Exxon misses projections amid lower demand and sinking refining margins

[6SpeedTA95]

NEW YORK (CNNMoney.com) -- Record oil prices netted Exxon Mobil a $10.89 billion profit in the first three months of the year, sharply higher than a year earlier but short of Wall Street estimates and below what was needed to set a new all-time profit record.

The profit was still enough to be the second-highest U.S. corporate profit on record, falling just short of the record $11.66 billion Exxon Mobil (XOM, Fortune 500) earned in the fourth quarter. The profit came to $1,385 a second, enough to buy nearly 382 gallons of gas at current prices.

The sheer size of the Exxon profit reported Thursday will still likely attract attention from consumer groups and lawmakers, who have been arguing for higher taxes on oil companies amid soaring gas and oil prices.

Both contenders for the Democratic presidential nomination - Hillary Clinton and Barack Obama - want to slap a "windfall profit" tax on oil companies and use the money for either renewable energy research or to help low income people pay gas bills.

Several lawmakers in Congress, mostly Democrats, have tried to eliminate oil company tax breaks and use the money to fund renewables.

So far, those efforts have gone nowhere, blocked by lawmakers and the Bush administration who say higher taxes will result in less domestic drilling and a greater reliance on imported oil.

But with gasoline prices setting a new record every day, the political pressure is mounting on lawmakers to do something.

Why record oil doesn't mean record profits

It was actually gasoline prices that caused Exxon to miss estimates Thursday. While nationwide gas prices are at record highs, they have not risen as fast as oil prices.

Gasoline, with a nationwide average of $3.62 a gallon, costs about 20% more than it did a year ago, according to the motorist organization AAA.

But oil, at $113 a barrel Thursday, costs over 75% more than it did a year ago.

Exxon - which makes more gas than it produces oil - saw less profit than expected because it has to pay more to buy that crude oil.

"Higher crude oil and natural gas realizations, driven by record worldwide crude oil prices, were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs," Rex Tillerson, the company's chief executive, said in a statement.

Exxon, by the numbers

Exxon posted first-quarter net income of $10.89 billion, or $2.03 a share. That's up 17% from the $9.28 billion, or $1.62 a share it earned a year earlier, but it missed the earnings per share consensus forecast of $2.14 from analysts surveyed by earnings tracker First Call.

Revenue hit $116.85 billion, up 34% from a year earlier when sales hit $87.2 billion. The revenue was short of forecasts of $124.4 billion.

Exxon spent $8 billion buying back shares in the first quarter. Companies buy back shares to increase the value of the remaining shares outstanding.

Including dividends, the company returned $9.9 billion to shareholders this quarter.

Exxon said it spent $5.5 billion on finding and developing new sources of oil and gas, up 30% from a year ago.

Exxon has been criticized for not spending enough money of finding new oil and - especially - not investing enough in renewable resources.

Exxon has long maintained that it is an oil company, and renewable technologies should be left to renewable energy companies.

Despite Exxon's investments in finding new oil, the company said "liquids production," includes oil, fell 6% in the quarter, even excluding things such as OPEC production quotas or seizures in Venezuela.

That drop will likely be noticed by proponents of the "peak oil" theory, who contend world oil production has peaked and will run out in fairly short order.

Many analysts - Exxon executives - say the oil is there, it's just held in countries not particularly friendly to U.S. oil firms.

Exxon Mobil profit soars but misses Wall Street targets - May. 1, 2008


This is an example of how higher oil prices are also hurting the energy companies. Their ROA, ROE and margins are suffering, ExxonMobil is the most efficient company in the industry and its affected them now. Other companies like ConocoPhillips and Chevron are being hit substantially harder than ExxonMobil.

Oil company execs have said numerous times that prices are too high, all this talk that they somehow control their prices is BS and this along with the terrible collapse in the 80s/90s is more proof of just the same.

The good news is prices will probably start coming down if the dollar continues to gain strength over the next few years. As prices fall to 60 to 80 dollars per barrel refining margins will go back up and overall prices are still lower for consumers. Hopefully we'll see that take place in the next 18 months or so.

[thewise1]

Someone is going to come in here and say "cry me a river, they still made almost 11 billion".

That prediction aside, the discussion surrounding punishing them for making profit by taxing them more makes me sick. Looters, every one of them. Go make your own money instead of complaining because a company was successful.

[A_C_E]

Originally Posted by thewise1

Someone is going to come in here and say "cry me a river, they still made almost 11 billion".

That prediction aside, the discussion surrounding punishing them for making profit by taxing them more makes me sick. Looters, every one of them. Go make your own money instead of complaining because a company was successful.

Wouldn't it be a justifiable statement to make?

6 wants to make the claim that the oil companies are being "hurt" by higher oil costs. I would say, well, they still had the second-highest quarterly profit for ANY UNITED STATES CORPORATION, EVER. Who the fuck cares if it missed projections? They banked more than $10B in profits when oil costs are at their highest rates in years. There's nothing wrong with a company being successful, Mr. Libertarian. But when everyone in America is suffering (consumers, producers, "industry champions" and politicians alike), and XOM is yanking in record profits, it's ok to be annoyed. You said it yourself, oil costs are going to hurt your ability to commute to work. You don't have to roll over and accept that because it's "what business wants."

Cry me a fucking river, indeed.

[6SpeedTA95]

Originally Posted by A_C_E

Wouldn't it be a justifiable statement to make?

6 wants to make the claim that the oil companies are being "hurt" by higher oil costs. I would say, well, they still had the second-highest quarterly profit for ANY UNITED STATES CORPORATION, EVER. Who the fuck cares if it missed projections? They banked more than $10B in profits when oil costs are at their highest rates in years. There's nothing wrong with a company being successful, Mr. Libertarian. But when everyone in America is suffering (consumers, producers, "industry champions" and politicians alike), and XOM is yanking in record profits, it's ok to be annoyed. You said it yourself, oil costs are going to hurt your ability to commute to work. You don't have to roll over and accept that because it's "what business wants."

Cry me a fucking river, indeed.

Simple solution...quit using oil if you dont like it....and if you figure out how to quit using oil without destroying your standard of living you'll be a rich man.

On a BTU basis oil is still fairly cheap and efficient.

Its very clear the oil companies are being hurt by high prices. I already stated that, its blatantly obvious especially when going over the companies financials.

Their bottom line is large but their revenues are huge and project costs are huge and margins are shrinking. There's far more to operating a business and sustaining a business then net income alone. You have to look at the entire picture, not just a SINGLE data point of "net income". Blueberry muffins

[A_C_E]

Obviously higher back-end costs are going to affect the company. I'm not a moron.

But at the same time, why is it not justified to be annoyed? Do you hold corporations as so sacrosanct that even when your cost of living, my cost of living, everyone's cost of living is gradually going up and up and up, they continue to line their pockets, and there's nothing no one can do about it? What is XOM lowered their front-end retail price by $0.02? You know how much money that would save on the aggregate to US businesses and consumers, and it would hardly effect their profit margin.

You want to trivialize the impact of net income, which is something you can't do. They are obviously meeting all their costs and performing well above what they need to to be successful. That is an indisputable fact. I'm not advocating a "windfall profits tax," but there's no reason to want to defend XOM. I know you libertarians are all about theoretical optimal profit and what not, but they are making it more difficult for everyone else in America to be prosperous. It's not just poor people who use oil, you know--it's the poor, the middle class, the rich, the very wealthy, corporations, and non-profits alike.

Edit: For the record, I have very low oil costs. I don't have a car 9 months out of the year, and the 3 months that I do, I have a 5-minute commute to work.

[6SpeedTA95]

You want to beat up the very companies that built the infrastructure this country runs on. It's pretty funny really how much flack the oil companies get when they helped build and supply this nation with the fuel it needed and still needs today.

I'm not saying youc an't be annoyed, but XOM can't affect the price of oil and their JOB is to make money for shareholders. Not making money or decreasing profits hurts EVERYONE including old men and women who count on their stokc price and stock dividends to make ends meet.

I work in the industry and I'm terribly annoyed at how high prices are, but I dont expect the companies to quit making money.

It's also annoying to see people ciriticizing them despite the fact that the energy business employs a million + people in the US with HIGH Paying high benefit jobs and dirt cheap healthcare. They are responsible corporations that for the most part treat their employees very well...

But all anyone wants to bitch about is how they have to spend a hundred bucks to fill up their god damned suburbans.


Edit: do you have any plastic in your house? Do you have electricity? How do you get to work when you're not driving your car? oil is imbedded in our daily lives...do you drive on an asphalt road? etc etc etc....

[A_C_E]

Originally Posted by 6SpeedTA95

Edit: do you have any plastic in your house? Do you have electricity? How do you get to work when you're not driving your car? oil is imbedded in our daily lives...do you drive on an asphalt road? etc etc etc....

Plastic, sure. Can't avoid it.

I try and keep my electrical costs as low as possible. Don't use A/C, don't leave my computer on, don't leave the lights on, etc. I either walk or take the subway to work depending on the weather.

You're right that oil is embedded in our lives. But you're still trivializing the effect which higher costs are having on all of us. The more oil costs, the more it exponentially compounds everything else we have to pay for to survive in the world that we (and, as you say, the oil companies) have built here in America. But why can't we slowly try to wean ourselves off it? Yea, it's cheap and efficient. But it's not the cleanest fuel in the world, it's only going to get more expensive, and it won't last forever. We're already depleting reserves like crazy.

I know you work in the industry, but perhaps you should try to separate your personal beliefs and dependency on the business and try to think objectively.

[David Octavius]

Great headline:

For Exxon Mobil, $10.9 Billion Profit Disappoints

6, the oil companies are so embedded because their supply is what our economy requires to function, the so called "infrastructure this country runs on" that these companies helped create is now holding us hostage from liberating ourselves from its clutches.

You said it yourself, their JOB is to make money, can't be mad about that its true, but a part of that is also to PREVENT any competition that can erode their positions to make the billions they are making now. The money they are making is not so much about how great their quality of supply is or how superior their service is, but rather that we have no real alternative, in part because of their actions - and that is where the real anger comes from.

[Scrum]

Originally Posted by thewise1

Go make your own money instead of complaining because a company was successful.

How about if I just stop buying their product?

Oh wait, that's nearly impossible. I'm forced to fund those record profits by paying these inflated prices.

[6SpeedTA95]

Originally Posted by A_C_E

Plastic, sure. Can't avoid it.

I try and keep my electrical costs as low as possible. Don't use A/C, don't leave my computer on, don't leave the lights on, etc. I either walk or take the subway to work depending on the weather.

You're right that oil is embedded in our lives. But you're still trivializing the effect which higher costs are having on all of us. The more oil costs, the more it exponentially compounds everything else we have to pay for to survive in the world that we (and, as you say, the oil companies) have built here in America. But why can't we slowly try to wean ourselves off it? Yea, it's cheap and efficient. But it's not the cleanest fuel in the world, it's only going to get more expensive, and it won't last forever. We're already depleting reserves like crazy.

I know you work in the industry, but perhaps you should try to separate your personal beliefs and dependency on the business and try to think objectively.

No sir I'm not trivializing. Its embedded in our lives and affects everything...my wife has a total of 104mile commute each day. These higher gas prices have really crimped our discretionary spending budget. Food prices are up, but the main driver of food is the ethanol subsidies and world demand.

[6SpeedTA95]

Originally Posted by Scrum

How about if I just stop buying their product?

Oh wait, that's nearly impossible. I'm forced to fund those record profits by paying these inflated prices.

So get a car that gets better mileage? Ride a bike to work? take public transportation?

[Scrum]

Originally Posted by 6SpeedTA95

So get a car that gets better mileage? Ride a bike to work? take public transportation?

Grow my own food, buy nothing from stores, use no plastic, and stay off paved surfaces.


It's impossible to live in the modern world and not use petroleum products. We need to devise a different system.

[Stylerod]

Originally Posted by A_C_E

Wouldn't it be a justifiable statement to make?

6 wants to make the claim that the oil companies are being "hurt" by higher oil costs. I would say, well, they still had the second-highest quarterly profit for ANY UNITED STATES CORPORATION, EVER. Who the fuck cares if it missed projections? They banked more than $10B in profits when oil costs are at their highest rates in years. There's nothing wrong with a company being successful, Mr. Libertarian. But when everyone in America is suffering (consumers, producers, "industry champions" and politicians alike), and XOM is yanking in record profits, it's ok to be annoyed. You said it yourself, oil costs are going to hurt your ability to commute to work. You don't have to roll over and accept that because it's "what business wants."

Cry me a fucking river, indeed.

Even with all those profits didn't I read that they make about .30 cents a gallon profit? If they decided to make no profit at all gas would be $3.20 instead of $3.50. Big woop. But I guess it would make libs feel better

[TankRizzo]

Originally Posted by 6SpeedTA95

Edit: do you have any plastic in your house? Do you have electricity? How do you get to work when you're not driving your car? oil is imbedded in our daily lives...do you drive on an asphalt road? etc etc etc....

That's something I've always wondered, when the oil runs dry, how do we make plastic?

I guess we'll have bio/soy-plastics or something.

[6SpeedTA95]

Originally Posted by TankRizzo

That's something I've always wondered, when the oil runs dry, how do we make plastic?

I guess we'll have bio/soy-plastics or something.

Yeah or prices will be high enough that companies like waste management will begin recycling/dredging plastic out of their landfills.

[JaJae]

The tax you pay on gas is upwards of double the share the oil company makes.
Gasoline tax information - New Jersey Gas Prices

Hillary and McCain are talking about having a gas tax holiday for the summer. Reducing the federal tax would only get the American half a tank of gas for the entire summer.

The oil companies are making their profits on volume. They're running their businesses efficiently and they are not overcharging in my opinion. If anyone is raping you at the pumps it's the federal and state governments. The oil companies don't make as much as them. But everyone is so quick to go after the oil companies.

[David Octavius]

Originally Posted by JaJae

Hillary and McCain are talking about having a gas tax holiday for the summer. Reducing the federal tax would only get the American half a tank of gas for the entire summer.

That's it? I would think more, do you have a source?

As a side note, I am glad Obama came out against it and called it for what it was, a poorly planned political ploy to placate people and get easy votes

[motivez]

Originally Posted by thewise1

Someone is going to come in here and say "cry me a river, they still made almost 11 billion".

That prediction aside, the discussion surrounding punishing them for making profit by taxing them more makes me sick. Looters, every one of them. Go make your own money instead of complaining because a company was successful.

Why shouldn't we tax excess profits when we subsidize them to begin with?

They don't need to be subsidized, if they make enough money that they far exceed the subsidies they've given, we should be able to tax those profits to get the people's money back.

Has nothing to do with looting.