NEW YORK (CNN/Money) -
Phillips Petroleum Co. warned its first-quarter results will be much lower than expected -- a loss, as opposed to the profit expected by Wall Street -- driven down by one of the worst markets for its refined petroleum products in years.
Phillips, the No. 5 U.S. oil company, said it expects a "slight net operating loss" in its first quarter, which ended in March. Wall Street analysts on average expected Phillips to earn 37 cents a share, according to earnings tracker First Call. The company earned $1.96 a share a year ago.
The market for Phillips' refined products such as gasoline -- its "downstream" market -- was "the weakest in years" as prices for those products did not recover as quickly as crude oil prices this year.
Crude oil prices accelerated in the first quarter, driven by an economic recovery in the United States and rising tensions in the Middle East. But Phillips said it would not realize any gains from higher crude prices until the second quarter because of contractual pricing lags. As a result, its "upstream" exploration and production business is expected to be even with the fourth quarter of 2001, but well below the first quarter a year ago.
The Bartlesville, Okla.-based company said it made two production cutbacks in the quarter; and major scheduled maintenance, an operating expense, hurt results by $40 million.
Phillips' chemicals business was hurt by low margins and sluggish demand in the quarter, and its natural gas business also is expected to be well below the year-ago quarter.
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Phillips also said it expects to end the quarter with $8.9 billion in debt, resulting in a debt-to-capital ratio of about 38 percent.
Shares of Phillips (P: Research, Estimates) closed Monday up $1.22 at $61.86.
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