Crude oil and natural gas producer Exxon Mobil Corp. (XOM) Friday reported a decline in fourth-quarter profit, owing to weaker crude oil prices, higher operating expenses, lower chemical volumes and the impact of the Gulf Coast hurricanes. However, earnings, although dropped from last year, came above Street consensus.
Net income for the fourth-quarter fell to $7.820 billion or $1.55 per share from $11.660 billion or $2.13 per share in the previous year. On average, 13 analysts polled by First Call/Thomson Financial expected fourth-quarter earnings of $1.45 per share. Analysts' estimates typically exclude one-time items.
The company noted that earnings in the just concluded quarter were $570 million lower due to damage repairs and lower volumes associated with Hurricanes Gustav and Ike. Exxon had warned a few months ago that its fourth-quarter earnings would be reduced by about $500 million due to damage repairs and lower volumes across all business lines associated with the hurricanes.
Total revenues and other income for the quarter declined to $84.696 billion from $116.642 billion in the previous year period. Analysts had a consensus revenue estimate of $69.14 billion for the quarter.
The Irving, Texas-based company is involved in the manufacture of petroleum products, and transportation and sale of crude oil, natural gas and petroleum products. Exxon manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics. The company also has interests in electric power generation facilities and has operations spread over the U.S., Canada, Europe, Africa, Asia-Pacific, the Middle East, Russia/Caspian region and South America.
Commenting on the fourth-quarter results, Rex Tillerson, chairman of the company, said, "ExxonMobil's fourth quarter earnings excluding special items were $7,820 million, a decrease of 33% from the fourth quarter of 2007. Weaker crude oil prices, higher operating expenses, lower chemical volumes and the impact of the Gulf Coast hurricanes were partly offset by higher downstream margins."
Oil prices, which touched a record high in July 2008, receded during the fourth quarter owing to the decline in demand brought about by a recession-gripped economy. From below $150 a barrel, crude plunged to less than $45 per barrel by the turn of the year, indicating that the record profits posted by oil majors due to the price rise would be dented soon. However, Exxon reportedly said recently that the company is not discouraged by the plunge in prices, as it costs are kept low enough to make profit even when oil slumps.
Upstream earnings declined to $5.634 billion from $8.204 billion in the previous year. The company noted that lower crude oil realizations reduced earnings by about $3.2 billion, while higher natural gas prices increased earnings by about $500 million.
Oil-equivalent production dropped 3% from the fourth quarter of 2007. Excluding the impacts of lower entitlement volumes, OPEC quota effects and divestments, production was down about 1%.
Downstream earnings grew to $2.414 billion from $2.267 billion in the previous year. Higher margins increased earnings by about $900 million. However, unfavorable foreign exchange, volume and mix effects and higher operating expenses, including hurricane repair costs, reduced earnings by about $800 million.
Petroleum product sales of 6,761 kbd were 364 kbd lower than last year's fourth quarter, largely owing to asset sales and lower demand. Chemical earnings plunged to $155 million from last year's $1.112 billion.
Capital and exploration expenditures for the quarter rose 11% to $6.8 billion from last year. Cash flow from operations and asset sales was nearly $12.2 billion, including asset sales of $1.8 billion.
Among others in the industry, Royal Dutch Shell plc (RDS-A), Europe's largest oil company, posted a loss for the fourth quarter on lower oil prices and lower production volumes due to the impact of the hurricanes. This is the first loss for the company in a decade. The Hague, Netherlands-based company posted a net loss attributable to shareholders of $2.81 billion or $0.44 per basic share, compared to income attributable to shareholders of $8.48 billion or $1.36 per basic share a year-ago. Quarterly revenues declined to $81.07 billion from $106.7 billion a year ago.
Chevron Corp. (CVX), Exxon's biggest U.S. rival, reported fourth-quarter net income of $4.90 billion or $2.44 per share, up from $4.88 billion or $2.32 per share in the year-ago period. Total revenues and other income for the quarter declined to $45.20 billion from $61.41 billion in the prior year quarter.
For the third quarter of 2008, Exxon Mobil reported a 58% surge in profit as summer's record oil prices offset lower production. The company's earnings increased to $14.83 billion or $2.86 per share from $9.41 billion or $1.70 per share in the same quarter last year. Total revenues and other income soared to $137.74 billion from $102.34 billion in the comparable quarter a year-ago. Third-quarter results also benefited from a $1.620 billion gain from the sale of a natural gas transportation business in Germany.
For full year 2008, net income increased to $45.22 billion or $8.69 per share from $40.61 billion or $7.28 per share in 2007, thus creating a U.S. record for annual profit. Revenues and other income advanced to $477.359 billion from $404.552 billion. For full year 2008, the Street expected the energy giant to earn $8.41 per share, on revenues of $456.89 billion.
XOM is currently trading at $78.60, up $1.60 or 2.08%, on 4.35 million shares. For the past year, the stock traded between $56.51 and $96.12.
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