Irving, Texas – Exxon Mobil Corp. and Royal Dutch Shell Plc, the world’s two biggest oil companies, posted higher third- quarter earnings than analysts expected after crude prices soared to a record and production increased.
At Irving, Texas-based Exxon Mobil, net income rose 5.7 percent from a year earlier to $10.5 billion, or $1.77 a share, the company said Thursday in a statement. Shell’s net income dropped 34 percent to $5.94 billion. Profit excluding a year-earlier divestiture and changes in inventory values rose to $7.03 billion from $5.8 billion.
“Oil demand is quite surprisingly strong and doesn’t seem to be responding as one would expect to higher prices,” said Robbert Van Batenburg, head of research at Louis Capital Markets LP in New York. “The big enigma for Wall Street is whether these earnings are sustainable going forward.”
Exxon Mobil shares touched a record high after the company reported its 10th straight increase in profit and its biggest production gain since Exxon Corp.’s 1999 acquisition of Mobil Corp. The world’s three largest oil companies – Exxon Mobil, Shell and BP Plc – netted $172,000 a minute during the quarter.
“The long-term outlook for Big Oil is very bullish,” said Jim W. Oberweis, who oversees $2 billion at Oberweis Asset Management in Lisle, Ill. “Demand continues to be strong, and supplies just aren’t keeping up.”
Exxon Mobil’s profit was 18 cents a share higher than the average estimate from 20 analysts surveyed by Thomson Financial. Shell, based in The Hague, exceeded the average estimate for earnings excluding one-time items by $1.43 billion.
“Our earnings have proven to be resilient in the face of rising industry costs and weakening refining margins,” Shell chief executive Jeroen Van der Veer said.
Oil producers are ramping up spending on exploration and production to capitalize on high prices. U.S. oil futures rose to a record $78.40 a barrel on July 14 on demand gains around the world and concern over supply disruptions, such as those in Nigeria. The futures averaged $70.60 a barrel during the quarter, up 12 percent from a year earlier.
Each $1 increase in oil prices boosts Exxon Mobil’s earnings per share by 1.5 percent, according to Citigroup Inc. estimates.
Exxon Mobil’s profit was its second-highest for any quar ter. Excluding a $1.62 billion gain last year on the sale of a pipeline business, profit rose 26 percent.
