DALLAS – For anyone stunned by the size of Exxon Mobil Corp.’s $36.13 billion profit in 2005 – the highest ever for a U.S. company – some Wall Street analysts have a message: there’s more to come.
“Unless (energy) prices collapse, earnings in 2006 will make 2005 look like a cake walk,” said Oppenheimer & Co. oil analyst Fadel Gheit.
That would be good news for Exxon investors, who, like the company, have benefited enormously from high oil and natural-gas prices. But Democratic lawmakers expressed outrage at the industry’s latest profit surge, renewing calls for a windfall profits tax, as well as for increased investment in refining capacity and alternative fuels.
Sen. Byron Dorgan, D-N.D., on Monday said Congress should enact a consumer rebate on oil company profits.
Last November he introduced legislation for such a rebate, but the proposal was rejected.
Given Exxon’s record profits, Congress needs to take another look at the proposal, Dorgan said in a release.
“Consumers have all the pain and the big oil companies have all the gain, and that’s simply not fair,” he said. “Congress can and should move to correct that, and this news just may be spark that makes it happen.”
The proposal would add a50 percent tax on oil company revenue from sales of oil at more than $40 per barrel.
Experts said there wasn’t much that could be done in the short term to lower the price of gasoline, which now hovers around $2.34 a gallon nationwide.
“As long as demand stays high, people will have to pay more,” said David E. Dismukes, an energy economist and associate director at Louisiana State University’s Center for Energy Studies.
Exxon said Monday that its fourth-quarter profit climbed 27 percent to $10.71 billion.
And with annual revenue of $371 billion – an amount that exceeds Saudi Arabia’s estimated gross domestic product in 2005 – Exxon will likely dethrone Wal-Mart Stores Inc. from atop the Fortune 500 when it’s released this spring. Wal-Mart, whose fiscal year runs through January, had $290.29 billion in revenue through December.
Exxon said its average sale price for crude oil in the U.S. during the quarter was $52.23 a barrel, compared with $38.85 a year earlier. It sold natural gas in the U.S., on average, for $11.34 per 1,000 cubic feet, compared with $6.61 during the same period a year ago.
While strong commodity prices underpinned the record earnings, Exxon executives said the company also deserved credit for completing projects on time while keeping costs in check.
“Our record results show a disciplined approach and we continue to deliver superior value to our shareholders,” the company’s vice president of investor relations, Henry Hubble, told analysts in a conference call.
Exxon’s results lifted the combined 2005 profits for the country’s three largest integrated oil companies to more than $63 billion.
ConocoPhillips said last Wednesday that its fourth-quarter earnings rose 51 percent to $3.68 billion, while annual income climbed 66 percent to $13.53 billion. Two days later, Chevron Corp. said its fourth-quarter earnings rose 20 percent to $4.14 billion, while annual income jumped 6 percent to $14.1 billion.
Exxon spent $5.2 billion in the fourth quarter to buy back 92 million of its own shares, and raised its dividend to 32 cents per share for the first quarter, compared to 29 cents per share last quarter.
Hubble said Exxon spent $17.7 billion in 2005 to find and develop oil and gas, a $2.8 billion jump from the year before. He said projects in Qatar, Nigeria and Russia would keep the company “well-placed for continued growth.”
But the oil industry’s stellar results renewed talk among some politicians for a windfall profit tax that would push companies to invest even more in new production and refining capacity.
Sen. Barbara Boxer, a California Democrat who sharply criticized oil executives appearing before Congress in November, on Friday said the Bush Administration and Federal Trade Commission needed to “put an end to gouging.” She then suggested that FTC stood for “Friend to Chevron.”
On Monday, the eve of President Bush’s State of the Union address, Sen. Chuck Schumer, a New York Democrat, weighed in.
“The federal government has a responsibility to make sure that these companies continue to innovate instead of just profiting from the status quo,” he said. “These companies should be investing in developing new sources of fuel and new technologies, like hydrogen fuel cells and alternative fuels, that will ease our dependence on foreign oil and help consumers save.”
Rep. Edward Markey, a Massachusetts Democrat, said he planned to introduce legislation on Tuesday mandating that all cars sold in the U.S. be able to run on both gasoline and ethanol, a corn derivative.
Analysts said they are not worried about any political fallout from the industry’s soaring profits.
“I hope the capitalist system would promote and applaud the hard work of companies that have been smart and lucky to achieve good earnings for shareholders,” said Tina Vital, analyst for Standard & Poors.
Exxon shares rose $1.82, or 3 percent, to close at $63.11 on the New York Stock Exchange. That is near the upper end of its 52-week trading range of $51.35 to $65.96.
“The outlook is looking a lot better for them,” said Jacques Rousseau, analyst for Friedman, Billings, Ramsey and Co. “I think you’ll see more momentum.”
Quarterly revenue ballooned to $99.66 billion from $83.37 billion a year ago but came in shy of the $100.72 billion Exxon posted in the third quarter, which was the first time a U.S. public company generated more than $100 billion in sales in a single quarter.
By segment, exploration and production earnings rose sharply to $7.04 billion, up $2.15 billion from the 2004 quarter, reflecting higher crude oil and natural-gas prices. Production decreased by 1 percent due to the lingering effects of hurricanes Katrina and Rita, which battered the Gulf Coast in August and September.
The company’s refining and marketing segment reported a 2 percent increase in earnings to $2.39 billion, while profits at its chemicals business declined by $413 million to $835 million because of higher raw materials costs.
Exxon’s profit for the year was the largest annual reported net income in U.S. history, according to Howard Silverblatt, a senior index analyst for Standard & Poor’s. He said the previous high was Exxon’s $25.3 billion profit in 2004. The third best performance belongs to Citigroup Inc., which posted net income of $24.64 billion in 2005.