ExxonMobil brought in the biggest annual profit ever by a US company in 2006, thanks to record-breaking oil prices.
The company made $39.5bn (£20.1bn) last year - equivalent to $4.5m every hour of every day - topping its own record of $36.1bn set in 2005. But Exxon revealed that its profitability had begun to slide in the final months of the year, and it posted its first quarterly earnings decline in almost three years.
Falling commodities prices - not just oil, but more precipitously natural gas - were to blame, although there was also some disappointment at falling production levels at Exxon, a fact that could reignite political pressure on the company.
The massive profits generated by the oil industry made it a favoured whipping boy of politicians in 2006, particularly during the summer when high oil prices sent the cost of petrol past $3 a gallon at the pump. The new Democrat-controlled Congress has begun trying to winnow away some of the generous tax breaks handed to the industry under Presidents Bill Clinton and George W Bush, saying that companies were simply pocketing the money, rather than reinvesting it. The tax breaks were intended to stimulate investment in new oil finds.
Exxon calculated yesterday that it distributed a total of $32.6bn to its shareholders in 2006, through dividends and share repurchases, 41 per cent more than in 2005. But to forestall further political criticism, it also made much of the fact that it has invested heavily in new production.
Rex Tillerson, Exxon's chairman and chief executive, told Wall Street: "ExxonMobil continued to leverage its globally diverse resource base to bring additional crude oil and natural gas to market. In 2006, spending on capital and exploration projects was $19.9bn, an increase of 12 per cent over 2005. The results of our long-term investment programme yielded an additional 172,000 oil-equivalent barrels per day of production, a 4 per cent increase over 2005."
However, in the fourth quarter, production fell 1 per cent, mainly because of asset disposals. Combined with lower selling prices, and higher costs in the form of scarce drilling equipment, Exxon posted net income in the quarter of $10.3bn, down from $10.7bn a year earlier.
Exxon shares soared 36 per cent in 2006, outperforming those of its nearest US rivals Chevron and ConocoPhillips, and they rose again on yesterday's fourth-quarter figures, which were better than expected.
The oil price slipped from its summer high of $78 a barrel to trade at $50 last week, but analysts and fund managers continue largely to expect robust, if not record-breaking, oil prices this year. Scott Black of Delphi Management said: "You look at the supply-demand situation, and you see that China has crossed the threshold of consuming 7 million barrels a day and is on its way to 10 million barrels, and then you also see that many of the supplier countries are politically unstable."Reuse content