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Exxon Second-Quarter Profit Declines On Lower Oil Prices

Exxon Mobil Corp. (XOM) said second-quarter profit fell for the first time in four years as crude oil prices declined along with returns from its gasoline and diesel manufacturing business.

Net income was $6.86 billion, or $1.55 a share, compared with $15.9 billion, or $3.41, a year earlier, the Irving, Texas-based company said in an e-mailed statement today. The year-earlier quarter included a $7.5 billion net gain from tax-related items and divestments including the sale of part of its stake in a Japanese refining business.

Brent crude futures, a global benchmark, averaged $103.35 a barrel during the second quarter, down 5 percent from $108.76 a year earlier. The average margin from processing crude into transportation fuels narrowed by 12 percent during the April-to-June period as gasoline demand and prices declined in the U.S. market that burns one of every five barrels of the world’s crude supply, according to data compiled by Bloomberg.

Exxon Chairman and Chief Executive Officer Rex Tillerson has been steering exploration to Russia, Liberia and the U.S. Gulf of Mexico to revive crude production after $52 billion in natural gas investments during the past three years floundered amid depressed prices for the furnace and power plant fuel.

Exxon, the world’s largest publicly traded energy company, said in March that its combined oil and gas output will fall for a second straight year as the company constructs new platforms and pipelines to bring recent discoveries online.

Production vs. Demand

Tillerson reduced the full-year capital projects budget by 4.5 percent this year to $38 billion. The company has underperformed its biggest U.S. rival, Chevron Corp. (CVX), and the broader market this year, with shares advancing 8.3 percent. During that period, Chevron increased 16 percent and the Standard & Poor’s 500 Index rose 18 percent.

Global oil prices declined during the second quarter as crude production growth outpaced the expansion in demand by an almost 6-to-1 margin, according to data from the International Energy Agency in Paris. The world’s oil supply increased by an average of 590,000 barrels a day, overshadowing the 100,000-barrel rise in daily demand, the IEA said in a July 11 report.

Rising natural gas prices in the U.S. failed to offset all of the impact on profit from weaker crude and motor fuel prices for Exxon, the largest U.S. gas producer. Benchmark New York Mercantile Exchange gas futures jumped 71 percent to an average of $4.018 per million British thermal units in the quarter, from $2.354 a year earlier.

Gas comprised more than 48 percent of Exxon’s overall output in 2012, up from 41 percent before the company acquired XTO Energy Inc. for $34.9 billion in 2010 to tap into the North American shale drilling revolution.

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

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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