28 July 2006Yahoo News! / AP
Soaring energy prices catapulted Exxon Mobil to a second-quarter profit of more than $10 billion and promise to ignite industrywide growth — and public outrage — all year.
Royal Dutch Shell PLC came close to matching Exxon Mobil Corp.'s 36 percent quarterly earnings boost on Thursday, posting net income of $7.3 billion, an increase of 40 percent from the year before.
The oil and gas industry's prolific profits come as motorists in the U.S. pay an average of $3-a-gallon at the pump and as Washington lawmakers consider opening to drilling areas of the Gulf of Mexico currently off-limits — both of which have generated political backlash.
Rep. Edward Markey (news, bio, voting record) (D-Mass.) said Thursday that American consumers have been "tipped upside down and have (had) their savings shaken out of their pockets at the gas pump."
Across the globe, energy-intensive businesses such as shippers and chemical manufacturers are feeling the pinch from higher prices, while oil exporting nations in the Middle East and beyond are experiencing rapid economic growth.
Crude-oil prices are hovering near $75 a barrel, and analysts do not foresee a sharp drop anytime soon given the world's rising appetite for fuel and supply threats that pump fear into the market.
"We continue to see demand growth year over year," Henry Hubble, Exxon's vice president of investor relations, told analysts. "We're selling everything we can make."
Other oil companies reported big numbers for the quarter this week as well. BP PLC reported its quarterly profit rose 30 percent to $7.3 billion and ConocoPhillips said its earnings rose 65 percent to $5.18 billion. Chevron Corp. will round the field of five majors when it reports its second-quarter performance Friday.
These five were expected to earn an estimated $33.6 billion, or a 32 percent boost, according to analysts surveyed by Thomson Financial. Already the first four have reported earning $30.16 billion.
And if prices stay at these levels, look for more record-breaking profits soon, said Fadel Gheit, analyst for Oppenheimer & Co.
"The rising tide lifts all boats," Gheit said. "Unless there is a price collapse of oil, you will see the second half of the year best its first half."
Exxon Mobil, the world's largest publicly traded oil company, said earnings amounted to $1.72 per share in the April-June quarter compared with a profit of $7.64 billion, or $1.20 per share, a year ago.
The results topped Wall Street expectations but came in behind Exxon Mobil's record profit of $10.71 billion set in the fourth quarter of 2005. Analysts polled by Thomson Financial expected the company to earn $1.64 per share.
Revenue rose to $99.03 billion from $88.57 billion in the prior-year quarter. That was short of Exxon Mobil's record third-quarter revenue of $100.72 billion — which also stands as record revenue generated by any U.S. public company in a quarter.
Its shares fell 13 cents to close at $66.47 on the New York Stock Exchange after reaching an all-time high of $67.65 earlier in the session.
Exxon Mobil said it spent $4.9 billion on capital and exploration projects during the quarter, up 8 percent from a year ago, while distributing $7.9 billion to shareholders in the form of dividends and share repurchases.
Congress has been urging the big oil companies to put more of their profits toward boosting the supply of energy for consumers. And this week the Senate sought to help out the industry by working on an election-year bill that would open a large area of the central Gulf of Mexico to oil and gas drilling.
By a vote of 86-12 the Senate agreed Wednesday to proceed with the legislation that opponents fear could clear the way to lifting a federal drilling moratorium that has protected 85 percent of the country's Outer Continental Shelf from New England to Alaska for a quarter century.
Hubble told analysts that Exxon will boost capital spending from the previously stated $19 billion by another $1 billion this year, though one-third of that increase is tied to rising costs for labor and equipment.
"That's a big midyear jump," said Bruce Lanni, analyst with A.G. Edwards.
Exxon Mobil's production has increased 6 percent from a year ago and 9 percent if the impact of divestments are excluded.
"For a company of this size to report that sort of production, that growth is quite remarkable," said Tina Vital, equity analyst for Standard & Poor's.
Exxon Mobil watched all parts of its business grow.
By segment, exploration and production earnings rose sharply to $7.13 billion, up $2.23 billion from the second quarter of last year, a reflection of higher crude and natural gas prices.
The company's refining and marketing segment reported a $264 million earnings increase to $2.48 billion, the result of soaring fuel prices, which offset reduced output at its refineries and, as a result, fewer gallons of gasoline, heating oil and jet fuel being sold.
The company said its average sale price for crude oil in the U.S. during the quarter was $63.84 a barrel, compared to $45.85 a year earlier. Internationally, however, Exxon said the average sale price for oil was $65.12 compared to $47.55 a year ago. Natural gas prices were slightly lower in the U.S. and around the world.
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Associated Press Writer Toby Sterling in Amsterdam contributed to this report.
