ASSOCIATED PRESS
Oil giants Exxon Mobil and Royal Dutch Shell on Thursday added to the industry’s worst midyear showing in years, stung by the slumping global energy demand that threatens to further slow exploration and production.
For Exxon Mobil Corp., the world’s biggest publicly traded oil company, a 66 percent profit plunge for the second quarter marked its lowest result in nearly six years. The company vowed to maintain its aggressive spending plans but acknowledged that the tough economic environment has made that difficult.
Quarterly production fell, too - bad news considering it generates more than two-thirds of its earnings from oil and gas output.
“The results were very disappointing,” said Brian Youngberg, an energy analyst at Edward Jones. He noted Exxon has an extensive list of projects in various stages, “but now they need to start delivering.”
When demand does rebound, however, the reduction in spending on exploration and drilling could lead to supply shortages and prices spikes such as those of 2008.
Exxon Mobil said earnings from April to June came to $3.95 billion, or 81 cents a share, down from $11.68 billion, or $2.22 a share, a year ago, a record at the time.
Shell, Europe’s biggest oil company, said its profit slid 67 percent to $3.82 billion, and production fell 6 percent.
The latest result missed the average Wall Street profit forecast by a wide margin. Analysts polled by Thomson Reuters were looking for net income of $1.02 cents a share. Those estimates typically exclude one-time items.
Revenue fell 46 percent to $74.5 billion.
The substantial profit falloff was no surprise given the steep drop in oil and natural gas prices from a year ago. Already this week, ConocoPhillips said its second-quarter profit tumbled 76 percent, while BP PLC’s net income fell 53 percent. Chevron Corp., the No. 2 U.S. oil company behind Exxon, is scheduled to report earnings Friday.
Exxon posted the company’s most meager quarterly showing since it earned $3.65 billion in the third quarter of 2003. The company, which replaced Wal-Mart Stores Inc. atop the 2009 Fortune 500 list of largest U.S. companies, has made a habit of setting quarterly and annual profit marks in the past few years.
Its shares fell 71 cents to $70.72 Thursday. They’ve traded in a range of $56.51 to $84.76 in the past year.
Exxon has said it expects to spend $29 billion on capital and exploration projects this year. In its earnings release Thursday, it said the tab for the first half of 2009 amounted to $12.3 billion, “in line with our longer term plan.”
Royal Dutch Shell PLC executives said more drastic steps will be taken to adjust to the downturn. CEO Peter Voser promised Thursday to cut jobs and reduce capital spending next year. He said Shell would still increase production by 2 percent to 3 percent a year through 2012, reversing seven years of declines.
“We simply don’t know when the global economy will recover, and we have to plan on the basis that this downturn could last quite some time,” Mr. Voser said.
Mr. Voser, CEO since July 1, said a major move to streamline Shell’s operations was on schedule. He said Thursday that 150 “top managers” had been released and repeated earlier statements that there would be further “substantial” job losses among lower ranks, but didn’t specify how many.
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