It's not every company that can register $11.68 billion in quarterly profits -- and still disappoint the analysts. Yet Exxon Mobil Corp. is a special company in many ways, and analysts have their own view on the world.
Poor Exxon. Its profit margin is a meager 8.5 percent of sales. It doesn't have enough places to drill. Costs are going up. Skilled manpower is scarce. Despite all that, it is still under attack from members of Congress, consumer groups and environmental groups. And now the analysts are disappointed too!
As usual, it helps to take a step back to put things in the right perspective. First, a word on Exxon's behalf. Most people don't appreciate just how enormous the oil business is. Exxon Mobil is operating in 200 countries. It has a staggering number of refineries, gasoline stations and, most important, oil wells. It has a huge chemical business. As it pointed out several times today in conference calls, it has 119 projects underway to bring on more oil and gas production. Its $25 billion capital spending program for this year is two and a half times the amount Boone Pickens wants to spend on a giant wind farm over the next three years. The spending program is two and a half times as big as the combined revenues of half a dozen of the world's biggest solar companies and the biggest wind turbine company put together. Our addiction to oil is an expensive habit.
Having said that, it's hard to feel sorry for Exxon. Most of the oil it is pumping out of the ground was found and developed when oil prices this high were something that couldn't be imagined. Less than three years ago, its chairman said that the then-$60 a barrel price of oil included $20 of speculation. The increase in price - after subtracting taxes and cost increases -- is what economists would call a windfall. The oil companies correctly note that finding new oil reserves will cost more than it did to find the ones we're using now. Still, it seems only natural for consumers to wonder whether that windfall is being put to good use.
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