Posted on 08/17/2005 2:09:32 PM PDT by WmShirerAdmirer
No. 1 oil producer beats forecasts, helped by bullish crude prices, but supply concerns weigh.
NEW YORK (Reuters) - Exxon Mobil Corp., the world's largest publicly traded oil company, posted a 32 percent rise in quarterly profit Thursday, fueled by a relentless surge in crude oil prices and strong refining profits.
But a more than 4 percent drop in oil and gas production in the second quarter tempered much of the enthusiasm, adding to Wall Street concerns that large oil companies are finding it increasingly difficult to boost output.
Nevertheless, like its peers, Exxon (down $0.34 to $59.26, Research) has continued to bask in the glow of an extended bullish run in oil and gas prices, spurred by soaring demand in Asia and increasingly stretched global supplies of crude. Oil prices topped $62 a barrel earlier this month to touch yet another record high.
Persistently strong refining and marketing margins also helped boost the company's bottom line.
"Oil and gas production volumes (and earnings) were disappointing in the quarter, but this was offset by a now-familiar bonanza in the refining and marketing division - particularly in the U.S.," Credit Suisse First Boston analysts said in a research note.
Net income was $7.64 billion, or $1.20 a share, in the second quarter, compared with $5.79 billion, or 88 cents a share, in the year-earlier quarter.
Excluding a $200 million charge for a lawsuit provision, the company earned $1.23 per share. Analysts, on average, expected Exxon to earn $1.22 per share, according to Reuters Estimates.
The Irving, Texas company, which has maintained a large stock buyback program as its cash pile soars alongside oil prices, said it would further increase its share repurchase level to $5 billion in the third quarter.
(Excerpt) Read more at money.cnn.com ...
Last time this happened the majors were hit with the windfall profits tax, this time they get a tax break.
I liked it better the first time.
So you voted for Carter (the creator of the windfall tax)?
People will adjust and cope. Just as they always have.
Most won't like what that adjustment will look like if that scenario comes true.
How many of us have changed our habits? I know I walk, ride my bike, got a motorcycle that gets 60mpg, etc., and I CAN afford the increase (so far).
Walk? Ride a bike? I drive about 200 miles a week to work and back, not to mention my second half drives about 120 miles. And this is just to work.
Trust me, it goes anywhere near 5. per gallon, either everyone gets a big time raise, or things go belly up fast. Real fast.
The same idjits who complain about gas prices have no complaint about buying overpriced lattes at Starbucks.
I've never been to a Starbucks.
You might need to go back to business school yourself. For if the cost of goods goes up, then the added expense should offset the increase in net income.
Example:
I buy 100 widgets from a wholesaler for $10 each and I sell them for $15 each. That produces revenue of $1500. Subtract the $1000 expense and I have $500 in profit.
Now let's say that my supplier raises the price of the widgets to $15 and now I pass that added cost to the consumer and sell them for $20 (as the oil companies claim to be doing). That produces revenue of $2000 less an expense of $1500. Net profit? Still $500.
Well, much of the investment is in fact in refining capacity, and frankly I don't know what their return on investment is. I could find out easily enough by taking a look at their annual report, but my only point was that absolute numbers, like seven BILLION, serve only to upset the public unless the return on investment is also known. If I can invest $100,000 in a security paying six percent with virtually no risk, like a tax free municipal bond, why should I be upset if an investor in a high risk enterprise like oil makes four percent return on his investment?
go big oil
Amazing.
In my original reply, I stated that the oil companies are passing on more to the consumer than just the added price in oil. They are protecting their gross margins as well! Not that there's anything wrong with that. Just calling a spade a spade.
This is what I said.
>>It goes anywhere near 5. per gallon, either everyone gets a big time raise, or things go belly up fast. Real fast.<<
And I stand by it. I don't know what you all do for money, but there are a hell of a lot of American's out there only making 25k or 35k a year. I am here to tell you, if this even comes close to $5. per gallon, not only will Wall Street go belly up, so will everything else.
You heard it here first.
And for the record, I can survive this due to having assets, etc, but most of the working class, those that buy things, those that make the wheels go round, will be hammered into the ground if this ever gets near $5. a gallon.
It's even better than that. I own a mineral lease in Louisiana in the Tuscaloosa trend. This is a very rich oilfield in Louisiana/Texas. When times are good, I get a sweet oil check, when oil prices are low, I can fill up the sportute cheaply. Either way, life is good.
Most people, even businesspeople and some accountants, tend to think in terms of profit on what is sold. However, that is not the only source of bookkeeping profits and losses. There is also gains and losses on the balance sheet that must be considered.
Exxon-Mobil always had a large inventory of oil and oil products on hand. Much of this is "baseline" -- it is tied up in their entire supply chain. Right this second, they have oil in tankers, oil in storage tanks, oil in refineries, oil products in storage, gasoline, etc.
As the price of crude rises, the value of all of this baseline inventory rises. The other side of the entry is an increase in shareholders' equity -- which is reported as a gain in the quarterly reports. This affects all companies with inventory, but particularly affects any commodity-based companies with large inventories (such as chemicals).
When the price falls, these companies will take hits. Of course, at that point the general public isn't paying attention.
The oil companies are reluctant to invest in drilling and refining because they fear the current high price will not last. They have been burned before on production investment that came on stream after prices fell.
Still, adjusting for inflation, gas is still much cheaper than Jimmy Carter Days.
BINGO!!!!!
I drive 200 miles a week - 20 miles each way. My wife drives 180 miles a day.
I own a diesel and am looking at a hybrid. I ride my bicycle to work two days a week and try to ride my motorcycle a couple more days.
The economy may go belly-up. But a lot of folks will adapt regardless.
I'm not saying it will be a good thing for the economy, just Americans a more resilient than some on these energy threads are willing to give credit for.
Something else on the consumer end of things hasn't been mentioned. Those in the Midwest, Northeast and East will be taking a double hit this coming winter with heating oil.
The visual of that graph is misleading because the increment between 40 and 60 is measurably shorter than the increment between 20 and 40, as well as the increment between 1 and 20 which is HUGE. The increment between 60 and 80 is even shorter still than the increment between 60 and 80. Not your fault, BUT I HATE GRAPHS THAT LIE.
Interesting reading!
And they're beating the hell out of my wallet!
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No they are not. They are running an efficient business that generates profit because they are good at what they do. Shop somewhere else for gas if you don't like their price. If you don't have a choice the only reason is that government meddling is preventing you from making that choice.
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