Oil producers' profits soar amid higher prices
Thursday, October 28, 2010; 10:48 PM
NEW YORK - The major oil companies racked up significant gains in net income for the third quarter by charging more for oil than they could a year ago and making money refining it.
The companies also earned more from producing natural gas, but a couple have signaled that the current low price for gas could force a change in strategy.
Both oil and natural gas increased in price when compared with the average price from last year, oil up by about 12 percent and gas by 23 percent. As a result, Exxon Mobil Corp. on Thursday reported 55 percent higher profits for the third quarter, while Wednesday, ConocoPhillips reported that its profits had more than doubled.
The ability to sell crude oil for more money helped Royal Dutch Shell overcome a billion-dollar asset write-off. It also offset expenses and a drop in Gulf of Mexico production tied to the government's monthslong ban on deepwater drilling after BP's giant oil spill. The moratorium was lifted two weeks ago, but tough new regulations should slow down Gulf Coast exploration.
Exxon, Shell, Conoco and others such as Occidental Petroleum have joined the rush to develop U.S. shale gas deposits, helping pump up domestic supplies well above average and beyond what the country needs for its power plants and home heaters.
While supplies remain ample, U.S. natural gas demand will be flat next year, according to the Energy Information Administration. That's good news for consumers, who should see prices continue to slide this year. But oil executives, who worry about declining profits, have been looking for ways to soften the blow.
Shell increased capital spending 77 percent in its upstream operation to $9.6 billion. Exxon increased capital spending 55 percent to $7.6 billion in the third quarter. Conoco kept its capital spending program flat at $2 billion for its exploration and production arm.
Exxon earned $7.35 billion in the third quarter as revenue rose 15.8 percent to $95.3 billion. Shell's quarterly profits climbed by 6.5 percent, to $3.46 billion.