Exxon makes $10B on record gas prices

But profit falls from last year on lower natural gas sales and doesn't top its previous record quarter.

By Steve Hargreaves, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Exxon Mobil reported over $10 billion in quarterly profit Thursday as higher gasoline prices helped offset a decline in revenue from natural gas.

But Exxon's profit fell short of last year's and missed estimates. It was also lower than the $10.7 billion it reported in the fourth quarter of 2005, the highest quarterly corporate profit ever.

Nonetheless, Exxon's earnings are sure to draw fire from consumer rights groups, who contend the oil industry is deliberately restricting supply and profiting on the back of U.S. motorists.

The average price for a gallon of regular gasoline hit an all-time high of $3.227 in May, according to the motorist organization AAA. The high prices were blamed on strong demand and a series of accidents that shut down refineries in the U.S.

"Oil companies are making outrageous profits on gasoline even when they make less of it," Judy Dugan, research director of the advocacy group OilWatchdog, said earlier this week in a statement.

Exxon pointed out earlier this week that gasoline production in the United States is at an all-time high, and that the high gasoline prices can be blamed on a number of things, including high crude prices and record demand from U.S. drivers.

Still, the high gasoline prices clearly helped Exxon's bottom line.

In it's quarterly statement, the company said it made $3.4 billion off its worldwide refining operations, a 37 percent increase from the year prior.

Most refiners are expected to get a big boost from prices in the second quarter, when easing geopolitical tensions and relatively high stockpiles pushed down the price of crude oil but refining problems and high demand pushed up the price of gasoline.

In it's earlier statement, Exxon also attempted to deflect criticism that it's a monopoly, saying that while it is the world's largest publicly traded oil company, it pumps just three percent of the world's crude.

Record high gas and oil prices have prompted calls from politicians to institute a windfall profits tax on the industry or even break it up.

So far, it appears those calls are going nowhere. While falling far short of a "windfall" profits tax, the House voted earlier this year to raise taxes on the industry, mainly by eliminating some tax breaks the industry enjoyed. But a similar measure that would have directed the tax proceeds to renewable energy firms failed in the Senate last month.

The industry said higher taxes on domestic production would simply lead to a grater reliance on imported oil, while the big integrated oil companies like Exxon, ConocoPhillips (Charts, Fortune 500) and Chevron (Charts, Fortune 500) need to retain their size to compete against even larger state-owned firms from places like Russia and China.

In its earnings release, Exxon (down $4.58 to $88.21, Charts, Fortune 500) said it made $10.3 billion, or $1.83 a share, compared with $10.4 billion, or $1.72 a share, a year earlier, when it had more shares outstanding. Analysts surveyed by earnings First Call had forecast EPS of $1.96.

Revenue came in at $98.4 billion in the quarter, down from $99 billion when oil prices were higher but gasoline prices were lower. Analysts had forecast revenue would fall to $97.6 billion in the period.

In its earlier statement, Exxon noted how its profit margin of about 10 percent was in line with other industries.

On a conference call with analyst, a company spokesman said lower natural gas revenue was largely the result of a warmer-than-usual spring in Europe, where Exxon is a big player providing the home heating fuel.

Analysts on the call were generally pleased with Exxon's performance, although Exxon shares declined over 4 percent on the New York Stock Exchange.

The spokesman also said Exxon is in ongoing talks with the Venezuelan government over assets it gave up when it failed to reach a new profit sharing agreement with the Hugo Chavez administration. He said the assets in question are worth about $750 million.

On Wednesday, ConocoPhillips took a huge $4.5 billion charge related to its Venezuela operations, but Exxon said it wouldn't take any charges until the compensation negotiations yield more information.

Venezuela recently forced foreign oil companies to renegotiate leases more favorable to the government, and several big firms left the country.

In the quarter, Exxon said it spent $5 billion on capital and exploration projects and returned $9 billion to shareholders in the form of dividends and share buybacks.

Exxon said its total tax bill for the quarter was $26 billion. Top of page