sE searched 


The global recession's withering impact on petroleum prices and demand dragged down profits at Exxon Mobil Corp. and Royal Dutch Shell PLC, two of the world's largest oil companies.

"Our results show that no one is immune from global economic conditions," said Kenneth Cohen, a vice president at Exxon, the Texas-based oil company that had a peak market capitalization of half a trillion dollars in 2008 and is still the world's largest publicly traded company.

The companies posted sharply lower second-quarter profits and declining production rates that missed analysts' expectations. Exxon said profit fell 66% from a year earlier to $3.95 billion. Profit at the Anglo-Dutch Shell, one of Europe's largest public companies by market capitalization, dropped 67% to $3.82 billion. (See related article.)

[Oilfield Blues]

The recession is severely testing the energy giants' strategies, which have been focused on maintaining strong investment in future production while preserving hefty stock-dividend payments to shareholders. Exxon is also engaged in a substantial share-repurchase program.

Shell's new chief executive, Peter Voser, has responded to the downturn by cutting 20% of senior management positions, saying he wanted "fewer people thinking about strategy and more people implementing it."

In contrast, Exxon said it isn't cutting jobs and is sticking with its $29 billion capital-spending plan in 2009. Despite the difficult economic conditions, said Exxon CEO Rex Tillerson, "We continued our capital investment program at near record levels while returning over $16 billion to our shareholders during the first half of the year."

But Exxon said it dialed back its share-repurchase program in the second quarter to $5 billion, down from $7 billion at the beginning of the year. The company said it expects to buy back only $4 billion of shares during the current quarter.

Exxon dipped heavily into its enormous cash stockpile in the second quarter. It ended the quarter with $15.6 billion in cash, down $9.4 billion from the first quarter.

Both companies also had trouble sustaining oil and gas production rates.

Oil Market Eyes Violent Clashes In North Nigeria


Concern is growing among oil traders this week over increased violence and political instability in Nigeria, one of the world's chief oil producers after 600 peopled died in bloody clashes between Islamist extremists and security forces in the North.

In what J.P. Morgan said in a research note would probably be the worst performance among the large global oil companies, Shell said its total production fell 5.3% compared with the year-earlier period. It cited shutdowns in Nigeria because of political unrest, production cuts by the Organization of Petroleum Exporting Countries that affected Shell projects in those countries, and weaker natural-gas demand.

Exxon said its oil and gas production fell 3.1%, to 3.68 million barrels, from a year earlier, the second-lowest quarter since the company was formed in a megamerger in late 1999. A drop in European demand for gas led Exxon to ratchet back production by 12% in the region.

But Exxon reaffirmed its expectations for an annual growth rate of 2% to 3%, noting the growth would occur in the year's second half as gas projects come online in Qatar.

Neither Exxon nor Shell was optimistic about a turnaround in economic conditions -- and therefore energy demand -- in the near future. In a prepared statement, Shell's Mr. Voser said "we are not banking on a quick recovery."

Exxon Vice President David Rosenthal said on a conference call with reporters that "we are operating in a tough business environment. I would tell you it is certainly too early for us to call a bottom."

—Guy Chazan contributed to this article.

Write to Russell Gold at and Angel Gonzalez at









Page mailing to a friend temporary disabled