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Exxon breaks $500-billion barrier

The oil behemoth's market value zooms to lofty levels amid surging earnings.

July 13, 2007|From Bloomberg News

With Wall Street's big bull run Thursday, Exxon Mobil Corp. became the only publicly traded company currently valued above half a trillion dollars.

Shares of Exxon Mobil rose $2.33 to $89.62, pushing the market capitalization of the Irving, Texas-based oil company to $504.9 billion.

That's more than the annual economic output of Argentina, Finland and Kazakhstan combined. Shares have gained 40% in the last 12 months, making Exxon Mobil 26% bigger than General Electric Co., the next largest U.S. company.

"Exxon is the standard bearer for what an integrated Western oil company should be," said Ted Harper, who helps manage $8 billion in assets at Frost Bank in Houston, including 900,000 Exxon Mobil shares. The rise in the stock "certainly suggests that you need to be in energy."

Oil and gas producers' profits have surged as demand, spurred by global economic growth, particularly in China and the U.S., caught up with world production.

A bottleneck in U.S. refining capacity has also helped earnings for integrated companies such as Exxon Mobil that produce, process and market petroleum. The profit margin for turning a barrel of oil into gasoline and heating oil averaged $23.68 in the second quarter, compared with $5.13 a barrel five years ago.

Exxon Mobil shares have been the biggest contributor to the rally by the Standard & Poor's 500 index during the current bull market. The stock has surged 173% since Oct. 9, 2002, adding 38.4 points to the index.

Exxon now accounts for 3.7% of the S&P 500's market value.

Exxon Corp.'s $85.2-billion buyout of Mobil Corp. in 1999 brought together two descendants of John D. Rockefeller's Standard Oil Trust. The merger also set the pace for acquisitions that later created oil giants Chevron Corp. of San Ramon, Calif., and London-based BP.

The oil behemoths have come under pressure in recent years as countries including Venezuela and Russia seek greater control over their oil and gas reserves. Many of the world's largest oil and gas deposits are off limits to the international oil companies and are being tapped by state-controlled giants such as Saudi Aramco or PetroChina Co.

"The rules of the game are changing, and the balance of power is clearly shifting to the national oil companies," Harper of Frost Bank said. "Exxon's ability to maintain its position as the industry standard bearer will be dependent on its ability" to work with rivals, he said.

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