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
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
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
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.