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2nd-Quarter Earnings Surge at Exxon, Shell

The world's six biggest publicly traded oil companies are on track to record their richest three months ever.

July 28, 2006|From Bloomberg News

Exxon Mobil Corp. and Royal Dutch Shell, the world's No. 1 and No. 3 publicly traded oil companies, reported Thursday combined second-quarter profit of nearly $18 billion as a result of record prices for crude.

Net income at Exxon Mobil rose 36% from a year earlier to $10.4 billion, or $1.72 a share. Shell said profit jumped 40% to $7.32 billion, or $1.13 a share. Both companies exceeded analysts' expectations, and Exxon's profit was the second-highest in corporate history, bested only by its record of $10.7 billion in last year's fourth quarter.

"The energy sector is again poised to be among the best- performing sectors in 2006, with a strong second half ahead," said Gene Pisasale, who helps manage $25 billion, including 4.9 million Exxon Mobil shares, at Mercantile Bankshares Corp. in Baltimore.

"Investors are underestimating the earnings power of this group."

Exxon Mobil, based in Irving, Texas, said revenue rose 12% to $99 billion. Sales swelled as crude oil prices surged because of growing world demand and supply disruptions in Nigeria and the Gulf of Mexico.

The second quarter is shaping up as the richest three months ever for the six largest publicly traded oil companies.

BP of Britain, which ranks ahead of Anglo-Dutch rival Shell as Europe's biggest producer by market value, said Tuesday that net income rose 30% to $7.3 billion. Houston-based ConocoPhillips on Wednesday said its profit jumped 65% to a record $5.2 billion. Chevron Corp. of San Ramon, Calif., will report its results today.

This week's profit reports brought renewed calls from U.S. lawmakers, including Rep. Edward J. Markey (D-Mass.), for a tax to redistribute windfall oil profits to small businesses and the poor.

Such a tax would erode capital available for drilling new wells and expanding refineries, Exxon Mobil spokesman Henry Hubble told investors Thursday in a conference call. Kenneth Cohen, another company spokesman, said some politicians were using high energy prices as an election issue.

"It seems like in tight races around the country some of the candidates are running against us rather than their challengers," Cohen said.

Oil futures in the U.S., which burns a quarter of the world's petroleum, averaged $70.72 a barrel during the second quarter, 33% higher than a year earlier. Prices touched a record $78.40 a barrel July 14 and have more than tripled since the end of 2001.

The average U.S. margin on processing crude oil into gasoline and diesel widened 41% to almost $16 a barrel, based on futures prices. That topped the record average, set in the third quarter of 2005, when hurricanes lashed Gulf Coast refineries and wrecked wells and pipelines.

Average U.S. retail gasoline prices in the second quarter rose to $2.849 a gallon, up 30% from a year earlier, the Energy Department said.

Exxon Mobil shares fell 13 cents to $66.47 after reaching a 52-week high of $67.65 during the session. Shell's U.S.-traded shares rose $1.01 to $70.51.

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