Oil profits continue to bubble

DALLAS – Exxon Mobil said today it earned $10.36 billion in the April-June period, the second largest quarterly profit ever recorded by a publicly traded U.S. company.

The earnings figure was 36 percent above the profit it reported a year ago. High oil prices and the growing global appetite for fuel helped boost the company's revenue by 12 percent to a level just short of a quarterly record. Its shares briefly rose to a new high.

"We continue to see demand growth year over year," Henry Hubble, Exxon's vice president of investor relations told analysts. "We're selling everything we can make."

And as long as oil prices continue to climb, look for more record quarters, said Fadel Gheit, analyst for Oppenheimer.

"The rising tide lifts all boats, including the biggest of them all. Unless there is a price collapse of oil, you will see the second half of the year best its first half," Gheit said.

Exxon Mobil's report comes as many drivers in the U.S. are paying $3 for a gallon of gas — increasing the likelihood of further political backlash in Washington, D.C.

But the company isn't alone. Royal Dutch Shell said earlier today that second-quarter earnings jumped 40 percent to $7.32 billion as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

Other oil companies reported big numbers for the quarter this week as well. BP reported its quarterly profit rose 30 percent to $7.3 billion and ConocoPhillips said its earnings rose 65 percent to $5.18 billion. Chevron will round the field of five majors when it reports its second-quarter performance Friday.

These five were expected to earn an estimated $33.6 billion, or a 32 percent boost, according to analysts surveyed by Thomson Financial. Already the first four have reported earning $30.16 billion.

Exxon Mobil, the world's largest oil company by market capitalization, said earnings amounted to $1.72 per share in the second quarter compared with a profit of $7.64 billion, or $1.20 per share, a year ago.

The results topped Wall Street expectations but came in behind Exxon Mobil's record profit of $10.71 billion set in the fourth quarter of 2005.

Analysts polled by Thomson Financial expected the company to earn $1.64 per share.

Revenue rose to $99.03 billion from $88.57 billion in the prior-year quarter. That was short of Exxon Mobil's record third-quarter revenue of $100.72 billion — which also stands as record revenue generated by any U.S. public company ever in a single quarter.

Its shares rose 54 cents to $67.14 in afternoon trading after reaching a new all-time high of $67.65 earlier in the session.

Exxon Mobil said it spent $4.9 billion on capital and exploration projects during the quarter, up 8 percent from a year ago, while distributing $7.9 billion to shareholders in the form of dividends and share repurchases. Congress has been urging the big oil companies to put more of their profits toward boosting the supply of energy for consumers.

Hubble told analysts that Exxon will boost this kind of spending from the previously stated $19 billion by another $1 billion this year. He attributed the additional investment to increased drilling moreso that rising costs.

He offered no guidance for 2007 or years thereafter, however.

Royal Dutch Shell, Europe's second-largest oil company, said its net profit rose to $7.32 billion from $5.24 billion a year earlier. Sales rose less than 1 percent to $83.1 billion from $82.6 billion.

Chief Executive Jeroen van der Veer said in a statement the earnings were "underpinned by overall good operational performance and not simply high energy prices."

Still, the main reason for the increase was higher oil prices, with earnings at Shell's oil exploration and production arm leaping to $4 billion from $2.75 billion, despite an 8 percent drop in production to 3.25 million barrels a day.

Shell said that excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.

Shell is missing around 180,000 barrels per day in Nigeria because of recent attacks, and said Thursday it couldn't confidently predict when production will resume.

Van der Veer said that despite a pipeline rupture this week, possibly due to an attack by militants, the company has no intention of scaling back operations in the West African nation. "We are not afraid to invest in Nigeria," he said.

The Niger Delta region has been the scene of frequent disputes for years between oil companies and communities that demand a greater share of the wealth of Africa's largest crude producer. At least 31 expatriate workers have been held hostage by a variety of militant groups so far this year.

Shell's results beat earnings estimates compiled by Dow Jones, which had predicted a 17 percent rise in earnings, helped by strong refining margins. Shares rose 1.9 percent to 27.89 euros in Amsterdam trading.

Shell's 2004-2005 accounting scandal, in which it was forced to repeatedly reduce the size of its proven oil reserves, continued to affect the company's earnings and prospects.

The company said Thursday it had reserved $500 million in the second quarter to pay shareholder class-action lawsuits.

Shell has also been spending heavily to restore reserves, planning investments of $19 billion in 2006, and $21 billion in 2007, most of it in exploration and production.

But in 2005, the company pumped more oil than it added to proven reserves, and in Shell's 2005 annual report those reserves stood at around 11.5 billion barrels.

With Thursday's earnings, Shell said it has added "at least" 48 billion barrels of oil to unproven reserves via acquisitions in Canada in the first half of 2006, at a combined cost of some $2.6 billion.