Exxon Mobil 2Q profit down 66 percent as lower crude, gas prices cut into earnings

Exxon Mobil 2Q profit falls a surprising 66 pct

Exxon Mobil Corp. on Thursday reported its lowest profit in nearly six years, a 66 percent plunge from the second quarter a year ago as the world’s biggest publicly traded oil company confronted sharply lower crude and gas prices and anemic demand for refined products.

For the king of corporate profit records, it marked the third straight quarter for lower year-over-year earnings, providing a clear picture of how demand for oil and gasoline has evaporated.

Exxon Mobil, based in Irving, Texas, said earnings for the April-June period came to $3.95 billion, or 81 cents a share. That was down from $11.68 billion, or $2.22 a share, a year ago, a record at the time.

Excluding one-time items, net income in the most-recent quarter amounted to $4.09 billion, or 84 cents a share.

The latest result missed the average Wall Street profit forecast by a wide margin. Analysts polled by Thomson Reuters were looking for net income of $1.02 cents a share. Those estimates typically exclude one-time items.

Revenue fell 46 percent to $74.5 billion from $138.1 billion a year ago. Analysts, on average, had forecast revenue of about $71.3 billion, Thomson Reuters said.

The substantial profit falloff was no surprise given the steep drop in oil and natural gas prices from a year ago. Major integrated oil companies ConocoPhillips, BP and Royal Dutch Shell already have reported profit declines ranging from 53 percent to 76 percent for the second quarter.

Yet the size of Exxon’s decline is sure to catch investors off guard. It marked the company’s lowest quarterly showing since it earned $3.65 billion in the third quarter of 2003.

Company shares fell 88 cents to $70.55.

This time last year crude was in the triple digits after a historic ride to almost $150 a barrel. Prices eventually dipped into the $30s in January but have doubled in recent months amid some signs of recovery from the worst recession in a generation.

Still, the amount of unused oil held in storage right now is enormous.

The government reported Wednesday that another 5 million barrels of oil was added to U.S. stockpiles last week. That’s nearly 18 percent greater than the amount of crude in storage at this time last year.

“Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products,” Exxon Mobil Chairman and CEO Rex Tillerson said in a statement.

Oil giants like Exxon Mobil are still notching billions of dollars in profits, but topping last year’s mammoth numbers is almost unthinkable unless crude goes on another unprecedented ascent. That’s unlikely given the state of the global economy.

Exxon, which replaced Wal-Mart atop the 2009 Fortune 500 list of largest U.S. companies, has made a habit of setting quarterly and annual profit marks in the past few years.

It’s a different story these days.

The company, which produces 3 percent of the world’s oil, said earnings at its exploration and output, or upstream, business fell 62 percent to $3.8 billion. The company said lower crude and natural gas prices lowered results by $6.1 billion.

On another dour note, Exxon said production on an oil-equivalent basis fell 3 percent from a year ago. The company generates more than two-thirds of its earnings from oil and gas production.

Like its competitors, Exxon Mobil said it took a beating from lower global refining margins. Earnings from its refining and marketing, or downstream, arm fell 67 percent in the quarter to $512 million as weaker refining margins more than offset stronger marketing margins.

In the U.S., Exxon’s downstream segment posted a loss of $15 million. Refiners across the globe have seen downstream earnings crumble because of weak demand for refined products such as gasoline, diesel and jet fuel.

For the first six months of 2009, Exxon Mobil said it earned $8.5 billion, or $1.73 a share, down roughly 62 percent from the $22.6 billion, or $4.24 a share, in made in the first half of 2008. Revenue declined to $138.5 billion from $254.9 billion.