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Exxon's record profits: $36.13B

The company's 2005 profit draws scrutiny from Washington and calls for a windfall tax.

By wire services
Published January 31, 2006

DALLAS - For anyone stunned by the size of Exxon Mobil Corp.'s $36.13-billion profit in 2005 - the highest ever for a U.S. company - some Wall Street analysts have a message: There's more to come.

"Unless (energy) prices collapse, earnings in 2006 will make 2005 look like a cake walk," said Oppenheimer & Co. oil analyst Fadel Gheit.

While that's good news for Exxon investors, the company's profits are generating new scrutiny in Washington. Legislators have recently expressed concern over Big Oil's good fortune as soaring oil and natural gas prices pressure consumers. Democratic lawmakers expressed outrage at the industry's latest profit surge, renewing calls for a windfall profits tax, as well as for increased investment in refining capacity and alternative fuels.

Exxon's annual profit is bigger than the economies of 125 of the 184 countries ranked by the World Bank. Profit rose 42 percent from 2004, the previous U.S. corporate record, largely due to soaring oil and gas prices.

Experts said there wasn't much that could be done in the short term to lower the price of gasoline, which now hovers around $2.34 a gallon nationwide, $2.42 across Florida and $2.35 in the Tampa Bay area.

"As long as demand stays high, people will have to pay more," said David E. Dismukes, an energy economist and associate director at Louisiana State University's Center for Energy Studies.

Exxon said Monday that its fourth-quarter profit climbed 27 percent to $10.71-billion.

And with annual revenue of $371-billion - an amount that exceeds Saudi Arabia's estimated gross domestic product in 2005 - Exxon will likely dethrone Wal-Mart Stores Inc. from atop the Fortune 500 when it's released this spring. Wal-Mart, whose fiscal year runs through January, had $290.29-billion in revenue through December.

Exxon's profit for the year was the largest annual reported net income in U.S. history, according to Howard Silverblatt, a senior index analyst for Standard & Poor's. He said the previous high was Exxon's $25.3-billion profit in 2004. The third best performance belongs to Citigroup Inc., which posted net income of $24.64-billion in 2005.

Exxon said its average sale price for crude oil in the United States during the quarter was $52.23 a barrel, compared with $38.85 a year earlier. It sold natural gas in the United States, on average, for $11.34 per 1,000 cubic feet, compared with $6.61 during the same period a year ago.

While strong commodity prices underpinned the record earnings, Exxon executives said the company also deserved credit for completing projects on time while keeping costs in check.

"Our record results show a disciplined approach, and we continue to deliver superior value to our shareholders," the company's vice president of investor relations, Henry Hubble, told analysts.

Exxon's results lifted the combined 2005 profits for the country's three largest integrated oil companies - including ConocoPhillips and Chevron Corp. - to more than $63-billion.

Hubble said Exxon spent $17.7-billion in 2005 to find and develop oil and gas, a $2.8-billion jump from the year before. He said projects in Qatar, Nigeria and Russia would keep the company "well-placed for continued growth."

But the oil industry's stellar results renewed talk among some politicians for a windfall profit tax that would push companies to invest even more in new production and refining capacity. At Exxon, for example, profits climbed more than 40 percent last year, while its tax bill rose only 14 percent.

Sen. Barbara Boxer, a California Democrat who sharply criticized oil executives appearing before Congress in November, on Friday said the Bush administration and Federal Trade Commission needed to "put an end to gouging." She then suggested that FTC stood for "Friend to Chevron."

On Monday, Sen. Chuck Schumer, a New York Democrat, weighed in.

"The federal government has a responsibility to make sure that these companies continue to innovate instead of just profiting from the status quo," he said. "These companies should be investing in developing new sources of fuel and new technologies, like hydrogen fuel cells and alternative fuels, that will ease our dependence on foreign oil and help consumers save."

Rep. Edward Markey, a Massachusetts Democrat, said he planned to introduce legislation today mandating that all cars sold in the United States be able to run on gasoline and ethanol, a corn derivative.

Analysts said they are not worried about any political fallout from the industry's soaring profits.

"I hope the capitalist system would promote and applaud the hard work of companies that have been smart and lucky to achieve good earnings for shareholders," said Tina Vital, analyst for Standard & Poors.

Exxon shares rose $1.82, or 3 percent, to close at $63.11 on the New York Stock Exchange. That is near the upper end of its 52-week trading range of $51.35 to $65.96.

Information from the Associated Press, Washington Post and New York Times was used in this report.

[Last modified January 31, 2006, 00:31:49]