Exxon Mobil earnings: Down today, up tomorrow, but after that ... who knows?
Filed under: Energy, Earnings, Exxon Mobil, Green
Exxon Mobil (XOM) is the beast of the global energy industry. It ranks No.1 in market cap among all companies traded on U.S. exchanges with a market value of $355 billion That is $125 billion ahead of Chinese oil giant PetroChina (PTR) and more than double the market cap of the next-largest U.S.-based energy company, Chevron (CVX).
The market started to show some concern about Exxon's earnings over a year ago, when the stock began its descent from nearly $95 to the $73 where it trades today. Most large global oil companies have turned in only modest earnings for the last quarter because crude prices traded around $65 a barrel during that period, less than half their July 2008 peak. Earlier this week, BP (BP) posted earnings for the third quarter that were off 34 percent from last year. It said the major reason for the dip was relatively low oil and gas prices.
Wall Street expected Exxon to post earnings per share of $1.06 for the third quarter on revenue of $79.3 billion. Actual results came in at $0.98, down 65 percent year-over-year. Revenue was $82.26 billion. The stock sold off, but only modestly.
Analysts expect the next few quarters of earnings will be good for Exxon and its competitors because crude prices are moving up again, but looking out five years, the oil giant faces problems, many of which will not be easily overcome.
The first issue Exxon faces is that oil is not only harder to find, it is harder to recover, so the costs of its exploration operations are likely to rise sharply and soon. Most of the largest deposits being discovered now are in deep water. The most recently tapped large fields are in the Gulf of Mexico, and off the coasts of Brazil and Africa. These fields are miles beneath the ocean's surface and then more miles below the ocean's floor. Recovering this oil will test the limits of drilling technology, and it will be expensive. As reserves in countries like Mexico dwindle, the ocean will emerge as the only major untapped source of new supply.
Exxon is also up against large Chinese oil companies when it bids for supply, and those companies are funded by China's central government. As China's need for oil and gas has rocketed upward along with its economy, it has rapidly become an aggressive bidder for large reserves. Recently, it locked up new supply from Venezuela and Brazil, and may cut a deal with Ghana. An additional issue for U.S. companies such as Exxon: Some of the nations with large untapped reserves are ruled by repressive regimes, which may keep Exxon from offering to develop their oil fields. China has no such qualms. Political and ethical issues aside, the Chinese are bidding up the price of oil and other assets, making low-cost inventory more difficult to acquire.
Exxon's final problem has been a threat looming on the horizon for years, but it's not one the company has appeared to worry about. Alternative energy sources including solar, wind, and ethanol have grown in fits and starts. The technology for these sources has often been primitive, and there has not been enough demand to properly fund R&D and capital spending. But as fossil fuel prices rise, the US, Europe, and Japan will have a growing incentive to look to alternative energy and fund it. Publicly-traded alternative energy firms like Suntech (STP) have multibillion-dollar market caps, an indication of significant investor interest. And a number of large companies such as Google (GOOG) are developing their own power alternatives to save money. The technology that Google creates is likely to be shared with other large tech companies, even if they have to pay modest licensing fees.
Exxon's future may look good for the next two or three years. After that, all bets are off.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 2)
10-29-2009 @ 11:36AM
hemipwr54 said...
Oh , poor oil companies , only a shabby 125 billion , 355 billion over all , my God how do they make it with such little profits ? Sarcasm .
Thought with Bush out the Big Oil would be brought under control ? Must not have been Bush's fault !
If Congress does not stop this fleecing of Americans , you know what , we can stop Congress in 2010 lets give them change , lets change a few seats in Congress .
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10-29-2009 @ 11:50AM
Dee said...
Totally agree--If they are in office now --do not re-elect--
Oh by the way with their revenue of 82.26 billion--that equals
6.85.. billion dollars per month--How many of you reading this have that revenue per month--I know I surley do not--still unemployed after a year due to Gov of VA cutting money from the school budgets!!!!
10-29-2009 @ 2:11PM
vaughnvdg said...
MY, MY what a BIG DIFFERENCE in OIL PROFITS now that DUMBYA BUSH is no longer in office. Those of you who want to PRETEND there is no difference TELLTHE GAS STATION YOU WANT TO PAY $5 A GALLON THE NEXT TIME YOU FILL UP BECAUSE PRICES HAVEN'T CHANGED OVER THE PAST YEAR!!!! ENJOY!!!!
10-29-2009 @ 11:55AM
Another taxed fool said...
I'm I supposed to cry now or throw my money back in the ponzimart? Negitive is the new positive ,yes? I will not raise a hand to raise the sails aboard this ship of fools.
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10-29-2009 @ 12:35PM
the man with a plan said...
just think if the american people would just stop buying from farrin oil that itself would help america not sending our money to other countrys lets cut off china and bp british pertroilium . this could make big changes . or you can continue sending them our money and make them better off then we are .
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10-29-2009 @ 12:37PM
frisco8112 said...
Just in time to ruin people's planned holiday plans. Big Oil loves to raise prices just before big travel holidays because they know people will have to pay them. I'll bet that at least 90 percent of Congress men and women own stock in Big Oil. Americans need to take back America. Vote them out! Let your voice be heard to the new ones coming in. We have to stop what they have started. The 'old boys club' needs to be demolished.
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10-29-2009 @ 12:37PM
wantedmytrulove said...
EXON MOBIL can Kiss my ______..
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10-29-2009 @ 12:58PM
Craig said...
You Good Folks on here just dont seem to grasp the underlining meaning of what your saying,,, Oh lets just vote all of congress out of office and put in some new faces.= And just what do you think the new faces of congress is going to do for you...... Nothing,,,, just like they have always done.... how many times have you been voting.... and has anything really changed... no and it never will..... power breeds power and greed breeds more greed..... how long have you folks been complaining about gas prices.... 3 to 4 yrs now... and have you not heard every excuse in the book... lets see..... its the hurricane that hit, its the hurricane that may hit, its wall street pushing up the price, its some group in somilla that has attack a ship, it the war, its the economy, its exxon, its bp, its supply and demand,,, its supply up ,, its supply down.... its George Bush, its Dick Cheney , its Blackwater,,, its because we dont have any new refineres, its because of cost of exploration, its because of drilling , its because of china , its because of we are running out of oil, its because of Everything they can think up ... and there is nothing we can do about it.... so let it go. just let it go.... the world is about to end anyway . so where will they spend their money that they have stole .....
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10-29-2009 @ 12:56PM
REalist said...
It would be intertesting to know how many hundreds of millions big oil pay to private security fims to keep key executives and their families safe from an ever-growing irrate public. I am totally suprised that nobody has assassinated an oil company executive, kidnapped one of their family members - or both. It must be security is very, very good.
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10-29-2009 @ 2:20PM
joseph said...
Mid term elections is coming up. Research your candidates background (regardless if they're Repubs or Democrats) then decide if big oil is behind them. If they are it's up to you.
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10-29-2009 @ 3:08PM
Terry said...
When it comes to the UN-controlled and non-regulated fuel pricing that we have here in the US, you have to asked the right questions as to why they are unbridled in our current economic situation.
First question: Who benefits the most from high fuel and oil cost?
Second question: What regulatory arm of our government is supposed to protect Americans from this kind of monopolies?
Third question: What lessons should Americans have learned from the run away fuel costs in the summer of 2008?
Answers:
First, Oil companies who have reaped $476 Billions in net profit over the last six years (not counting the numbers from the summer of 2008) are the major benefactors in these runs in fuel and oil costs.
Second, the same government that is currently taking in millions from these same oil companies in contributions. And the oil industry is dumping more millions this year at a alarming rate. They are literally buying your government.
Third, that we as Americans need TERM LIMITS in our Congress with no exceptions.
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10-29-2009 @ 4:26PM
p held said...
I have an F350 diesal pickup that I have covered up and don't drive unless we are on vacation. I bought a Toyata hybrid that gets 55 miles to the gallon. If we all put away our gas guzzlers and use a hybrid or any vehicle that get's good fuel mileage they may wake up and realise enough is enough
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10-29-2009 @ 7:10PM
Dale said...
p held...
are you for real???? first you buy a foreign car and think thats great???? maybe for the Japanese people who are enjoying the stupid americans who continue to ship the money to china korea and japan....do you really believe that the oil companies will not raise the prices even higher to off set the increased mileage your car gets....and what abot all these fools that have to have mcManisons to live it...last time I checked they need oil or gas to heat them....the only message to send is vote these moron millionaire congres jackasses out of office and give them a wake up call!!!!
10-29-2009 @ 3:42PM
Terry said...
85% of Congress and your government are millionaires, less then 1% of American’s are. Congress needs term limits, no more career politicians who feather their own nest at the expense of Americans today. Call, write, email and fax your representative today let them know your watching.
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10-29-2009 @ 4:00PM
Jim said...
For goodness sake
U already spend so much on oil
Can't we get off foreign Oil?
Kansas corn is not the answer
Big Oil Must stop destroying our country
I am buying a electric car@-@!!!
Gotta love Arnold!
Oil is causing us to war other countries!
I think we should tax gas a buck to reduce demand!
Let us get tax money for building infrastructure, not Oil profit
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10-29-2009 @ 5:12PM
John Hoover said...
You can tell the economy is getting bettmer because the price of oil and gasoline are rising as Wall Street and the energy sector work diligently to suck as much money out of general circulation as possible before we can get sustainable energy policy regs passed and reregulate the banking/insurance/Wall Street econoimc bubble complex.
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10-29-2009 @ 6:48PM
Terry said...
If we had gone with Thomas Edison, we would all be driving electric cars today, we would not have global warming. The oil industry as a whole has manipulated their product by shutting down refineries, thereby controlling a product that every, single American has to use. It is a monopoly, pure and simple and should be treated by our legislature side of our government as monopoly and investigated to the full extent of our anti trust laws! Call your representative today and tell them we want off oil now.
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10-29-2009 @ 7:24PM
Terry said...
Life in the Congress, up by 8:00 am, have the nanny get the children ready for their private school. The cook prepares a fine breakfast, the waiter brings it out and serves. 8:45 am, gardener starts work on the beautiful lawn with landscape flowers. The limo arrives at 9:00 sharp to get children to school, drop congressman off for early brunch meeting with lobbyist and special interest groups working on bills coming up for vote soon. Limo takes the misses to various shopping events, club meetings and then back to the mansion around 1:00 pm.
2:00 driver picks up children from school drops them off for private lessons. (piano, tennis, etc.) Congressman makes it to capital hill (2:00) via client ride and proceeds to abstain from vote because it does not serve his purpose and might look bad on his record. (Fence straddling is a art form in Congress) Limo driver takes congressman back to get children from lessons and then proceed to go home. Supper is served at 5:00 pm and then off to the charity of their favorite cause. (Save the whale, snail or some other unheard of insect)
Nanny puts children to bed by 8:30, checks in on the congressman and wife to see if they can get them anything else before retiring for the evening. Couple rest by fireplace sipping champagne and talking about what they have to do tomorrow. In a long story short, someone takes them to work, shopping, children to school, cooks for them, serves the meals for them and cleans their house, yard, laundry and takes care of their kids for them.
Just a little bit out of touch with the real world.
And the recovery is just around the next corner.
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10-29-2009 @ 7:56PM
Terry said...
Hears a idea, why not send some of the bail out money to the 10 million Americans who have lost their jobs and the additional 250,000 or so more who lost theirs last month. Instead of giving it to the “Too Big to Fail” corporations. Or maybe let the oil and gas industry pick-up the tab for Christmas, they have made over $476 Billion in net-profit in the last 6 years. That’s it, we could call it “Christmas Bail out Program”, or just call it the “CBOP” for short. (You know how they like to abbreviate all those things)(Kind’a like “TARP”)
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10-29-2009 @ 8:24PM
Rick said...
Whether we like it or not sky rocketing gas prices are right around the corner. Oil companies dictate their prices to the public with impunity. As soon as some talking head reports any sort of positive economic news the price of gas rises another dime. Just wait until the econonmy actually does begin to look better. I don't care if companies and people get rich but it really is a national disgrace that these entities operate with no sense of civic responsibility or moral compass. Oil companies, banks, "Wall Street Investors".......they're all the same.
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