ExxonMobil Corp.’s active exploration program combined with lower oil and natural gas output to give the company its first profit miss since 3Q2005 Thursday, with net income down 1% from a year ago.

The Irving, TX-based producer reported a sizable profit of $10.26 billion ($1.83/share), with quarterly earnings per share up 6%, but profit fell from the same period a year ago, when Exxon earned $10.36 billion ($1.72/share).

Exxon CEO Rex W. Tillerson blamed lower natural gas realizations for some of the quarterly loss, which were mostly offset by higher refining, marketing and chemical margins. He noted that the company also directed more of its capital budget to global exploration.

“ExxonMobil continued to actively invest in the second quarter, spending $5 billion in capital and exploration projects,” Tillerson said. “For the first half of 2007, spending on capital and exploration projects was $9.3 billion.”

Investor Relations Vice President Henry Hubble, who presided over a conference call to discuss the earnings on Thursday, agreed that the exploration expenses had contributed to Exxon’s lower earnings.

“A lot of it is timing of big wells and specific timing of whatever dry holes we have in the period,” Hubble said in response to a question on the high exploration costs. “We have a broad slate of activity going on around the globe, and there’s not a specific area that was a big chunk of that.”

Included in Exxon’s North American portfolio of new exploration projects are the Beaufort Sea, the deepwater Gulf of Mexico’s Lower Tertiary region and the Piceance Basin. Hubble said those regions are all areas the company wants to pursue.

“There’s a fair bit of activity, and those are prospects that are best that we see,” Hubble said. He added that Exxon will be reviewing additional Gulf of Mexico acreage in future Minerals Management Services lease sales to see if there is the possibility to build its deepwater position.

Exxon’s worldwide upstream earnings were $5.953 billion, down $1.18 billion from 2Q2006. In the United States, the upstream earned $1.222 billion, which was $422 million less than a year ago.

On an oil-equivalent basis, worldwide oil and gas production declined by 1% from a year ago. Total natural gas production worldwide available for sale was 8.711 Bcf/d, basically flat from the 8.754 Bcf/d reported in 2Q2006. In the United States, gas available for sale reached 1.517 Bcf/d, down from 1.656 Bcf/d in 2Q2006. Gas for sale in Canada also declined in the period to 794 MMcf/d from 841 MMcf/d.

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