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Exxon Mobil Posts 2nd-Highest Profit Ever
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The production side of Exxon Mobil was the driving force behind its earnings. That was magnified by the company's ability to boost its production of oil and natural gas by 7 percent over the third quarter of 2005, with increases in West Africa, Abu Dhabi and Qatar offsetting declines in aging fields in North America and Europe. Production that was damaged last year by hurricanes also recovered.
Other major oil companies -- including three of the other five biggest -- have struggled to maintain production levels. BP PLC's earnings were hurt by pipeline leaks in Alaska and the failure to complete a major production platform in the Gulf of Mexico on schedule. ConocoPhillips had maintenance issues in the North Sea and is a partner in BP's Prudhoe Bay field in Alaska. Royal Dutch Shell has been unable to produce from its fields in the Niger River delta of Nigeria because of attacks by insurgents.
While Exxon Mobil said it boosted capital spending by 15 percent to $5.06 billion, it spent even more -- $7 billion -- buying back shares. As a result, the company's earnings per share rose more sharply than earnings overall. The company earned $1.77 a share for the quarter just ended, up 12 percent from $1.58 in the third quarter of 2005. Excluding one-time gains in the third quarter of 2005, third-quarter profit was up 26 percent.
"They are worried that oil prices will collapse," Gheit said. If they do, he added, Exxon Mobil "wants to be ready with enough dry powder to bulldoze anybody, to buy assets on the cheap or enter projects because they're the preferred partner."
Not all of the major firms have such strong financial positions. ConocoPhillips is still working to reduce $28 billion in debt left from its acquisition of Burlington Resources Inc., Gheit noted.
Exxon Mobil shares hit a record high yesterday, closing at $71.62 a share, up 61 cents. Royal Dutch Shell shares closed at $69.46 a share on the New York Stock Exchange, up $1.82.
Oil analysts warned that the big oil companies' prospects hinged on future prices. "The bad news is, I think we have peaked here," said Gheit, who expects lower crude oil prices. "Their earnings are likely to go down. The question is not if, but by how much." He estimates that every $1-a-barrel drop in crude oil prices will cost Exxon Mobil $500 million, or 9 cents a share.
Asked during a conference call with journalists what he would say to the ordinary person at the gasoline pump, Exxon Mobil Vice President Cohen said: "The price at the pump is a function of supply and demand. We're doing everything we can to bring more supplies to market. And we'll take the price the market gives us."
