NEW YORK (AP) - ConocoPhillips' three-year plan to strip the company down to its most profitable parts remains a work in progress, and third-quarter net income slid 14 percent.
However, its shrink-to-grow strategy already is putting more money in its pocket for each barrel of oil produced and refined into gasoline. And among businesses still under the company's control, profits are rising.
That's not just because of oil and gasoline cost significantly more than last year: "We continue to see benefits as we shift our portfolio" toward more profitable businesses, Chief Financial Officer Jeff Sheets said.
For the past few years, Conoco has been aggressively selling assets to get rid of unprofitable oil refineries and focus on more profitable oil fields in the U.S. and Canada. It will complete the transformation next year by splitting into two companies - one that produces oil and another that refines it into gasoline and other fuels.
If all goes according to plan, the two companies will grow faster on their own than they could together. But, for now, it's also forcing Conoco to slice off parts of its business that would have generated profits this year.
Conoco has shed $8 billion in assets since 2010, and it expects to sell another $7 billion to $12 billion before the end of 2012. Many of those assets produce oil and natural gas that the company no longer can count on.
In the third quarter, oil production fell 17 percent to 741,000 barrels per day and natural gas production dropped 4 percent to 4.4 billion cubic feet per day.
Oil production fell in the U.S. and overseas when compared with a year ago. Some of that was expected because of the asset sales, but Conoco also dealt with a series of unexpected problems this year..
China forced Conoco to suspend production in the Bohai Bay after discovering an oil spill in June. Conoco operates the field with state-owned partner China National Offshore Oil Corp. Its operations in Libya also were shut down this year as a rebellion swept through the country and ousted leader Moammar Gadhafi.
Higher oil and gas prices made up for those production losses. Conoco said oil prices increased 40 percent to $97.24 per barrel and natural gas prices rose 14 percent to $5.45 per 1,000 cubic feet.
"I think they're going to be in good shape," Argus analyst Phil Weiss said. "They're keeping the stuff that's the most lucrative, and all of their remaining businesses seem to be operating pretty well."
The Houston oil company reported earnings of $2.62 billion, or $1.91 per share. That compares with $3.06 billion, or $2.05 per share, in the same part of 2010. Excluding charges related to asset sales, Conoco reported adjusted earnings of $3.45 billion, or $2.52 per share.
Revenue increased 33 percent to $62.78 billion.
Its adjusted results beat Wall Street estimates of $2.16 per share on revenue of $55 billion, according to FactSet.
The increased oil and natural gas prices boosted Conoco's exploration and production profits by 13 percent to $1.76 billion. Profits also more than doubled at Conoco's refining business to $789 million as the price of gasoline and other fuels rose in the quarter. Conoco said it continues to try to sell its refinery in Trainer, Pa. The facility will close by the end of March if it cannot find a suitor.
The company's chemicals business increased earnings 49 percent to $197 million.
BP on Tuesday reported that its third-quarter profit more than doubled to $4.9 billion. Exxon Mobil Corp. and Royal Dutch Shell are expected to release their quarterly reports on Thursday. Chevron's third-quarter earnings report is expected on Friday.
Shares rose $1.21 to close at $71.89.