HOUSTON -(Dow Jones)- Exxon Mobil Corp. (XOM) said Monday its fourth-quarter earnings surged 53% on higher oil prices and the return to profitability of its refining arm, signs that the Texas oil giant is reaping the benefits of a healing world economy.
The energy sector's profits seem to be rapidly recovering from the deep gash left by the recession, and seem poised for a return to the boom days that preceded the financial collapse in 2008. On Monday, Brent crude futures hit the $100-per-barrel mark for the first time in more than two years. Brent is the benchmark crude for much of Europe and Asia.
Exxon's quarterly results follow last week's reports of soaring profits by fellow oil giants Chevron Corp. (CVX) and ConocoPhillips (COP). Oilfield service companies like Schlumberger Ltd. (SLB) and Baker Hughes Inc. (BHI) also posted significant earnings gains, a sign that energy producers have a rosy view of the future and are performing more work.
"The global economy appears to be stabilizing, with signs of modest growth in the United States and Europe and continued strong growth in the developing world, mainly in the Asia Pacific and Latin American regions," said David Rosenthal, Exxon's vice president of investor relations.
Exxon reported a profit of $9.25 billion, or $1.85 a share, up from $6.05 billion, or $1.27 a share, a year earlier. That's a profit level not seen since the third quarter of 2008, when the company posted a record $14.83 billion. Revenue increased 17% to $105.19 billion. Analysts were expecting earnings of $1.63 on revenue of $99.11 billion. The results were driven by better-than-expected earnings in its international exploration-and-production segment. A cold European winter has increased demand for natural gas, boosting prices outside the U.S., according to investment bank Credit Suisse.
Oil and gas production rose 19% to about 5 million barrels of oil equivalent per day, its highest level ever, boosted by last year's $25 billion purchase of XTO Energy Inc., which helped Exxon triple its U.S. natural gas production. XTO Energy, a Fort Worth-based independent natural gas producer, accounted for 10% of Exxon's total output, but low natural gas prices meant that it represented only about 1.6% of what the oil giant got from the sale of oil and gas. Capital spending associated with the XTO purchase also helped boost Exxon's capital spending to $32.2 billion, up 19% from 2009 and exceeding Exxon's previously stated guidance of $25 billion to $30 billion a year through 2014.
Some on Wall Street have criticized the XTO acquisition and others Exxon has made in the pursuit of unconventional natural gas reserves. Natural gas trades at about $4.5 per million British thermal units, far below the $13-per-million level reached in mid-2008, and its great abundance makes it unlikely that prices will increase significantly. Oil, on the other hand, has remained relatively expensive, and many of Exxon's peers are focusing on that commodity instead. Exxon says it is pleased with the XTO purchase and that natural gas demand will grow in the long term. In its recently released long-term energy outlook, the company says gas will replace coal as the world's second-most popular fuel in 2030.
Rosenthal said during a conference call with analysts that it is still adding natural gas acreage in North America. The company bought 18,000 acres next to what it already owns in the Horn River natural gas shale rock basin in Canada's British Columbia; Exxon also plans to increase drilling in other unconventional gas formations, such as the Eagle Ford Shale in Texas and the oil-rich Bakken Shale in North Dakota.
Exxon Mobil's quarterly results also reflected the widespread improvement in the profitability of the refining industry, which was wrecked by slumping fuel demand during the recession, as well as the continued strengthening of the chemical business. Exxon Mobil's refining business returned to the black, posting earnings of $1.5 billion, up from a loss of $189 million a year ago. Its chemical arm posted quarterly earnings of $1.07 billion, compared with $716 million in the same period in 2009.
Exxon shares recently were up 1.6% at $80.26.
--Russell Gold contributed to this article.
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