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Exxon posts biggest annual profit ever

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« on: March 09, 2007, 02:53:07 am »

Exxon posts biggest annual profit ever
Record oil prices help the world's largest public oil company earn $39.5 billion in 2006.
By Steve Hargreaves, staff writer
February 1 2007: 2:54 PM EST

NEW YORK ( -- Exxon Mobil Corp. Thursday reported the biggest annual profit on record for a U.S. corporation - earning more than $75,000 every minute of 2006 on the back of record oil prices.

The world's biggest publicly traded company by revenue posted net earnings of $39.5 billion on revenue of $377.6 billion last year, topping its previous profit record of $36.1 billion in 2005, which at the time was the largest for any U.S. company.

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Not adjusted for inflation, oil prices hit a record high of $77.03 a barrel last July, pushing gasoline prices above $3 a gallon nationwide.

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The spike in gas prices led many politicians to call for a windfall oil profits tax, and some even suggested breaking up the nation's biggest oil companies, including Exxon (Charts), ConocoPhillips (Charts) and Chevron (Charts).

Although gas prices have eased back near $2 a gallon - and the fiery rhetoric in Washington has receded - the huge amounts of money involved have not gone unnoticed.

"It is our view that the huge profits that continue to be made by oil companies - and the countries that have huge oil reserves - should be re-invested in finding new sources of energy and energy conserving technologies," Geoff Sundstrom, a spokesman for the motorist organization AAA, said in a statement. "Not doing so invites a future of economic and environmental distress for people around the globe."

Naturally oil companies balked at a windfall profit tax back in the spring, saying they needed to retain their large size, and profits, to compete against big foreign national oil companies from Russia, Saudi Arabia, Norway and China.

Oil executives noted that oil prices, like other commodities, go through boom and bust cycles, and that the long-term profit margins at their companies are about average when compared to other industries.

Out of Exxon's $377.6 billion in revenue, the company said it spent $19.9 billion on exploration and production to bring new oil to market, a 12 percent increase over 2005.

"The results of our long-term investment program yielded an additional 172,000 oil-equivalent barrels per day of production, a 4 percent increase over 2005," CEO Rex Tillerson said in a statement.

The United States currently consumes about 21 million barrels of oil a day - making it by far the world's biggest user - out of worldwide consumption of about 84 million barrels a day, according to the Energy Information Administration.

Industry analysts noted that despite growing demand, Western oil companies have struggled to increase production.

High oil prices have driven up demand for drilling rigs and experienced workers, which has boosted the cost of finding new oil. And much of the world's remaining reserves lie in politically unstable areas or countries that are simply off-limits to foreign firms.

Oil companies have also returned much of their record earnings to shareholders.

Exxon said it spent $32.6 billion buying back stock in 2006 or boosting its dividend. Stock buybacks boost earnings per share, and can thus give a lift to the company's stock price.

It noted it paid $27.9 billion in income taxes last year.

For the fourth quarter, Exxon reported earnings of $10.2 billion, or $1.76 a share, down from $10.7 billion, or $1.71 a share, a year earlier.

Excluding special items, Exxon's quarterly earnings were $1.69 share, which topped First Call's estimates of $1.51 per share.

Exxon cited falling natural gas prices for the decline in fourth-quarter profit.

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