Exxon Mobil’s profit falls on refining income

HOUSTON — Exxon Mobil’s third quarter earnings fell 18 percent compared with the same period a year ago, but the company is poised to pull in more cash, particularly from shale plays, an executive said Thursday.

“We are just really getting started in the unconventional side,” said David Rosenthal, Exxon Mobil’s vice president of investor relations, speaking during a conference call with analysts. “We spent a lot of time in the last couple years evaluating what we had… now you’re really starting to see wells coming on, not for evaluation and delineation, but to sell so we can start ringing the cash register from these investments.”

As an example, the company has been growing its production in the Permian Basin, but not through drilling into shale, Rosenthal said. The vast majority of Exxon Mobil’s efforts in that region have been conventional drilling with carbon dioxide injection, meaning that the company has yet to fully target shale there, Rosenthal said.

Exxon Mobil also is ramping up its shale drilling efforts throughout its substantial North America holdings, some of which were acquired through its $25 billion purchase of XTO Energy in 2010 and others that Exxon Mobil has picked up over the last year.

“You’re really starting to see the benefit of the time we spent evaluating those areas, understanding what we had, quietly adding acreages to our position, which is now quite large in all of those key areas,” Rosenthal said.

Earnings results

Exxon Mobil’s net income in the three months ending Sept. 30 was $7.9 billion, down from $9.6 billion in the same period a year ago. Earnings for the company’s refining arm fell by $2.6 billion as a result of lower margins, driving down overall results.

The company’s earnings per share was $1.79, down from $2.09 for the same period a year ago. Its revenues fell 2 percent, to $112 billion.

Exxon Mobil, the nation’s largest oil company and largest producer of natural gas, increased its dividend by 11 percent, or 63 cents per share, compared with the third quarter dividend in 2012.

Exxon Mobil’s oil-equivalent production grew 1.5 percent, to 4 million barrels per day. The company’s quarterly earnings eclipsed the $6.9 billion pulled in during the second quarter of this year, which was Exxon Mobil’s worst quarter since early 2010.

Capital spending

Analysts pressed Rosenthal on the company’s hefty spending this year, which is projected to reach $41 billion.

Rosenthal said there were no plans to scale back spending for 2013, which he described as a “peak year” for capital expenditures.

Exxon Mobil’s Kearl project in Canada is producing 100,000 barrels per day of oil sands crude, Rosenthal said. The company is able to move all of those products to its own refineries using pipelines that it also owns.

Rail plan

Rosenthal said the company expects to continue moving oil sands crude via pipelines, even after a planned expansion at Kearl, which likely would benefit from the proposed Keystone XL pipeline. But Exxon Mobil is exploring a plan to build a rail terminal to move crude by train from Edmonton, he said.

“As we look toward 2015 and bringing that online we are looking at a number of logistical opportunities that we have, including pipeline routes,” he said. “And certainly Keystone XL would be there for the industry in general, but as would be prudent we are looking at other options including evaluating a project to build a rail terminal in Edmonton and move some of that crude out of there into the Lower 48 by rail.”

Rosenthal highlighted Exxon Mobil’s myriad opportunities to sell natural gas, including its current consideration of a liquefied natural gas terminal in Russia.

Also in Russia, Exxon Mobil has completed testing of sea ice defense systems that would be used on drilling rigs in the country’s Arctic regions there, Rosenthal said.

He also touched on the company’s efforts to explore in Germany’s shale resources, where Exxon Mobil holds drilling rights over 4 million acres. The company is working with regulators there over concerns about hydraulic fracturing.