Exxon's Big Profits Fail to Impress Investors

Despite the fact that the company earned nearly $11 billion in the first quarter, Wall Street was expecting more. Shares fall 4.4%.
By Chuck Marvin ,

Exxon Mobil's

(XOM) - Get Report

first-quarter profit rose 17% to $10.89 billion, but its results still missed analysts' estimates on both the top and bottom lines.

The Irving, Texas, oil giant earned $2.03 a share for the latest quarter, up from $1.62 a share in the year-earlier period. Still, the first quarter was 11 cents short of the consensus forecast carried by Thomson Financial.

Revenue surged to $116.85 billion from $87.22 billion in the 2007 first quarter, but despite the increase, that number also failed to meet expectations of around $124 billion.

Higher crude oil and natural gas realizations, driven by record worldwide oil prices, were partly offset by lower refining and chemical margins, weaker production volumes and higher operating costs, Exxon said in a press release Thursday.

Although Exxon's production rates declined 5.6% year-on-year on an oil-equivalent basis, its income from exploration and production activities soared to $8.79 billion from $6.05 billion the same period a year ago.

Cramer: Head for the Exit With Exxon

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Exxon's average realized sales price of crude in the U.S. was $91.35 last quarter, vs. $50.59 a year ago. Internationally, Exxon garnered an average realized price of $93.47 a barrel compared with $57.99 a barrel in the first quarter last year.

The company's natural gas realizations for the first three months in 2008 were $7.95 per thousand cubic feet in the U.S. and $9.28 per thousand cubic feet internationally, compared with $6.70 domestically and $6.69 abroad a year ago. Exxon was able to take advantage of abnormally high natural gas prices in Europe by selling nearly half of its 10.24 million cubic feet per day of supply to the European market. Exxon said 81.5% of its total quarterly earnings were generated overseas.

Refining and marketing segment earnings were $1.17 billion, down $746 million from the first quarter of 2007, due to poor worldwide refining margins. Chemical segment earnings were $1.02 billion, $208 million lower than last year's first quarter. Low refining margins were attributed for the decline in chemical earnings as well.

Exxon had $5.49 billion worth of capital expenditures in the first three months of the year, with the bulk going toward new E&P projects. It also repurchased $8 billion in common stock from shareholders.

Although Exxon's line-item figures seem impressive in their own right, they lose their veneer when compared with the figures posted by its European peers earlier this week.

BP

(BP) - Get Report

and

Royal Dutch Shell

(RDS.A)

both reported big gains in earnings that exceeded the growth at Exxon, and both of those stocks rose more than 4% in the wake of their results.

Prior to this week's announcements,

ConocoPhillips

(COP) - Get Report

and

Occidental

(OXY) - Get Report

reported numbers that also clobbered expectations, and

Hess

(HES) - Get Report

said on Wednesday that its earnings more than doubled year over year.

Chevron

(CVX) - Get Report

is due to report its numbers Friday.

For its part, Exxon had shareholders disappointed. Shares of Exxon were recently trading 4.4% lower at $89.

Exxon's earnings miss wasn't the only embarrassment the company has had to endure this week. On Wednesday the energy giant was publicly accused of corporate and social negligence by descendents of John D. Rockefeller, the company's legendary founder.

Members of the Rockefeller family took turns lambasting Exxon CEO Rex Tillerson at a press conference in New York, saying that his refusal to join other energy companies in promoting renewable energy is causing measurable harm to the environment.

They also argued that Exxon's stubborn focus on fossil fuel production will ultimately hurt its shareholders by forcing them to miss out on the long-term economic opportunities that the renewable energy space now offers.

The Rockefellers announced that they will seek shareholder approval for four proxy resolutions that would nudge the company toward a greener approach. One, aimed directly at Tillerson, would split the roles of chairman and CEO, reducing his tight grip over the company. The others would encourage Exxon to limit its carbon footprint by adopting an official policy on renewable energy and by establishing a task force to study the effects of global warming.

While the Rockefeller family managed to draw investor attention for a brief spell on Wednesday, all eyes are again focused on the integrated energy earnings show and the allure of $110-a-barrel crude oil.

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