Bloomberg News

Exxon Profit Rises as Chemical Earnings Offset Crude Price Drop

April 25, 2013

Exxon Mobil Corp. (XOM:US), the world’s largest company by market value, said net income rose as widening chemical margins made up for lower crude production and prices.

First-quarter profit was $9.5 billion, or $2.12 a share, compared with $9.45 billion, or $2 a year earlier, the Irving, Texas-based company said in statement today. Exxon was expected to report per-share net income of $2.05, based on the average of 19 analysts’ estimates compiled by Bloomberg.

Chairman and Chief Executive Officer Rex Tillerson has been acquiring North American gas and oil fields and expanding exploration in Russia, Africa and the Gulf of Mexico to stem production declines that the company has said will extend through the end of this year. Exxon’s global output will fall 1 percent this year after dropping by 5.9 percent in 2012, the company said in a March 6 slide presentation to analysts.

Exxon hasn’t turned new discoveries into producing fields quickly enough to replace shrinking output from assets that have been pumping oil and gas for decades.

The company’s Kearl oil-sands development in Canada that is expected to produce 3.2 billion barrels over the next three decades has been beset by equipment-transport and weather delays. The project was expected to produce its first batch of pipeline-ready crude “within days,” Pius Rolheiser, a spokesman for Exxon’s Imperial Oil Ltd. (IMO) unit, said on April 23.

Share Performance

Exxon underperformed its biggest U.S. rival, Chevron Corp. (CVX:US), and the broader market during the first quarter, advancing 4.1 percent. During that period, Chevron increased 9.9 percent and the Standard & Poor’s 500 Index rose 10 percent.

Crude demand declined or stagnated during the first three months of the year in Europe’s largest economies as well as Japan and South Korea, the Paris-based International Energy Agency said in a March 13 report. Brent crude futures, the benchmark for two-thirds of the world’s oil, averaged $112.61 a barrel during the quarter, down 4.9 percent from $118.45 a year earlier.

Exxon relies on oil and gas sales outside the U.S. for 71 percent of its operating earnings, more than any major U.S. oil producer aside from Marathon Oil Corp. (MRO:US), Paul Cheng, an analyst at Barclays, said in an April 8 note to clients. Houston-based Marathon counts on foreign oil and gas sales for 77 percent of its operating earnings, according to Cheng.

Gas Futures

The impact of lower crude prices was partly blunted by higher gas prices in the U.S., where Exxon is the biggest producer of the furnace and power-plant fuel. Gas futures traded on the New York Mercantile Exchange averaged $3.478 per million British thermal units during the January-to-March period, up 39 percent from the year-earlier period, according to data compiled by Bloomberg. Exxon became the pre-eminent U.S. gas supplier in 2010 after its $34.9 billion acquisition of XTO Energy Inc. vaulted the company past Chesapeake Energy Corp. (CHK:US)

Exxon’s worldwide gas production will decline by 5 percent this year, the company told analysts last month. Shares rose 0.2 percent to $89.43 yesterday in New York.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • XOM
    (Exxon Mobil Corp)
    • $93.64 USD
    • 2.48
    • 2.65%
  • CVX
    (Chevron Corp)
    • $112.93 USD
    • 3.90
    • 3.45%
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