Oil sales boost Exxon profit

EXXON Mobil had a simple formula for success last quarter: it sold oil at higher prices.
Everything else was a struggle for the largest US oil company.
Production fell, its refineries suffered from high costs and falling fuel demand, and it made less money on chemicals. Even its big investment in natural gas hasn’t paid off.
But oil is a different story. Global oil demand is outstripping supply.
The US benchmark price for crude rose 10% during the final three months of last year.
 As a result, Exxon was able to charge customers more for crude – 27% more than a year earlier.
That helped the company’s fourth-quarter income rise 2%.
Net income totalled US$9.4 billion, or US$1.97 per share, compared with US$9.25 billion, or US$1.85 per share, a year earlier. Revenue rose nearly 16% to US$121.6b.
ExxonMobil, like other major oil company, is struggling to tap new sources of oil fast enough in an environment where big finds are rarer and costlier to exploit.
Potential fields lie deep under the seabed, or in shale rock formations that require expensive technology to crack open.
When ExxonMobil can’t find oil fast enough, it is stuck with existing fields where production is declining.
In the fourth quarter, Exxon’s oil and natural gas production fell 9%, even though it has ploughed more than US$20b a year into finding new sources since 2007.
ExxonMobil is heavily involved in developing a huge gas field in Papua New Guinea which is expected to come on-line in 2014.
ExxonMobil says its investments will pay off long-term. Still, investors worried about the company’s ability to raise production sent the company’s stock price down 2% yesterday.
Rivals such as Chevron are struggling with the same challenges, reporting    production levels last year that were the lowest since 2008.
Last week, Chevron reported 2011 production levels that were the lowest since 2008.
Exxon is also grappling with its US$30 billion bet on natural gas from two years ago.
In 2010, the company bought XTO Energy, a huge natural gas producer. – AP
Exxon won praise for the deal because natural gas prices were falling. Experts assumed that prices would rise once the US economy strengthened following the 2007-2009 recession.
The XTO Energy deal sparked a stampede by major energy companies into North American gas markets. A surge in drilling has since pushed production to record levels in the US, creating record levels of supply.
This January, the price of natural gas dropped to its lowest since 2002.
Now, Exxon is looking to oil to hedge its natural gas bet.
The Texas energy giant said yesterday that it has shifted US operations to focus more on developing wells rich in oil. It didn’t give more details.
– AP.