Exxon Mobil reported a first-quarter profit Thursday of $10.7 billion, a 69 percent jump from the year before as higher crude oil prices, fatter U.S. oil refining and marketing margins, and a revival in global demand for petrochemicals boosted earnings.
Royal Dutch Shell also reported higher profits. Excluding one-time items and inventory gains, Shell earned $6.3 billion, up 30 percent from the first quarter of 2010 even as production dropped 3 percent.
The earnings — one of the half-dozen best quarterly results ever for Exxon Mobil, but not a record — poured fuel on the political fires in Washington as lawmakers and the White House condemned the company’s tax breaks and complained about high oil prices.
Rep. Edward J. Markey (D-Mass.), a senior member of the House Energy and Commerce Committee, said the profits show that the oil industry doesn’t need long-standing tax incentives for exploration and production.
“What is good for the biggest oil companies isn’t always what’s good for American taxpayers,” he said in a statement. “The American people are getting tipped upside down at the pump, then asked to fork over whatever change they have left to subsidize these oil behemoths.”
Exxon Mobil fired back, arguing that high prices aren’t its fault and were the result of higher global oil demand, political instability in oil producing regions and the weak U.S. dollar. The company also asserted that last year it paid $1.6 billion in U.S. income taxes and $8.2 billion in other taxes.
In response to questions, company officials said they were counting $6.2 billion in gasoline sales taxes and $2 billion in local property taxes and other duties.
“We understand that it’s simply too irresistible for many politicians in times of high oil prices and high earnings; they feel they have to demonize our industry,” said Exxon Mobil vice president for public affairs, Kenneth Cohen.
From a business point of view, a lot of things went right in the first quarter for the world’s biggest oil company.
Higher crude oil prices were the overriding reason for the increase in profits. Exxon Mobil produces 2.4 million barrels a day of crude oil and natural gas liquids, and the average price Exxon received for every barrel was $25 higher than the year before, David Rosenthal, vice president of investor relations, said in a conference call with analysts.
Exxon Mobil reported that its combined production of oil and natural gas was up 10 percent overall from the first quarter of 2010, thanks to a big increase in output in Qatar and to tapping shale gas assets it acquired last year when it bought the independent exploration firm XTO Energy. But the increase resulted from higher natural gas volumes while oil production dropped, disappointing investors because crude oil prices have been stronger than natural gas. Midway through the trading day, Exxon’s stock had fallen about 1 percent.
Iraq contributed to the company’s oil output. Exxon Mobil is working to increase lackluster production from one of Iraq’s biggest fields, the West Qurna field. Rosenthal said the company had hit its initial target, boosting production there by 10 percent to 320,000 barrels a day. There are three rigs working there now.
The oil giant also said that it has returned to the Gulf of Mexico and that it is drilling the Hadrian North exploration well there. Drilling activities in the gulf had been delayed after the massive BP oil spill last year.
Exxon Mobil also said that its refineries and gasoline stations had more than kept pace with rising crude oil costs. In the United States, those so-called “downstream” earned $694 million, compared with a $60 million loss in the first quarter of 2010.
During the first quarter, Exxon Mobil continued its big share buyback program, spending $5.7 billion to buy back its shares. It had $7.8 billion in capital expenditures, up 14 percent from the first quarter last year.
The quarter wasn’t a record. Exxon Mobil had three quarters that were more profitable in 2008, when crude oil prices peaked at $147 a barrel. The fourth quarters of 2007 and 2005 were also more profitable.
Still, Exxon Mobil’s first-quarter 2011 profits — an average of $119 million a day — could reinforce a call by President Obama for Congress to do away with $4 billion of oil subsidies.
Cohen said “these are legitimate tax provisions to keep U.S. industry internationally competitive.” He added, “We have seen the predictable political positioning but no action to actually help bring down energy prices.”