Oil prices boost Exxon Mobil, Shell profits

DALLAS — Exxon Mobil Corp., the world’s largest publicly traded oil company, posted record profits of $5.79 billion Thursday, and the Royal Dutch/Shell Group of Cos. saw its earnings rise 54 percent, thanks to higher prices for oil and natural gas.

The sterling earnings reports, which came on top of strong results from BP and ConocoPhillips, may be small comfort to motorists paying about $2 for a gallon of regular unleaded — unless they also happen to be shareholders.

Exxon Mobil, for instance, earned a profit of more than $10 on each barrel of oil it produced, said Pat Mulva, the company’s director of investor relations.

Mark Baxter, director of an energy institute at Southern Methodist University, said pump prices should be even higher, given that crude is hovering near $43 a barrel.

“These profits probably appear gross, and consumers wonder why they’re not lowering the prices,” Baxter said. “They could do that, but the first time they did, the CEO would get fired.”

Baxter said oil companies need to make profits while the getting is good to carry them through times of low prices — oil was $10 a barrel a few years ago — and to take risks to explore around the world.

Exxon Mobil chairman and chief executive Lee R. Raymond said recently that Exxon Mobil earns no more than 5 cents per gallon for refining and selling gasoline — although he didn’t include profit from producing crude oil.

Analysts cite several reasons for high oil prices, notably that OPEC is producing at near capacity, demand continues to grow in the United States, China and other large markets, and fear that events in the Middle East or Russia could curtail supplies and lead to shortages.

Oil prices surged to a record level this week — briefly above $43 a barrel for U.S. light crude — on new violence in Iraq and reports that Russian oil giant Yukos might be forced to suspend sales, although its production was not interrupted. Both developments were seen as possibly disrupting production in an already tight world market.

Analysts said that oil companies aren’t charities, but some faulted the industry for not spending more on finding new sources of oil to meet rising demand.

“Forty-dollar crude is a big gift to the exploration and production sector,” said George Gaspar, an analyst with Robert W. Baird & Co. “They ought to be putting it into the ground, both in the U.S. and overseas. Mr. Consumer is going to be paying $3 and $4 a gallon in 10 years unless something is done to increase oil reserves.”

• Irving, Texas-based Exxon Mobil earned $5.79 billion, or 88 cents per share, in the April-June period, compared with $4.17 billion, or 62 cents per share, a year earlier. That matched the forecast of analysts surveyed by Thomson First Call.

Revenue jumped 24 percent to $70.69 billion from $57.17 billion, although oil and gas production rose only 1.4 percent.

Profits rose in all three main areas of Exxon Mobil’s business — production, up 36 percent; refining and selling, up about 31 percent to the highest mark in 13 years; and chemicals, up 38 percent to its highest level since 1995.

The company said it would increase the pace of buying back its own shares by about $1 billion over the $1.95 billion it spent in the second quarter.

For the first six months of the year, Exxon Mobil earned $11.23 billion, or $1.71 per share, compared to $11.21 billion, or $1.67 per share, in the same period last year. Revenue rose to $138.30 billion from $120.95 billion.

• Royal Dutch/Shell Group of Cos. earned $4.0 billion, compared with $2.6 billion in the same period a year earlier.

After stripping out the fluctuating value of Shell’s oil and gas inventories, the company said its adjusted earnings would have been $3.77 billion, a 16 percent increase from a year earlier. Sales rose to $62.5 billion from $58.1 billion.

Shell also announced it would pay a $120 million civil penalty to settle an inquiry by the U.S. Securities and Exchange Commission into the downgrading of the company’s reserves.

• Paper and tissue manufacturer Georgia-Pacific Corp. cited strength in its building products business as it reported a sharply higher second-quarter profit on a 6 percent jump in sales.

But the results, announced Thursday, missed Wall Street expectations by a penny a share, and the company’s stock fell.

The Atlanta-based maker of Brawny paper towels said it earned $220 million, or 84 cents a share, for the three months ending June 30, compared to a profit of $61 million, or 24 cents a share, in the same period a year ago.

Excluding one-time items — a gain on asset sales and charges related to its debt, restructuring and severance costs — Georgia-Pacific said it earned $239 million, or 91 cents a share. On that basis, analysts surveyed by Thomson First Call were expecting earnings of 92 cents a share.

Revenue in the April-June period was $5.19 billion, compared to $4.88 billion recorded a year ago.

• Film studio Metro-Goldwyn-Mayer reported a sharply reduced net loss for the second quarter Thursday on lower revenues during a period that saw two small, but profitable, theatrical releases as well as one flop.

MGM reported a net loss of $19.7 million, or 8 cents per share, for the quarter ended June 30, compared to a loss of $133.6 million, or 55 cents per share in the same period last year.