Thursday, May 1, 2008

Exxon First-quarter Net Income Profit Rose to $10.9 Billion

Exxon Profit Rises Less Than Estimated on Output Drop

By Joe Carroll

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Exxon Mobil Corp. posted the smallest earnings increase among the world's three largest oil companies, falling short of analyst estimates as production dropped and profit margins from refining narrowed.

Exxon Mobil fell 3.3 percent to $90 in New York trading after the Irving, Texas-based company said first-quarter net income rose to $10.9 billion, or $2.03 a share, from $9.28 billion, or $1.62, a year earlier. Per-share profit was 10 cents below the average of 17 analyst estimates compiled by Bloomberg.

Exxon Mobil's 17 percent profit increase lagged behind the gains of 25 percent and 63 percent by Royal Dutch Shell Plc and BP Plc. Oil and gas production fell 5.6 percent, leaving Chief Executive Officer Rex Tillerson unable to take full advantage of record prices. U.S. refining profit at Exxon Mobil, the world's largest company by IND' ))">market value, plunged by more than half.

‘‘They've got one big tailwind and that's higher oil prices, but that's also a headwind because it means lower margins in their chemicals and refining businesses,'' said Stephen Leeb, who manages $175 million as president of Leeb Capital Management in New York. ‘‘Exxon is also having trouble raising production, and that's not a good sign.''

Revenue climbed 34 percent to $116.9 billion, Exxon Mobil said in a statement. That was almost $2.6 billion below analyst estimates.

$100 a Barrel

U.S. oil futures breached $100 a barrel for the first time in January and averaged $97.82, up 68 percent from the 2007 first quarter. The gain, the steepest since 2000, was offset by narrowing profit margins on refined fuels and contracts that give oil-rich governments a bigger share of output when prices rise.

Crude output from the company's wells dropped by 11 percent to 2.47 million barrels a day, led by declines in Africa and Europe. Gas production fell in the U.S., Canada, South America, Asia and the Middle East.

Refining profit slumped as the cost of oil rose faster than the 47 percent increase in wholesale gasoline prices. Net income at the company's U.S. refineries dropped almost $5 million a day. Exxon Mobil is the world's biggest refiner and pumps more oil than every member of OPEC except Saudi Arabia and Iran.

San Ramon, California-based Chevron Corp., the second- biggest U.S. oil company, is scheduled to report its first- quarter results tomorrow. Houston-based ConocoPhillips, No. 3 in the U.S., reported a 17 percent profit increase, to $4.14 billion, last week.

Stock Buybacks

Exxon Mobil spent $9.5 billion on stock buybacks, a 20 percent increase from the last three months of 2007. The company announced a 14 percent increase in its dividend yesterday.

Crude prices are rising at the fastest pace since the first three months of 2000. Prices set an all-time high at $119.93 last month.

Natural-gas futures traded 22 percent higher than a year earlier, averaging $8.74 per million British thermal units. Gas is the most widely used U.S. heating fuel and the No. 3 fuel for power generation, behind coal and nuclear plants.

Crude prices are expected to remain above $105 a barrel through 2016, New York futures contracts indicate. That's more than twice the minimum price that major oil companies need to continue raising exploration budgets, according to Lehman Brothers Holdings Inc. analyst James Crandell.

Spending Plans

Exxon Mobil, which traces its roots to the 1880s when kerosene began competing with whale oil as household lamp fuel, plans to boost spending on new wells and plant expansions by at least 20 percent this year to more than $25 billion, CEO Tillerson said during a March 5 presentation to investors and analysts in New York.

Tillerson, 56, is engaged in a $12 billion dispute with Venezuela over a government seizure of an oil field and is trying to fend off Russia's demand for control of gas from a $17 billion project in the northwest Pacific Ocean.

Descendants of company founder John D. Rockefeller want Exxon Mobil to spend more money on alternative fuels and bar the CEO from also serving as chairman of the board. Yesterday, family members urged fellow shareholders to support four resolutions on the environment and corporate governance at the company's May 28 annual meeting.

Exxon Mobil's price-to-book ratio, or share price divided by book value, is 62 percent above the average for its U.S.- based peer group, according to data compiled by Bloomberg. Exxon Mobil has a 29 percent return on capital employed, highest among the world's 10 largest oil companies by sales.

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