Frist backs oil hearings

Exxon, Shell report record 3Q gains

Senate leader seeks joint investigation

October 28, 2005|By ELIZABETH SOUDER | ELIZABETH SOUDER,THE DALLAS MORNING NEWS

DALLAS -- Exxon Mobil Corp. reported yesterday the highest quarterly revenue of any U.S. company ever, thanks to record-high oil and natural gas prices in the wake of Hurricanes Katrina and Rita.

The big jump in earnings for Exxon Mobil, as well as other major oil companies, prompted a backlash from some politicians, concerned that high energy costs are hurting voters.

"At the same time that oil companies are posting record profits, Americans are paying more than ever to fill up their cars and heat their homes," said Senate Majority Leader Bill Frist.

The Tennessee Republican called for Senate committee hearings at which lawmakers can ask oil executives why oil and natural gas prices are so high.

The political concern seemed to set the tone for Exxon Mobil's presentations yesterday.

The company pointed out that, after the hurricanes, Exxon Mobil quickly boosted refining capacity to make much-needed gasoline.

Exxon Mobil also highlighted its investment in new projects to bring more fuel to market.

The Irving, Texas, company said third-quarter revenue rose 32 percent to $100.7 billion from $76.4 billion a year ago. Earnings rose 75 percent to $9.92 billion, or $1.58 a share, including a gain on the transfer of a stake in a Dutch gas company.

Excluding the gain, the world's largest company earned $8.3 billion, or $1.32 a share.

To put its performance into perspective, Exxon Mobil's revenue for the quarter was greater than the annual gross domestic product of some of the largest oil-producing nations, including the United Arab Emirates and Kuwait.

"Our earnings in the third quarter reflect the impact of the relatively volatile industry environment on commodity prices and industry margins," Exxon Mobil said in a statement.

Anglo-Dutch competitor Royal Dutch Shell PLC wasn't far behind, posting a profit of $9.03 billion for the quarter, up 68 percent from $5.37 billion a year earlier.

Shell's profits from exploration and production increased by $2.6 billion to $5 billion, despite an 11 percent decline in oil and natural-gas output.

Shell's refining and marketing profit climbed by $201 million to $1.7 billion. Its chemicals business saw profits decline by $251 million, to $321 million.

Shell said the hurricane damage would cost it about $350 million, although much of the expense would be covered by insurance.

Oil, gas futures rise

Meanwhile in New York, crude oil futures closed up 43 cents to $61.05 yesterday. Natural gas fell 1.5 percent to $13.83.

Oil and natural gas prices hit all-time highs during the third quarter after hurricanes halted Gulf Coast production and wrecked some facilities.

The storms shut down some refineries, boosting gasoline prices as well.

"Following the hurricanes, Exxon Mobil maximized gasoline production from all of our refineries which were operating in the U.S., and increased imports from overseas affiliates to meet U.S. demand," the company said.

Hurricane damage cost Exxon Mobil $45 million in the third quarter, and will cost more in the fourth quarter, though the company said it expects that its fourth-quarter costs won't go above $100 million.

More capacity

The hurricanes also caused Exxon Mobil oil production to drop 4.7 percent and gas production to fall 9 percent.

Exxon Mobil said it invested $4.4 billion during the third quarter on capital and exploration projects.

The company's vice president of investor relations, Henry Hubble, said the company has been steadily increasing its refining capacity, allowing it to bring more gasoline to market.

"We've grown our capacity 2 percent per year, well above the demand rate, which has been about 1.5 percent. And when you apply it across the kind of capacity that we have, that ends up delivering us the equivalent of a new refinery every three years," Hubble said during a conference call yesterday.

Some lawmakers, concerned that high energy costs will hurt consumers, have made a number of suggestions, from levying more taxes on oil companies to compelling them to invest in projects to bring more fuel to market.

Frist asked the Senate Energy and Natural Resources Committee and the Senate Commerce, Science and Transportation Committee yesterday to hold a joint hearing on energy prices, and to invite oil executives and state attorneys general. He also called for an inquiry into whether any price gouging has occurred.

Hubble said the issue is a "tightness of supply versus demand," and the best way for lawmakers to stimulate supply is to step back and let the markets work.

Elizabeth Souder writes for The Dallas Morning News. The Associated Press contributed to this article.

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