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Exxon Rides High on Profit, Loses Ground on Output

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Exxon Rides High on Profit, Loses Ground on Output

Higher Prices Drive 
14% Earnings Rise; 
Shell Net Leaps 33%
By ANA CAMPOY and GUY CHAZAN
August 1, 2008; Page B1

Exxon Mobil Corp. posted a 14% rise in second-quarter net income, boosted by high oil prices, but results were tarnished by falling production figures that worried investors.

Exxon Mobil’s profit of $11.68 billion, or $2.22 a share, up from $10.26 billion, or $1.83 a share, a year earlier, wasn’t enough to distract investors from a 7.8% drop in its production of oil and natural gas. The earnings also missed Wall Street expectations of $2.52 a share, according to analysts surveyed by Thomson Reuters.

EXXON’S EARNINGS

 
Dollars in millions
Segment 2Q’08 2Q’07 Change
Exploration & Production $10,012 $5,953 68%
Refining & marketing $1,558 $3,393 -54%
Chemicals $687 $1,013 -32%

MORE

 

Revenue soared 40% to $138.07 billion, but analysts were expecting $144.39 billion.

Also on Thursday, Royal Dutch ShellPLC reported second-quarter profit jumped 33% to $11.56 billion, or $1.87 a share, from $8.67 billion, or $1.38 a share, a year earlier as high oil prices more than offset barrels lost from unrest in Nigeria and weaker refining conditions. Revenue rose 55% in the quarter to $131.4 billion from $84.9 billion a year earlier.

Shell’s total oil and natural-gas production was down 1% to 3.05 million barrels of oil equivalent a day, from an average of 3.09 million barrels of oil equivalent a day in the same period a year earlier. The numbers exclude Canada’s oil-sands production.

In 4 p.m. New York Stock Exchange composite trading Thursday, Exxon shares fell $3.95, or 4.7%, to $80.43, and Shell’s Class A American depositary shares fell $2.90, or 3.9%, to $70.79. (Marathon Oil Corp. may split into two. Please seerelated article.).

[Full Tank]

Major oil companies face mounting challenges to increasing their oil and natural-gas production as their existing fields mature and oil-producing countries become more restrictive about access to their oil. In the last week, BP PLC reported that its second-quarter production was flat with a year earlier, and ConocoPhillips said its quarterly production was down 8.4%.

Exxon’s production fell mainly due to expropriation of some of the company’s assets in Venezuela, a labor strike in Nigeria and lower entitlement volumes under production-sharing contracts, the company said. Excluding those factors, the company’s output was down about 3%.

“These results are much lower than expected and put a lot of pressure on the company’s management to do something,” Fadel Gheit, an analyst with Oppenheimer & Co., said of Exxon’s results. “They will either have to make an acquisition or to boost their share-buyback program.”

Exxon increased capital spending to $6.97 billion from $5.04 billion in the same period last year. The company has said its annual capital expenditures will be between $25 billion and $30 billion in the next few years.

Exxon says that in 2008 it has started up five major projects that will boost its production. Even so, in the second quarter increased production from projects in West Africa and the North Sea wasn’t enough to offset declines from mature fields and maintenance activities.

Shell said that its crude-oil production was down 6% in the latest quarter, while natural-gas production was up 6%. “Shell is increasingly becoming the global gas major,” said Citigroup analyst James Neale.

Also on Thursday, Shell unveiled the largest capital-investment target in its history: up to $36 billion in 2008.

Exxon’s quarterly net represented the highest three-month profit from recurring business posted by a publicly traded company and beat the previous record of $11.66 billion reported by the Irving, Texas, company in the fourth quarter of last year.

–Benoit Faucon and Isabel Ordonez contributed to this article.

Write to Ana Campoy at [email protected] and Guy Chazan at [email protected]

http://online.wsj.com/article/SB121749575639100347.html

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