High oil prices drive up Exxon Mobil’s profit

updated 7:55 a.m. ET May 3, 2006

DALLAS - Exxon Mobil Corp. posted the fifth highest quarterly profit for any public company in history on Thursday, and with oil prices above $70 a barrel it could go down as the company’s weakest quarter for the year.

Exxon Mobil’s first-quarter was lower than its record fourth-quarter, when the world’s largest oil company reported the highest profits ever for any publicly traded company. And the earnings, which rose 7 percent to more than $8 billion, still fell short of analysts’ estimates.

But in what is sure to spur the growing furor over outsized energy industry earnings, Exxon Mobil’s massive profits may only increase in 2006 as it benefits from rising crude-oil prices and production, analysts say.

“This is only the beginning,” said Fadel Gheit, analyst for Oppenheimer & Co. “Let me tell you, it gets better after that. Oil prices will add huge amounts to earnings, at least a billion dollars.”

The earnings report comes amid consumer outcry in the U.S. about soaring gasoline prices, which average $2.91 a gallon nationwide, or 68 cents higher than a year ago.

It also lands as Washington lawmakers are looking to appease consumers with various proposals to make big oil companies pay more taxes or provide consumers with some other relief. But everyone acknowledges that little can be done in the short term to bring down prices.

“If we had a silver bullet, we would be proposing it to Washington right now,” said Ken Cohen, the company’s vice president of public affairs. He said Exxon Mobil was investing a growing portion of its profits in new oil and gas production, and that the company is sympathetic to the added energy-price burden on consumers.

Still, he said consumers and members of Congress need to “take a deep pause and a deep breath” because market forces will eventually bring supply and demand back into balance. He said Congress could help matters longer term by removing barriers to domestic drilling.

The increasing public scrutiny of Exxon arrives less than a month after the news that the company handed its former chairman and chief executive officer, Lee Raymond, a $400 million retirement package, when all pension payoffs and stock options are included, that sparked headlines across the country and calls in Washington to justify the huge compensation.

In January, Exxon posted the highest quarterly profits of any public company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.

Howard Silverblatt, a senior index analyst for Standard & Poor’s, said the latest profit figure still places Exxon fifth historically among quarterly earnings. Exxon also holds the first, second and fourth spots; Royal Dutch Shell PLC has the third spot.

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