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ExxonMobil, Shell Post Gains, But Gas Output Falls

ExxonMobil Corp. and Royal Dutch Shell, the world's largest oil majors, on Thursday reported higher-than-anticipated earnings in the last three months of 2006, despite softening commodity prices. ExxonMobil's natural gas output was down, both in North America and worldwide for the quarter and year, while Shell reported gas production worldwide fell about 5% in the quarter.

In the United States, Irving, TX-based ExxonMobil reported gas production available for sale totaled 1,588 MMcf/d, down from 1,620 MMcf/d in 4Q2005. In Canada, ExxonMobil's gas output dropped to 818 MMcf/d from 912 MMcf/d. Worldwide, gas production fell to 9,301 MMcf/d from 9,822 MMcf/d.

"Lower European demand and the impact of mature field decline were partly offset by higher volumes from projects in Qatar and the absence of 2005 hurricane effects," ExxonMobil said in a statement.

Shell, headquartered in The Hague, did not break out its North American gas production separately. However, during a presentation to financial analysts Thursday, Executive Director Malcolm Brinded, who is in charge of exploration and production, said in the U.S. onshore, the company had 15% lower well costs versus its competitors in the Pinedale play of Wyoming, with 15 rigs in operation and a 130-plus well drilling campaign planned for 2007.

In the Pinedale anticline play, Brinded said Shell had increased production by 30% since 1Q2005 to more than 425 MMcf/d. Shell also is expanding its operations offshore in the Gulf of Mexico on the Perdido and Ursa plays, and in South Texas.

Shell CEO Jeroen van der Veer said the company would drive its upstream investments this year toward a "combination of exploration, LNG [liquefied natural gas] and unconventionals." He said Shell has implemented a deliberate policy of investing in large stakes in major integrated projects. As part of the funding for that policy, we expect asset sales to accelerate in 2007 to some $9 billion, as we continue to refocus our company. Taken together with the purchase of the minority shares in Shell Canada Ltd., I therefore anticipate that net capital spending will be around $22-23 billion in 2007, compared to some $21 billion in 2006."

Shell, which already owns about 78% of Shell Canada, is offering to buy out the remaining stake for C$45/share, which represents a value of about C$8.7 billion (see Daily GPI, Jan. 24).

In the final quarter, Shell's gas production available for sale worldwide totaled 8,377 MMcf/d, which was about 5% less than in 4Q2005. For the year, Shell's gas production rose about 1% to 8,368 MMcf/d from 8,262 MMcf/d.

Shell's earnings from U.S. upstream operations were $1,052 million, $735 million lower than the fourth quarter of 2005. Non-U.S. Upstream earnings excluding special items were $5,168 million, down $83 million from 2005. Shell said its upstream earnings reflected higher production volumes and oil prices, which were partly offset by higher operating costs, which reflected "industry conditions, increased pre-development activity levels and lower U.S.A. gas prices."

ExxonMobil posted a $9.84 billion profit, excluding a tax gain, in 4Q2006. Net income at ExxonMobil fell to $10.3 billion from $10.7 billion in 4Q2005. Earnings from ExxonMobil's U.S. upstream operations in the quarter were $1.052 billion, $735 million lower than in 4Q2005. Upstream earnings, excluding special items and excluding U.S. earnings, were $5.168 billion, down $83 million from 2005. Full-year profit of $39.5 billion broke ExxonMobil's U.S. record for net income by any company.

Shell reported profit, excluding special items, reached $5.5 billion for the quarter. Net income jumped 21% to $5.28 billion from $4.37 billion in 4Q2005. Shell's full-year net income was $25.4 billion.

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