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Exxon beats own record for earnings in quarter

It posts net income of $14.83 billion, the biggest profit ever for a U.S. company, amid sky-high oil prices.

October 31, 2008|Ronald D. White | White is a Times staff writer

Riding record oil prices in the third quarter, Exxon Mobil Corp. on Thursday posted the biggest quarterly profit ever for a U.S. company: $14.83 billion, or about $112,000 a minute.

The results, amounting to $2.86 a share, beat the Irving, Texas, company's previous record and shattered analysts' average expectation of $2.38 a share, according to a survey by Thomson Reuters.

Consumer groups and politicians saw reason for anger in those numbers.

"Our economy is suffering from many factors, but one of them is the price of oil and our nation's dependence on it," said Rep. Edward J. Markey (D-Mass.), chairman of the House Select Committee on Energy Independence and Global Warming.

Markey said that "investments in renewable energy continue to lag with the world's most profitable company, and as an industry as a whole."

Judy Dugan, research director of Consumer Watchdog in Santa Monica, said: "Consumers got credit card debt and empty wallets, while Exxon got double-digit billions. Citizens deserve to be mad. They should demand that government get back in the business of protecting them from corporate greed."

Despite the boost from oil prices that reached nearly $150 a barrel in July, analysts said, Exxon's profit haul was not of the low-hanging-fruit variety. The company sets the industry standard for management efficiency and a carefully considered corporate outlook, they said.

"Other oil companies are very efficient, but they are more efficient," said Phil Weiss, an analyst for Argus Research. "If you look at margins, others are very good, but their margins are better than anyone else's. They have the strongest balance sheet."

Exxon shares, up 40 cents to $75.05 on Thursday, are down 20% year to date. But that compares with a 33.9% drop in the average energy stock in the Standard & Poor's 500 index and a 35% decline in the S&P 500 itself.

And some analysts are predicting that, far from retrenching at a time when oil prices have dropped by more than half, the oil industry as a whole and Exxon in particular are poised for a replay of events 10 years ago, when major consolidations rocked the oil industry. That's when Exxon became the world's largest publicly traded oil company by acquiring Mobil Oil.

"Competitors who have based their plans on oil staying on the range of $55 to $60 a barrel have cash on hand and will be making acquisitions from companies who had the false hope of oil staying at $80 to $100," said Fadel Gheit, senior energy analyst for Oppenheimer & Co. "Those companies will be selling assets to raise cash. But Exxon won't be bottom-fishing. They will be looking at their peers."

Exxon's earnings rose nearly 58% from the year-earlier period, when it posted net income of $9.41 billion, or $1.70 a share. It also beat the company's own record for the best U.S. corporate profit ever, set in the second quarter, when Exxon earned $11.68 billion.

Even excluding Exxon's third-quarter boost of $1.62 billion from the sale of a natural gas transportation business in Germany and an after-tax charge of $170 million related to a punitive damages award from the 1989 Exxon Valdez oil spill, the company netted more than enough to break its old quarterly profit record.

Third-quarter sales rose by nearly 35% to $137.7 billion from $102.3 billion a year earlier.

In exploration and production, the company posted a 48% gain to $9.35 billion even though output was down from the quarter a year earlier.

Analysts said that Exxon was well positioned to continue to earn profits despite the sharp decline in oil prices.

"They give out as few specifics as they can get away with, but my sense is that as a general rule they make decisions based on oil in a price range of $50 to $55 a barrel," said Weiss of Argus Research. "So they are going to make less in this environment, but they are still going to make money."

Exxon Vice President David S. Rosenthal said, "Despite recent volatility in the financial, commodity and credit markets, the fundamentals of Exxon Mobil's business remain strong and we continue to invest at record levels to bring new supplies to market."

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Staff writer Tom Petruno contributed to this report.

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ron.white@latimes.com

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