- The Washington Times - Friday, August 1, 2008

HOUSTON | Exxon Mobil Corp., the world’s biggest oil company, posted a smaller-than-expected increase in second-quarter profit Thursday after lower production countered record crude prices.

Net income rose 14 percent to $11.7 billion ($2.22 a share) from $10.3 billion ($1.83) a year earlier, buoyed by prices that climbed above $140 a barrel for the first time during the quarter.

Each $1 gain in the price of oil boosts Exxon Mobil’s net income by 11 cents a share, according to William Featherston, an analyst at UBS Securities LLC.

But Exxon Mobil said its oil and gas output fell 7.8 percent — the biggest decline in at least a decade — after Venezuela seized assets, Nigerian workers went on strike and governments from Angola to Russia kept a bigger share of the crude for themselves. The Irving, Texas, company pumped the equivalent of 3.8 million barrels of oil a day, its lowest average since the third quarter of 2005.

“They are not growing,” said Philip Weiss, an analyst at Argus Research in New York. “Production is becoming more and more of a concern. For these guys, access to reserves is a very big issue.”

Crude production declined in every region where the company has wells, and gas output fell everywhere except Russia, Europe and Africa. The company lost 160,000 barrels of daily oil equivalent because of production-sharing contracts that give host governments a bigger share when prices rise, company spokesman Henry Hubble told investors during a conference call.

Chief Executive Officer Rex Tillerson is facing increasing barriers to oil and gas exploration in Russia, Alaska and the South China Sea as governments limit access or raise the costs of tapping natural resources. He is spending $52 million a day to search for new fields after reserves fell in 2007 by the most in at least a decade.

Royal Dutch Shell PLC, Europe’s largest oil producer, reported a 33 percent gain in second-quarter profit to $11.6 billion Thursday and said output fell 1.6 percent. London-based BP PLC said earlier this week that its net income climbed 28 percent to $9.47 billion as output was little changed.

“If oil prices are going up $20 and $30 a barrel a quarter, like they have been, it hides a lot of flaws,” said Brian Gibbons, an analyst at New York-based CreditSights Inc. “The question on everyone’s mind is, how do these guys expect to grow production given the restrictions on access to reserves?”

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