Exxon Mobil, Shell have big profits despite lower production

Exxon Mobil and Royal Dutch Shell on Thursday joined other oil majors reporting double-digit increases in third-quarter profits, despite drops in production that are dogging firms due to political unrest, asset sales and declining fields.

Exxon Mobil reported its third-quarter net income increased 41 percent to $10.3 billion as higher oil prices offset a 4 percent drop in production.

Shell said its net income doubled to $7 billion while production fell 2 percent.

Other large oil companies reported large profits but falling production this week. Third-quarter production was down more than 10 percent for ConocoPhillips, 12 percent for BP and 16 percent for Hess.

While some companies, including ConocoPhillips and BP, lost production because they sold producing assets, another major factor was the disruption to oil and gas production because of unrest in the Middle East and North Africa, said Jeff Dietert, an analyst with Houston-based bank Simmons & Company International.

“It’s also been a very active year for maintenance work in the North Sea and in Alaska that, broadly speaking, has been a negative for production,” said Dietert.

Occidental, Statoil

Occidental Petroleum and Statoil were the standouts on production among large companies this week. Occidental’s production climbed 5 percent, thanks largely to its efforts in Texas and other U.S. fields. Statoil said it had a 16 percent jump in production because of expansions in Angola, the U.S. and Brazil.

The laggards on production in the last quarter should see rebounds soon, said Fadel Gheit, an analyst with Oppenheimer & Co.

Exxon Mobil has plenty of projects in the pipeline, including more than 400,000 acres under development in the Bakken oil shales in North Dakota and another 400,000 acres in Texas’ Permian Basin.

Irving-based Exxon Mobil has added about 38 wells in the Bakken so far this year, including 18 in the third quarter alone.

In 2012 it plans to start drilling in recently acquired acreage in Ohio’s Utica Shale.

Shell, based in The Hague, Netherlands, said it expects continuing benefit from three new projects that gave its profits a boost in the third quarter – the Qatargas 4 liquefied natural-gas project; the Pearl gas-to-liquids plant, also in Qatar; and an expansion of its oil sands project in Alberta, Canada.

Hadrian prospect

During a conference call with analysts on Thursday, Exxon Mobil Vice President of Investor Relations David Rosenthal said the company doubled its estimate on the size of its Hadrian prospect in the deep-water Gulf of Mexico. The oil column was originally thought to be about 500 feet thick, but Rosenthal said after the well was drilled to depth, it was determined the oil play was about 1,000 feet.

Exxon Mobil’s exploration and production earnings were $8.4 billion, up $2.9 billion from the third quarter of 2010.

Refining profits were up $419 million to $1.6 billion, with $1 billion of that coming from improved refining margins. U.S. refining profit rose $646 million to $810 million.

Exxon Mobil’s profit was $10 billion or more for all three quarters so far this year. The last time it had three consecutive $10 billion quarters was in 2008, when oil hit an all-time peak price of $147.50 per barrel.

tom.fowler@chron.com

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1 Comment

  1. Dollar

    What I get out of this, and especially for Exxon, is that its getting much tougher for the IOC’s to increase production internationally.

    It looks very much like they pulling back into domestic USA.

    Which is all the more reason that more offshore prospects need to be made available to them.

    I guess they are running up against national oil companies pushing them away.

    Just my view. I’m probably wrong.

    #1