ExxonMobil Corp. posted the highest quarterly results in U.S. history Friday, but neither Exxon nor second-largest U.S. producer Chevron Corp. managed to boost their oil and natural gas production levels in the final three months of the year.
On the strength of its international assets and higher oil prices, Irving, TX-based Exxon reported that its 4Q2007 net income jumped 14% to $11.66 billion ($2.13/share), compared with $10.25 billion ($1.76) a year earlier. Wall Street analysts had expected average earnings of $1.95/share. Exxon's annual profit of $40.6 billion also was a record, beating the $39.6 billion it earned in 2006. Revenue in the last three months of 2007 jumped to $116.64 billion from $90 billion in 4Q2006.
However, Exxon's oil and gas production fell flat last year, falling 2.4% from 2006. Exxon blamed some of the output losses on its decision to pull out of Venezuela after the country demanded joint venture agreements with producers. The Organization of Petroleum Exporting Countries also reduced its export quotas, which required Exxon to cut back its output to comply.
Exxon's total quarterly oil and natural gas output rose about 1% on increased volume from overseas projects. And gas production climbed 12% to 10.4 Bcf/d, up 1.1 Bcf/d, from 2006 on higher European demand and increased volume from projects in Qatar and the North Sea. The higher gas output was partially offset by mature field declines.
Gas production available for sale in the United States fell to 1,405 MMcf/d in 4Q2007 from 1,588 MMcf/d in 4Q2006. Exxon's full-year U.S. gas output fell to 1,468 MMcf/d from 1,625 MMcf/d in 2006. In Exxon's Canada/South America gas operations, which are grouped together, output fell to 717 MMcf/d from 894 MMcf/d. Full-year gas output fell to 808 MMcf/d from 935 MMcf/d in 2006.
WHG Funds' Chris MacDonald said the "only negative thing I see going forward is production; they just can't grow production...If they are spending $21 billion a year on capital expenditures and they can't grow production, with their technology...it does not bode well for the industry in general."
San Ramon, CA-based Chevron also reported a steep jump in net income in 4Q2007, which rose 29% to $4.88 billion ($2.32/share), compared with $3.77 billion ($1.74) a year earlier. Quarterly revenue increased to $59.9 billion from $46.24 billion a year earlier. Wall Street analysts had estimated Chevron's earnings would be $2.26/share.
However, Chevron's total gas and oil output fell about 1.6% to 2.61 million boe/d. Net natural gas production in the United States dropped to 1,675 MMcf/d from 1,782 MMcf/d in 4Q2006. And for the year, U.S. gas production declined to 1,699 MMcf/d from 1,810 MMcf/d in 2006. Chevron's gas sales rose in the United States to 7,073 MMcf/d from 6,973 MMcf/d. For the year, U.S. gas sales also were higher, up to 7,624 MMcf/d from 7,051 MMcf/d in 2006.
In a conference call Friday to discuss results, CEO Dave O'Reilly said the company is seeing lower inflation for its onshore business but rising costs offshore. He also warned that Chevron would reduce its 2008 production forecast and said the 2007 reserve replacement numbers would be lower as high oil prices cut into production from its international assets.
Chevron is forecasting production this year to rise only about 1.2% to 2.65 million boe/d, assuming oil prices average $70/bbl. The oil major had previously forecast output of 2.8 million boe/d at a lower average oil price. Last year's reserve replacement numbers were hurt by higher oil prices, asset sales and timing of various large projects, O'Reilly said.
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