Exxon Pumped Less Oil on the Way to $10.9 Billion Profit
Beneath ExxonMobil's $10.9 billion in profits—a first-quarter record for the company and the second-highest in the company's history—lies another number that should give pause to consumers and policymakers worldwide. The world's largest publicly owned oil company is producing a lot less oil.
Exxon's oil production was down 10 percent in the quarter, greatly accelerating a trend that has been evident for some time. Exxon saw a 2.4 percent decline in oil production between 2006 and 2007. Venezuela's grab of Exxon assets, the production limits set by OPEC countries where Exxon operates, and Exxon's own decisions to sell some of its fields all contributed to the decline, the company said in announcing its first-quarter figures today. But even excluding all of these factors, and counting natural gas production, which is increasing, the company's overall production slid 3 percent in the quarter.
Seen in the context of the production decline, Exxon's profits are even more staggering. The $10.9 billion the company netted in the first three months of the year was a 17 percent increase over last year and was surpassed only by the $11.7 billion profit Exxon reported in the fourth quarter of 2007. But on a per-barrel basis (counting both oil and natural gas), Exxon's profits in the first three months of this year leapt about 24 percent.
Speaking on the trend recently, before Exxon's latest numbers, Peter Hitchens, an oil analyst at Seymour Pierce in London, said that he had concerns about the future trends for all of the major integrated oil companies because of the struggle they are having growing their production. He noted that all of them have had to cut back their forecasts, and as recently as 2000, BP had been projecting 5 percent increases per year.
This week, BP reported first-quarter profit up 63 percent, to $7.62 billion, while Shell's net income was up 25 percent to $9.08 billion—but both saw production that was essentially flat.
"There are several problems for the companies," says Hitchens. "You've got nationalization, or I suppose, greed, coming through in the countries where they operate. When the oil price is low, the countries need the oil companies to fund development. But when the oil price is high, the countries don't actually need the majors because they can outsource all their needs to oil service companies." Not only Venezuela, but Russia and the Caspian countries have reduced the stake that outside oil companies have had in their national petroleum assets. The struggle over oil in Nigeria has been a constant headache for Shell. That's why Hitchens thinks the global market conditions are stronger for service companies like Halliburton and Schlumberger than for the giant oil companies like Exxon, Shell, and BP—despite the astonishing levels of profits they command on oil when it nears $120 per barrel.
"Profits are staying very, very high," Hitchens says. "But they're struggling to put those profits into growing the business."
It is clear, however, that the oil companies have one reliable place they can put their profits. Exxon accelerated its already aggressive share buy-back program, plowing $8 billion—or 73 percent of the quarter's profits—into the company's own stock. Exxon reduced shares outstanding by 1.8 percent and, including dividends, distributed $9.9 billion to shareholders in the first quarter, a 13 percent increase over last year.
Reader Comments
Gas prices
Why doesnt someone in office do what Reagan did. They should open up the reserves for what maybe2 weeks. That will tell the gas companies that they need us more than we need them.....
criminal profits
Isn't it ironic that their profits are still over 10 billion dollars when sales are down? So much for supply and demand. The huge oil company CEO's should be sent to prison for many years for gouging americans. But, our congree has no guts!!!
OIL COMPANY PROFITS, AND SUPPLY
There is no shortage of oil in the world market. Pls refer to Energy: the Non Crisis. The oil companies, CEOs, corporate greed, and crooked politicians are going to bring our economy to a stand still, and break this country. These crooks are allowed to do this when most average Americans cannot afford a decent home or decent health care. What is wrong with this picture??
There is technology out there right now, to wean us away from big oil and OPEC. It is all about the money and the greed, and nothing else. Same program with the insurance companies, pharmaceuticals, the medical industry, and the like.
sickening state of affairs for Exxon
As long as we allow oil to be traded on the open stock market nothing will ever change.....the price on the gas pump is artificially jacked up by hyping shortages etc...Oil is being bought cheap ....then sold later when the price goes up....whithout the buyers ever taking possession of their merchandise in the meantime....cute!
No profit if we do not buy from Exxon
Exxon only makes a profit because people continue to buy from them. We don't buy from the Big 5 and never will. We save our money by not eating out and I now skip dinner and we use it to patronize the other stations. We plan our shopping to coincide with buying gas and never buy from the Shell right here because they stay consistantly 30 to 40 cents higher. The Big 5 only make a profit because people buy from them. We shredded our gas cards and will never have a gas card again. We buy from a station that gives 10 cents off a gallon for cash. The profit the Big 5 makes never comes from our pocket. Nancy Pelosi has asked the FTC to investigate the oil companies for manipulation and gouging and we need to support her cause. Go to her website and cheer her on.
Price Control
In times past, the government has issues price caps on things for the sake of the economy. If this isn't a clear example of te need for such an action, what is?
OIL BUSINESS
Letts try and understand why oil and gasoline prices are so high. If you think it is greed or politically motivated it's time for a global education. The reason Americans enjoyed low cost oil for many years was because India and China did not participate in the consumption of crude oil. Not to mention the fact that Americans as a whole have wasted this non renewable resource by driving low mileage vehicles,read SUVS, and other fuel consuming activities. Oil and gasoline have been expensive in Europe for decades, the europeans have been forced to conserve now Americans must become better at conserving oil and gasoline.
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Paradox of decline in production versus increased profit
The decline in oil production, and still generating a 25% profit almost defies all economic policies. As the article states some of the profit was derived from sell of some of its oil fields. Was this do to poor production or was it to aquire more revenue.
The article further states that 73% of the profit was used to buy back some stock. All of these are good for the company , but may be deleterious to the economy and country as a whole.
The law of deminishing returns that says if I raise the price of a commodity enough the number of purchases will not result in same revenue for the increase in price. That has held throughout the 20th century, but is apparently not applicable to oil.
It is realized that since oil is not a limitless commodity, we must allow the oil companies to obtain an amicable return on their investment. However if we don't conserve and work together with both the CEO's, stock holders, and the public, the economy may go into recession/depression that may take years to recover.
May 01, 2008 17:28:14 PM [permalink] [report comment]