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ExxonMobil's Earnings Plummet; Shell to Cut 5,000 Workers

ExxonMobil Corp., the world's largest publicly traded oil major, saw its quarterly profits plummet 68% from a year ago as commodity prices retreated. Meanwhile, Royal Dutch Shell plc sees "some indications" that energy demand and pricing are improving but the "outlook remains very uncertain and we are not expecting a quick recovery," CEO Peter Voser said last week.

ExxonMobil, headquartered in Irving, TX, earned $4.73 billion (98 cents/share) in 3Q2009, less than forecast by Wall Street and less than the company has reported in at least four years. ExxonMobil earned $14.83 billion in 3Q2008, the company's best quarter ever.

Investor relations chief David Rosenthal, who presided over a conference call with analysts to discuss ExxonMobil's quarterly earnings, pointed to several natural gas projects in North America and worldwide that the company is developing. The Piceance Basin gas project in Colorado "is coming along very well, ramping up as we expected, and today is producing about 130 MMcf/d," he said. The Piceance Phase 1 project, with capacity to process up to 200 MMcf/d of gas, began operating in June at 80 MMcf/d (see NGI, June 29).

Also on the radar gas-wise in North America is the Horn River Basin in northeastern British Columbia. "After a very successful program there last year, we are ramping up this year and drilling our first horizontal well," said Rosenthal. Initial production numbers aren't expected before 2010. In addition, liquefied natural gas (LNG) projects in Qatar are on track, and the Golden Pass LNG import terminal near Sabine Pass, TX, should begin to take deliveries "somewhere around mid-year" 2010.

At Shell, 3Q2009 earnings fell sharply from a year ago to $3.25 billion from $8.45 billion. Operating cash flow plunged to $7.3 billion compared with $12.6 billion. Worldwide gas production climbed 3% from a year ago to 7,411 MMcf/d from 7,207 MMcf/d, and LNG sales jumped 13% to 3.49 million tons from 3.10 million tons. However, total oil and gas production was flat from a year ago, reaching 2.9 million boe/d, compared with 2.93 billion boe/d in 3Q2008.

"Despite Shell's good operating performance in this difficult environment, we have embarked on an ambitious program of stringent measures to further improve our performance," Voser said in announcing the company's 3Q2009 earnings. "We continue to focus on improving our competitive cost position, simplifying Shell and increasing personal accountabilities.

"The 'Transition 2009' program, which I announced earlier this year, is progressing well and will be completed by the end of 2009," he said (see NGI, Aug. 3). "Some 5,000 employees are leaving Shell as a result of these changes. This represents around a 10% reduction in employees in the redesigned divisions and corporate functions." Another 15,000 Shell employees will have to reapply for their jobs as it restructures.

Shell CFO Simon Henry, who answered analysts' questions during a conference call, said the producer would "continue with our investment program, and at the same time keep an eye on the medium term." Shell's operating costs came down an estimated $1 billion in the first nine months compared with the same period of 2008, but even more efficiencies are predicted once the restructuring is complete, he said. Shell is readying for a "period of significant growth in 2011 and 2012."

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