Exxon does it again

NEW YORK (CNNMoney.com) -- Despite falling oil prices that hobbled the competition, Exxon Mobil posted higher first-quarter profit Thursday that topped Wall Street estimates, relying on robust refining and chemical earnings to make even more money on lower revenue.

Exxon (Charts, Fortune 500), the world's largest publicly traded oil company, earned $9.28 billion, or $1.62 a share, on $87.2 billion in revenue. That's a 18 percent increase in earnings per share compared to the first quarter a year ago, when the company made $1.37 a share on $89 billion in revenue.

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Analysts were looking for the company to make $1.52 a share, according to First Call.

Net income was short of the company's all-time profit record of $10.7 billion, set in the fourth quarter 2005. It was the highest profit ever for a U.S. company.

The results, coming at a time when its competitors are reporting lower earnings, impressed analysts, and Exxon shares rose slightly on the New York Stock Exchange.

"It's a brutally efficient company," said Fadel Gheit, a senior oil analyst with Oppenheimer. "It basically competes against itself."

Oil prices averaged about 8 percent lower in the first quarter of 2007 than in the same period a year earlier, with U.S. NYMEX crude briefly dipping below $50 a barrel at the start of the year.

But Exxon's profit margins from refining oil remained high, largely due to a capacity crunch in the sector, much to Exxon's benefit.

The company reported a 50 percent jump in income from downstream operations worldwide, which include refining. Exxon earned $1.91 billion in downstream activities in the first quarter, up from about $1.27 billion a year ago.

Oil company critics have said the industry refuses to build more refining capacity just so they can reap higher profits.

But the industry says it is rushing out all the refined products it can amid high prices, and Exxon said it ramped up refinery production 3 percent in the first quarter.

The industry also says community opposition make it hard to build a new refinery in the U.S. and that they take a long time to build, a move that could be especially risky given the volatile price of oil and government calls for the country to use 20 percent less gasoline over the next ten years.

Exxon's per-share results were also helped by a massive share buyback program.

The company said it spent $7 billion buying back stock in the first quarter, and $1.8 billion paying dividends. The total amount of money returned to shareholders through these two programs increased 26 percent from last year.

"They are generating cash faster than their ability to spend it," said Gheit.

On Wednesday Exxon bumped up its quarterly dividend to 35 cents from 32 cents per share.

Spending on capital and exploration projects totaled $4.3 billion, down 11 percent from a year ago.

The company increased crude oil production in the first quarter, but natural gas output fell, so total production slipped about 3 percent.

In line with global trends, Exxon said oil and gas production in the United States, Europe and Canada fell. Production rose in Africa, Asia, the Middle East and Russia.

The oil industry has also been criticized for not investing enough to bring new products to market.

But defenders say pouring more money into exploration is likely to only drive up costs in a field stretched thin by too few workers and too few drilling rigs.

They also note that much of the world's remaining untapped oil deposits are located in places unfriendly to or outright off limits to Western oil firms, like Russia, Venezuela, Iran, Iraq and Saudi Arabia.

Exxon said it paid $24.5 billion in taxes in the quarter.

The company is the first major oil firm to post impressive results this quarter.

BP (Charts) reported lower earnings Tuesday, blaming falling crude prices and production.

ConocoPhillips (Charts, Fortune 500) on Wednesday said that earnings rose, but that number included gains from one-time asset sales. Revenue for the quarter declined.

Chevron (Charts, Fortune 500) is set to report earnings Friday, and Royal Dutch Shell (Charts) and France's Total (Charts) are scheduled to report next week. Chevron and Total are expected to show a drop in profits.