ConocoPhillips’ third quarter oil and natural gas production will be about 5% lower sequentially from the second quarter, mostly because of problems related to the shutdown of Prudhoe Bay operations in Alaska, the oil major said Tuesday. Financial results also will be affected by falling natural gas prices.

In an interim report, ConocoPhillips said more than half of its production losses in the quarter are from the early August shutdown of the Prudhoe Bay oilfield by operator BP plc. ConocoPhillips owns 36.6% of the field. Planned seasonal maintenance at some overseas facilities also will impact production numbers.

Crude oil prices are “similar” to those in the second quarter, but ConocoPhillips said its exploration and production earnings will take a hit from lower U.S. gas prices and lower worldwide production. Henry Hub first of month prices in the quarter were $6.58/MMBtu, compared with $6.80 in the second quarter. In 3Q2005, gas prices averaged $8.53/MMBtu. Exploration expenses are expected to be $215 million before-tax in the third quarter.

Quarterly results will be negatively impacted by newly enacted tax legislation in Alaska, which is retroactive to April 1, and ConocoPhillips expects to record an after-tax charge of $180 million for both the second and third quarters. Corporate expenses, however, are expected to be lower sequentially, and the company expects to record a benefit from hurricane-related insurance impacts from last year’s Gulf of Mexico storms. The producer expects to show a debt balance of about $27.8 billion in the quarter.

ConocoPhillips also said it is continuing to merge Burlington Resources’ operations into its business (see Daily GPI, Dec. 14, 2005). That portion of the $35.6 billion purchase price allocated to properties, plants and equipment has not changed materially, but ConocoPhillips said the application of purchase accounting for the acquisition at the operating-area level has affected the mix of depreciation, depletion and amortization (DD&A) rates and the timing of expense. As a result, third quarter DD&A is expected to be $170 million (before-tax) higher than the second quarter.

ConocoPhillips is scheduled to release its quarterly report on Oct. 25.

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