April 27 (Bloomberg) -- Exxon Mobil Corp., the world's biggest oil company, said first-quarter profit climbed 6.9 percent because of record prices and the first production increase in a year and a half.

Net income rose to $8.4 billion, or $1.37 a share, from $7.86 billion, or $1.22, a year earlier, Irving, Texas-based Exxon Mobil said today in a statement. Per-share profit was 10 cents lower than the average estimate from 20 analysts surveyed by Thomson Financial. Sales climbed 8.4 percent to $89 billion.

Oil and natural-gas output rose 5.1 percent as new wells began producing in Africa. Record prices, driven partly by supply disruptions in Nigeria and the dispute over Iran's nuclear program, have allowed Chief Executive Officer Rex Tillerson to boost exploration and stock buybacks. He said today buybacks will rise to $6 billion this quarter.

``They are trying to produce as much oil and gas as is reasonably possible,'' said Evan Smith, who helps manage $1.4 billion, including Exxon Mobil shares, at U.S. Global Investors Inc. in San Antonio. ``The growth in demand that's been driving prices higher will extend well into the next decade.''

The record earnings come as high gasoline prices spur politicians in Washington to call for a revival of the windfall- profits tax that was repealed in 1988. A U.S. Senate committee yesterday asked for tax returns filed by Exxon Mobil Corp. and other producers to ensure they are paying the full amount due.

Prices Surge

Crude-oil futures in the U.S., which burns one-fourth of the world's oil, traded 27 percent higher than a year earlier in the first quarter and touched an all-time high this week at $75.35 a barrel.

Profit fell short of expectations because Exxon Mobil's effective income-tax rate jumped to 46 percent from 39 percent, shaving $1.03 billion in net income, said Kenneth Carroll, an analyst at Johnson Rice & Co. in New Orleans.

Shares of Exxon Mobil fell 68 cents to $62.42 in New York Stock Exchange composite trading.

Exxon Mobil is the latest major oil company to report first-quarter earnings. London-based BP Plc, the world's No. 2 oil company, on April 25 said net income fell 15 percent to $5.62 billion on higher taxes and a drop in output.

Houston-based ConocoPhillips, the third-biggest U.S. oil company, yesterday said its profit rose 13 percent to $3.29 billion. Marathon Oil Corp., No. 4 in the U.S., today said net income more than doubled to $784 million.

Negative Sentiment

With some lawmakers pointing to oil industry profits as egregiously high, producers may be tempted to ``smooth your earnings out,'' said Janna Sampson, who helps manage $1.1 billion, including 300,000 Exxon Mobil shares, at Oakbrook Investments LLC in Lisle, Illinois.

``You'd better spend a little more on R&D to lower your profits because you're going to lose them one way or another,'' Sampson said. ``The sentiment toward the oil companies is pretty negative in government right now.''

Government regulations hinder exploration in North America, where Exxon Mobil ``would love to invest more,'' company spokesman Ken Cohen told reporters on a conference call. He said there's no ``silver bullet'' to reduce energy prices, and lawmakers should ``take a deep breath'' rather than taking hasty actions that may deter efforts to boost domestic production.

Tillerson, 54, who succeeded Lee Raymond as Exxon Mobil's CEO in January, capitalized on high prices by raising output from the Erha and Yoho fields in Nigeria and the Upper Zakum field in Abu Dhabi. The company in March bought a 28 percent stake in Upper Zakum, the world's fourth-biggest oil field.

`Higher Alert'

Exxon Mobil's Nigerian oil platforms and terminals are in ``a state of higher alert'' after militants threatened the installations, spokesman Henry Hubble told investors on a conference call. Production hasn't been affected, he said.

Exxon Mobil plans to start pumping oil and gas from eight new projects this year after starting eight in 2005. Tillerson's goal is to raise output by about 5 percent annually for the next five years.

First-quarter profit from oil and gas sales rose 26 percent to $6.38 billion as output gains in Africa, the Middle East and Russia more than made up for declines in North America.

Refining earnings dropped 13 percent to $1.27 billion. Excluding a $310 million year-earlier gain from the sale of a stake in a Chinese refiner, profit in the segment climbed 11 percent. Chemicals earnings fell 34 percent to $949 million.

Profit margins on refining are widening as some companies idle plants to perform maintenance delayed by the hurricanes of 2005. Based on futures prices, U.S. profits on processing crude into refined fuels averaged more than $9 a barrel in the first quarter, an 11 percent gain from a year earlier.

Exxon Mobil has phased out use of the additive methyl tertiary butyl ether, known as MTBE, in more than 90 percent of its gasoline and expects to finish the process by May, the company said.

Exxon Mobil said its cash holdings rose 11 percent to $36.5 billion in the first quarter. Debt was $8 billion at the end of March.

To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.

Last Updated: April 27, 2006 16:02 EDT