ExxonMobil earns $58b, highest ever for any company

New York Times, Straits Times 4 Feb 08;

NEW YORK - BY ANY measure, ExxonMobil's performance last year was a blowout.

It reported last Friday that it had beat its own record for the highest profits ever recorded by any company, with net income rising 3 per cent, to US$40.6 billion (S$57.5 billion), thanks to surging oil prices.

Its sales of more than US$404 billion exceeded the gross domestic product of 120 countries. It totted up profits at a pace of more than US$1,287 a second.

It also had its most profitable quarter ever, as net income rose 14 per cent, to US$11.7 billion, or US$2.13 a share.

Exxon beat analysts' expectations of US$1.95 a share, after missing targets in the earlier two quarters.

Like most oil companies, Exxon benefited from a near-doubling in oil prices as well as higher demand for petrol last year. Crude oil went from around US$50 a barrel to almost US$100.

'Exxon sets the gold standard for the industry,' said Mr Fadel Gheit, an analyst at Oppenheimer & Co.

Oil companies have all reported strong profits.

Chevron said last Friday that its profits had risen 9 per cent last year to US$18.7 billion. Royal Dutch Shell last Thursday said its net income had risen 23 per cent to US$31 billion.

Not surprisingly, there was a swift backlash against the industry.

One advocacy group, The Foundation for Taxpayer and Consumer Rights, called the profits 'unjustifiable'. Some politicians said Congress should rescind the tax breaks awarded two years ago to encourage oil companies to raise investments in the United States and domestic production.

'Congratulations to ExxonMobil and Chevron - for reminding Americans why they cringe every time they pull into a gas station,' said Senator Charles Schumer.

Exxon vigorously defended itself against claims that it was responsible for the rise in oil prices. Anticipating a backlash, it had run advertisements to highlight the size of the investments it makes to find and develop energy resources - more than US$80 billion between 2002 and 2006, with an additional US$20 billion planned for this year.

It said that over the next two decades, energy demand should grow by 40 per cent.

'Our earnings reflect the size of our business,' vice- president for public affairs Kenneth Cohen told journalists. 'We hope people will focus on the reality of the challenge we face.'

Given gloomy prospects for the US economy, some analysts said oil company profits could soon peak.

Oil prices could fall this year if a slowdown dampens energy consumption in the US, the world's biggest oil consumer.

Such concerns have pushed oil futures prices down about 10 per cent since the start of the year. Oil fell 3 per cent to US$88.96 a barrel last Friday on the New York Mercantile Exchange. Exxon shares fell a half a per cent, to US$85.95.

Some analysts said high oil prices, and the record profits they create, were masking growing difficulties at many of the major Western oil giants.

Faced with resurgent national oil companies - like PetroChina and Gazprom in Russia - the Western companies are having a hard time increasing production and renewing reserves.

Countries like Russia and Venezuela have tightened the screws on foreign investors in recent years, limiting access to energy resources or demanding a bigger share of the oil revenue.

At the same time, many traditional production regions, like the North Sea, are slowly drying up.

Western majors, which once dominated the global energy business, now control only about 6 per cent of the world's oil reserves.

Last year, PetroChina overtook Exxon as the world's largest publicly traded oil company.

NEW YORK TIMES