well,” Mulva said.

The producer was the first of the majors to report 4Q2008 earnings, but the losses had been expected. ConocoPhillips in mid-January issued an interim update to prepare investors for the bad economic news. Among other things, the producer plans to cut 2009 capital spending by 18% from a year ago. It also is laying off around 4% of its workforce.

“We encountered significant changes in the fourth quarter,” Mulva told analysts. “Early in the quarter we came to the conclusion that we would be experiencing a multi-year recession…and we then commenced downsizing, stopped our share repurchase program…did things in a way that was consistent with the anticipated business environment.” Although ConocoPhillips has adjusted its capital investment plans for the short term, the CEO said the company is “committed to continuing with our key projects. We are deferring other opportunities,” which he declined to detail.

“We are planning for a prolonged and difficult business environment…in 2009 and 2010,” he said. “It will be a difficult time for the energy business…but we are prepared to be able to live within our means and to fund dividends.”

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