Shares of Conoco fell nearly 3 percent in extended trading.

The third-largest U.S. oil company also set its 2009 capital expenditures at $12.5 billion, a budget the company said was ample enough to fund large development projects but down from a projected $20 billion in spending for 2008.

Conoco said the drop in oil and gas prices will affect its year-end reserves.

On a year over year basis, crude oil prices fell more than 50 percent, while natural gas prices tumbled 25 percent.

(Reporting by Anna Driver in Houston; Editing by Tim Dobbyn)