Los Angeles Times
February 2, 2008
by Elizabeth Douglass, Times Staff Writer
Exxon and Chevron both see profits soar
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
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
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."
Shares of Exxon fell 45 cents Friday to $85.95, and Chevron’s declined 76 cents to $82.49.
Bloomberg News was used in compiling this report.
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