Graph, OIL EARNINGS, The Washington Post
Mobil Corp., owner of the nation's second-largest petroleum company, reported yesterday that profits during 1979 rose 78 percent from the previous year to $2.01 billion -- an amount equal' to 4.2 percent of revenues, which totaled $48 billion.
The return on average stockholders' equity (stock investment) in the firm increased to 20.8 percent from 13 percent in 1978 -- the highest level since 17.3 percent in 1974.
Fourth-quarter profits increased 72 percent to $541 million.
Profits from overseas energy operations were a major factor in Mobil's gains last year, with worldwide earnings of 4.4 cents a gallon of gasoline sold compared with 3.3 cents a gallon in this country, as crude oil prices doubled and retail prices increased sharply.
Overall foreign energy earnings rose 132 percent to $1.36 billion and accounted for 81 percent of the year-to-year worldwide energy profits gains, Mobil said.
The New York-based company also said that capital spending and exploration outlays last year were $3.8 billion -- almost double the reported profits. Energy spending totaled $3.2 billlion compared with $1.6 billion the previous year, with expenditures in the U.S. accounting for 65 percent, or some $2 billion, of the total outlays.
Mobil said 92 percent of its spending in this country went into energy resources exploration and production. At the same time, Mobil revealed that profits of its big Montgomery Ward retail business fell sharply in 1979 to $52 million from $105 million in 1978 despite an increase in sales of 5 percent cent to $5.25 billion. The higher sales were more than offset by a $67 million increase in interest costs, Mobil said.
Except for the decline in Montgomery Ward profitability during a year when inflation generally cut deep into many retailer's profits, Mobil had a banner year in virtually every respect.
In addition to its oil and general merchandise retailing businesses, Mobil is engaged in chemical manufacturing and owns Container Corp. of American, a packaging manufacturer. Mobil also has real estate operations, including the undeveloped tracts of Reston in Northern Virginia. The company is moving its U.S. oil refining and marketing headquarters from Manhattan to Fairfax County starting next summer.
Mobil's earnings for 1979 were equal to $9.48 a share compared with $5.34 in 1978, when net income was $1.13 billion on on revenues of $34.3 billion. In the fourth quarter alone, Mobile's sales were $14.5 billion and profits were $2.55 a share vs. $1.49. In the 1978 quarter, Mobil earned $315 million on sales of $10.7 billion.
Most of the major petroleum companies are expected to announce 1979 profit results this week, and Wall Street analysts are forecasting strong gains for most firms.
In general, the oil companies are beneficiaries of rising prices and resulting asset values and production increases in the North Sea off Britain, Canada and Alaska's North Slope. Worldwide crude oil supply and demand balances are expected to remain tight, with some international productiuon -- particularly in Iran -- curtailed.
Oil-producing nations boosted crude oil prices about 100 percent in the past year, and Americana companies have been passing on some of these increases in higher retail prices for heating oil and gasoline. Large oil firms boosted prices again this week, and Shell Oil Co. President John Bookout has forecast $2-a-gallon gasoline in the United States by late this year or in 1981.
In addition to Mobile, other oil firms reporting 1979 results yesterday included:
Union Oil Co., the 14th largest, profits for the year of $500.6 million ($5.76 a share) compared with $382.3 millions ($4.32) as revenues rose 26 percent to $7.7 billion.
Getty Oil Co., No. 20, profits of $604.4 million ($7.34) vs. $330 million ($4) as sales rose 36 percent to $5.12 billion.
Murphy Oil Co., No. 24, profits of $8.1 million ($1.30) vs. $3.1 million (50 cents) as revenues declined to $129.5 million from $164.4 million -- reflecting a planned reduction in marketing of refined products.
With profit increase of such magnitude as Congress moves toward approving a new, $227.3 billion tax on "windfall" oil profits in the wake of phasing out domestic oil-price controls, oil companies have been on the defensive about their earnings reports.
Earlier this week, for examaple, Mobil sent copies of a 40-page "Profits in Perspective" discussion of oil earnings to newspaper reporters around the country. Exxon Corp., which plans to announce its earnings at a news conference on Friday, took $500.000 out of its normal advertising budget and used the funds to buy full-page or half-page advertisements in 328 newspapers on Monday to announce $6.6 billion of energy spending this year.
The Mobil preview for reporters, from its vice president for public affairs, Herbert Schmertz, noted that many media corporations and other businesses have experience better returns on shareholders' equity in recent years than the oil industry. For the 12 months ended Sept. 30, Mobil's return was 19.2 percent compared with 31.6 percent for Hilton Hotels, 31 percent for MGM, 27.9 percent for Washington Post Co., 26.2 percent for Kellogg and 24.6 percent for American Broadcasting Cos. More than 28 percent of 900 firms in a Business Week survey had higher rates of return than Mobil, Schmertz noted.
In yesterday's statement, Mobil emphasized such figures as well as exploration spending. The company provided percentage gains in profits and revenues in a subsequent section called 'traditional comparisions." A number of business executives have sited that year-to-year profit comparisons often distort a company's performance, although most corporations still emphasize such data.