Soaring Oil Prices Drive Record Exxon Mobil Profit
Date: 01-Feb-05
Country: USA
Author: Deepa Babington
The blockbuster results easily topped Wall Street forecasts, capping an exceptionally good year for the Irving, Texas, behemoth. Exxon's revenue in 2004 was more than $298 billion, surpassing the gross domestic product of countries such as Austria and Indonesia.
For the most part, Exxon has high crude prices to thank for its record profit.
Surging demand from fast-growing Asian giants India and China, coupled with fears of a disruption in supplies from countries such as Russia, Iraq and Nigeria, kept oil prices surging for much of last year. Crude prices topped a record $55 a barrel in late October.
Exxon's fourth-quarter profit was equal to $1.30 a share, up from $1.01 a share, or $6.65 billion, a year earlier. Analysts' average forecast was $1.05, according to Reuters Estimates.
"They're managing their business like a Swiss watch," said Oppenheimer & Co. analyst Fadel Gheit.
The results show Exxon Mobil remains the "gold standard" among its peers, Prudential Equity Group wrote in research note.
STRENGTH ACROSS THE BOARD
In particular, analysts were impressed with the sharp rise in earnings at all three major business segments at Exxon.
The rise in prices drove earnings at its exploration and production unit to $4.89 billion, up from $3.27 billion a year earlier. Profit from refining and marketing operations tripled, to $2.34 billion from $736 million a year earlier, on strong refining margins.
Healthy worldwide demand pushed up earnings at its chemicals business to $1.25 billion from $476 million.
"This is a particularly impressive set of results given that every segment outperformed expectations," Credit Suisse First Boston analysts said in a research note.
Overall, revenue jumped to $83.36 billion from $65.95 billion a year earlier. Capital spending fell slightly, to $4.23 billion from $4.36 billion a year earlier.
Oil and gas production fell 2 percent in the quarter, hurt by divestments and the impact of higher prices on production-sharing agreements. Excluding those items, production rose by 1 percent.
Most major oil companies have been struggling with sluggish or declining production, faced with maturing oil fields in regions like the US Gulf of Mexico and lack of access to regions that house some of the world's largest reserves.
An Exxon executive said on a conference call the company was involved in bidding, but was not among the winners when Libya on Saturday awarded its first exploration contracts to US companies in 18 years. US oil majors are eager to reenter Libya after US sanctions were eased last year.
No. 2 US oil company ChevronTexaco Corp., which Friday reported quarterly profit nearly doubled on the back of record oil and gas prices, bid successfully on one onshore block in Libya.
The results did not produce a drastic surge in Exxon shares, however. One analyst said Wall Street has come to expect extraordinary results from the oil giant. Also, the shares have been climbing for much of the past year and were already near a 52-week high.
Exxon's shares rose 33 cents, or less than 1 percent, to close at $51.60 on the New York Stock Exchange.
OIL SPILL IMPACT LINGERS ON
Crude oil from the 1989 Exxon Valdez spill still lingers in Alaska's Prince William Sound and nearby areas, with parts of the environment still far from recovery, several scientists said at a three-day conference last month.
The conference, held in Anchorage in January, was hosted by the Exxon Valdez Oil Spill Trustee Council, the federal-state group that administers the 1991 natural resource settlement, as well as by several other organizations.
Crude oil that percolated into beach soil remains largely locked in place until otters digging for food loosen it, while eight types of sea birds affected by spilled oil show no signs of recovery, scientists from the US Geological Survey said in a report issued late on Tuesday.
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