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Higher oil prices lift ExxonMobil's profit

August 10, 2014


ExxonMobil Corp, the world's largest publicly traded oil company, reported a stronger-than-expected quarterly profit as higher prices for its crude and natural gas offset a 6 per cent drop in production.Exxon has struggled in recent quarters to replenish its reserves quickly, investing in massive new projects in Russia and Papua New Guinea that take years to develop.Meanwhile, many of its smaller, more-nimble peers have aggressively developed shale formations around North America, fuelling massive production and exciting Wall Street."Declining production is a recurring theme for ExxonMobil," said Edward Jones analyst Brian Youngberg. "The company remains growth-challenged, and a lot of that is due to their large size."Adding to the company's challenges are Western sanctions against Russia, since Exxon is more involved in that country than any other US oil company.Lukoil, Russia's second-largest oil producer, said that the sanctions would force it to slash capital spending due to limited access to funds. Exxon is partnering with Lukoil peer Rosneft to develop a large oil field off the eastern Russian coast, and analysts said Lukoil's announcement could be the harbinger of funding challenges for the entire industry in Russia.Exxon said net income rose to $8.78 billion, or $2.05 per share, from $6.86 billion, or $1.55 per share, a year earlier.Analysts on average had expected earnings of $1.86 per share, according to Thomson Reuters I/B/E/S.Part of the increase in profit was due to a gain from Exxon's sale of its 60 per cent stake in a Hong Kong utility and power storage firm earlier this year. Unlike others on Wall Street, Exxon does not typically offer an "adjusted" earnings number. Youngberg said that if the company had backed out the gain from the Hong Kong sale, its profit would have missed expectations.Production fell 6 per cent to 3.8 million barrels of oil equivalent per day. While the drop is not a positive, investors should not see it as the beginning of a negative trend, said Oliver Pursche of Gary Goldberg Financial Services, who manages Exxon shares for clients."The bigger question beyond production is what their future exploration looks like," he said. "And I would say there's certainly opportunity there for them to make up for this dip in production with fresh reserves."The average price that Exxon receives for its crude oil jumped 3 per cent in the United States and 5 per cent internationally during the quarter.

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Source: Oil & Gas News

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