HOUSTON — Exxon Mobil reported the fattest operating profit in U.S. corporate history Thursday but took a beating anyway — from politicians railing against Big Oil, drivers bleeding cash at the pump and investors who expected more.
The world's largest publicly traded oil company turned a profit of $11.7 billion for the second quarter, lifted mostly by meteoric crude prices. Its earnings were up 14 percent from a year ago.
Total sales: $138 billion — roughly the gross domestic product of Hungary.
Henry Hubble, Exxon Mobil's vice president for investor relations, said the record profits "highlight the quality of our integrated business model and disciplined investment approach."
For the most part, the plaudits ended there.
Despite their heft, Exxon's profits were a disappointment on Wall Street, and the company's stock slumped nearly 5 percent. Almost the entire energy industry was walloped by investors Thursday.
European rival Royal Dutch Shell posted its own record profit across the Atlantic, with earnings of $11.6 billion. Its American depository receipts tumbled nearly 4 percent in afternoon trading.
Growing investor apprehension can be found at the heart of what the oil industry does — finding and producing oil and natural gas.
Exxon Mobil's overall output fell 8 percent in the second quarter from a year ago — a significant blow for a company that generates more than two-thirds of its earnings from oil and gas production.
For Exxon Mobil, which produces 3 percent of the world's oil, finding new deposits of hydrocarbons is getting harder and harder. State-run oil companies like those in Saudi Arabia and Venezuela control about 80 percent of known global oil reserves. It's difficult if not impossible for Exxon and its competitors to get any part of that oil.
"It all comes down to production," said Brian Youngberg, an analyst with financial services firm Edward Jones. "This is the second straight quarter production came in below expectations. Investors are going to be questioning when they can turn that around."
Exxon Mobil was not alone in the industry in posting massive profits over the past week.
The reward? A broadening backlash from a public that is getting squeezed on fuel prices from every front.
Consumers feel cheatedUnleaded gas cost $3.74 per gallon at a Mobil station in Milwaukee, where Jeff and Jennine Pynn of Putnam Valley, N.Y., stopped Thursday during a 10-day road trip. "It's totally unfair," Jennine Pynn said as she pumped $47 worth into a Toyota Highlander. "You really hope to see them not turn so much of a profit."
Dan Owens of Muskego, Wis., drives about 100 miles a day as a sales representative for a packaging firm. He called Big Oil's profits "obscene."
"I'm all for making a profit — it's the American way. But it's another thing to gouge," said Owens, 38, shaking his head. "It makes me feel like I'm getting ripped off."
The American Petroleum Institute, the industry's trade association, said Big Oil earnings are not out of line compared with earnings in other industrial sectors. For example, Exxon's earnings amount to about 8.5 cents per dollar of sales, versus 11.6 cents for the companies making up the Dow Jones industrials.
"The oil and natural gas industry is massive because it has to be to effectively compete for global energy resources," said John Felmy, the API's chief economist. "The industry's earnings make possible the huge investments necessary to help ensure America's future energy needs are met."
Some losses reportedThe entire industry is not rolling in cash. Refiners, including Exxon Mobil, must also buy crude. The company's earnings from refining and marketing fell 54 percent in the quarter to $1.55 billion.
Profits for Marathon Oil Corp., also reported Thursday, fell roughly 50 percent.
Exxon shares fell 4.7 percent, or $3.95, to $80.43. After Marathon announced it may split off its refining operations, its shares jumped 9.6 percent, or $4.34, to $49.47.
Stocks to Watch for 07/30/08 - VISA
Banks’ earnings plummet
Apple: Smashed, as Expected
