Shell and Exxon Earnings Boosted by Refining

Royal Dutch Shell and Exxon Mobil reported lustreless earnings due to declination in natural gas and oil production and weak prices of domestic gas.

If the performance of the refinery operations were not strong, then the Q3 results for the two companies might have been even worse. The executives said that the global oil business is hurt by distress in economy of Japan and Europe and slow growth rate in China.

The results didn’t surprise the energy analysts since the price of natural gas was 30% lower than last year’s price in United States. Only the price of the oil was changing, but the two companies were mostly dependent on gas production from past few years.

The net income of Exxon Mobil was $9.57 billion in this quarter, dropping from $10.33 billion of last year’s income. The revenue was $115.71 billion, 8 % lesser than in Q3 of 2011. However, the earnings rose by 10 percent in the first nine months.

The net earnings as reported by Shell were $6.6 billion, dropping from $7 billion in Q3 of 2011. The company was compelled to write down $354 million in gas field assets during this quarter. Shell profits in the quarter were up 2.3 percent to $7.14 billion from previous year, including inventory changes and extraordinary items.

Philip H. Weiss, a senior energy analyst at Argus Research Group, said that the company’s performance in production business and exploration lagged the predictions. The price of natural gas particularly in North America was weak because of underperformance.

Before three years, Exxon Mobil became America’s major gas producer by buying XTO Energy for $41 billion. The purchase gave skilled personnel for drilling and exploring in shale formations. But, in U.S from past two years, gas drilling became unprofitable and some analysts predict gas prices to rise by next year.

In past few months, the two companies shifted most of the American production from gas to oil.

Shell’s production of oil was severely hurt by flooding, political instability, and theft in Nigeria, while Exxon Mobil suffered production problems in North Sea and Kazakhstan.

Exxon reports show that there was a 1.8% decline in oil production and 1.3% decline in gas production, by excluding production-sharing contracts, divestitures, and quotas fixed by the Organization of the Petroleum Exporting Countries. Shell reported 1% decline in both gas and oil production.

Shell’s stock price rose $1.51 to $69.99, while Exxon’s price ended at $91.69, up 43-cent on Thursday.

Energy analysts believe that the international demand for oil will move up in the upcoming months if the Chinese economy rises.