Two of the world's largest energy companies saw their oil production fall during the third quarter, but each benefited from strong sales of processed fuels.
Exxon Mobil Corp.'s third-quarter earnings fell 7 percent from a year ago on declining oil production, the company reported Thursday.
Royal Dutch Shell said its overall earnings rose 2 percent compared with the July-September quarter a year ago. Production fell at both companies because of interruptions and other down time, but they have large projects looming that should provide substantial boosts in the coming years, analysts said.
"These are project-driven businesses," said Pavel Molchanov, an analyst for Raymond James. "In other words, these are not companies where a few extra wells in the Bakken, for example, will move the needle."
That hasn't stopped each of the companies from investing in large chunks of land in North Dakota's Bakken and other U.S. shale plays, as they continue to move toward development of larger projects.
Irving-based Exxon Mobil, the world's largest publicly traded oil company, reported net income of $9.57 billion, down from $10.33 billion in the third quarter a year ago. Earnings per share were $2.09, down from $2.13 a year ago.
Production fell 7.5 per- cent year-over-year, the company said. One of the main reasons for the earnings drop was a lack of asset sales in the quarter. Sales in the third quarter of 2011 gave the company a $1 billion boost in earnings.
Still, the decline in production added to a string of recent disappointments from Exxon Mobil's exploration and production division, said Brian Youngberg, energy analyst for Edward Jones in St. Louis.
"It's an ongoing thread," he said. "The problem is Exxon Mobil is so big it's hard for them to move the needle without numerous projects coming online."
Exxon Mobil's earnings for its exploration and production division were $6 billion, down $2.4 billion from the same period in 2011. The company was buoyed by strong performance from its refining arm, which matched an industry trend of gains from companies that are processing lower-cost crude in North America.
Unplanned outages and down time at some of its operations, specifically in the North Sea and Kazakhstan, hurt production, said David Rosenthal, Exxon Mobil's vice president of investor relations, during a conference call with analysts.
Large projects poised to come online beginning next year -- including the Kearl oil sands development in Canada -- will likely bring surges of production, Youngberg said.
Royal Dutch Shell
Shell's earnings rose from $7 billion a year ago to $7.1 billion in the third quarter of 2012. The company benefited from a 4 percent jump in sales of liquefied natural gas.
Overall production for the Anglo-Dutch company held about even at 3 million barrels a day of oil equivalent, but production of oil and other liquids fell 5 percent.
Exxon Mobil has maintained a shift away from natural gas production in North America, where low prices have influenced dramatic drops in rigs drilling for the resource.
The vast majority of Exxon Mobil's rigs in North America are drilling for oil.
"We'll continue to have this focus on the liquids-rich plays," Rosenthal said, adding that some rigs had to continue operating in natural gas plays because of lease obligations and contractual commitments.
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