Breaking Own Record, Exxon Sets Highest U.S. Profit Ever
Second-Quarter Earnings Total $11.68 Billion
Friday, August 1, 2008; Page D01
As political heat rises over high oil prices, Exxon Mobil yesterday announced the biggest quarterly profit of any corporation in U.S. history, breaking its own previous record with $11.68 billion in earnings during the second quarter.
The company's revenue surged 40 percent, to $138.07 billion for the quarter. If it were a country, the company would have the 18th-largest economy in the world.
The engine behind those results was Exxon Mobil's oil and gas production. Exxon Mobil produces about 2.4 million barrels a day of oil and natural gas liquids worldwide. It sold that output for an average of $119.28 a barrel, more than $50 a barrel higher than the price a year earlier, essentially riding the wave of world oil prices that has boosted prices at the pumps.
Profit from oil and gas production accounted for the overwhelming majority of the company's earnings, which rose 14 percent compared with the second quarter of 2007. And high crude prices outweighed an 8 percent slide in Exxon Mobil's worldwide output of oil and natural gas as well as a steep drop in net income from the company's other businesses -- oil refining, fuel marketing and chemical manufacturing, which all rely on oil and natural gas as raw materials.
The outsized profits at Exxon Mobil and other big oil companies reporting earnings this week sparked a barrage of criticism from lawmakers, consumer groups and environmental organizations, who called for measures to either rein in tax breaks for big oil firms or prod the companies to invest more in oil exploration and the development of alternative energy. Friends of the Earth called for an end to $33 billion in tax breaks and other "handouts" that it said the industry would receive over the next five years.
Much of the criticism focused on the fact that Exxon Mobil's spending to buy back shares of its own stock exceeded that for capital projects, such as oil and gas exploration. The company devoted a record $7 billion to capital in the second quarter, a 38 percent increase, while it spent $8 billion on share purchases.
Yesterday, the company said it was spending all it could to bring new supplies of oil and gas to a world thirsty for petroleum products. "We continue to invest at record levels to bring new supplies to the market," Henry Hubble, Exxon's vice president of investor relations, told analysts in a conference call.
Later, Kenneth P. Cohen, Exxon's vice president for public affairs, said the company would like to "do more" and urged Congress to open up areas off U.S. shores to oil and gas drilling. "Our Congress needs to give us access to areas currently off-limits to the industry," he said. "The best way to bring downward pressure on prices is by bringing on new supply while doing everything we can to use energy efficiently."
Leading Democrats, who have opposed opening up areas off-limits to drilling, reacted sharply.
"What's shocking is that Big Oil is plowing these profits into stock buybacks instead of increasing production or investing in alternative energy," said Sen. Charles E. Schumer (D-N.Y.). "Why do they need more land to drill on when all their money is going into buying up stock?"
Buying back shares, a common practice among U.S. corporations, bolsters a company's stock price and boosts the earnings per share. Despite the big buyback program, Exxon's stock is down 14 percent this year; without the buybacks, Exxon's stock would probably have fallen further. The company's stock is widely held by mutual funds, stock index funds and pension funds. Exxon Mobil chief executive Rex W. Tillerson owns $74.7 million worth.
Exxon is expected to pay about $8.4 billion in dividends this year, but it says buying back stock is another way to return money to shareholders. The company can, in theory, reissue the shares in the future if it needs to raise money, but with $39 billion in cash on hand, Exxon has no need to do that.