Exxon reports record profit of nearly $16 billion
By Steve Hargreaves @CNNMoney July 26, 2012: 10:50 AM ET
Exxon Mobil reports record profit of nearly $16 billion, but nearly half comes from one-time gains.NEW YORK (CNNMoney) -- Exxon Mobil reported a quarterly profit of nearly $16 billion Thursday -- the highest ever for a U.S. corporation. The number beat out the previous quarterly record of $14.83 billion set in the third quarter of 2008, also by Exxon.
But this quarter's massive number includes $7.5 billion from "divestments and tax-related items," partly from the sale of refining and chemical operations in Japan.
Excluding that special credit, the company made $8.4 billion, down 21% from the $10.7 billion Exxon made in the same period last year as falling oil and natural gas prices cut into earnings.
Exxon said its combined production of oil and gas decreased 5.6% from year-earlier levels -- also a worrying trend for investors.
Exxon's quarterly profit of $15.9 billion came on revenues of $127.4 billion, giving it a profit margin of just over 12%.
The company said it paid $26.6 billion in taxes and royalties during the quarter -- $8.5 billion in the form of income taxes.
Exxon's big bet on shale gas
The lackluster economy caused oil and natural gas prices to sharply decline in the second quarter of this year.
Oil prices were about 9% lower than they were a year ago, while natural gas prices were off about 25%. Exxon produces twice as much natural gas as it does oil.
The falling prices have hit other major oil companies as well.
Earlier Thursday Royal Dutch Shell (RDSA), the world's largest publicly-traded company, reported a 14% drop in earnings. Exxon is the largest U.S.-based company, taking the top spot in this year's Fortune 500 list. It's the world's second largest company based on revenues behind Shell.
Exxon said it spent $9.3 billion searching and developing new oil and gas supplies in the second quarter.
The company touted recent agreements it signed with Russia's Rosneft to develop shale oil deposits in Western Siberia, as well as major expansions at petrochemical plants in Saudi Arabia and along the U.S. Gulf Coast.
Oil spill worries ahead of Arctic drilling
But analysts have been critical of Exxon's declining production rates for the last several quarters. Exxon blamed the decline on pre-arranged agreements, OPEC production decisions and the sale of assets.
Some analysts also say the company spends too much money on share buybacks and not enough on dividend payments. Share buybacks reduce the number of outstanding shares, and are intended to boost the company's stock price.
Exxon said it spent $5 billion buying back shares in the second quarter, and noted the dividend increased 21% from the same time last year.
On Wednesday Exxon's board voted to keep the dividend the same going into the third quarter this year, at 57 cents per share.
Shares of Exxon Mobil (XOM, Fortune 500) rose slightly in early trading.
Labels: EXXON MOBIL
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COMMENT - Big winners of the Oil Wars: The Rockefellers (
CFR,
PNAC,
Bilderberg Group,
Trilateral Commission). Once called Standard Oil (est. 1870),
they are now Chevron and Exxon. And of course JP Morgan. And Exxon Mobile just moved into the Forbes 500 number one slot, edging out the Walton family's Wal-Mart.
From CNN/Fortune Magazine (Forbes) Mr. Rockefeller would like to thank the people of Iraq, Libya and in fact the world, for their generous contributions to his personal fortune. The fact that they had no choice in the matter is for historians to study, as it has been for the last 150 some years. - MrK
FORTUNE 500: A NEW No. 1
1. Exxon Mobil
Exxon Mobil
Get Quote: XOM
Financials: Latest Results
Rank: 1 (Previous rank: 2)
CEO: Rex W. Tillerson
Was this company a 2011 top stock?
It's tough to beat the kind of year Exxon Mobil had in 2011. Shares rose by 20% and profits surged by 35% to $41.1 billion. Revenues jumped 28% to $452.9 billion, helping Exxon reclaim the top spot in the Fortune 500.
Exxon has certainly benefited from rising oil prices, particularly during the last quarter of 2011. But the company has also positioned itself well to capitalize on the latest controversial trend in domestic energy production: Fracking. Exxon now produces just about as much gas as it does oil, thanks to its $35 billion purchase of XTO Energy in 2010. As CEO Rex Tillerson told Fortune recently, with world demand for energy expected to rise considerably during the coming decades, the shale gas party has just begun.
Labels: EXXON MOBIL, NEOCOLONIALISM, POLLUTION
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Exxon 'loses' Venezuela nationalisation case
World's biggest oil company receives ten per cent of what it demanded in a dispute over the planet's "largest" deposit.
Chris Arsenault Last Modified: 06 Jan 2012 15:08
Venezuelan President Hugo Chavez has taken a tough line with multinational oil companies [GALLO/GETTY]Hugo Chavez must be smiling.
In the latest showdown between western oil companies and Venezuela’s populist president, Exxon Mobil is widely seen as the loser, after the Paris-based International Chamber of Commerce (ICC) ruled that the world’s biggest oil company would not be entitled to most of the damages it demanded after its fields were nationalised.
"The ICC only awarded Exxon ten per cent of what they wanted," Chavez said recently. "You can make your own conclusions."
Petroleos de Venezuela (PDVSA), the state oil company, said on January 2 it would pay Exxon Mobile $255m, after accounting for money frozen in a New York bank account and outstanding debts.
"Exxon has been granted the value of its [initial] investment, but not the value of the project today," Chris Nelder, an independent energy analyst, told Al Jazeera. The company had demanded as much as $12bn, citing potential lost future profits and other concerns, after the nationalisation of its Venezuelan heavy oil assets in the Orinoco belt in 2007.
"This is a victory against a corporation that tried to abuse Venezuelan law," said Eva Golinger, a lawyer and author of The Chavez Code: Cracking US Intervention in Venezuela. "The Venezuelan government had originally offered $1bn for the nationalisation and now they end up only having to pay $255m."
After four years of arbitration at the ICC, Exxon still has another case pending against Venezuela at the World Bank-affiliated International Centre for Settlement and Investment Disputes.
"The Orinoco is incredible - it is the largest volumne of oil on the planet. "
- Steve Levine, Georgetown University
'Sending a signal'
"Traditionally, Exxon is very litigious," Steve LeVine, professor of energy security at Georgetown University, told Al Jazeera. "This whole exercise is about Exxon sending a signal around the world to anyone who would attempt to mess with their contracts."
After refusing to obey Venezuela’s new petroleum laws in 2007, under which foreign companies would have to become minority partners with PDVSA, Exxon and ConocoPhillips, another US firm, pulled out of the country entirely.
Exxon spokesman Patrick McGinn told the Associated Press that the arbitration award "represents recovery on a limited, contractual liability of PDVSA".
Talk of foreign companies cancelling Venezuelan oil projects abounds in some business circles. But aside from Exxon and ConocoPhillips, western multinationals have stayed, perhaps because the stakes of leaving are so high.
"ChevronTexaco is still there. European oil companies are there from Italy and France; the Russians, Chinese, Indians and Brazilians are there," Golinger told Al Jazeera. "Foreign companies shouldn’t try to use their political and economic power to undermine local laws."
Biggest deposits 'ever assessed'
Venezuela’s Orinoco belt, containing an estimated 513bn barrels of technically recoverable heavy oil, is "the largest accumulation ever assessed" by the US Geological Survey. Until recently, the oil was not counted in reserve figures, because it was too expensive to extract. New technologies, rising oil prices and dwindling conventional reserves have changed the game.
"The Orinoco is incredible - it is the largest volume of oil on the planet," Professor Levine said. "The cost of producing it is huge, but the volume is bigger than Saudi Arabia's."
Venezuela celebrates 200 years of independence
Unlike Saudi’s proven reserves of 260bn barrels of light sweet crude, heavy oil in the Orinoco is expensive, difficult to refine and environmentally harmful to extract. This type of oil is either mined, or separated from earth by injecting steam deep into the ground in a process called insitu. Most experts believe that Venezuela does not have the technology to profitably extract and refine this heavy crude alone. Extracting heavy oil from tar sands deposits causes up to three times more greenhouse gas emmissions than conventional crude, while polluting huge amounts of water. Environmentalists believe these despoits should be left in the ground, as fears of global warming intensify.
Despite this recent victory, PDVSA is facing some trouble. Under Chavez, the energy giant has undertaken ambitious social spending, running subsidised food distribution programmes and international aid projects as if it were a state unto itself.
Critics say oil companies should not be delivering government services. And the money used for "Bolivarian" projects means the corporation has less to invest in developing new reserves; production has dropped from about 3.3m barrels per day in 1998 to about 2.25m in 2011, The Economist reported.
After subsidised gasoline for locals and cheap oil sent to Venezuelan allies - such as Cuba - is figured into the mix, the firm only exports about 1.25m barrels per day at regular market prices.
"Chavez did bring in social programmes to reduce inequality," Amy Jaffe, director of energy research at Rice University’s Baker Institute, told Al Jazeera. "But he did so in a way that damaged the future of the oil industry in Venezuela. Is it really in people’s interest to have production cut in half or worse?
"Is it better to have 60 per cent of a lot or 100 per cent of a little? Sometimes people get so hell-bent on the ideology of getting 100 per cent that they lose the baby with the bathwater."
Under Chavez, PDVSA may not be a perfect model for corporate governance. Chavez’s vocal critics, however, tend to compare current problems at PDVSA with a barometer such as Norway’s Statoil, rather than PDVSA in the pre-Chavez era.
"Prior to the Chavez administration, there were governments in place getting kick-backs from these [international oil] agreements; they didn't care if companies obeyed the law," Golinger, a vocal supporter of Chavez, said. Corruption, and the selective enforcing of local laws, has also been a major problem for Chavez's government, according to critics and former government officials.
Poverty reduction
Like many of its South American neighbours, Venezuela has drastically reduced poverty in the past decade; the Bolivarian Republic’s poverty rate fell from 48.6 per cent in 2002 to 27.8 per cent in 2010, according to the UN Commission for Latin America's 2011 report. Inequality also declined sharply. This progress is linked to tough negotiations with foreign oil companies, so the state can have more resources to invest in local communities, Chavez’s supporters contend.
"If we [the world] really were running out of oil, people might have to kiss the ring in Venezuela. That is not the reality we are facing."
- Amy Jaffe, Rice University
Away from the medical clinics funded by oil wealth in poor Venezuelan neighbourhoods, or the stores selling subsidised food, the Exxon case symbolises something larger happening on international energy markets.
"The big picture is that the vast majority of the world’s remaining [conventional] oil resources are not accessible to the western oil majors," Nelder, the independent analyst, said. "The easy to access oil, the stuff in the western hemisphere, has been declining. Those with the resources try to drive the hardest bargain possible."
Other analysts aren't so sure. Concerns over peak oil - the idea that demand will rapidly outstrip supply in the near future - may seem to have been exaggerated, they contend, especially as new, unconventional sources come onto the market.
"Instead of staying in Venezuela, Exxon invested in shale gas in the US and the Canadian oil sands," Jaffe said. "People are now making a fortune drilling in the US. There will be one million barrels a day coming from North Dakota, Ohio is going to have oil. If we [the world] really were running out of oil, people might have to kiss the ring in Venezuela. That is not the reality we are facing."
But with prices rising from around $12 a barrel in 1998 to $100 today, markets view oil scarcity as a growing reality, which helps Venezuelan exporters demand more from companies, even with new supplies coming online.
"Oil is sort of like cocaine," Levine said. "Supply creates demand." If the professor is correct, then international consumers are going to be demanding crude from massive Orinoco reserves for generations to come. In this context, driving a hard bargain doesn't sound like such a bad idea.
Follow Chris Arsenault on Twitter: @AJEchris
Labels: EXXON MOBIL, HUGO CHAVEZ
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COMMENT - Learn to share.
Gunmen attack Nigerian Exxon Mobil facilityA storage tank at an Exxon Mobil refinery in the United States
Gunmen attacked an offshore facility operated by US oil giant Exxon Mobil off the coast of southern Nigeria at the weekend, the company said Monday.
The Nigerian subsidiary of Exxon Mobil said one of its offshore facilities "was boarded by unknown armed persons in the evening of Sunday," but gave no further details.
The raid is the latest on oil facilities in Akwa Ibom state, one of Nigeria's main oil producing states.
Seven foreign workers were captured last week in waters off the same state when gunmen attacked a rig and support vessel operated by British-based Afren.
A statement purportedly from Nigeria's main militant group in the oil producing region, the Movement for the Emancipation of the Niger Delta (MEND) claimed responsibility for last week's attack.
In another statement, MEND last week warned of a series of attacks on oil installations across the Niger Delta in the coming days.
However, the statements came from a different email address than the militant group has used previously to warn of and to claim attacks.
MEND has carried out scores of attacks in the oil-producing Niger Delta region in recent years, slashing output and playing havoc with oil prices.
It also claimed responsibility for twin car bombings on independence day on October 1 that killed at least 12 people, the first such attack in the Nigerian capital Abuja.
The group claims to be fighting on behalf of local people in the deeply impoverished Niger Delta, but it has also been seen as an umbrella organisation for criminal gangs in the volatile oil region.
Exxon Mobil said "relevant government and security agencies have been informed and appropriate response measures are underway at this time."
Following a spate of attacks including on politicians' properties and kidnappings in the region, the military at the weekend warned it would clampdown on militant camps.
"We have observed with concern some criminal acts within the past few days, by some people claiming to be militants," chief of defence staff, Air Marshal Oluseyi Petirin, said.
"Many of these criminals are known to be hiding in camps within the creeks of Niger Delta. These camps will no longer be tolerated," said the military chief telling villagers living in the vicinity of the camps to leave immediately "to avoid any collateral damage".
Nearly a dozen major incidents of attacks and kidnappings have occurred in the restive delta situated in south of the OPEC member country and the world's eighth oil exporter.
Thousands of militants last year laid down arms under a government amnesty offer resulting in a lull in attacks lasting several months.
Since July, there has been an upsurge in attacks ahead of crunch general elections due early next year.
Armed men last week used explosives to attack the house of a top presidential adviser on the Niger Delta crisis and overseer of the government's amnesty programme for repentant rebels in the region.
Labels: EXXON MOBIL, NIGERIA, OIL
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