While its U.S. and Canadian natural gas production declined somewhat, that didn’t stop Exxon Mobil Corp. from posting its greatest first quarter profit ever and the fifth greatest quarterly profit of any public company ever.

Net income in 1Q2006 was $8.4 billion or $1.37/share, up $540 million from 1Q2005 results, which got a one-time $460 million boost from the sale of the company’s Sinopec interest. Excluding this special item yields a $1 billion quarterly increase for 1Q2006.

First quarter worldwide natural gas production was 11,199 MMcf/d compared with 10,785 MMcf/d last year, the company said. “Higher volumes from projects in Qatar and increased European demand were partly offset by the impact of mature field decline.”

Still, the strong results fell short of analyst expectations. The Wall Street consensus expectation was $1.46/share. Exxon Mobil blamed the lower-than-expected results on litigation and higher tax expenses.

Friedman Billings Ramsey’s energy and natural resources group was estimating first quarter earnings would come in at $1.55/share. “As a result of the lower than forecasted quarterly earnings, we’re reducing our 2006 estimate from $5.90 to $5.70 but maintaining our outperform rating and $72/share net asset value-derived price target,” the firm said in a research note. Exxon closed down 68 cents Thursday at $62.42.

John Olson, co-manager of equity hedge fund Houston Energy Partners, told NGI that the major oil companies are seeing return on equity of around 24% currently while the rest of corporate America is realizing about 16%. He said it’s important to note, however, that energy is highly cyclical and the Wall Street consensus forecast sees lean days ahead. Return on equity in energy is projected to be 19.7% next year and 12.9% in 2008. “We are looking at the top of the cycle [in energy prices], and the tide will be going out later this year,” said Olson, who will be a featured speaker at the annual GasMart conference next week in Denver.

Exxon Mobil’s gas production available for sale in the United States declined to 1,707 MMcf/d from 1,897 MMcf/d in 1Q2005. Canadian production declined to 882 MMcf/d from 923 MMcf/d. However, production increased in Europe, Asia Pacific/Middle East, and Russia/Caspian regions.

The average realized price for U.S. gas production was $8.31/Mcf in 1Q 2006, up from $6.18/Mcf in the first quarter of 2005 but down significantly from 4Q2005 when the average was $11.34/Mcf. U.S. price realizations have been stronger than those in the rest of the world for at least the last five quarters, according to company figures.

First quarter upstream spending in the United States was less than one-sixth what it was in the rest of the world. Exxon Mobil spent $548 million during the first quarter in the U.S., up from $441 million, compared to $3.54 billion in the rest of the world, up from $2.37 billion. Total upstream spending was $4.09 billion, up from $2.81 billion in the first quarter of 2005.

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