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The Baltimore Sun: Exxon profit falls 10%, despite record sales

Associated Press
November 2, 2007

Exxon Mobil Corp., the world’s biggest publicly traded oil company, said yesterday its profit fell 10 percent in the third quarter as higher crude prices failed to offset lower natural gas prices and refining and chemical margins.

The profit decline came even as Exxon Mobil set a U.S. record for quarterly revenue.

Exxon Mobil said net income declined to $9.41 billion, or $1.70 per share, in the third quarter, from $10.49 billion, or $1.77 per share, for the quarter last year.

Its profit in the third quarter of 2006 was the second-largest ever recorded by a publicly traded U.S. company.

Revenue rose to a record of $102.3 billion from $99.59 billion in the third quarter of 2006. The previous mark – also owned by Exxon Mobil – was $100.7 billion in the third quarter of 2005, according to Howard Silverblatt, senior index analyst at Standard & Poor’s.

On average, analysts expected the company to earn $1.75 per share in the third quarter on revenue of $112.97 billion.

Despite Exxon Mobil’s lower year-over-year profit, Henry H. Hubble, the company’s vice president for investor relations, said the firm’s fundamentals remain strong as it continues to aggressively explore and tap new sources of hydrocarbons.

He said the company has launched six major oil and gas projects since the start of the year, in regions such as the Middle East, Europe and Africa. During the quarter, Exxon Mobil also was the high bidder for Gulf of Mexico leases covering more than 70,000 acres.

The company spent $5.4 billion on capital and exploration projects in the third quarter, an 8 percent increase from 2006.

Volatile commodity prices and other factors hurt the bottom line in the most recent quarter.

Exxon Mobil, which produces 3 percent of the world’s oil, said earnings from its exploration and production arm fell about 3 percent – to $6.29 billion from $6.49 billion a year ago. The drop largely reflects lower natural gas prices and higher operating costs, which were offset somewhat by higher realized crude oil prices.

Like most of its competitors, Exxon Mobil said lower global refining and marketing margins hurt earnings. Profits at its refining and marketing unit were $2 billion in the third quarter, off 27 percent from the $2.74 billion it earned in the quarter last year.

Oil prices have surged in recent months, and crude futures have hit record levels, but lower refining margins, increased costs and other factors have hindered third-quarter earnings at some of the world’s major oil companies.

BP PLC, Europe’s second-largest oil company, posted a 29 percent drop in third-quarter profit last week, while ConocoPhillips, No. 3 among U.S. oil companies, said its quarterly earnings fell 5 percent.

Royal Dutch Shell PLC also said last week that its net profit rose 16 percent, but the world’s second largest oil firm warned that the underlying performance of its refining operations was weaker than it appeared.

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