Thursday, February 01, 2007

Exxon Reports Record Windfall Annual Profits Of $39.5 Million

The New York Times reports that Exxon Mobil earned an eye-popping record annual windfall profit of $39.5 million for 2006 today, despite a fourth quarter profit of $10.3 billion which was a decline of 4.3% from its record quarterly profit in the fourth quarter of 2005. The annual profit for 2006 represented a 9% increase over their annual profit for 2005. but a modest decline in fourth-quarter earnings because of falling oil and gas prices. Graphic at left courtesy of the New York Times.

High oil prices fueled much of the increase. Oil prices in 2006 averaged $66, $10 higher than the year before, according to a recent Citigroup report on the energy industry. Oil prices reached a high of $77 in July, but they have declined to the low-to-mid $50s due to generally warm weather and the perception of easing tensions in much of Middle East since then. For the last quarter, oil prices ranged between $55 and $63 a barrel, averaging just under $60. That represented a 15 percent decline from the third quarter and was less than 1 percent lower than the fourth quarter of 2005.

Meanwhile, its competitor Royal Dutch Shell reported an unexpected rise in quarterly earnings, a sign that the industry is still going strong. Shell reported a fourth quarter profit of $5.28 billion, a 21 percent rise from the fourth quarter of 2005. Shell’s annual income of $25.4 billion was also a record.

The results followed reports by other energy companies in recent days that said easing commodity prices, declining refining and chemical earnings, rising steel and labor costs and higher royalties and taxes had hurt their bottom lines somewhat.

But the shortfalls at all the major companies, including Occidental, ConocoPhillips and Hess, have come after record or near-record previous quarters. With oil and gas prices on the upswing again in recent days, few analysts think the bonanza of profits that energy companies have enjoyed in recent years will end anytime soon. Exxon, the world’s largest publicly traded oil company, reported profit of $10.3 billion in the fourth quarter. That represented a decline of 4.3 percent from its record profit in the fourth quarter of 2005 and was Exxon’s first quarterly decline in almost three years.

Natural gas prices declined through much of the year from their peak following the exceptionally active hurricane season in 2005. But they have remained historically high despite the unseasonably warm winter in much of the country. Henry Hub natural gas prices averaged $6.3 per thousand cubic feet in the latest quarter, down 46% from the fourth quarter in 2005.

Analysis: Of the "Big Three" producers in Alaska seeking to procure a natural gas pipeline, Exxon Mobil is considered the most arrogant and contemptuous of the lot. ConocoPhillips strives for social reponsibility and actively seeks accountability; one of their vice-presidents, Joe Maruschak, has actively engaged the public in outreach in various venues like KTUU News Director John Tracy's Natural Gas Pipeline Roundtable aired in mid-2006 (KTUU dumped their archives, but I posted seven of those discussions on this website). British Petroleum has been somewhat sloppy, careless, and negligient at times, but after one of their pipelines started leaking, they took action to correct the problem and minimize a recurrence. In addition, BP has a lengthy history of social involvement in the community.

However, Exxon is totally different. They show very little concern for community sensibility. Last year they chose to spend part of their then-windfall profits on a $167.7 million golden parachute for retiring CEO Lee Raymond. And, despite the fact that the Ninth U.S. Circuit Court of Appeals lowered the outstanding civil judgement against them from $5.0 billion to $2.5 billion, they've chosen to appeal the revised version, claiming that they've already spent $3 billion in cleanup costs, government settlements, fines, and compensation. However, if they think they're doing Alaska a favor merely by bidding on the proposed natural gas pipeline, think again. Instead of a stooge like former Governor Frank Murkowski who was willing to accept the table scraps proffered by the Big Three in the form of the Highway Route, we now have a real Governor, Sarah Palin, who will open up the process to other producers and promote real competition, resulting in the best possible deal for Alaska.

And just today, Exxon is under fire again - from a different source. The Anchorage Daily News reports that a new Federal study released January 31st shows that crude oil lingering in Prince William Sound and the Gulf of Alaska from the 1989 Exxon Valdez tanker spill is likely to be present for many years. The estimated 85 tons of oil -- or more than 26,600 gallons of the 11 million gallons spilled -- is declining by about 4 percent a year in the Sound and likely even slower in the Gulf, according to research chemist Jeffrey Short with the National Oceanic and Atmospheric Administration.

Short's study, partially funded by the Prince William Sound Regional Citizens' Advisory Council, is to be published in the February 15th edition of Environmental Science & Technology, the journal of the American Chemical Society. However, the Anchorage Daily News has posted a copy on their site. Click HERE to view it in HTML format.

Exxon Mobil wasted little time in responding. Exxon spokesman Mark Boudreaux said the company's Valdez team planned to closely review the findings. "Based on our initial review of the report, there is nothing newsworthy or significant in the report that has not already been addressed," he said. "The existence of some small amounts of residual oil in Prince William Sound on about two-tenths of 1 percent of the shore of the Sound is not a surprise, is not disputed and was fully anticipated."

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