Huffpost Business

Oil Profits Shatter Records

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HOUSTON — Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion Thursday, the biggest profit from operations ever by any U.S. corporation, but the results were well short of Wall Street expectations and its shares slumped 3 percent.

The world's largest publicly traded oil company said net income for the April-June period came to $2.22 a share, up from $10.26 billion, or $1.83 a share, a year ago.

Revenue rose 40 percent to $138.1 billion from $98.4 billion in the year-earlier quarter.

Excluding an after-tax charge of $290 million related to an Exxon Valdez court settlement, earnings amounted to $11.97 billion, or $2.27 per share.

Analysts on average expected Exxon Mobil to earn $2.52 a share on revenue of $144 billion, according to a survey by Thomson Financial. The estimates typically exclude one-time items.

The record-setting results were largely expected, given that crude prices in the second quarter were nearly double what they were a year ago. Natural gas prices were significantly higher too.

But investors expected even bigger profits Thursday, especially after Europe's Royal Dutch Shell reported a 33 percent jump in second-quarter earnings to $11.6 billion, which fell just shy of Exxon's own record earnings from 2007.

Exxon Mobil shares fell $2.64, or 3.13 percent, to $81.74 in afternoon trading.

Setting U.S. profit records has become commonplace for Irving-based Exxon Mobil. The $11.68 billion topped its own U.S. record of $11.66 billion, posted in the fourth quarter of last year. Right behind that was the $10.9 billion it reported to start 2008.

In fact, if one-time gains like bankruptcy settlements and spinoffs are stripped away from other companies, Exxon Mobil owns the record for the top 10 most-profitable quarters for a U.S. company, as well as the largest annual profit.

United Airlines' UAL Corp. reported first-quarter profits of $22.9 billion in 2006, but that reflected a bankruptcy settlement, not true profit. The airline would have posted a $306 million loss if those gains were stripped out.

Ford Motor Corp. reported profits of $17.6 billion in the first quarter of 1998, but that included a $16 billion, one-time gain from the spinoff of Associates First Capital.

Exxon Mobil, which produces 3 percent of the world's oil, got its biggest boost from its exploration and production arm, where earnings rose 68 percent to $10.01 billion from $5.95 billion a year ago. The main driver was record crude prices, partially offset by lower sales volumes and higher operating costs.

Once again, Exxon Mobil's results revealed a troubling trend at the heart of its business.

Production on an oil-equivalent basis fell 8 percent from a year ago _ a significant blow for a company that generates more than two-thirds of its earnings from oil and gas production. That follows an opening quarter of 2008 when the company said overall production fell 5.6 percent from a year ago.

Excluding last year's loss of its Venezuelan assets, a labor strike in Nigeria and lower volumes because of production-sharing contracts, Exxon said production was down about 3 percent in the most-recent quarter.

Like its competitors, Exxon Mobil said it took a beating from lower global refining margins. Earnings from refining and marketing fell 54 percent in the quarter to $1.55 billion.

For the first six months of 2008, Exxon Mobil said it earned $22.57 billion, or $4.25 a share, from $19.54 billion, or $3.45 a share, in the first half of 2007. Revenue rose to $254.9 billion from $185.5 billion.