IW 50 Best: Exxon, Chevron Profits Soar On Rising Oil Prices
IW 50 Best Manufacturers benefit from higher prices and investments.
By Jonathan Katz
Chevron's second-quarter net income rose 209% to $5.41 billion, or $2.70 per share, compared with $1.75 billion, or 87 cents a share in the year-ago quarter. Exxon’s profit grew 85% to $7.6 billion, or $1.60 a share, compared with $4.09 billion, or 85 cents a share in the year-earlier period.
While higher prices impacted earnings, Exxon CEO Rex Tillerson also attributed his company's gains to investments Exxon made during the first half. He noted that the company increased capital and exploration spending 9% during the first half to $13.4 billion. One of the most significant investments was the company's purchase of natural gas producer XTO Energy Inc. on June 25.
Exxon first announced the $41 billion XTO deal in December 2009. Exxon said the deal will enhance its position to develop unconventional natural gas and oil resources. The acquisition makes Exxon the largest U.S. natural gas producer, according to the company.
"ExxonMobil's Energy Outlook indicates that gas will grow more rapidly than any other major energy source given its availability and relatively low carbon profile," said Tillerson when announcing the deal had closed. "We believe gas is the fuel of choice for power generation, producing fewer greenhouse gas emissions than other electrical-generation fuels, such as coal."
During the quarter, Exxon and Synthetic Genomics Inc. announced the opening of a greenhouse R&D facility where the companies will research and test an algae biofuels program. The companies are trying to determine whether large-scale quantities of affordable fuel can be produced from algae.
Chevron highlighted many exploration achievements during the quarter, including two deepwater natural gas discoveries in Australia's Carnavon Basin, which will contribute to growth at its Gorgon and Wheatstone liquefied natural gas (LNG) projects.
Chevron also signed nonbinding heads of agreement with Korea Gas Corp. to receive 195 million metric tons of LNG from the Chevron-operated Wheatstone project and to acquire an equity share in the field licenses and LNG facilities. The project is undergoing front-end engineering and design and has a planned capacity of 8.6 metric tons per year.
Meanwhile, Chevron and Exxon joined ConocoPhillips and Shell to develop a rapid-response system to capture and contain oil in the event of a future underwater well blowout in the deepwater Gulf of Mexico, the companies said on July 21.
The new system will be capable of mobilization within 24 hours and can be used on a wide range of well designs and equipment, oil and natural gas flow rates and weather conditions, the companies said. It will be engineered for use in deepwater depths up to 10,000 feet and have initial capacity to contain 100,000 barrels per day with potential for expansion.
The companies have committed $1 billion to fund the initial costs of the system. This system is being developed by a team of marine, subsea and construction engineers from the four companies.
It will include subsea containment equipment connected by manifolds, jumpers and risers to capture vessels that will store and offload the oil. Dedicated crews will ensure regular maintenance, inspection and readiness of the facilities and subsea equipment.
The four companies also said they have formed a nonprofit organization called the Marine Well Containment Company to operate and maintain this system.