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THE NEW YORK TIMES: High Energy Prices Boost 3 Oil Companies: “Repeated restatements of its oil reserves last year cost Shell, one of the world's largest oil producers with BP PLC and Exxon Mobil, almost $150 million in fines imposed by U.S. and British regulators and led to the dismissal of three senior executives.”: Friday 29 July 2005 



Published: July 29, 2005

Filed at 1:42 a.m. ET


DALLAS (AP) -- Two of the world's largest oil companies, Exxon Mobil Corp. and Royal Dutch Shell PLC, said Thursday that second-quarter profits rose by about one-third, buoyed by high energy prices and higher worldwide consumption. The companies improved their earnings despite rising costs and lower output of oil and natural gas.


Marathon Oil Corp., a smaller player in the energy business, also benefited from soaring energy prices in the second quarter, achieving 91 percent earnings growth.


''It was a good day for oil,'' said Fadel Gheit, an analyst at Oppenheimer & Co. in New York.


However, the mammoth quarterly profits at Exxon Mobil and Royal Dutch Shell -- more than $7 billion and $5 billion, respectively -- fell short of analysts' expectations and there is some concern on Wall Street about the oil giants' flagging output.


''The earnings that are coming out have been for the most part very impressive, near record levels, so whether they meet consensus or come up short, is less important in my mind,'' said Jacques Rousseau, analyst from Friedman, Billings, Ramsey & Co.


But ''there are some concerns over big oil companies not growing production,'' he said.


Shares of Exxon Mobil rose 40 cents to $60 on the New York Stock Exchange. Royal Dutch Shell's stock price fell 31 euros (37 cents) to close at 24.75 euros ($29.70) on the Euronext stock exchange.


A major factor underpinning profit growth at major petroleum companies is the soaring cost of crude oil, which traded above $50 a barrel on world markets for much of the quarter. Lucrative transportation fuels such as gasoline, diesel and jet fuel are also trading at near-record heights and demand is rising globally as a result of economic growth.


In the United States, the average retail price of unleaded gasoline is $2.29 per gallon, an increase of 38 cents from a year ago. Diesel, which keeps the trucking industry humming, is selling for $2.34 a gallon, up 59 cents from last year.


Exxon Mobil, the world's largest publicly traded oil company, said Thursday that net income in the April-June quarter rose 32 percent to $7.64 billion, with gains coming from exploration and production, refining and sales of gasoline and other fuels. Revenue climbed 25 percent to $88.6 billion.


Exxon's net profit was equivalent to $1.20 per share. Excluding one-time items, earnings totaled $1.23 per share, a penny shy of the consensus estimate of analysts surveyed by Thomson Financial.


With world oil prices trading above $50 a barrel for much of the quarter, Exxon's profit from exploration and production jumped $1 billion to $4.9 billion in spite of a 4 percent decline in output.


Gheit, said the segment stood out, but he still thought the figures should have been higher. ''The underlying cost structure for Exxon and the industry is definitely rising -- and it could be rising pretty fast,'' he said.


A steep rise in the price of gasoline, diesel and other fuels enabled Exxon to increase its earnings from refining and retail sales by $714 million to $2.2 billion. Its chemicals business reaped $814 million, up $207 million from a year earlier.


The newly merged Royal Dutch Shell announced a 34 percent increase in second-quarter profit to $5.24 billion. That was below analysts' expectations of $5.509 billion.


Revenue jumped 33 percent to $82.64 billion, according to the Anglo-Dutch company, which reported earnings as a single entity for the first time on Thursday following last week's unification of its parents, Shell Transport & Trading and Royal Dutch Petroleum.


Shell's quarterly profit from exploration and production surged 48 percent to $2.7 billion even as output declined by 1.5 percent. Still recovering from last year's scandal over the downward revision of its oil reserves, Shell said it plans to boost spending on exploration to an $1.8 billion in 2005 and 2006, up from $1.5 billion in 2004.


Repeated restatements of its oil reserves last year cost Shell, one of the world's largest oil producers with BP PLC and Exxon Mobil, almost $150 million in fines imposed by U.S. and British regulators and led to the dismissal of three senior executives.


''We know we have much more to do, including improving project management,'' said Chief Executive Jeroen van der Veer. ''We are working very hard with a strong sense of purpose and I expect to see steady improvement.''


Gheit said the company's latest results are evidence that they are ''finally putting their house in order.''


In Houston, oil and gas producer Marathon reported earnings of $673 million, compared with $352 million in the year-ago period. Its revenue rose rose 28 percent to $16.1 billion.


Stripping out special items, Marathon reported adjusted earnings of $755 million, or $2.16 per share. The results soundly beat analysts' expectations for a profit of $1.57 per share.


Shares of Marathon climbed $1.11 to $58.99 on the NYSE.


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