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Exxon 2nd Qtr Profit = $10 Billion | Oil Watchdog

Exxon 2nd Qtr Profit = $10 Billion

Thu, Jul 26, 2007 at 10:58 am

    Exxon 2nd Qtr Profit = $10 Billion

    July 26, 2007

    by Steve Hargreaves, CNNMoney.com staff writer

    ExxonMobil makes $10 billion on record gas prices

    But profit falls from last year on lower natural gas sales and doesn’t top its previous record quarter.

    NEW YORK, NY — ExxonMobil reported over $10 billion in quarterly
    profit Thursday as higher gasoline prices helped offset a decline in
    revenue from natural gas.

    But Exxon’s profit fell short of estimates and was lower than
    the $10.7 billion it reported in the fourth quarter of 2005, the
    highest quarterly corporate profit ever.

    Nonetheless, Exxon’s earnings are sure to draw fire from
    consumer rights groups, who contend the oil industry is deliberately
    restricting supply and profiting on the back of U.S. motorists.

    The Bad Boys Of Oil

    The average price for a gallon of regular gasoline hit an
    all-time high of $3.227 in May, according to the motorist organization
    AAA. The high prices were blamed on strong demand and a series of
    accidents that shut down refineries in the U.S.

    "Oil companies are making outrageous profits on gasoline even
    when they make less of it," Judy Dugan, research director of the
    advocacy group OilWatchdog, said earlier this week in a statement.

    Exxon pointed out earlier this week that gasoline production in
    the United States is at an all-time high, and that the high gasoline
    prices can be blamed on a number of things, including high crude prices
    and record demand from U.S. drivers.

    Still, the high gasoline prices clearly helped Exxon’s bottom line.

    In it’s quarterly statement, the company said it made $3.4
    billion off its worldwide refining operations, a 37 percent increase
    from the year prior.

    Most refiners are expected to get a big boost from prices in
    the second quarter, when easing geopolitical tensions and relatively
    high stockpiles pushed down the price of crude oil but refining
    problems and high demand pushed up the price of gasoline.

    In it’s earlier statement, Exxon also attempted to deflect
    criticism that it’s a monopoly, saying that while it is the world’s
    largest publicly traded oil company, it pumps just three percent of the
    world’s crude.

    Record high gas and oil prices have prompted calls from
    politicians to institute a windfall profits tax on the industry or even
    break it up.

    So far, it appears those calls are going nowhere. While falling
    far short of a "windfall" profits tax, the House voted earlier this
    year to raise taxes on the industry, mainly by eliminating some tax
    breaks the industry enjoyed. But a similar measure that would have
    directed the tax proceeds to renewable energy firms failed in the
    Senate last month.

    The industry said higher taxes on domestic production would
    simply lead to a grater reliance on imported oil, while the big
    integrated oil companies like Exxon, ConocoPhillips (Charts, Fortune
    500) and Chevron (Charts, Fortune 500) need to retain their size to
    compete against even larger state-owned firms from places like Russia
    and China.

    In its earnings release, Exxon (down $4.19 to $88.60, Charts,
    Fortune 500) said it made $10.3 billion, or $1.83 a share, compared
    with $10.4 billion, or $1.72 a share, a year earlier, when it had more
    shares outstanding. Analysts surveyed by earnings First Call had
    forecast EPS of $1.96.

    Revenue came in at $98.4 billion in the quarter, down from $99
    billion when oil prices were higher but gasoline prices were lower.
    Analysts had forecast revenue would fall to $97.6 billion in the

    In its earlier statement, Exxon noted how its profit margin of about 10 percent was in line with other industries.

    On a conference call with analyst, a company spokesman said
    lower natural gas revenue was largely the result of a warmer-than-usual
    spring in Europe, where Exxon is a big player providing the home
    heating fuel.

    Analysts on the call were generally pleased with Exxon’s
    performance, although Exxon shares declined over 4 percent on the New
    York Stock Exchange.

    The spokesman also said Exxon is in ongoing talks with the
    Venezuelan government over assets it gave up when it failed to reach a
    new profit sharing agreement with the Hugo Chavez administration, but
    said the assets in question are worth about $750.

    On Wednesday, ConocoPhillips took a huge $4.5 billion charge
    related to its Venezuela operations, but Exxon said it wouldn’t take
    any charges until the compensation negotiations yield more information.

    Venezuela recently forced foreign oil companies to renegotiate
    leases more favorable to the government, and several big firms left the

    In the quarter, Exxon said it spent $5 billion on capital and
    exploration projects and returned $9 billion to shareholders in the
    form of dividends and share buybacks.

    Exxon said it’s total tax bill for the quarter was $26 billion.

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