Friday, July 28, 2006

Exxon Mobil profit tops $10 billion

Exxon Mobil profit tops $10 billion
By Deepa Babington / Reuters

NEW YORK - Exxon Mobil Corp., the world's largest public oil company, on Thursday reported quarterly profit surged 35 percent to more than $10 billion, driven by yet another quarter of sharply higher oil prices.

It was the second-largest quarterly operating profit ever posted by a U.S. company, just shy of the Texas behemoth's own record fourth quarter profit reported in January.

The results sailed past Wall Street forecasts and sent its shares to an all-time high, but triggered a fresh bout of outrage from U.S. lawmakers and consumer groups angry at Big Oil's handsome profits in the midst of high gasoline prices.

"While American families get tipped upside down and have their savings shaken out of their pockets at the gas pump, the Bush-Cheney team devises even more ways to line Big Oil's pockets," Rep. Ed Markey, a Massachusetts Democrat, said in a statement on Exxon's profits. He is a member of the U.S. House of Representatives Energy and Commerce Committee.

Exxon expects the attacks from politicians to continue as U.S. mid-term elections come up later in the year, Ken Cohen, its public affairs vice president told a conference call.

The oil industry has been waging an aggressive public relations campaign against the backlash, and ran full page advertisements playing down the size of the profits in newspapers like the New York Times on Thursday.

In a surprise move, Exxon -- notorious for rarely changing its plans no matter how high oil prices are -- boosted its capital spending forecast for the year to $20 billion, citing fresh exploration and production opportunities.

The company, the world's largest by market capitalization, also said it planned to increase its already hefty stock buyback program to $7 billion in the third quarter to make use of its ballooning hoard of cash.

Soaring prices, stronger refining margins and higher oil and gas production all combined to boost Exxon's second-quarter earnings to $10.36 billion, or $1.72 a share.

That is up from $7.64 billion, or $1.20 a share a year earlier, and above the average Wall Street forecast of $1.64 a share, according to Reuters Estimates.

Revenue jumped 12 percent to $99.03 billion -- bigger than the economies of many small countries -- from $88.57 billion a year earlier but below the Reuters Estimates' forecast of $104.26 billion.


Exxon, like its peers, has enjoyed another in a string of bumper quarters as crude oil prices hovered at historic highs. Oil prices, on a steady rise in recent years because of growing Asian demand and fears of supply disruptions, hit a record high of $78.40 a barrel two weeks ago on anxiety over Middle East supplies.

"They're just benefiting from a strong commodity cycle and doing a very good job of it," said Lysle Brinker, analyst with energy research firm John S. Herold. "But they don't operate in a vacuum and they realize that. They're going to get tons of spears and blow darts from political and consumer groups."

Exxon is the latest oil major to report blockbuster profits this quarter, coming on the heels of Royal Dutch Shell Plc's (RDSa.L) 36 percent profit rise earlier on Thursday, and a 65 percent profit surge reported by No. 3 U.S. oil company ConocoPhillips on Wednesday.

Exxon's oil and gas production jumped 6 percent on higher volumes in West Africa and Qatar, partly offset by maturing fields. Excluding divestments and the impact of high oil prices on production-sharing contracts, total output grew 9 percent.

Analysts said that healthy spurt in production accounted for much of the company's stronger than expected profit.

"The rate of Exxon's upstream production growth had arguably been a cause for concern among some investors," J.P. Morgan analysts said in a research note. "However, today's results should give investors more confidence in Exxon's ability to grow volumes.

The company's new capital spending forecast of $20 billion this year is up from a previous estimate of roughly $19 billion. Exxon said less than a third of the hike was due to higher costs sweeping across the industry and that the bulk of the rise was due to increased drilling in places like Nigeria.

Exxon shares rose less than 1 percent, or 51 cents, to $67.06 on the New York Stock Exchange in afternoon trade after touching an all-time high of $67.65 earlier in the day.