Exploration and production net operating income was $499 million, up from $360 million in the same quarter of 2001. Net operating income benefited from higher crude oil prices and increase crude oil production, as well as the addition of earnings from the Conoco assets, said ConocoPhillips.

Conoco and Phillips merged at the end of August, which incurred costs included in 'special items' of $531 million in merger related and discontinued operation costs. The results for the third quarter include two months' activity for Phillips and one month's activity for ConocoPhillips.

Production for the quarter fell 3% from the same quarter last year to 1.55 million barrels of oil equivalent per day. This was attributed to OPEC-related cuts of 9600 BOE per day, a decline in US Lower 48 output and a late 2001 property sale.

The company's refining and marketing net operating income also fell to $79 million, down from $100 million a year ago. However, the periods are not directly comparable due to the addition of one month's earnings from Conoco, the company said.

Lower margins and volumes affected refining and marketing earnings, ConocoPhillips said.

Despite the reported figures, ConocoPhillips president and chief executive officer, Jim Mulva remained positive.

"We are extremely pleased with the progress we've made thus far in integrating the operations of Conoco and Phillips," Mulva said.

"As we execute our integration plans, we will focus on improving financial returns through capturing synergies and optimising our portfolio. We will also continue to emphasize the importance of capital discipline and a strong balance sheet.

"We expect our fourth quarter 2002 production to be approximately 8% above third quarter pro forma."