ExxonMobil xom reported Thursday second-quarter earnings of $11.7 billion, a record for any U.S. company, but profit fell well short of estimates, and its share price took a hit.
"Weakening demand has now moved front and center on investors' radar," says CreditSights analyst Brian Gibbons.
Higher crude prices represent a double-edged sword for ExxonMobil, despite beating its own record for a quarterly profit. They nearly doubled earnings from production and exploration to $10 billion. But income from refining and marketing fell more than 50% to $1.6 billion as slackening consumer demand prevented the company from fully capitalizing on the higher prices.
ExxonMobil posted net income of $2.22 a share, up from $1.83 a share, a year ago. Revenue soared 40% to $138 billion. Excluding an after-tax charge of $290 million related to the settlement of the Exxon Valdez oil spill, the world's largest oil company earned $12 billion.
Oil prices last quarter shattered records, and peaked at $147 on July 11. Light sweet crude prices for September delivery settled at $124.08 Thursday on the New York Mercantile Exchange, down $2.69.
Analysts surveyed by Thomson Reuters expected earnings of $2.52 a share. ExxonMobil stock closed down $3.95, or 4.7%, at $80.43.
Exxon said production fell 8% from last year's second quarter as Venezuela seized oil-field assets amid record crude prices and Nigerian workers went on strike. Other culprits included declining production from mature fields and maintenance-related outages.
Oppenheimer analyst Fadel Gheit says production disruptions are likely to worsen as oil-producing nations such as Russia and Angola "drive a harder bargain" and limit U.S. access to fields. As oil prices rise, the companies "make more money, but they lose clout," he says.
But Standard & Poor's analyst Tina Vital says ExxonMobil is scheduled to start up seven new fields this year and another seven by 2010.
"I think a lot of (the problems) are behind them," she says.
Shell rdsa, the No. 2 oil producer, said profit rose 24% to $8.6 billion, excluding increases in the value of its inventory. Sales soared 55% to $131 billion. The Dutch giant said crude production dipped 6%. Its shares closed down $2.90 at $70.79. Marathon Oil mrosaid profit fell 50% to $774 million as high crude prices cut refining margins.