Earnings stay hefty for ExxonMobil, Shell;

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Energy giants confront political implications

The Houston Chronicle

ExxonMobil and Royal Dutch Shell, the first- and third-largest publicly traded energy companies in terms of market value, reported Thursday their profits popped 36 percent and 40 percent, respectively, for the second quarter.

Irving-based ExxonMobil booked net income of $10.4 billion, or $1.72 per share, on revenue of $99 billion for the three-month period.

The Hague-based Shell booked net income of $7.3 billion, or 98 cents per adjusted share, on revenue of $83 billion for the quarter.

ExxonMobil and Shell are the latest in a string of major energy companies to
report earnings this week.

On Tuesday, BP announced a profit akin to Shell‘s — $7.3 billion for the second quarter. On Wednesday, ConocoPhillips announced a record-busting profit of $5.2 billion for the quarter, up 65 percent over this time last year.

The companies have benefited from high crude prices. Tight refining capacity also gave them a bounce, allowing them to charge more to process crude into transportation fuels such as gasoline, diesel and jet fuel.

While major energy companies are accustomed to confronting political risk in many of the far-flung nations where they operate, including Russia, Venezuela and Nigeria, their quarter-after-quarter profit-taking is creating political tensions in the U.S., too.

Ken Cohen, ExxonMobil’s vice president of public affairs, told reporters during a Thursday morning teleconference that the upcoming midterm elections have made oil companies easy targets for vote-seeking politicians.

“It seems, in some of the tight races, some candidates are trying to run against us as opposed to their opponent,” Cohen said. “I guess it’s understandable, given the high level of prices, so it’s just part of the price of poker right now. I don’t see that abating” any time soon.

Rep. Ed Markey, D-Mass., a member of the House Energy and Commerce Committee who is up for re-election in November, issued a swift statement after ExxonMobil released its earnings.

“While American families get tipped upside down and have their savings shaken out of their pockets at the gas pump, the Bush-Cheney team devises even more ways to line Big Oil’s profits,” he said.

Markey is calling for tougher fuel economy standards, which would force automakers to churn out more fuel-efficient cars and trucks.

“Unfortunately, the president is at the economic and diplomatic wheel of this country and is heading for a brick wall,” Markey said.

Some camps, including the Foundation for Taxpayer & Consumer Rights, are calling on Congress to revive efforts to tax energy companies’ so-called “windfall” profits. Congress would have to come up with a calculation to define what excessive profits are.

“These oil giants are profiting once from the sale of crude oil at record prices and again from refining profits of 43 cents per gallon of gasoline, an amount for which there is no possible justification,” Judy Dugan, the foundation’s research director, said in a prepared statement. “Profits at this level are pure greed and the real explanation for outrageous prices at the pump.”

All the rhetoric is making analysts jittery about the political pressure that could come to bear in the U.S. if energy prices remain a prime pocketbook issue for consumers.

Henry Hubble, ExxonMobil vice president of investor relations, during a Thursday morning conference call with analysts and investors, was asked what specific financial steps the company was taking to hedge political risk in the U.S.

“You’ve got to be able to estimate what they are in order to take them, and we can’t do that,” Hubble said.

ExxonMobil’s Cohen said the biggest thing any energy company can do to reduce prices is to reinvest in the business, bringing new supplies of oil to market.

Also on Thursday, ExxonMobil announced it was boosting its capital expenditures for the year to $20 billion, up from a previously announced $19 billion, as it drills for more oil and gas.

Shell, too, said it is putting significant money into “unconventional” energy sources, such as turning natural gas into liquid fuels and wringing oil out of Canada’s tar sands.

Today, those unconventional fuels account for 5 percent of the company’s output, but Shell estimates they will account for 15 percent of output by 2014.


ExxonMobil — Profit by the:

Half-year, 2006: $18.8 billion*
Month: $3.1 billion
Week: $721.5 million
Day: $103.7 million
Hour: $4.3 million
Minute: $72,000
Second: $1,200

Royal Dutch Shell — Profit by the:

Half-year, 2006: $14.2 billion*
Month: $2.4 billion
Week: $546.8 million
Day: $78.6 million
Hour: $3.3 million
Minute: $54,500
Second: $908

* Calculations were based on $18.78 billion for Exxon Mobil and $14.217 billion for Royal Dutch Shell. Numbers were then rounded after calculations were made.

Source: Chronicle research

Contact the author at: [email protected]

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