March 29 (Bloomberg) -- Exxon Mobil Corp., the world's largest publicly traded oil company, persuaded an Alabama state court judge to cut a $11.9 billion verdict to $3.6 billion today in a lawsuit over natural gas royalties.

Circuit Court Judge Tracy McCooey said that Exxon would be adequately punished and deterred from future misconduct with a $3.5 billion punitive award in a contract suit brought by the state of Alabama. The jury awarded $11.8 billion in punitive damages in November after finding that the company cheated the state out of gas royalties. She left intact almost $103 million in compensatory damages.

While cutting the punitive verdict, the judge criticized the oil company for its ``insidious and calculating'' fraud. ``Exxon engaged in a carefully planned scheme, conceived and approved at the highest echelons of its corporate offices, to keep nearly $1 billion in easy money,'' McCooey said in her ruling today in Montgomery, Alabama.

Exxon said it plans to appeal the reduced award to the state Supreme Court. The jury's $11.9 billion award was the largest in the U.S. last year and fourth-largest ever.

``We don't think any number other than zero is consistent with the facts or the law,'' Exxon attorney Chris King said.

``The remaining award is still unjustified and excessive,'' said Russ Roberts, an Exxon spokesman.

Robert Cunningham, one of the attorneys for Alabama, said the state will not appeal the reduction in punitive damages.

Arguing that the entire punitive verdict should have been thrown out, Exxon claimed that jury selection was flawed and that the verdict exceeded what is permitted under the U.S. Constitution.

The November verdict was the second one in the case. The state Supreme Court in 2002 threw out a $3.5 billion award after finding that the judge erred in allowing internal company records to be shown at trial.

Shares of Irving, Texas-based Exxon rose 35 cents to close at $41.09 on the New York Stock Exchange.

The case is: Exxon Corp. v. Department of Conservation and Natural Resources, No. 99-2368.

To contact the reporter on this story: Lawrence Viele in Atlanta lviele@bloomberg.net.

Last Updated: March 29, 2004 17:52 EST