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Bloomberg: Exxon Profit Rises as Oil Surges Toward $100 a Barrel (Update3)

By Joe Carroll

Feb. 1 (Bloomberg) — Exxon Mobil Corp., the world’s largest oil company, said fourth-quarter profit rose 14 percent amid the biggest increase in crude prices in the 148-year history of the petroleum industry.

Net income climbed to a record $11.7 billion, or $2.13 a share, from $10.3 billion, or $1.76, a year earlier, the Irving, Texas-based company said today in a statement. Per-share profit was 16 cents higher than the average of 16 analyst estimates compiled by Bloomberg.

Oil had its biggest yearly increase by dollar amount before trading last month above $100 a barrel for the first time. A 50 percent gain in average U.S. futures prices in the fourth quarter made up for contracts with oil-rich nations that cut producers’ share of output when crude rallies.

“As long as oil is $90-plus a barrel, you’re going to see a lot of money rolling in,” said Todd Petzel, who advises pension funds and endowments with $5 billion under management as chief investment officer at Offit Capital Advisors in New York. “Growth in demand globally is expected to rise by 2 million more barrels a day next year, so while everyone is working hard to increase supplies, they’re being outpaced by demand.”

Increases in worldwide demand for oil-derived fuels used to run trucks, trains, airplanes and automobiles accelerated to 1.8 percent in the fourth quarter from 1.2 percent in the preceding three months, according to the International Energy Agency.

U.S. Record

Profit for all of 2007 was $40.6 billion, topping Exxon Mobil’s own record for full-year earnings by a U.S. company. Fourth-quarter revenue rose 30 percent to $116.6 billion.

Exxon Mobil climbed 9 cents to $86.49 at 9:37 a.m. in New York Stock Exchange composite trading. The stock, which has 10 buy and 11 hold ratings from analysts, rose 22 percent in 2007, outperforming Exxon Mobil’s biggest rivals, Europe’s Royal Dutch Shell Plc and BP Plc.

San Ramon, California-based Chevron Corp., the second- biggest U.S. oil company, today said its fourth-quarter profit rose 29 percent to $4.88 billion, or $2.32 a share, exceeding analyst estimates.

Houston-based ConocoPhillips last week reported a 37 percent jump in fourth-quarter profit to $4.37 billion, a company record. Shell, the world’s second-largest oil company, yesterday said its net income rose 60 percent to $8.47 billion.

$35 Gain

Oil rose by $35 a barrel in 2007. Prices topped $99 a barrel for the first time during the fourth quarter.

“With the price of oil up as much as it was, it more than offset any declines in production,” said Douglas Ober, whose biggest holding is Exxon Mobil among the $1.8 billion he helps manage at Adams Express Co. in Baltimore. “If we see more results like this, I think we’re going to see a stirring up in Congress among people who feel these guys are getting away with murder.”

Natural gas rose 1.9 percent during the quarter to an average of $7.39 per million British thermal units, based on benchmark futures contracts traded in New York. Gas is the most widely used U.S. furnace fuel and the biggest source of electricity in the world’s largest economy after coal and nuclear plants.

Crude prices are expected to remain above $85 a barrel through 2016, New York futures contracts indicate. That’s about $35 above the minimum price that major oil companies need to continue expanding drilling programs, according to Lehman Brothers Holdings Inc. analyst James Crandell.

Spending Plans

Exxon Mobil, which traces its roots to the 1880s when kerosene began competing with whale oil as household lamp fuel, probably will boost spending on exploration and new wells by 7.5 percent this year to $16.6 billion, Crandell said in a December report.

Chief Executive Officer Rex Tillerson is scheduled to disclose the company’s 2008 spending plan in his annual presentation to Wall Street analysts in New York on March 5.

Tillerson, who just finished his second year as CEO, has expanded Exxon Mobil’s search for new reserves to Madagascar, New Zealand and the Arctic as decades-old fields in North America and the North Sea near exhaustion.

Exxon Mobil’s price-to-book ratio, or share price divided by book value, is 71 percent above the average for its U.S.- based peer group, according to data compiled by Bloomberg. Exxon Mobil has a 28 percent return on capital employed, highest among the world’s 10 largest oil companies by sales.

Exxon Mobil began pumping crude in October at the Marimba North project off the Angolan coast.

In November, the company won the right to drill wells in Libya’s offshore Sirte Basin, which holds 80 percent of the country’s 41.5 billion barrels of reserves. Exxon Mobil also began work on a new chemicals plant on Singapore’s Jurong Island that month.

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

Last Updated: February 1, 2008 09:38 EST

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