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Exxon Mobil Earnings Top $8 Billion

The report's release comes amid a growing chorus of calls for action against oil companies.

April 28, 2006|Elizabeth Douglass | Times Staff Writer

Exxon Mobil Corp. brought home huge barrels of money in the first three months of the year -- more than any first quarter in company history, the oil giant said Thursday -- but it was less than Wall Street expected.

The Irvine, Texas-based company's $8.4-billion net income for the quarter added fuel to accusations from politicians, state officials and consumer groups that the oil industry is pocketing hefty profits while motorists grapple with $3-per-gallon gasoline.

Within hours of Exxon Mobil's earnings report, California Atty. Gen. Bill Lockyer announced he would subpoena financial and other records from refiners in the state to "determine whether the firms are profiteering and gouging consumers."

Lockyer, who has spent more than six years investigating possible antitrust violations by the oil companies, also formed a task force that expands the scope of the probe to look for evidence of unfair business practices, fraud and other violations.

"It's a look for illegal behavior," Lockyer said in an interview. "I understand the economic necessities associated with operating a business. However, these profit margins seem unconscionable."

Exxon Mobil's earnings for the quarter were equal to $1.37 a share, up from $7.9 billion in profit, or $1.22, for the same period last year.

Wall Street analysts had been expecting profit of $1.47 a share, according to a survey by Thomson Financial.

Extra taxes, lowered fuel production because of refinery maintenance and an uptick in oil and natural-gas production costs, kept its profit from increasing even more, Exxon Mobile said. Litigation expenses also rose, the company said.

The company's three-month record for net income came at the end of 2005, when fourth-quarter profit totaled $10.7 billion. Full-year net income of $36.1 billion was the highest ever for a U.S. corporation.

In New York, the company's share price closed down 68 cents at $62.42 Thursday, a day when many oil stocks fell along with the cost of crude oil. Futures for U.S. benchmark crude oil, which rose above $75 a barrel last week, fell 96 cents to $70.97 on the New York Mercantile Exchange.

In California, the average retail pump price hit $3.179 a gallon for self-serve regular on Thursday, another record high, according to AAA.

"We understand that people are quite upset by the current prices that they're paying at the pump," Exxon Mobil spokesman Kenneth Cohen told reporters during a conference call. But the global energy prices are rising because demand is outpacing supply, he said, "and what Exxon Mobil's working hard to do is to increase supplies."

In Washington, politicians bombarded with gasoline price complaints have been busy lambasting oil company greed and pushing a flurry of new energy policies. Legislation involving antitrust laws, a possible windfall-profits tax and other items are all on the table.

"It's unfortunate, but they're the largest [publicly traded] oil company in the world ... and they're going to have to expect to deal with some criticism when they're making a lot of money like they are," said Evan Smith, co-manager of the $1.4-billion oil-rich Global Resources Fund. "Profitability is at absolute highs right now."

Indeed, higher profit margins at its refineries and in marketing helped increase Exxon Mobil's income for that business to $1.3 billion, up 11% from last year's first quarter, excluding special items. That figure becomes a 13% drop after including a $310-million one-time gain in the earnings for the prior year's first quarter.

Figures from industry consultant Muse, Stancil & Co., which subtracts for crude oil costs as well as for estimated plant overhead costs, show that cash operating margins for refineries on the West Coast were the highest of any U.S. region, averaging 49.4 cents a gallon in February and jumping to 66.2 cents a gallon in March. Analysts have said that a gasoline price surge in April will make second-quarter refining profits higher still.

Exxon Mobil's Cohen bristled at the notion of a windfall tax, saying that a similar plan in the late 1970s failed because it stunted oil company investment. Earlier this week, the Senate Finance Committee added to the tax talk by pledging to review oil company tax records to make sure they were paying enough.

"We pay our fair share of taxes," Cohen told reporters.

The company's quarterly revenue totaled nearly $89 billion, up from $82 billion a year earlier. Cohen said Exxon Mobil paid $7 billion in income taxes, and an additional $18.6 billion in excise and other taxes during the quarter.

Still, he acknowledged that the uproar had the company bracing for another round of hearings and lobbying. "I think we're going to be very busy, based on everything I read, and everything I hear," Cohen said.

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