By Ernest Scheyder
Jan 30 Exxon Mobil Corp, the world's
largest publicly traded oil company by market value, posted
lower-than-expected quarterly profit on Thursday as it failed to
offset declining production but spent heavily to find fresh
The problem of declining production at legacy oil and
natural gas wells has become endemic for multinational energy
groups, which have tried to offset the trend by launching
massive and risky exploration projects.
Exxon's oil and natural gas production dropped 1.8 percent
in the fourth quarter from year-ago levels, with natural gas
production falling around the world and oil output slipping in
half the regions where the company operates.
The results reflected a "mediocre quarter" for Exxon,
especially in international production, Edward Jones analyst
Brian Youngberg said.
"They've lost momentum already, reverting back to declining
production and stagnant earnings," Youngberg said.
Exxon rival Royal Dutch Shell Plc said on Thursday
the fourth quarter was its least profitable in five years as its
own production slipped.
To assuage Wall Street, Chief Executive Officer Rex
Tillerson promised in a statement that the company will ramp up
exploration projects over the next two years to find newer
Exxon spent $42.5 billion in 2013 on exploration and other
capital projects, a staggering sum that led Tillerson to admit
last year: "I never would have dreamed we'd be spending at this
Exxon's liquefied natural gas operation in Papua New Guinea
should make its first deliveries by September, while expansions
at the Kearl oil sands development in Canada and the Upper Zakum
oil project in Abu Dhabi are underway, executives said on a
conference call with investors.
The company also is expanding in U.S. shale formations,
adding rigs in the Permian formation in Texas and running all
rigs available in the Bakken formation in North Dakota and the
Woodford Ardmore shale in Oklahoma.
These and other projects should help Exxon reach its goal of
boosting annual oil and natural gas production 2 percent to 3
percent by 2017.
(BREAKINGVIEWS - Exxon outlays should pump up 2014 after
down year: )
Investors said they supported the new exploration if it
helps increase total production.
"If it's done in the context of normal exploration, or a
change in the makeup of demand, that's probably a positive,"
said Oliver Pursche of Gary Goldberg Financial Services, who
manages Exxon shares for clients. "If it's as a result of
existing wells are drying up, that's a negative."
For the fourth quarter, Exxon posted net income of $8.35
billion, or $1.91 per share, compared with $9.95 billion, or
$2.20 per share, in the year-ago period.
Analysts expected earnings of $1.92 per share, according to
Thomson Reuters I/B/E/S.
Earnings fell in all of the company's units, including
refining, where weaker margins eroded profit.
Refiners make more money when the price difference between
various types of crude oil is wide. When the gap narrows in the
price difference between West Texas Intermediate crude
oil and Light Louisiana Sweet crude oil, as it has in
recent months, costs tend to rise.
The company's chemical unit profit dropped slightly due in
part to higher supply costs, especially for high-end specialty
Separately, Exxon said it supports U.S. exports of crude
oil, a potentially divisive issue in the country.
"We oppose any barriers or restrictions to free trade,"
David Rosenthal, Exxon vice president of investor relations,
told investors on the call.
Shares of Exxon fell 0.8 percent to $94.32 in afternoon