Exxon Mobil Profit Down, Sales at Record

Even Exxon Mobil Corp., the world's biggest publicly traded oil company and king of record corporate profits, couldn't overcome the negative effect higher crude oil prices had on its refining business in the third quarter.

The Irving, Texas-based company said Thursday its profit fell 10 percent in the July-September period, when lower natural gas prices and chemical margins also hurt the bottom line.

What's more, with oil prices reaching a new record of $96 a barrel Thursday before retreating somewhat, some analysts say refining margins could continue to drag on earnings in the fourth quarter.

"We expect high oil prices to curb demand growth and further squeeze refining margins," Oppenheimer & Co. said in a note Thursday to investors.

Those margins reflect the difference between what refiners pay for oil and what they are paid for the products they make from it, like gasoline. Exxon Mobil noted the average retail price for regular gasoline fell roughly 45 cents a gallon between the end of May and mid-October.

Houston-based Marathon Oil Corp. said Thursday it too fell victim to tighter refining margins in the third quarter, as net income fell 37 percent. But, unlike Exxon Mobil, Marathon's results still beat Wall Street earnings estimates.

Exxon Mobil's profit decline came even as it set a U.S. record for quarterly revenue.

Exxon Mobil said net income fell to $9.41 billion, or $1.70 per share, in the July-September period from $10.49 billion, or $1.77 per share, a year ago. Its profit in the third quarter of 2006 was the second-largest ever recorded by a publicly traded U.S. company.

Revenue rose to a record for gross sales of $102.3 billion from $99.59 billion in the third quarter of 2006. The previous mark _ also owned by Exxon Mobil _ was $100.7 billion in the third quarter of 2005, according to Standard & Poor's Senior Index Analyst Howard Silverblatt.

On average, analysts expected the company to earn $1.75 per share in the latest quarter on revenue of $112.97 billion.

Exxon Mobil shares fell $3.49, or about 3.8 percent, to $88.50 Thursday. They've traded in a range of $69.02 to $95.27 in the past year.

Despite the oil giant's lower year-over-year profit, Vice President of Investor Relations Henry Hubble said the company's fundamentals remain strong, and it continues to aggressively explore and tap new sources of hydrocarbons.

He said the company has launched six major oil and gas projects since the start of the year in the Middle East, Europe and Africa. During the quarter, Exxon Mobil also was the high bidder for Gulf of Mexico leases totaling more than 70,000 acres.

The company spent $5.4 billion on capital and exploration projects in the third quarter, an 8 percent increase from 2006.

But volatile commodity prices, higher costs and other factors hurt the bottom line in the most-recent quarter.

Exxon Mobil, which produces 3 percent of the world's oil, said earnings from its exploration and production arm fell about 3 percent _ to $6.29 billion from $6.49 billion a year ago.

Production on an oil-equivalent basis was down 2 percent from a year ago _ a concern for a company that generates more than two-thirds of its earnings from oil and gas production.

Part of the production decline was from the loss earlier this year of Exxon Mobil's Venezuelan operations. Exxon Mobil has filed a request for international arbitration in its dispute with Venezuela over the nationalization of its Cerro Negro heavy oil project _ one of four projects in which President Hugo Chavez's government assumed majority control in May.

Earnings at Exxon Mobil's refining and marketing unit were $2 billion in the quarter, off 27 percent from the $2.74 billion it earned a year ago.

Exxon Mobil joined two other oil majors that have reported lower third-quarter profits versus a year ago, citing weakness in their refining businesses. Last week, BP PLC, Europe's second-largest oil company, posted a 29 percent drop in third-quarter profit, while ConocoPhillips, No. 3 among U.S. oil companies, said its quarterly earnings fell 5 percent.

Royal Dutch Shell PLC, reporting July-September results last Thursday, said its net profit rose 16 percent, but it warned the underlying performance of its refining operations was weaker than it appeared.

Chevron, the second-largest U.S. oil company, is scheduled to report third-quarter earnings Friday.

Marathon said its net income for the three months ended Sept. 30 fell to $1.02 billion, or $1.49 per share, compared with $1.62 billion, or $2.26 per share, during the same period a year earlier.

Excluding foreign currency gains, the loss of long-term contracts in the U.K., and other adjustments, Marathon said it earned $1.02 billion, or $1.48 per share, compared with $1.54 billion, or $2.26 per share, last year.

Analysts surveyed by Thomson Financial had been expecting earnings of $1.38 per share, on average. Those forecasts typically exclude one-time adjustments.

Revenue rose to $16.95 billion, from $16.63 billion a year ago. That figure was more than $1 billion less than the $18.06 billion analysts had been expecting, according to Thomson.