Cashing in on higher prices and production, oil giant Exxon Mobil Corp. surprised Wall Street yesterday with a third-quarter profit of $10.49 billion, putting it on pace to smash earnings records for the full year.
Exxon's earnings were the second-highest ever recorded by a publicly traded company - behind its $10.71 billion profit in last year's final quarter - and helped reawaken the public outrage that came with this summer's record-high pump prices.
Another big oil company, Royal Dutch Shell also announced earnings yesterday that were well above expectations. The company's profits for the quarter that ended Sept. 30 were up 21 percent after excluding an asset sale that sharply boosted last year's third-quarter income and other items.
"It seems like almost every quarter, Exxon Mobil and the other big oil companies are shattering all previous profit records," said Rep. Edward J. Markey, a Massachusetts Democrat. "These companies are doing so not because they're creating any new product or being innovative, but because they control the supply of foreign oil that feeds America's addiction."
But with oil prices down more than 20 percent since July's peak of $78.40 a barrel, many think the industry's profit party might have peaked for now. The cost of light, sweet crude for delivery in December fell $1.04 to $60.36 a barrel yesterday on the New York Mercantile Exchange.
"When oil prices are falling from a very high level - and that absolutely reflects what was happening in the third quarter - that is your maximum earnings generation period," said Mark Gilman, energy analyst at Benchmark Co. Gilman, who doesn't own Exxon shares, said Exxon's latest earnings were "not something that one should get used to."
Wall Street analysts, noting lower oil prices, have cut fourth-quarter earnings estimates for many oil companies, including Exxon. During the third quarter, Exxon collected an average of $62.07 a barrel in the United States and $65.64 a barrel overseas. The U.S. average was up 9 percent from last year's third quarter. The price Exxon paid for natural gas was lower in this country, but higher elsewhere.
The company's $10.49 billion quarterly earnings, equal to $1.77 a share, were 6 percent higher compared with its profit of $9.9 billion, or $1.58 a share, in the third quarter last year. Analysts had expected income of $1.59 a share, according to Thomson Financial.
Exxon said its overall profit was boosted by higher crude oil and natural gas prices, along with increased earnings from its chemical business and its retail fuel and convenience store operations. Income at its refineries was lower than the year-earlier period.
Revenue for the period fell slightly to $99.6 billion, down from $100.7 billion, as the company spent $5.1 billion on capital and exploration projects. Exxon said its worldwide production of oil and natural gas rose 7 percent.
"I think everyone's quite impressed with their ability to put up the numbers," said Richard J. Morone, vice president and portfolio manager at Horizon Investment Services, a company that manages a $125 million portfolio that includes Exxon shares.
Royal Dutch Shell reported third-quarter profit of $5.94 billion, or 93 cents a share, down from $9 billion in the previous year's quarter.
Excluding special items, including the $1.7 billion gain from its 2005 sale of a pipeline, the oil company's quarterly income rose 21 percent to $7 billion.
Exxon shares touched an all-time high of $72.33 yesterday and closed at $71.62, up 61 cents. Royal Dutch Shell's class A shares rose $1.82 to $69.46.
Elizabeth Douglass writes for the Los Angeles Times.