) --


(COP) - Get Report

reported lower net income in the third quarter versus a year ago, though excluding special items its profit was up, as higher crude oil prices -- though declining from the second quarter 2011 -- and better refining margins continue to offset production shortfalls for the oil majors.

ConocoPhillips reported adjusted earnings of $3.5 billion, or $2.52 a share, compared with adjusted earnings of $2.2 billion, or $1.50 a share, for the same period in 2010. The Wall Street consensus was for earnings of $2.18.

Net income was $2.6 billion with earnings per share at $1.91, an unfavorable headline comparison to the previous year.

"This quarter's results benefited from improved market conditions," said Jim Mulva, chairman and CEO, in an earnings release. "While commodity prices were higher, E&P production was lower, mainly due to suspended operations in Bohai Bay and Libya. Our downstream business ran well, allowing us to capture stronger refining margins."

Overall production fell from 1.64 BOE (barrel of oil equivalent) to 1.54 BOE quarter over quarter. ConocoPhillips production, excluding the impact of dispositions and the civil unrest in Libya, was 90,000 barrels of oil equivalent per day lower than the third quarter of 2010.

Higher crude price and better refining margins with crack spreads at historic highs isn't a recipe to get investors too excited about the earnings headlines from the oil majors. The long-term view of production growth is a needle-mover while earnings tend to be glanced over quickly by investors who know that high crude profit means favorable comparisons to the previous year, but aren't a major reason to bid up shares. In the second quarter, most of the oil majors beat due to higher crude oil prices, but production shortfalls stood out against the headline numbers and kept shares from moving higher.

The big ticket item for COP, and ostensibly the major catalyst for shares -- by allowing it to focus E&P on getting better production growth -- is its plans to spin off its refining and chemicals arm as a separate company. ConocoPhillips said in an earnings release it expects to file an initial Internal Revenue Service ruling request this month and a

Securities and Exchange Commission

Form 10 in mid-November. The distribution of the downstream company shares is expected to occur in the second quarter of 2012. So the plan is on track, but we don't know more than that.


(BP) - Get Report

saw a bit of a run on Tuesday when it reported because it announced another $15 billion in planned asset sales, above its existing $30 billion divestiture plan, and plans to hike its dividend in 2012, with shares up 4%.

ConocoPhillips shares were trading close to flat on Wednesday, which is exactly what one would expect from an oil major on earnings day when its result play out according to a script that any knowledgeable energy investor could write for the company.

Refining and marketing's adjusted earnings in the third quarter of 2011 were $928 million higher than the corresponding period of 2010, primarily due to improvement in global refining and marketing margins. R&M's reported earnings were $521 million higher than the prior year, and include charges of $407 million primarily from asset impairments and losses on dispositions.

Exxon Mobil

(XOM) - Get Report

will report on Thursday morning, and


(CVX) - Get Report

on Friday morning. Chevron already previewed its earnings in an interim report issued earlier this month. Chevron said it expected results to be flat versus the second quarter 2011 due to the dip in commodity pricing quarter over quarter, and its production was lower sequentially, but its results would be buttressed by a one-time refinery sale.

-- Written by Eric Rosenbaum from New York.

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