Big oil equals big money - earnings up despite production drop

| 7/27/2006

As oil prices have soared in 2006, so, too, have profits for major oil companies.

What are the odds?

Hot on the heels of BP Amoco PLC’s announcement of record profits for the second quarter of 2006, Royal Dutch Shell, Exxon Mobil Corp. and ConocoPhillips have all reported their own large jumps in profits.

Shell reported a 40-percent leap in second quarter earnings, with net profit rising to $7.32 billion from $5.24 billion for the same time period in 2005.

The Associated Press reported that Shell’s chief executive officer, Jeroen van der Veer, downplayed the significance of rising oil prices, claiming that the company’s profit increase was largely due to “overall good operational performance.”

The numbers, however, suggest otherwise. The AP reported that Shell’s oil exploration and production arm saw a $4 billion increase in earnings in spite of an 8-percent drop in production.

Exxon Mobil reported a 36-percent increase in earnings for the second quarter, jumping to $10.36 billion. That’s up from $7.64 billion a year ago.

And not to be outdone, ConocoPhillips reported a 65-percent increase in second quarter profits, jumping to $5.2 billion. The Wall Street Journal reported that ConocoPhillips’ earnings from oil exploration and production jumped 71 percent in the second quarter, while profit from refining and marketing rose by 54 percent.