Exxon's Production Falls as Profits Soar
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ExxonMobil's (XOM) third-quarter earnings demonstrate the mixed universe occupied by Big Oil as a whole today—the company reported record profits but its lowest production volume in almost a decade. The Irving (Tex.)-based corporation says it earned $14.8 billion in the third quarter, an increase of 58% from the same period last year. Exxon is on track for a third straight year of record earnings—in both 2006 and 2007, the company earned some $40 billion. In each year, that was the most ever for any company on the planet.
Despite the breathtaking profit, however, the report weighed on Exxon's share price on Oct. 30. Exxon closed up 0.5%, at 75.05, after falling as low as 71.44 during the trading session. One of the main reasons was its reported production volume. The company produced just 3.6 million barrels of oil per day, an 8% drop from the same period last year. It's the lowest production since Exxon bought Mobil in 1999. Since then, Exxon's production has mostly fluctuated between 3.8 million and about 4.2 million barrels a day.
Some of the third-quarter drop was attributable to seasonal hurricanes, maintenance outages at Exxon facilities, and production-sharing contracts that reduce volume it receives when oil prices rise, but that accounted for just three percentage points of the 8% decline. The other 5% was independent of special factors. In prior quarters, the company has noted that it has considerable production increases coming online in the next two years. But the decrease seemed to worry Wall Street, nonetheless.
Stroking Investors
In an unusual statement in the earnings report, Exxon Chairman Rex Tillerson sought to calm any worries about the company's strength amid the global financial meltdown and reassure investors that the company's capital spending plans remain intact. Some smaller energy companies have trimmed capital spending as oil prices have plummeted from a high of about $147 a barrel during the summer to less than $70 a barrel now.
"Despite the continuing uncertainty in world financial markets, ExxonMobil has maintained a strong financial position," Tillerson said. "We plan to continue our disciplined capital investments with our full-year capital and exploration expenditures projected to be about $25 billion, consistent with previous guidance."
Revenue for the quarter was $13.7 billion, 34% higher than the same
period last year. The company earned $2.59 a share excluding special
items, or 20¢ higher than the $2.39 expected by analysts.
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