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Exxon Woes Continue--Earnings Decline 13%

April 25, 1989|From Associated Press

NEW YORK — Exxon Corp.'s first-quarter earnings fell 13%, the company said Monday, as rising crude oil prices took a bite out of refining margins and the Alaskan oil spill took a toll mostly on the company's image.

For the three months ended March 31, earnings at the nation's biggest oil company declined to $1.3 billion from $1.5 billion in the first quarter of last year. Revenue rose 1% to $22.2 billion, compared to $22 billion in the year-ago period.

Exxon, based in New York, said expenses grew fourfold from the 1988 first quarter--to $5.4 billion from $1.3 billion--due mainly to special one-time costs, including the acquisition of Texaco Canada Inc.

Exxon said the March 24 spill that tarnished its reputation had only a negligible financial impact in the first period. Exxon said it charged $30 million for "salvage expense, vessel repair and partial loss of cargo."

The huge Exxon Valdez oil tanker crashed into an underwater reef off the Alaskan coast March 24, spewing about 250,000 barrels of oil into Prince William Sound.

Exxon Chairman Lawrence G. Rawl said the company doesn't yet know the full cost of the disaster.

Rising Prices Hurt

"Exxon and Exxon Shipping Co. carry insurance in substantial amounts to deal with cleanups, damage claims and liabilities resulting from oil spills," the company said. "Based on information to date, we cannot reasonably estimate the net expense to be borne by Exxon and Exxon Shipping Co."

Rising world oil prices hurt Exxon's refining and marketing earnings but helped its exploration and production income in the first quarter, Rawl said.

"Contrary to some public perceptions, prices for motor gasoline and other products did not increase as rapidly as crude oil costs," the chairman said.

World crude prices have risen about $10 a barrel in the last six months, and, although gasoline retail prices have jumped in recent weeks, analysts said they have not risen by a comparable amount per gallon.

"That's the reason we're continuing to have a price rise in April as they play catch-up to crude," said Bruce Lazier, analyst with Prescott, Ball & Turben Inc.

Lazier said Exxon's earnings were good considering the rise in crude.

Earnings from domestic exploration and production rose 22% to $343 million from $281 million a year ago. Income from foreign exploration and production, however, slid 20% to $513 million from $642 million.

Refining profit, meanwhile, was down nearly 43% to $147 million from $431 million in last year's first quarter.

Stephen Smith, an analyst with Bear, Stearns & Co., said he expects a reversal in the second quarter as the rise in crude prices is passed through to product prices, including gasoline.

"At some point, gasoline will take over as demand increases with the driving season," Smith said.

Exxon said first-quarter results reflected a $3.9-billion expense for the acquisition of Texaco Canada Inc. by its Canadian subsidiary, Imperial Oil Ltd. Texaco Inc. sold its 78% stake in Texaco Canada in January.

Exxon also purchased more than 15 million shares of its own stock at a cost of $676 million.

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