UPDATE 1-ConocoPhillips says plans run cuts at some refineries

(Recasts, updates with comments from official, CEO, adds

By Haitham Haddadin

NEW YORK, Jan 27 (BestGrowthStock) – ConocoPhillips (COP.N: ) said on
Wednesday it planned economic run cuts at some refineries to
combat weak industry fundamentals but added it expected
depressed refining margins in the U.S. West Coast to improve.

The third largest U.S. oil company’s strategy over coming
years is to have a smaller downstream business, Clayton Reasor,
vice president of corporate affairs, told analysts during a
conference call to discuss quarterly earnings.

Earlier on Wednesday, Houston-based ConocoPhillips reported
a $1.2 billion profit for the fourth quarter of 2009, but its
refining arm had a loss of $215 million. [ID:nN27202613]

The company does not expect refining unit losses in 2010 to
continue at last year’s magnitude, Reasor said.

“I don’t think we are just sitting on our hands,” Reasor

“We are going to look at run cuts in certain areas where
the refineries aren’t covering their variable costs,” he noted,
adding the company’s 260,000 barrel-per-day Wilhelmshaven
refinery in Germany was down for most of the fourth quarter.

In the long-term, ConocoPhillips envisages a structure
where downstream accounts for 15-20 percent of the company’s
total portfolio rather than the current 20-25 percent, as part
of a plan to improve returns over time, he added.

“But that’s going to take some time given the environment
for refineries,” Reasor added.

“There may not be a lot we can do from a portfolio
perspective in 2010 … but over the next few years you can
expect us to look at creative ways of reducing our exposure to
the downstream,” he noted, without elaborating.

In the earnings release, Chairman and Chief Executive Jim
Mulva said that in the downstream segment, the company was
“responding to a difficult market by lowering utilization,
reducing discretionary capital expenditures, managing costs and
optimizing turnaround timing.”

In the fourth quarter, Conoco’s worldwide refining crude
oil capacity utilization rate was 76 percent, added Mulva,
whose company has 17 refineries around the world, including a
dozen in the United States.

After U.S. West Coast’s refining profits were hammered in
the fourth quarter, company officials on Wednesday sounded an
optimistic note on margins for the region where ConocoPhillips
has several refineries.

“We do expect the West Coast (margins) to get better than
it’s been,” Reasor told the analysts.

“I think we’ve already seen it improve a little here. I
think imports and the demand level on the West Coast have been
very low,” he said. “I can’t give you specifics as to why the
West Coast had done so poorly but it was at a level that it was
operating below variable costs.”

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(Reporting by Haitham Haddadin; Editing by David Gregorio)

UPDATE 1-ConocoPhillips says plans run cuts at some refineries