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Bloomberg: Exxon 1st-Quarter Profit Rises 10% on Refining Gains (Update9)

By Joe Carroll

April 26 (Bloomberg) — Exxon Mobil Corp., the world’s biggest oil company, said earnings climbed 10 percent to a first-quarter record after rising gasoline and diesel prices increased refining profit.

Net income rose to $9.28 billion, or $1.62 a share, from $8.4 billion, or $1.37, a year earlier, the Irving, Texas-based company said today in a statement. Per-share profit was 8 cents higher than the average of seven analyst estimates compiled by Bloomberg. Revenue fell 2 percent to $87.2 billion.

Refining profit jumped 50 percent as the company boosted fuel output at its 45 plants amid growing demand and breakdowns that held back competing producers. U.S. gasoline prices may climb to a record this year, especially if labor disputes in Europe cripple fuel shipments to the East Coast, said Paul Sankey, an analyst at Deutsche Bank AG in New York.

“Gasoline and diesel demand are up, and we’re seeing that at the pump,” said Barry James, who holds 221,000 Exxon Mobil shares among $2 billion in assets under management at James Investment Research in Xenia, Ohio. “It’s the feedstock of profits.”

U.S. retail gasoline prices rose 1.5 cents a gallon from a year earlier while crude prices fell, reducing production costs for refiners. Exxon Mobil, which traces its roots to the 1880s, when kerosene competed with whale oil as household lamp fuel, refines twice as much crude as it pumps from wells.

Fuel Demand Climbs

Gasoline demand in the U.S., the world’s biggest market for the fuel, rose 1.7 percent during the first quarter, more than twice the rate of growth a year earlier, Energy Department data showed. The average U.S. profit margin on refining jumped 37 percent to $12.43 per barrel of oil processed.

Worldwide demand for refined fuels including gasoline and diesel is expected to rise 1.8 percent this year, according to the International Energy Agency in Paris.

The Exxon Mobil report comes a day after Houston-based ConocoPhillips, the third-biggest U.S. oil company, said its first-quarter profit rose 7.7 percent to $3.55 billion. The U.K.’s BP Plc on April 24 reported a 17 percent decline in net income, to $4.66 billion, as oil and gas production fell for a seventh straight quarter.

Chevron Corp., based in San Ramon, California, is scheduled to release its results tomorrow, and The Hague-based Royal Dutch Shell Plc plans to report earnings on May 3.

Tax Proposed

Rising gasoline prices and high oil-industry profits spurred eight Democrats in the U.S. Senate to introduce legislation today that would impose a 50 percent tax on profits when oil prices top $50 a barrel. Kenneth Cohen, Exxon Mobil’s vice president for public affairs, said the measure would hurt the economy, lower domestic oil output and inflate pump prices.

“It’s been tried before in this country and it didn’t work,” Cohen said on a conference call with reporters.

Exxon Mobil said its refining profit surged to $1.91 billion as worldwide gasoline sales rose 4.5 percent to 120 million gallons a day. Chemicals earnings climbed 30 percent to $1.24 billion.

Shares of Exxon Mobil rose 63 cents to $80.55 in New York Stock Exchange composite trading. The stock, which has 10 buy and 13 hold ratings from analysts, has climbed 28 percent in the past year, outperforming shares of Shell and BP, the world’s second- and third-biggest oil companies.

$4 Gasoline

Retail gasoline prices in the U.S. rose 33 percent in the past three months to a nationwide average of $2.869 a gallon, according to the Energy Department. Prices haven’t risen that fast since Hurricanes Katrina and Rita slammed into refineries along the Gulf Coast and gasoline surged to an all-time high of $3.069 a gallon.

Deutsche Bank’s Sankey said $4-a-gallon gasoline “is not out of the question” this year if U.S. plants continue to malfunction and European refinery workers strike.

Exxon Mobil’s first-quarter profit from oil and gas sales fell 5.4 percent to $6.04 billion. The company’s average oil price in markets outside the U.S. dropped 3 percent to an average of $55.31 a barrel.

U.S. natural-gas sales yielded the company an average price of $6.70 per thousand cubic feet, 18 percent lower than a year earlier, when output from the Gulf of Mexico was still hobbled by the most destructive Atlantic hurricane season in history.

Gas Production Falls

Oil and gas production fell 2.7 percent to the equivalent of 4.44 million barrels of crude a day, led by declines in gas output from wells in North America and Europe, sources of two- thirds of the company’s gas.

Chief Executive Officer Rex Tillerson, 55, increased oil production by 1.8 percent to 2.747 million barrels a day with new wells in Abu Dhabi, Angola, Nigeria, Russia and Azerbaijan. The company plans to drill two exploratory wells later this year in the Gulf of Mexico’s deepwater Lower Tertiary basin, which may hold 3 billion to 15 billion barrels of crude.

Exxon Mobil pumps more oil than every member of the Organization of Petroleum Exporting Countries except Saudi Arabia and Iran. The company’s annual sales exceed the gross domestic products of most of the world’s nations, including Norway, Poland and Argentina.

$34.6 Billion in Cash

Cash holdings at Exxon Mobil swelled to $34.6 billion at the end of the quarter, almost four times total debt. The company spent $7 billion on share buybacks and distributed $1.8 billion in dividends during the quarter.

Exxon Mobil has been more successful than rivals at keeping a lid on cost increases for rigs, steel pipe and drilling crews, which have squeezed profits for other oil companies.

The company probably spent $17.74 per barrel of oil pumped from January through March, a 5 percent increase from a year earlier, William Featherston, an analyst at UBS Securities LLC in New York, said in an April 19 note to clients. That compares to a 9 percent increase for Chevron and an 18 percent jump for ConocoPhillips, the analyst said.

To contact the reporter on this story: Joe Carroll in Houston at [email protected] .

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