By Steven Mufson
Washington Post Staff Writer
Saturday, February 2, 2008
Buoyed by soaring crude oil prices, Exxon Mobil announced yesterday that it set new records for U.S. quarterly and annual corporate profits in 2007, and Chevron, the nation's second-largest oil company, also reported big gains in earnings.
Exxon broke the record it previously had set for profits by a U.S. corporation, earning $40.6 billion last year. It earned $11.7 billion in the fourth quarter, or $2.13 a share, up 14 percent from the fourth quarter of 2006. Revenue for the quarter rose 30 percent, to $116.64 billion. Exxon's profit for the year came to $4.6 million an hour.
Chevron said its profit rose 29 percent, to $4.9 billion, or $2.32 a share. Chevron's quarterly revenue grew 29 percent, to $61.41 billion. Profits of the five biggest international oil companies have tripled since 2002.
Kenneth P. Cohen, Exxon Mobil's vice president for public affairs, said the earnings reflected the company's "long-term, disciplined approach" and investments made a decade ago when oil prices were low. With mounting exploration costs and increasingly remote oil prospects, Cohen said, the large revenues were needed to meet "the massive scale of the energy challenge before us."
But in Washington, the earnings were seen as outsized. Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, issued a statement saying, "Congratulations to ExxonMobil and Chevron -- for reminding Americans why they cringe every time they pull into a gas station and for reminding Washington why it needs to act swiftly to break our dependence on foreign oil and roll back unnecessary tax incentives for oil companies."
The announcement of record profits came on the same day the Organization of the Petroleum Exporting Countries was meeting in Vienna. The 13-member group, which produces about 40 percent of the world's petroleum, decided to leave its output unchanged despite crude oil prices that continue to hover around $90 a barrel, about 35 percent higher than they were a year ago.
During his visit to Saudi Arabia last month, President Bush urged OPEC to boost production to ease oil prices, but yesterday the group issued a statement saying that current markets, "coupled with the projected economic slow-down," meant that "current OPEC production is sufficient to meet expected demand for the first quarter of the year."
If anything, the group suggested that it might trim production in the coming weeks. Citing "significant uncertainties associated with the projected downturn in the global economy," it said there was a need for "vigilant attention" and that the organization would "take every measure deemed necessary to keep the market stable."
The prospect of stable oil prices at current levels will translate into more big profits for the major international oil companies. Though they are net buyers of crude oil to supply their refineries and retail gasoline stations, the companies also have large amounts of their own crude oil production pegged to world prices.
In the last three months of 2007, Exxon Mobil produced 2.5 million barrels a day of crude oil and natural gas liquids. The figure was down almost 1 percent from the year before because Exxon's operation in Venezuela was nationalized and because, as prices rise, some exporting countries cut Exxon's share of production.
But the drop in volume was more than offset by higher prices. The price of crude oil was $29 a barrel higher than the year before, said Henry Hubble, Exxon Mobil's vice president of investor relations. Even after paying taxes and expenses, Exxon earned $20.97 a barrel in profits on its production, Hubble said.
Exxon boosted capital spending last year to $20.9 billion, up 5 percent from 2006. About three-quarters of that went for oil and gas exploration, with much of the rest for refinery projects. That was still outstripped by the amount of money the company spent to repurchase its own shares. In 2007, Exxon Mobil bought 386 million shares of its common stock at a cost of $31.8 billion. About a tenth of that went into company pension and benefit plans; the rest went toward reducing the number of shares outstanding.