Last year, Exxon made $4.5 million an hour

WASHINGTON — It was a hard act to follow, but Exxon Mobil managed an encore.

After ringing up the biggest annual profit in U.S. corporate history in 2005, Exxon Mobil on Thursday announced that it topped that number in 2006. Riding the wave of high crude-oil and gasoline prices, and despite depressed fourth-quarter earnings, the company reported a $39.5 billion profit, up more than 9 percent from the previous year.

Its revenue of $377.6 billion exceeded the gross domestic product of all but 25 countries.

Exxon Mobil's vice president for public and governmental affairs, Kenneth Cohen, made a spirited defense of the company's record. "Yes, the earnings are certainly large," Cohen said. "But so are our capital expenditures, and so are the challenges for the industry to find and produce the energy ... we need to keep the economy humming."

The same forces that drove up oil prices could push them down in other years, he added. "The industry is huge, and the company is huge. But it's cyclical," he said.

Not everyone is applauding the performance, though. Rep. Edward Markey, D-Mass., called the profits "outlandish" and took the opportunity to blast the Bush administration.

Exxon Mobil's record profit is "the direct result of a Bush energy policy that for seven years has used every lever of the American government to tilt the scales toward satisfying the special-interest demands of a single industry at the expense of the public interest," Markey said, noting the companies have not paid all royalties required of them for drilling on federal land.

Liberal economist Dean Baker, co-director of the Center for Economic and Policy Research, called the earnings a "huge bonanza" and said Congress should adopt a windfall-profits tax.

"They're benefiting from the bad luck that's hit the rest of us," he said.

Some analysts, however, said out-of-this-world profits may not last. Lower commodity prices that sank their teeth into Exxon Mobil's fourth quarter may linger for at least the first part of this year, even as the cost of doing business increases because of factors such as a shortage of drilling equipment and labor.

So while big players such as Exxon Mobil, Chevron and ConocoPhillips — first, second and third, respectively, among integrated U.S. oil companies — are expected to continue to rake in piles of cash, the totals aren't likely to be the eye-popping amounts of recent quarters.

"I'd say overall, if you look for earnings to decline 5 to 15 percent from the huge highs this past year, you're probably going to see most of these companies fall within that range," said John Parry, a senior analyst at energy consulting firm John S. Herold Inc.

Irving, Texas-based Exxon Mobil is the world's largest oil company not owned by a foreign government. It is in a capital-intensive business, and the company's capital-spending budget last year was $19.9 billion, up 12.2 percent from 2005, in part because of higher costs.

The company credited its level of spending in past years, when prices were lower, for contributing to the increase of 172,000 barrels a day, or 4 percent, in its oil and gas production in 2006.

New crude-oil production off the coasts of Nigeria and Angola, and in the Norwegian North Sea, Russia's Sakhalin Island and Abu Dhabi offset drops in older, declining fields.

Crude-oil output is key to the success of the company. Exxon Mobil said it produced 2.7 million barrels a day in 2006, and oil-and-gas production accounted for $26.2 billion, or two-thirds of the company's profit.

Henry Hubble, vice president of investor relations, said the company received $51.26 a barrel for its oil in the fourth quarter, down from $62.07 in the third quarter, and down about $1 from the fourth quarter of 2005. He said the after-tax earnings on that production was $15.99 a barrel.

Analysts were impressed with the company's earnings, and most are recommending that investors buy shares. Exxon Mobil "remains amongst the most attractive of the super majors," Doug Leggate, an oil analyst at Citigroup, said in a note to investors.

Its fourth-quarter earnings, even after removing special one-time earnings, still beat analysts' estimates handily.

Leggate and other analysts cautioned that Exxon Mobil's earnings depended heavily on international events, some of which could drive oil prices and others that could hurt the company's far-flung operations.

Venezuelan President Hugo Chávez said Thursday that Venezuela intends to take control of "no less than 60 percent" of four heavy-crude joint ventures in the country's eastern Orinoco Belt by May 1.

Exxon Mobil owns a portion of those operations. Hubble said Thursday that Exxon Mobil would prefer to retain its current level of ownership, but that it would seek an "amicable resolution" that would "maintain shareholder value" in the projects.

The decline in oil prices in the last three months of 2006 meant a dip in Exxon Mobil's fourth-quarter results. The company said it earned $9.84 billion, or $1.69 a share, in the period — down from $10.3 billion, or $1.65 a share, during the fourth quarter of 2005.

The company also spent lavishly to buy back its shares last year, boosting the net income per share. Exxon Mobil said it spent $8.4 billion during the fourth quarter to buy back about 115 million shares.

During all of 2006, the company spent $25 billion buying back its stock, more than its capital-spending budget. But it has no shortage of cash for new projects; the company finished the year with $33 billion in cash and $8 billion in debt.

Exxon Mobil was not the only company benefiting from high oil prices in 2006. On Thursday alone, three other companies — Royal Dutch Shell, Marathon Oil and Valero Energy — also reported best-ever full-year profits. The four companies had combined earnings of $75.6 billion last year.

Last week, ConocoPhillips said its $15.5 billion profit in 2006 topped its previous record from 2005 by about $2 billion.

Chevron is scheduled to report 2006 results today.

Oil companies now occupy six of the top 10 positions on the list of the world's biggest publicly traded companies measured by revenue.

Material from The Associated Press is included in this report.