Exxon Mobil makes case for big profits
The Houston Chronicle
As a political storm over fast-rising gasoline prices continued to rage Thursday, Exxon Mobil Corp. reported record first-quarter earnings of more than $8.4 billion.
The massive profit helped fuel the ongoing controversy over high prices at the gasoline pump. But it also prompted Exxon Mobil to talk about whether it has any solutions for higher prices.
“If we had a silver bullet, we would be proposing it to Washington right now,” said Ken Cohen, the company’s vice president of public affairs. “What we would hope is we could all take a deep pause, take a deep breath. We certainly understand the impact high prices are having.”
In Washington, lawmakers were scrambling to find ways to soften the blow to consumers.
And the nonprofit Foundation for Taxpayer and Consumer Rights declared in a report Thursday that skyrocketing gasoline prices are due to oil company profiteering, rather than the world price of crude oil.
It was hardly the ideal day for the biggest U.S. oil company to report that its net income rose to $8.4 billion in the first quarter, or $1.37 per share, compared with $7.9 billion, or $1.22 per share, in the year-earlier period.
Shares of the Irving-based oil company, which employs 15,000 in the Houston area, fell by 1 percent Thursday, closing at $62.42 a share on the New York Stock Exchange.
Exxon Mobil’s earnings actually were below expectations of analysts. Those polled by Thomson Financial were looking for $1.47 per share for the latest quarter, according to the Associated Press.
The profit would have been larger were it not for certain higher costs in its oil and natural gas exploration efforts, and lower production in its downstream segment — processing operations such as refining and chemical making, Jacques Rousseau of Friedman Billings Ramsey said.
“The company mentioned that earnings were reduced by 7 cents per share due to a combination of litigation and higher tax expenses,” the analyst said in a report Thursday.
Get used to it
Analysts who follow oil stocks and others warned Thursday that there is no easy fix and that the public had better get used to paying higher gasoline prices.
The rising demand for oil, which has been driving prices higher, will extend well into the next decade, said Evan Smith, a portfolio manager at U.S. Global Investors in San Antonio.
Smith said much of the demand is coming from rapidly growing emerging economies, like those of China and India, which is why oil prices are expected to remain at high levels.
Exxon Mobil said Thursday that it is making enormous efforts to increase production. It noted that oil and natural gas production increased by 5 percent during the first quarter of 2006 compared to the first quarter of 2005.
Cohen said U.S. policymakers could help matters by removing many barriers to supply, both internationally and domestically.
The oil and gas industry would love to invest more in North America if it had access to promising areas now off-limits to drilling, such as the waters off the West Coast, Cohen added.
But even that would not allow the U.S. to eliminate imports.
“The idea that some have that we can have energy independence in the U.S. is not realistic in the short or medium term,” he said.
Questions on taxes
In the near term, Exxon Mobil will also face questions about its taxes from the Senate Finance Committee, which announced Wednesday it will be asking for tax returns from the 15 biggest oil companies.
Cohen’s response: “We pay a lot of tax.”
Asked why the company is making so much money, Cohen answered that the industry is a commodity market at both ends — oil and gasoline — and both have had record prices in recent quarters.
Cohen said Exxon Mobil’s projects take time to develop, which is a big issue in dealing with policymakers, who are elected every few years. The company’s capital spending is up, it is adding capacity, and production is up, he said.
“There is a lot being said, but if you take a look at facts and fundamentals, we are doing what we can,” Cohen said.
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