Earnings Round-up: Exxon Sets New Record
IRVING, Texas -- Exxon Mobil Corp., the world's biggest oil company, saw third-quarter profit jump 58 percent, totaling $14.8 billion in net income, as record crude prices resulted in the largest drop in output in at least a decade, Bloomberg News reported.
ExxonMobil’s profit excluding one-time items, such as a gain on a pipeline sale, was an all-time high for any U.S. corporation, and was 18 cents a share higher than the average of 13 analysts’ predictions compiled by Bloomberg News, according to the report. Revenue climbed 35 percent to $137.7 billion, Bloomberg News reported, citing ExxonMobil.
Profit from oil and gas sales climbed 74 percent to $11 billion, and its refineries earned $3 billion during the quarter, a 51 percent increase from a year earlier, as the company increased diesel production to capitalize on higher prices, the report stated.
Though output fell 8.2 percent during the quarter, earnings from oil and gas wells alone were higher than the company's total profit a year earlier, the report stated. Third-quarter crude and natural-gas output equaled 3.6 million barrels of oil a day, the lowest since Exxon Corp. bought Mobil Corp. in 1999, the report stated.
"The picture is more complicated now,'' Todd Petzel, who advises pension funds and endowments with $5.5 billion under management as chief investment officer at Offit Capital Advisors in New York, told Bloomberg News. "They're going to be under pressure to deliver on newer projects that have higher costs than their older assets.''
Meanwhile, it was also a profitable quarter for Royal Dutch Shell Plc, which saw third-quarter current cost of supply (CCS) net profit increase 71 percent to $10.9 billion, as high crude oil prices and asset sales outweighed a 7 percent drop in oil and gas production, to 2.93 million barrels of oil equivalent per day in the quarter, due to hurricane outages in the Gulf of Mexico, new field startups and the impact of production sharing contracts, Reuters reported.
"A good performance. All divisions have performed well. The big driver seems to be the downstream. It was much better than expected," Alexandre Weinberg, analyst at Petercam, told Reuters.
While the upstream operations are the main profits driver, Citigroup said in a research note the smaller downstream division, which refines crude oil and markets fuel to users, was the "standout" performer in the quarter, the report stated. Profits in the division rose 40 percent due to higher refining margins in Europe and strong sales of jet fuel and diesel to commercial customers.
However, earnings from fuel retailing to motorists fell as the company suffered lower sales and could not pass on high fuel prices to customers, a spokesman told the news service.
Another company realizing a strong quarter was El Dorado, Ark.-based Murphy Oil Corp., which saw third quarter net income soar to $584.4 million from $199.5 million in the third quarter of 2007, primarily due to "significantly better" earnings in exploration and production operations, as well as improved earnings in refining and marketing, the company stated.
"Although the lower oil prices seen in recent weeks have curtailed exploration and production earnings, the decline has allowed the refining and marketing business to make a strong contribution to the company’s results of operations in the third and early fourth quarters," Claiborne P. Deming, president and CEO, said in a statement. "Following Hurricanes Gustav and Ike, our Gulf of Mexico production has been hampered by delays in repairs to third-party pipelines."
Murphy Oil’s income contribution from exploration and production was $529.9 million in the third quarter of 2008, compared to $150.8 million in the same quarter of 2007. The company attributed the increase to higher oil sales prices and volumes, which averaged 118,797 barrels per day in the quarter. U.S. production did decline due to Hurricanes Gustav and Ike during the quarter, the company stated.
In its refining and marketing operation, Murphy Oil generated a quarterly profit of $85.8 million during the third quarter, compared to a quarterly profit of $73.2 million a year earlier, on better margins for U.S. marketing operations, according to the company.
San Antonio-based Tesoro Corp. also saw net income jump, totaling $259 million in the third quarter of fiscal 2008, compared to $47 million in the year-ago period, the company stated.
Operating income rose thanks to "significant improvement" in commercial and retail marketing margins, averaging $4.77 per barrel, vs. $2.65 per barrel a year ago. Retail operations income totaled $34 million during the quarter, due to improved fuel margins and increased volumes associated with the purchase of the Shell and USA brand retail assets, according to the company.
"This quarter’s performance highlights our commitment to delivering on our company’s stated goal of lowering crude costs and increasing product netbacks," Bruce A. Smith, chairman, president and CEO, said in a statement. "We recognize that the highs and lows of margins don’t continue indefinitely. The sudden rise in crude prices caused us to make early adjustments to our goal of reducing both operating and crude costs … another early goal was to internally fund our operations and to maintain a strong balance sheet by repaying all of our outstanding borrowings under our revolver. Today, the company is positioned to generate earnings and meet the challenges of slowing global economies."
In other earnings news, Marathon Oil Corp. more than doubled its net income in the third quarter of 2008, generating $2.06 billion, compared to $1.021 billion in the same quarter a year prior.
"Despite volatility in the marketplace, Marathon delivered outstanding operational and financial results across all our business segments in the third quarter 2008," Clarence P. Cazalot, Jr., president and CEO of Marathon, said in a statement. "Our upstream business achieved strong production performance and our downstream segment realized strong profitability, in spite of impacts from Hurricanes Gustav and Ike."
The company’s exploration and production segment earned $939 million in the third quarter 2008, almost double the $479 million reported in the third quarter of last year, primarily due to a 63 percent higher average liquid hydrocarbon price realization and higher sales volumes, according to the company. Sales volumes during the quarter averaged 379,000 barrels of oil equivalent per day, compared to 371,000 barrels of oil equivalent per day for the same period last year, an increase in production despite shutting down the Gulf of Mexico operations for Hurricanes Gustav and Ike.
Marathon’s refining, marketing and transportation segment income reached $771 million in the third quarter, from $482 million in the year-ago period, primarily from a higher refining and wholesale marketing gross margin and partially from a drop in crude oil prices, the company stated.
The company’s Speedway SuperAmerica LLC (SSA) convenience store chain saw gasoline and distillates gross margin per gallon average 16.9 cents in the third quarter of 2008, an increase from the 11.03 cents in the third quarter of 2007. Meanwhile, its same-store gasoline sales volume declined approximately 12 percent during the quarter, and same-store merchandise sales increased by approximately 2 percent during the same period, the company stated.
Also during the quarter, Marathon signed an agreement to sell its 50 percent ownership interest in Pilot Travel Centers LLC (PTC) to Pilot Corp. The transaction, valued at approximately $700 million before tax, was completed during October 2008.
"Importantly, Marathon continues to maintain a strong balance sheet, with substantial cash balances and significant unused credit facility capacity. Furthermore, our liquidity has been further enhanced since Sept. 30, with the proceeds from the sale of our ownership interests in Pilot Travel Centers, which closed in early October, and will additionally benefit from the sale of our non-core Norwegian assets, which is expected to close Oct. 31," Cazalot added. "As a prudent approach to the current business environment, and as part of our ongoing capital discipline, we expect our 2009 capital program to be more than 15 percent lower than 2008 expenditures. We also are continuing the process of evaluating a potential separation of Marathon's businesses, and we're on course for a decision by the end of this year."
ExxonMobil’s profit excluding one-time items, such as a gain on a pipeline sale, was an all-time high for any U.S. corporation, and was 18 cents a share higher than the average of 13 analysts’ predictions compiled by Bloomberg News, according to the report. Revenue climbed 35 percent to $137.7 billion, Bloomberg News reported, citing ExxonMobil.
Profit from oil and gas sales climbed 74 percent to $11 billion, and its refineries earned $3 billion during the quarter, a 51 percent increase from a year earlier, as the company increased diesel production to capitalize on higher prices, the report stated.
Though output fell 8.2 percent during the quarter, earnings from oil and gas wells alone were higher than the company's total profit a year earlier, the report stated. Third-quarter crude and natural-gas output equaled 3.6 million barrels of oil a day, the lowest since Exxon Corp. bought Mobil Corp. in 1999, the report stated.
"The picture is more complicated now,'' Todd Petzel, who advises pension funds and endowments with $5.5 billion under management as chief investment officer at Offit Capital Advisors in New York, told Bloomberg News. "They're going to be under pressure to deliver on newer projects that have higher costs than their older assets.''
Meanwhile, it was also a profitable quarter for Royal Dutch Shell Plc, which saw third-quarter current cost of supply (CCS) net profit increase 71 percent to $10.9 billion, as high crude oil prices and asset sales outweighed a 7 percent drop in oil and gas production, to 2.93 million barrels of oil equivalent per day in the quarter, due to hurricane outages in the Gulf of Mexico, new field startups and the impact of production sharing contracts, Reuters reported.
"A good performance. All divisions have performed well. The big driver seems to be the downstream. It was much better than expected," Alexandre Weinberg, analyst at Petercam, told Reuters.
While the upstream operations are the main profits driver, Citigroup said in a research note the smaller downstream division, which refines crude oil and markets fuel to users, was the "standout" performer in the quarter, the report stated. Profits in the division rose 40 percent due to higher refining margins in Europe and strong sales of jet fuel and diesel to commercial customers.
However, earnings from fuel retailing to motorists fell as the company suffered lower sales and could not pass on high fuel prices to customers, a spokesman told the news service.
Another company realizing a strong quarter was El Dorado, Ark.-based Murphy Oil Corp., which saw third quarter net income soar to $584.4 million from $199.5 million in the third quarter of 2007, primarily due to "significantly better" earnings in exploration and production operations, as well as improved earnings in refining and marketing, the company stated.
"Although the lower oil prices seen in recent weeks have curtailed exploration and production earnings, the decline has allowed the refining and marketing business to make a strong contribution to the company’s results of operations in the third and early fourth quarters," Claiborne P. Deming, president and CEO, said in a statement. "Following Hurricanes Gustav and Ike, our Gulf of Mexico production has been hampered by delays in repairs to third-party pipelines."
Murphy Oil’s income contribution from exploration and production was $529.9 million in the third quarter of 2008, compared to $150.8 million in the same quarter of 2007. The company attributed the increase to higher oil sales prices and volumes, which averaged 118,797 barrels per day in the quarter. U.S. production did decline due to Hurricanes Gustav and Ike during the quarter, the company stated.
In its refining and marketing operation, Murphy Oil generated a quarterly profit of $85.8 million during the third quarter, compared to a quarterly profit of $73.2 million a year earlier, on better margins for U.S. marketing operations, according to the company.
San Antonio-based Tesoro Corp. also saw net income jump, totaling $259 million in the third quarter of fiscal 2008, compared to $47 million in the year-ago period, the company stated.
Operating income rose thanks to "significant improvement" in commercial and retail marketing margins, averaging $4.77 per barrel, vs. $2.65 per barrel a year ago. Retail operations income totaled $34 million during the quarter, due to improved fuel margins and increased volumes associated with the purchase of the Shell and USA brand retail assets, according to the company.
"This quarter’s performance highlights our commitment to delivering on our company’s stated goal of lowering crude costs and increasing product netbacks," Bruce A. Smith, chairman, president and CEO, said in a statement. "We recognize that the highs and lows of margins don’t continue indefinitely. The sudden rise in crude prices caused us to make early adjustments to our goal of reducing both operating and crude costs … another early goal was to internally fund our operations and to maintain a strong balance sheet by repaying all of our outstanding borrowings under our revolver. Today, the company is positioned to generate earnings and meet the challenges of slowing global economies."
In other earnings news, Marathon Oil Corp. more than doubled its net income in the third quarter of 2008, generating $2.06 billion, compared to $1.021 billion in the same quarter a year prior.
"Despite volatility in the marketplace, Marathon delivered outstanding operational and financial results across all our business segments in the third quarter 2008," Clarence P. Cazalot, Jr., president and CEO of Marathon, said in a statement. "Our upstream business achieved strong production performance and our downstream segment realized strong profitability, in spite of impacts from Hurricanes Gustav and Ike."
The company’s exploration and production segment earned $939 million in the third quarter 2008, almost double the $479 million reported in the third quarter of last year, primarily due to a 63 percent higher average liquid hydrocarbon price realization and higher sales volumes, according to the company. Sales volumes during the quarter averaged 379,000 barrels of oil equivalent per day, compared to 371,000 barrels of oil equivalent per day for the same period last year, an increase in production despite shutting down the Gulf of Mexico operations for Hurricanes Gustav and Ike.
Marathon’s refining, marketing and transportation segment income reached $771 million in the third quarter, from $482 million in the year-ago period, primarily from a higher refining and wholesale marketing gross margin and partially from a drop in crude oil prices, the company stated.
The company’s Speedway SuperAmerica LLC (SSA) convenience store chain saw gasoline and distillates gross margin per gallon average 16.9 cents in the third quarter of 2008, an increase from the 11.03 cents in the third quarter of 2007. Meanwhile, its same-store gasoline sales volume declined approximately 12 percent during the quarter, and same-store merchandise sales increased by approximately 2 percent during the same period, the company stated.
Also during the quarter, Marathon signed an agreement to sell its 50 percent ownership interest in Pilot Travel Centers LLC (PTC) to Pilot Corp. The transaction, valued at approximately $700 million before tax, was completed during October 2008.
"Importantly, Marathon continues to maintain a strong balance sheet, with substantial cash balances and significant unused credit facility capacity. Furthermore, our liquidity has been further enhanced since Sept. 30, with the proceeds from the sale of our ownership interests in Pilot Travel Centers, which closed in early October, and will additionally benefit from the sale of our non-core Norwegian assets, which is expected to close Oct. 31," Cazalot added. "As a prudent approach to the current business environment, and as part of our ongoing capital discipline, we expect our 2009 capital program to be more than 15 percent lower than 2008 expenditures. We also are continuing the process of evaluating a potential separation of Marathon's businesses, and we're on course for a decision by the end of this year."