Friday, October 30, 2009

NEW YORK -- The world's biggest oil companies are reporting sharp declines in quarterly profit as the recession continues to weigh on consumer demand, driving down energy prices.

Exxon Mobil, the world's largest oil company by market value, said Thursday that its third-quarter profit slumped 68 percent, to $4.73 billion (98 cents per share). That's down from $14.8 billion ($2.85), in the same July-September period a year ago, the most lucrative quarter ever for the oil industry, when crude oil prices neared $150 a barrel.

Royal Dutch Shell, meanwhile, said Thursday that its third-quarter profit fell 62 percent, to $3.25 billion, while sales tumbled 43 percent. Shell, Europe's biggest oil company, said it would cut 5,000 jobs and that 15,000 employees must reapply for employment.

Exxon's refining business took an especially large hit from July to September, with profits dropping 89 percent, as gasoline and diesel prices fell. Shell, whose refining earnings declined 47 percent, said the plunge in demand will keep profit margins narrow in "the short and medium term" and a quick recovery in energy usage and prices is unlikely.

"I think it's well advertised that refining conditions going forward are not going to be as stellar as they were in the hallmark period between 2004 and 2007," said Robbert Van Batenburg, head of equity research at Louis Capital Markets in New York. "It's something that's going to be here to stay."

Oil futures in the period slid almost $50 a barrel from their year-earlier average, and natural gas hit a seven-year low. Crude oil has averaged $59 a barrel in New York this year, compared with $99.75 in 2008, according to Bloomberg.

The price of crude oil has more than doubled from its low of $33.98 per barrel in February, driven in large part by the falling U.S. dollar, which is used to buy and sell crude.

"If you look at the whole picture for all the big oils, the only thing that's really helped them is that the oil price has come off the floor," said John Parry, an analyst with IHS Herold in Norwalk, Conn. "You're still a long way from catching up to where the industry was back in '07 and '08."

Those rising prices -- which usually fatten profits at companies such as Exxon -- have come with a cost, however. The refining side of the business is getting hit hard because it must pay more for crude to make fuel, but consumer demand for fuel has not rebounded as strongly.

ConocoPhillips said this week it would shed $10 billion in assets and slash capital expenditures next year by 12 percent. ConocoPhillips, which reported a 71 percent drop in quarterly profit earlier this week, also may sell part of its exploration and production operations, pipelines and terminals in North America.

-- From news services