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The New York Times: Exxon Profit Slips, Surprisingly

By JAD MOUAWAD
Published: July 27, 2007

Exxon Mobil, the world’s largest publicly traded oil company, reported an unexpected slip in quarterly profit today as refining gains failed to offset drops in oil and natural gas production.

Shell Net Profit Rises 18 Percent to $8.67 Billion (July 26, 2007) But its profit still remained substantial. The company reported net income of $10.26 billion for the second quarter, down 1 percent from $10.36 billion in the period a year earlier. Exxon has had quarterly profits of more than $10 billion for five of the last seven quarters.

The results were lower than analysts expected. On a per-share basis, Exxon’s net income was $1.83 a share, 13 cents lower than the consensus of analysts compiled by Thomson Financial.

The weaker performance by Exxon contrasts with Royal Dutch Shell, Europe’s biggest oil company, which reported a strong jump in its quarterly earnings. Shell said today that net income rose 18 percent, to $8.67 billion.

Exxon’s shares fell $2.73, or 2.7 percent, to $90.06, in morning trading.

Despite the mixed picture for corporate earnings at oil companies this week, oil prices have been on the rebound this year. Oil has gained 24 percent so far this year following a series of production shutdowns in Norway and Nigeria, refining problems in North America, high geopolitical tensions in the Middle East, and ever-rising global demand.

Oil futures on the New York Mercantile Exchange jumped 3.5 percent, to $75.88 a barrel on Wednesday. In after-hours electronic trading, they rose as high as $77.24 a barrel. Oil prices are now close to the record set last summer, when New York futures closed at a peak of $77.03 a barrel.

Analysts at Goldman Sachs said recently that oil prices could rise above $90 a barrel this autumn if OPEC oil producers like Saudi Arabia, Kuwait and the United Arab Emirates do not pump more oil by the end of the summer.

The announcements by Exxon and Shell cap a mixed week for oil companies, which all reported lower oil production in the last quarter.

ConocoPhillips’ second-quarter earnings dropped sharply, to a mere $301 million, after the company incurred a $4.5 billion charge for abandoned assets in Venezuela. Earlier this week, BP said oil and gas production fell 5 percent in the quarter.

Chevron reports its quarterly earnings tomorrow.

At Exxon, revenue in the quarter also fell slightly, to $98.3 billion from $99 billion.

The company bought back $7 billion worth of its shares and distributed $2 billion in dividends to shareholders in the second quarter. In that period, the company also spent $5 billion on capital and exploration projects.

But the company made less money from natural gas sales and pumped less oil in mature fields in the United States. Earnings from oil and gas sales fell 17 percent, to $5.95 billion.

Liquids production, which includes oil and liquefied natural gas, was 2.67 million barrels a day on average in the quarter, down by 1.25 percent. Exxon said that excluding the effect of production cuts by OPEC countries and divestments, liquids production was up 5 percent.

The drop in production was sharpest in the United States, where Exxon’s output fell nearly 10 percent, to 393,000 barrels a day. Production from Europe and Africa also fell; in Russia, Canada, Asia and the Middle East, Exxon’s oil production rose.

Natural gas production was 8.7 billion cubic feet a day, down slightly because of mature field declines and lower demand in Europe.

Refining profits, however, jumped 37 percent, to $3.39 billion in the quarter, and profits at the chemical unit rose 21 percent, to about $1 billion.

Oil futures in New York averaged $65 a barrel in the second quarter this year, compared with an average of $70.75 a barrel in the period a year earlier.

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