Saturday, 29 January 2011

New Oil Fields and Tax Gain Help Exxon Hit Record Profit

ExxonMobil, the world's biggest stock-listed oil group, yesterday wiped away some of the pessimism surrounding its business by unveiling $17bn (£9.4bn) annual profits - the biggest in corporate history.

The Texan oil firm, under fire from environmentalists and the courts, took full advantage of booming crude prices but also benefited from a large tax gain, plus a rebound in chemical earnings.

Exxon reported net income of $6.65bn - up 60% - with the help of a $2.23bn bonus from the Internal Revenue Service in settlement of a long-running tax dispute.

The strong result puts added pressure on rival Shell, which reports next week, and BP, on February 10, while raising Exxon morale, which was hit by a $6.75bn clean-up bill from an Anchorage court over its Valdez tanker spill in Alaska.

The Texan company is also happy to switch attention away from renewed criticism by environmentalists, who claim to have calculated that the company has been responsible for 5% of certain global warming emissions.

Fadel Gheit, oil analyst with the Fahnestock brokerage in New York, described the financial performance of Exxon as "stellar" and said it was the perfect riposte to those worried about the court judgment.

"When things get tough, the tough get going. This is a stellar result which Shell and BP will have to match if they don't want to be relegated to second class citizens," he said.

First-quarter revenue at Exxon was up 17% to $66bn but total worldwide production fell by 0.6% to 4.41m barrels a day, bringing questions about where the group's future earnings will come from.

Exxon blamed lower output from mature wells in North America but it benefited from new fields and extra production from Opec countries.

The biggest surprise came from the chemical division where profits surged from $76m to $476m, the best performance in five years.

Shares in the company increased 1% to $41.22 in a falling market.

On Wednesday an Anchorage district court increased its punitive damages award against Exxon for the 1989 oil spill. The company has already spent $3.5bn on cleaning.

Friends of the Earth said research showed Exxon had caused 5% of global man-made climate changing carbon dioxide emissions over the past 120 years but Exxon dismissed the research as "absurd".

© Guardian News & Media 2008
Published: 1/29/2004