Jan. 31, 2006
COMMENTARY: Surprise! Surprise! Big Oil Companies Report Record Profits
By David M. Kinchen
Editor, Huntington News Network
Hinton, WV (HNN) – If you’re startled by the news that the nation’s No. 1 oil company, Exxon Mobil, had record profits in 2005, I have a bridge over the New River here that I’ll be happy to sell you. Coincidentally, my monthly statement from Exxon Mobil arrived in the mail on Monday, Jan.30, 2006, the same day the profits were announced.
Exxon Mobil reported net income in the fourth quarter of $10.7 billion, or $1.71 a share, compared to $8.4 billion, or $1.30 a share, a year earlier. News reports said the jump in 4Q income was “larger than expected.” For the year the company earned net income of $36.1 billion, or $33.9 billion excluding special items. That's up 31 percent from the $25.9 billion it earned on that basis year earlier.
Here’s another way of looking at the Exxon Mobil income story: “Exxon Mobil's 2005 net income for the year comes to $1,146 a second. That per-second profit is enough to pay for gas for the average American vehicle to be driven 10,294 miles, at current gasoline prices.” "Our earnings reflect our ability to capture the strong industry condition. More importantly they highlight the things we do exceptionally well," Hubble said, detailing work to deliver strong operating margins and its investment strategy.
Fadel Gheit, oil analyst with Oppenheimer, said the company beat expectations by recovering faster than expected from the hurricanes that hit the Gulf Coast near the end of the third quarter and by posting strong margins in its refining and marketing units, the side of the oil business that can often be squeezed by higher oil prices. Despite the company record cash flow and a strong cash position on its balance sheet, Gheit told CNN that he doubts the company will use any of its wealth to buy other companies as some competitors have done. Company officials have said they don't want to buy oil assets at current prices but Gheit said he thinks there are also political reasons behind their reluctance.
"That would invite unnecessary and unwanted scrutiny of Exxon," he said. The rest of Big Oil – especially the 12 U.S. oil companies in the S&P 500 – did almost as well as Exxon Mobil, according to news reports. They have reported 4Q results with an average of a 48 percent rise in earnings. The oil companies in the S&P are expected to see full-year earnings of $96.5 billion, when combining reported results and forecasts for the companies yet to report. That also would be up 48 percent from a year ago.
The list includes No. 2 Chevron and No. 3 ConocoPhillips, but doesn’t include foreign-based firms like Royal Dutch Shell or BP – both of which have extensive U.S. operations.
So, as you reach into your increasingly slimmer wallet to pay for energy, just think what a nice day the shareholders of Big Oil will have, at your expense.