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Big Oil Companies Strike Money in Earnings

Exxon, Shell, BP and others are soaring


Oil giant Exxon Mobil Corp. (NYSE: XOM) reported a 90% leap in second quarter diluted EPS compared with the same period last year. EPS came in at $1.60 on revenue of $92.49 billion. Analysts expected EPS of $1.47 on revenue of $98.49 billion. The company grew production 8%, excluding certain items.

Royal Dutch Shell PLC (NYSE: RDS.A) also reported strong results today. For the second quarter, Shell posted adjusted EPS of $0.72, up from $0.62 in the same period a year ago. Revenue totaled $90.57 billion, up from $63.88 billion a year ago. Oil & gas production grew 5% in the quarter.

Other news from the oil patch this morning includes the possible sale by BP plc (NYSE: BP) of its Venezuelan assets to its Russian joint venture TNK-BP and the sale by ConocoPhillips Corp. (NYSE: COP) of its 20% stake in Russia’s Lukoil.

Back on the earnings front, both Exxon and Shell benefited from higher realized prices than they were able to achieve in the same period a year ago. Exxon reported that it earned about $4 billion more this year due to higher net realizations. Shell noted that net realizations on liquids were up 41% year-over-year and US natural gas realizations were up by 22%.

In the two companies’ downstream segments, Shell’s refining margins improved, while Exxon reported a drop of $500 million in refining margin. Exxon’s downstream segment were lower overall than a year ago due to lower sales resulting from reduced demand. Shell’s product sales grew 7% year-over-year. Both companies also saw a rise in earnings from chemicals sales.

Growing production, higher prices, and better refining margins all contributed to growth in the quarter. No surprises here. Share prices for both Exxon and Shell are up about 1% in early trading.

Conoco, which originally planned to sell half its 20% stake in Lukoil, has now announced that it plans to sell the whole thing. Lukoil has agreed to buy back a 7.6% stake for about $3.44 billion, and the remaining 13.4% will be sold on the open market or to Lukoil. The stake in Lukoil was supposed to lead to greater involvement in other projects, but that didn’t work out as Russia has strengthened its control of its natural resources. Conoco apparently decided that it could spare its Lukoil investment, and will likely use the cash it gets to pare its debt.

BP’s sale of its Venezuelan assets, which are worth about $1 billion, is another part of the company’s effort to shed $30 billion in assets to pay the bills for the Gulf of Mexico oil spill. TNK-BP, which will buy the assets, is a 50-50 joint venture with Russian partners that has had its own difficulties with the Russian government. New BP CEO Robert Dudley was BP’s head man with TNK-BP, and was essentially kicked out of Russia in a dispute over control of the company. Doing business in Russia did not turn out to be the bonanza everyone thought it would be 15 years ago.

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