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NEW YORK, US - EXXON Mobil posted a US$10.89 billion (S$14.82 billion) first-quarter profit, but still managed to disappoint investors as weak production volumes and low refining margins blunted the impact of record-high crude prices.
Earnings rose 17 per cent year over year, and were the second-highest in US history, but still fell short of Wall Street expectations, and its shares dropped 3.6 per cent.
Exxon's near-record profits on Thursday brought sharpened scrutiny from politicians and consumer groups, who are upset about sky-high gasoline prices at the pump.
Benchmark United States oil prices averaged a record of nearly US$98 a barrel during the quarter, up about 70 per cent from a year earlier.
Exxon posted record earnings of US$40.6 billion in 2007, with revenue higher than the gross domestic product of Turkey, the world's 17th-largest economy. If oil prices stay above or around US$100 for the remainder of 2008, the company could beat that mark.
A steep drop in profit margins for gasoline cut into Exxon's earnings as the company, like other refiners, struggled to pass on higher crude costs to customers. First-quarter gasoline prices rose 33 per cent year over year in the United States - less than half crude's rise.
Exxon's oil and gas production also fell 5.6 per cent in the quarter.
Mr Chris MacDonald, portfolio manager at WHG Funds, said the production decline was 'kind of shocking'. 'It makes the future seem kind of dire, because this quarter they really got bailed out by high oil prices ... It kind of shows that you're at the limit of big new finds.'
The company has been criticised by analysts and investors for laying back on capital spending while going full bore on share buybacks.
Exxon spent US$31.8 billion to buy back shares in 2007, while shelling out US$20.9 billion for capital expenditures. In 2008, the company expects to increase its capital spending to around US$25 billion.
'It seems that they are more of a share buyback machine that also happens to produce energy,' Mr MacDonald said.
Earlier this week, European oil majors BP and Royal Dutch Shell posted big first-quarter earnings gains as the crude oil surge was an even bigger boon for them than expected.
Both companies had flat production during the quarter. -- REUTERS
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