ExxonMobil Posts Largest Annual Profit for US Company

By Simon Romero and John Holusha
The New York Times

Monday 30 January 2006

Houston - ExxonMobil, the nation's largest energy company, today reported a 27 percent surge in profits for the fourth quarter as elevated fuel prices gave rise to the most lucrative year ever for an American company, with profits in 2005 reaching $36.13 billion and revenue $371 billion.

Exxon's profits are expected to generate new scrutiny of the company's operations in Washington, where legislators have recently expressed concern over Big Oil's good fortune as soaring oil and natural gas prices pressure consumers. Exxon said its profits climbed more than 40 percent last year, while its tax bill rose only 14 percent.

"This might be the best macroeconomic environment ever for oil," said Dave Pursell, a partner at Pickering Energy Partners, Houston-based research firm. "More than any of its peers, Exxon knocked the cover off the ball with its long, disciplined view of global projects."

Exxon's revenue last year allowed it to surpass Wal-Mart as the largest company in the United States, and by some measures Exxon became richer than some of world's largest oil-producing nations. For instance, its revenue of $371 billion surpassed the gross domestic product of $245 billion for Indonesia, an OPEC member and the world's fourth most populous country with 242 million people.

Shares in Exxon closed at $63.37, adding $2.08 or 3.4 percent in New York after the announcement. However, even as investors applauded Exxon's new chief executive, Rex W. Tillerson, who replaced Lee Raymond at the start of this year, its results masked potentially weaker profits if oil and gas prices begin to decline.

Production on an oil-equivalent basis at Exxon's oilfields around the world declined 1 percent in 2005, excluding stoppages at platforms in the Gulf of Mexico from last year's hurricanes, illustrating an industrywide dilemma: an inability to tap into the world's richest oil exploration areas in the Middle East and Venezuela because of political instability.

However, political instability also worked in Exxon's favor in the most recent quarter as concern over Iran's nuclear ambitions and tension in Nigeria and Venezuela kept oil prices high. Crude oil prices have doubled in the last two years, driven by strong demand in rising economies in Asia and in the United States. Oil for March delivery fell slightly by 38 cents to $67.38 a barrel in New York trading. High gasoline and heating fuel prices have prompted some political leaders to call for a windfall profits tax on oil companies. But the company said today that it was reinvesting in exploration and refining capacity to meet the world's need for energy.

"Our strong financial results will continue to allow us to make significant, long-term investments required to do our part in meeting the world's energy needs," Mr. Tillerson, said in a statement accompanying the earnings report.

Gas production declined in the fourth quarter to 9.822 billion cubic feet per day from 10.43 billion in the comparable period last year. New gas supplies, the company said, were more than offset by declines in output from older fields, lower demand in Europe and the lingering effects of hurricanes on operations on the Gulf Coast.

Earnings from the sales of chemical products were down $413 million to $835 million, the company said, due mostly to the higher cost of raw materials and hurricane damage.

For the year, the company said, its exploration and capital expenses were $177 billion, an increase of $2.8 billion over the 2004 total. Earnings excluding special, one-time events totaled $33.86 billion, an increase of 31 percent, with all segments of the business contributing to the performance, the company said.