-- ExxonMobil xom said Thursday that third-quarter earnings jumped 58% to nearly $15 billion, solidly beating estimates and setting another record for the biggest profit by a U.S. corporation as higher refining margins offset the initial drop in crude oil prices.
Shares of the world's largest oil company inched higher despite the steep drop in crude prices that is expected to crimp fourth-quarter earnings. Shares closed at $75.05, up 0.5%.
"I wouldn't expect the fourth-quarter to be anywhere near as" robust, says Argus Research analyst Phil Weiss.
ExxonMobil earned $14.8 billion, or $2.86, a share, vs. $9.4 billion, or $1.70 a share, a year ago. Sales soared 35% to $138 billion.
The previous record for U.S. corporate profit was set in the last quarter, when ExxonMobil earned $11.68 billion.
Setting U.S. profit records has become commonplace for the oil giant.
If one-time gains like bankruptcy settlements and spinoffs are stripped away from other companies, ExxonMobil owns the record for the top 10 most-profitable quarters for a U.S. company, as well as the largest annual profit.
Even excluding one-time items, the company still posted a record $13.4 billion in net income, or $2.59 a share. Analysts expected per-share earnings of $2.38. The items included a $1.6 billion gain from the sale of a natural gas-related business in Germany.
Income from oil and natural gas sales increased 46% from the year-ago quarter to $9.4 billion. Yet that's down from $10 billion in the second quarter as the price of crude began to plunge from its July record of about $147 a barrel.
Crude prices have fallen below $70 and analysts surveyed by Thomson expect fourth-quarter earnings to dip 8% vs. a year ago.
Lower output is an even bigger concern. Production fell 8% in the quarter, partly because Hurricanes Ike and Gustav shut down much of the company's facilities in the Gulf and oil-exporting nations slashed U.S. companies' share of output when crude prices rose. The company said the hurricanes reduced production by 24,000 barrels of oil equivalent a day and storm-related expenses will cut fourth-quarter earnings by $500 million.
Even excluding those factors, output fell 5% due partly to declining output from mature oil fields. That could hobble the company's ability to meet demand when the economy recovers.
"The concern now is production growth going forward," says Edward Jones analyst Brian Youngberg.
The company says it's poised to boost output. Despite a drop the in crude prices, ExxonMobil says it has not scaled back plans to spend at least $125 billion the next five years on new oil projects. Youngberg, though, says the those plans will not bear fruit for several years and the company is making up for several years of minimal investment as it spent billions repurchasing its stock.
On the bright side, the company's earnings from its refining business grew 33% to $3 billion. With crude sinking faster than gasoline prices, oil companies can benefit from fatter margins. And the company, with $37 billion in cash, is expected to remain profitable even if oil prices sink below $50 a barrel.
"Exxon is the best-run company in the energy space," says analyst Jason Gammel of Macquarie Research.
Contributing: Associated Press