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The Guardian: Exxon Mobil profits hit by refining margins

Terry Macalister
Friday November 2, 2007

Investors in ExxonMobil, the world’s biggest quoted oil group, have been rewarded with more than $50bn (£25bn) of cash handouts over an 18-month period.

The figures were revealed yesterday as the US company announced a 10% drop in third-quarter profits at a time when crude prices hit a record high.

Exxon revealed in its “highlights” that it had paid out $26.7bn to shareholders through dividends and share buy-backs in the first nine months of the year, and $23.8bn in the same period of 2006.

The Texas-based group blamed lower gas prices and higher costs for the decline in its third-quarter profits, which followed a long period when it ran up the highest profits in global corporate history.

Shares in the group slumped almost 3% as Exxon announced net income of $9.41bn (£4.52bn), down from the $10.49bn for the same period last year – despite stronger crude prices which yesterday hit a new high of $96 a barrel.

Earnings from exploration and production fell slightly, down $194m to $6.29bn, “reflecting lower natural-gas realisations and higher operating expenses, mostly offset by higher crude-oil realisations,” the company said. Downstream earnings from refining and production activities were down even more heavily, losing $737m, to $2bn.

The downstream profits were forced down by lower refining and fuels marketing margins, which have also damaged the earnings performance of rivals such as BP and Shell.

Refining margins crashed as the summer driving season ended, by as much as 90% from record highs reached in May. This followed a surge in oil prices, and gasoline prices did not keep up with the price increases.

“There’s a real bloodbath in refining margins right now and that will largely offset the higher upstream earnings,” said Lysle Brinker, analyst at John S Herold.

On an oil-equivalent basis, Exxon’s total production was down by more than 2% in the quarter. The company saw a sharp drop in production in Europe and Africa, which was partly offset by increased output in Middle East and Russia.

Operating expenses rose, because the cost of recovering oil and gas from newly tapped reserves is greater than from more mature fields, while the massive demand for rigs, platforms and manpower has helped service companies demand ever-higher prices for their help.

Oil companies have recently warned that the retail price of petrol has not kept pace with the rising price of crude oil.

Analysts had forecast a more robust performance from Exxon, expecting the company to benefit from rising demand for oil.

The price of a barrel of US light crude rose to more than $80 during the quarter, partly driven by China and India’s need for fuel.,,2203857,00.html and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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