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Oil & Gas

Five Western oil majors earn $45 billion in third quarter

November 03, 2008
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The five Western oil majors rang up a combined $45 billion in third-quarter profits, heading into a recession with a bigger cash cushion than most industries, but still facing uncertainty and fears of leaner times ahead, according to MarketWatch. The record profits came as oil peaked at $147 a barrel in July, fueling profits on the exploration and production side. Later in the quarter, the refining side got a boost as the cost of buying crude to make gasoline and other products fell to $100 a barrel. Since Sept. 30, however, U.S. equities have staged their worst performance in decades, tied to the credit crunch and fears of a sudden and harsh economic slowdown. Those fears were also evident in oil markets recently, as crude continued to fall closer to the $60 a barrel mark and gasoline dropped to $2.50 a gallon, below year-ago levels. With volatility and uncertainty draining the industry''s appetite for investment and with production volumes stagnant or shrinking, the seeds of the next oil spike are already in the ground. On conference calls with analysts, oil executives tackled concerns about falling production, set plans to scale back some capital spending, and moved to address lower demand and the status of expensive oil and gas extraction programs around the world. With oil output falling on older wells and governments around the world less willing to cede access to fossil fuel resources, expenses for keeping up production continue to grow. Oil companies are thinking of ways to boost production, by tapping into unconventional resources and drilling deeper below the surface of the Gulf of Mexico, the Atlantic near Brazil and many other vastly remote geographic locales. Hurricanes and other unforeseen events continue to plague the sector as well, ranging from flare-ups in Nigeria to government policies on offshore drilling and windfall profits. Even in the face of such risks, Exxon Mobil stuck to plans to spend up to $25 billion next year on capital investment in a myriad of projects, including a major liquid natural gas business in Qatar and drill ship operations in Brazil. With more than $37 billion in cash as of Sept. 30, Exxon Mobil''s coffers remain at historic highs. The oil giant argued this week that energy demand will remain healthy despite short-term jitters, and said the world''s demand for fossil fuel hasn''t yet slowed down enough for it to cut production at its U.S. refineries.

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