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Exxon Mobil earnings hit $10.5 billion

Shell also posts profit that beats forecasts as the oil giants cash in on higher pump prices.

October 27, 2006|Elizabeth Douglass | Times Staff Writer

Cashing in on higher prices and production, oil giant Exxon Mobil Corp. surprised Wall Street on Thursday with $10.5 billion in third-quarter profit, putting it on pace to smash earnings records for the full year.

Exxon's earnings were the second-highest ever recorded by a publicly traded company -- behind its own $10.7-billion profit in last year's final quarter -- and helped reawaken the public outrage that came with this summer's record-high pump prices.

Oil major Royal Dutch Shell also announced earnings Thursday that were well above expectations. The Anglo-Dutch company's profit for the quarter that ended Sept. 30 was up 21% after excluding an asset sale that sharply boosted last year's third-quarter income and other items.

But with oil prices down more than 20% since July's peak of $78.40 a barrel, many believe the industry's profit party may have peaked -- at least for now. The cost of light sweet crude for delivery in December fell $1.04 to $60.36 a barrel Thursday in New York.

"When oil prices are falling from a very high level, and that absolutely reflects what was happening in the third quarter, that is your maximum earnings generation period," said Mark Gilman, energy analyst at Benchmark Co.

Gilman, who doesn't own Exxon shares, said the company's latest earnings were "not something that one should get used to."

For some, the lofty profit was too much.

"It seems like almost every quarter, Exxon Mobil and the other big oil companies are shattering all previous profit records," Rep. Edward J. Markey (D-Mass.) said in a statement. "These companies are doing so not because they're creating any new product or being innovative but because they control the supply of foreign oil that feeds America's addiction."

Exxon's three-month profit could fund the city of Los Angeles for 18 months based on this fiscal year's $6.7-billion budget. The Irving, Texas-based company's cash on hand at the end of September -- more than $37 billion -- could bankroll state operations in California for more than three months.

Wall Street analysts, citing lower oil prices, have cut fourth-quarter earnings estimates for many oil companies, including Exxon. During the third quarter, Exxon collected an average of $62.07 a barrel in the U.S. and $65.64 a barrel overseas. The U.S. average was up 9% from last year's third quarter. The price Exxon paid for natural gas was lower in this country but higher elsewhere.

The company's $10.5-billion quarterly earnings, equal to $1.77 a share, rose 6% from $9.9 billion, or $1.58, a year earlier. Analysts, on average, had expected income of $1.59 a share, according to Thomson Financial.

Exxon said overall profit was boosted by higher crude oil and natural gas prices, along with increased earnings from its chemical, retail fuel and convenience store operations. Refinery income was lower than in the year-earlier period.

Revenue for the period fell to $99.6 billion from $100.7 billion, while the company spent $5.1 billion on capital and exploration projects in the quarter. Exxon's worldwide production of oil and natural gas rose 7%, the company said.

"I think everyone's quite impressed with their ability to put up the numbers," said Richard J. Moroney, vice president and portfolio manager at Horizon Investment Services, which manages a $125-million portfolio that includes Exxon shares.

Royal Dutch Shell reported third-quarter profit of $5.94 billion, or 93 cents a share, down from $9 billion a year earlier.

Excluding special items, such as changes in inventory values and a gain from the 2005 sale of a pipeline, the oil company's quarterly income rose 21% to $7 billion.

Exxon shares touched an all-time high of $72.33 but closed at $71.62, up 61 cents. Royal Dutch Shell's Class A shares rose $1.82 to $69.46.

elizabeth.douglass@latimes.com

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