Los Angeles Times
ExxonMobil Corp. shattered its own record as the world’s most profitable publicly traded corporation, as rising oil prices helped the company bring in better-than-ever income and revenue for the fourth quarter and 2007.
Irving, Texas-based Exxon‘s net income rose 3% to $40.6 billion in 2007, surpassing its 2006 record of $39.5 billion.
Chevron Corp. also posted strong earnings despite lower production and lagging profit from making and selling gasoline. Full-year profit at the San Ramon, Calif.-based oil company jumped 9% to $18.7 billion.
That was happy news for company shareholders, but bad news on the public relations front. The robust results, booked amid high gasoline prices and a wobbling U.S. economy, irritated consumer groups and politicians, reigniting calls to eliminate oil industry subsidies.
“Congratulations to Exxon Mobil and Chevron — for reminding Americans why they cringe every time they pull into a gas station and for reminding Washington why it needs to act swiftly to break our dependence on foreign oil and rollback unnecessary tax incentives for oil companies,” Sen. Charles E. Schumer (D-N.Y.) said in a statement.
Exxon‘s and Chevron‘s big profits “come at the cost of an economy tipping into recession,” said Judy Dugan, research director for the Foundation for Taxpayer and Consumer Rights in Santa Monica. “While Exxon makes the largest corporate profit by any corporation ever, families pay $60 and more for a gas station fill-up.”
Asked about the backlash, Exxon spokesman Ken Cohen sounded resigned: “At least over the last few years, our industry has always been the focus of attention. I doubt that that will change here over the short term.”
Exxon and other oil companies are mindful that worldwide energy consumption is expected to jump 30% over the next 20 years, Cohen told reporters during a conference call. “The challenge for all of us in the industry is how do we meet that increased demand and do it in a way that is also consonant with people’s expectations in the environmental area and in other areas? That’s what our company is focused on doing.”
To that end, the company said it spent $20.9 billion on exploration and other projects in 2007, up 5% from 2006 and a record high for Exxon. It distributed more than that, $35.6 billion, to its shareholders through dividends and stock buy-backs during the year.
For the three months ended Dec. 31, Exxon‘s profit shot up 14% to $11.7 billion, or $2.13 a share — also a record for the company. Net income for the full year was equal to $7.28 a share.
The flood of cash came thanks to the soaring cost of crude oil, which in early January passed the $100-a-barrel mark for the first time and has stayed above $90 for most of the time since then. On Friday, the price of light, sweet crude for March delivery fell $2.79 to $88.96 a barrel on renewed concerns about the U.S. economy.
In Exxon‘s flagship business of exploring for and developing oil and natural gas, fourth-quarter income soared 30% to $8.2 billion compared with a year earlier.
“As long as oil is $90-plus a barrel, you’re going to see a lot of money rolling in,” said Todd Petzel, who advises pension funds and endowments with $5 billion under management as chief investment officer at Offit Capital Advisors in New York. “Growth in demand globally is expected to rise by 2 million more barrels a day next year, so while everyone is working hard to increase supplies, they’re being outpaced by demand.”
Exxon‘s refining and marketing business produced 13% higher net income in the fourth quarter, as strong earnings overseas more than offset declines in the U.S., where gasoline makers and sellers are seeing their profits shrink.
Revenue for the fourth quarter swelled 30% to $116.6 billion. Worldwide production of oil and natural gas was up about 1% for the quarter and down about 1% for the full year, Exxon said.
Chevron, the nation’s second-largest oil company, posted a fourth-quarter net income of $4.9 billion, or $2.32 a share, up 29% from the year-ago quarter’s profit of $3.8 billion, or $1.74 a share.
As with Exxon, Chevron‘s performance reflected strong earnings from the production and sale of oil and natural gas. That business brought in quarterly profit of $4.8 billion, up 66% from a year earlier.
Chevron, a leader in California’s gasoline market, said profit at its refining and marketing business plummeted during the fourth quarter because of refinery downtime and other factors. The company lost money on those operations in the United States and had worldwide net income of $204 million for the quarter, down nearly 79%.
The company’s worldwide production fell 1.6% for the quarter and 1.8% for the year. Chevron said it spent $20 billion in 2007 on capital projects and $7 billion more on share repurchases.
Oil expert Amy Myers Jaffe said that barring a recession, oil companies would continue to collect eye-popping profits for the foreseeable future. And if they do, they should brace themselves for a legislative assault from angry politicians.
“The bigger the profits, the higher the likelihood that there will be a windfall profits tax if the composition of the Congress changes,” said Jaffe of Rice University’s James A. Baker III Institute for Public Policy in Houston. “They’re an easy mark, and they need to consider that in their strategy.”
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