Exxon Mobil Corp., the world's largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations by a U.S. corporation, earning $14.83 billion in the third quarter.
Yet numbers contained within the company's most recent financial report revealed production numbers that continue to sag. The Irving, Texas-based company has reported unprecedented back-to-back quarters, the end of the most recent coinciding with a rapid plunge in crude prices. Benchmark oil prices fell another $2.91 to $64.59 Thursday on the New York Mercantile Exchange, about 56 percent off record highs in July.
Exxon said net income jumped nearly 58 percent to $2.86 a share in the July-September period, better than analysts had expected. That compares with $9.41 billion, or $1.70 a share, a year ago.
The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.
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Revenue rose 35 percent to $137.7 billion. Exxon likes to point out that other companies and industries have higher profit margins than its 10 percent earnings on revenues last year. Critics call for a “windfall” profits tax and have argued that the company should be using the money to expand oil and gas exploration or to invest in renewable energy.
Some companies, especially smaller producers, are scaling back spending on new exploration and production projects because of the uncertainty, though analysts say it's less likely to happen at the well-heeled giants like Exxon Mobil.
“Our integrated business portfolio, strong operational performance and financial discipline continued to allow us to capture the benefits of the commodity price environment,” Exxon Mobil investor relations chief David Rosenthal said on a call with analysts. “Despite recent volatility in the financial, commodity and credit markets, the fundamentals of Exxon Mobil's business remain strong.”
A not-so-bright note was Exxon's output, which once again was below year-ago levels.
The company, which produces 3 percent of the world's oil, said production on an oil-equivalent basis was down 8 percent from a year ago – a concern given it generates more than two-thirds of its earnings from oil and gas production.
Exxon cited disruptions caused by hurricanes Gustav and Ike, production-sharing contracts and increased maintenance activity. It said damage repairs and lower volumes from the storms are expected to reduce fourth-quarter earnings by about $500 million.
The third-quarter results also included a $170 million charge to cover a punitive damages award from the oil spill that took place when the oil tanker Exxon Valdez ran aground in Alaska in March 1989. The money set aside for the hotly contested damage award is barely more than 1 percent of the company's profits this quarter. Exxon has set aside $460 million for the Valdez damages so far this year.
Exxon Mobil's results got a boost of $1.62 billion in the most-recent quarter from the sale of a natural gas transportation business in Germany.
Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27 – and their profits have reflected it.
Royal Dutch Shell PLC, Europe's largest oil company, said Thursday its third-quarter net profit jumped 22 percent from a year ago, also despite falling production.
Crude prices have tumbled from summer highs, and the global economic malaise has raised questions about energy demand at least into 2009.
Earnings at Exxon Mobil's refining and marketing unit were $3.01 billion, up 50 percent from a year ago. Exxon saw margins improve on refined products, largely because of the drop in crude as the quarter progressed.
The company said it expects to spend about $25 billion on capital projects this year, the lower end of previous guidance of $25 billion to $30 billion.
Exxon Mobil said it bought 109 million shares of its common stock in the quarter at a cost of $8.7 billion. Roughly $8 billion of that amount was dedicated to reducing the number of shares outstanding; the balance was used to offset shares issued as part of the company's benefit plans.
Setting U.S. profit records has become commonplace for the oil giant.
In fact, if one-time gains like bankruptcy settlements and spinoffs are stripped away from other companies, Exxon Mobil owns the record for the top 10 most-profitable quarters for a U.S. company, as well as the largest annual profit.
United Airlines' UAL Corp. reported first-quarter profit of $22.9 billion in 2006, but that reflected a bankruptcy settlement, not true profit. The airline would have posted a $306 million loss if those gains were stripped out.
Exxon Mobil rose 40 cents to $75.05 in New York Stock Exchange composite trading. The stock has dropped 20 percent this year, heading for its worst decline since 1981.