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Thursday, July 26, 2012

Exxon Second Quarter Profits Rise

Story first reported from USA Today

A jump in Exxon Mobil's net income couldn't mask nagging problems for America's largest oil company.
The company (XOM) said its second-quarter net income rose 49% to $15.9 billion. But most of the gain came from $7.5 billion in asset sales.

It was an otherwise challenging quarter for Exxon Mobil. The company produced less oil and natural gas, and it sold both at lower prices.

Excluding the asset sales, profit fell 22% to $8.4 billion, or $1.80 per share. That was its smallest operating profit since the third quarter of 2010 and it fell far short of Wall Street expectations.

The big gain included the sale of Exxon's stake in its Japanese fuel and lubricants business to TonenGeneral Sekiyu. The $3.9 billion deal, announced in January, boosted profits for Exxon's international refining and chemicals businesses in the second quarter.

Meanwhile, Exxon's core oil and natural gas production business suffered. Total production fell 5.6% compared with 2011. And benchmark U.S. crude prices fell 8.8% in the period while natural gas prices dropped 46%.

Despite the drop in commodity prices, Exxon says it will press forward with aggressive exploration plan announced earlier this year. Exxon says it will spend $37 billion a year over the next five years to find new energy sources around the world.  Oil and gas claims consultants say the disappointing quarter isn't cause for alarm.

"Despite global economic uncertainty, we continue to invest throughout the business cycle taking a long-term view of resource development," Chairman and CEO Rex Tillerson said.

Overall, Exxon Mobil's net income amounted to $3.41 per share for the April-June period. A year earlier, Exxon earned $10.7 billion, or $2.18 per share. Revenue increased during the quarter by 1.5% to $127.4 billion.

Lower oil and natural gas prices did help some parts of Exxon's global operation. Its refineries were able to buy oil for cheaper prices, and lower natural gas prices made it less expensive to power some of their equipment. The company also was also able to sell gasoline at higher prices in some parts of the U.S.

Exxon's U.S. downstream business, which includes refineries, increased profit 14% in the period. Profit fell 21% for its U.S. chemical manufacturing business.

Smaller petroleum companies also reported weaker second quarter earnings this week, mostly due to the decline in oil and natural gas prices.

Second-quarter profit declined 53% at Royal Dutch Shell, 27% at Occidental Petroleumand 33% at ConocoPhillips. Chevron will release its financial results on Friday, and BP will report next week.

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