By Isabel Ordonez
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Exxon Mobil Corp.'s (XOM) first-quarter earnings surged 69% as the company benefited from high oil prices, stronger refining margins and a jump in production.
The results for the world's largest publicly traded oil company reflected a continued recovery from the recession for the broader energy sector, which appears poised for a return toward the boom days that preceded the financial collapse in 2008.
But while Exxon Mobil's first-quarter earnings of $10.65 billion, or $2.14 a share, bested analysts expectations of $2.06 per share thanks to a jump in natural gas production and higher chemical profits, the oil giant failed to match its previous quarterly profit record and was punished with a slight drop in its stock.
Exxon shares were recently trading $1.16 down at $86.61.
Investors were disappointed that the chemical segment and natural gas output rather than oil production were the drivers behind Exxon Mobil's better-than-expected results at a time when oil prices have increased sharply, said Phil Weiss, an analyst with Argus Research. "Exxon's outperformance was driven by higher natural gas production, which is not quite as profitable as oil," Weiss said.
The company's exploration and production earnings rose 49% as the company's production rose 10% to 4.82 million barrels of oil equivalent per day, boosted by its acquisition last year of XTO Energy Inc., which boosted its natural gas production by 24%. But its oil production was down 15,000 barrels of oil equivalent per day due to the effects of production sharing contracts with foreign governments, OPEC quota and divestments. Excluding these factors, Exxon Mobil's oil production would have been up about 2%, the company said.
Record chemical profits of $1.5 billion also helped Exxon Mobil to beat analysts estimates thanks to strong demand in Asia and low prices of natural gas prices, which is the feedstock used by the company's chemical plants in the U.S. But although it's evident Exxon Mobil's chemical business is doing very well, investors like to see the company beat estimates on strong exploration and production results, said William Featherston, an analyst at UBS.
"We are skeptical investors would pay for a beat in the chemical segment," Featherston said in a note to clients.
Exxon Mobil's first quarter results fell $4 billion short of the record profit of $14.8 billion it generated in the third-quarter of 2008, when oil prices reached a record of $147 a barrel. But the year is still young and the oil giant could see bigger earnings down the road if oil prices continue to climb, says Fadel Gheit, an analyst with Oppenheimer & Co. Exxon's total earnings for 2008 was $45.22 billion.