HOUSTON, Jan 30 (Reuters) - Oil producer ConocoPhillips outshone larger competitors on Thursday with a quarterlyprofit that beat expectations as it moved to overcome theproblems of high costs and lack of fresh reserves that havenagged at Exxon Mobil Corp and Royal Dutch Shell.
ConocoPhillips, the largest U.S. oil company withoutrefining operations, said its profits were helped by the sale ofits Algerian business and by higher crude oil production inNorth America.
The company shed its refining business in 2012 and has soldbillions of dollars of lower-yielding assets to focus on moreprofitable oil production from North American shale basins suchas the Eagle Ford in south Texas.
Analysts said Conoco's plan is beginning to pay off at atime when the industry faces pressure from shareholders to liftreturns despite flat oil prices and rising costs for riskyexploration work designed to replace reserves.
Conoco's profit in the fourth quarter was $2.5 billion, or$2.00 a share, compared with $1.4 billion, or $1.16 a share, ayear earlier.
Excluding special items, profits inched down, thoughanalysts characterized Conoco's reserve replacement ratio, ameasure of a company's ability to find new oil and gas reservesto replace what is produced, as strong.
On a preliminary basis, Conoco's proved reserves rose 3percent from a year earlier to 8.9 billion barrels of oilequivalent (BOE). Proved organic reserve additions are expectedto be about 1.1 billion BOE for a replacement ratio of 179percent of 2013 production.
In a note to clients, Ed Westlake of Credit Suisse dubbedConoco the best performing large oil company, citing 7 percentgrowth in cash flow despite asset sales, a reduced share countand more cash on the balance sheet.
"I think we're seeing pretty good evidence that the strategyis working," Jeff Sheets, Conoco's chief financial officer,said, citing cash margin growth and expected gains inproduction.
Conoco's shares rose slightly, while those of OccidentalPetroleum Corp, the fourth-largest U.S. oil and gascompany, edged lower even though it reported a quarterly profitthat beat expectations.
At $2.04 per share, Occidental's earnings were significantlyhigher than the 42 cents per share earned a year earlier, whenthe company wrote down the value of gas properties in the U.S.midcontinent by $1.1 billion.
SHELL, EXXON
At Shell, Chief Executive Ben van Beurden, just a month onthe job, set out plans to make the world's No. 3 investor-ownedoil company leaner, putting a new focus on increasing cash,while scrapping an Arctic drilling program.
"Our overall strategy remains robust, but 2014 will be ayear where we are changing emphasis, to improve our returns andcash flow performance," van Beurden said. "Our returns are atthis point in time too low to be considered competitive."
This year, Shell plans to slash spending to $37 billion from$46 billion and to increase asset dispositions to $15 billion -about 6.5 percent of its $228 billion market capitalization -from $1.7 billion in 2013.
The promises, along with a higher dividend, helped liftShell's shares 1 percent to 2,147 pence.
Shell's fourth-quarter earnings, excluding identified itemsand on a current cost of supply basis, came in at $2.9 billion,48 percent lower than in the year-before quarter but in linewith the downgraded forecast Shell gave on Jan. 17, making thequarter its least profitable for five years.
Shares of Exxon, the world's largest publicly traded oilcompany by market value, were down 0.5 percent at $94.60 afterthe company posted a lower-than-expected quarterly profit andfailed to offset declining production with fresh reserves.
The results reflected a "mediocre quarter" for Exxon,especially in international production, Edward Jones analystBrian Youngberg said. "They've lost momentum already, revertingback to declining production and stagnant earnings."
Exxon's oil and natural gas production fell 1.8 percent fromyear-before levels, with natural gas production falling aroundthe world and oil output slipping in half the regions in whichthe company operates.
Still, Exxon executives said they were confident newprojects in the Middle East, Asia and the United States wouldhelp boost production.
The blip in fourth-quarter results doesn't change Exxon'sinvestment appeal, or for that matter the sector's, said OliverPursche of Gary Goldberg Financial Services, who manages Exxonshares for clients.
"There's nothing in this report that's overly alarming," hesaid. "Exxon to us is a core, long-term holding."
