A year punctuated by windfall profits is usually good news for manufacturers unless you're Big Oil. Irving, Texas-based Exxon Mobil Corp., the world's largest publicly traded oil company with 2005 revenues of $371 billion, is one of the latest oil producers to defend record profits amid high fuel prices.
Indeed, 2005 proved to be a positive year financially for Exxon Mobil -- one of IndustryWeek's IW 50 Best Manufacturing Companies for 2005. The company reported on Jan. 30 a record profit of $36.1 billion for the year, a 43% gain from 2004 and the largest annual net income reported in U.S. history. Fourth-quarter profits increased 27% from the previous year to $10.7 billion.
More than a week before the results were announced, the company already was preparing for a backlash by holding an hour-long electronic news conference, according to the Los Angeles Times. Vice President Ken Cohen defended company profits in the Jan. 21 L.A. Times story, saying high profits for energy companies simply reflect an"immense" industry. He added that Exxon Mobil only supplies 2% of the world's energy and 3% of its oil.
| At A Glance Exxon Mobil Corp. Irving, Texas Primary Industry: Petroleum and Coal Products Number of employees: 85,900 2004 In Review Revenue: $293.1 billion Profit Margin: 8.6% Sales Turnover: 1.5 Inventory Turnover: 15.1 Revenue Growth: 20.9% Return On Assets: 14.5% Return On Equity: 28.2% |
"There is a great deal of public interest in global energy prices," said Exxon Mobil Chairman Rex W. Tillerson in a Jan. 30 statement. "We recognize that consumers worldwide want and need reliable supplies of affordable energy to fuel their vehicles, light and heat their homes and run their businesses. Our strong financial results will continue to allow us to make significant, long-term investments required to do our part in meeting the world's energy needs."
In an advertisement published in several newspapers, the company said the oil industry's average profits of 8.2 cents to the dollar in 2005 are comparable to the national average of 6.8 cents to the dollar for the year. The company's statements were further backed by President Bush who said oil profits are "determined by the marketplace," according to an Associated Press story published in the Washington Post Feb. 1.
While the public continues to question Big Oil profits and politicians vacillate on the idea of a windfall profit tax for oil companies, Exxon Mobil is pushing forward with expansion and exploration efforts. The company signed an agreement in December 2005 with Libya's National Oil Corporation to begin exploration activity in Libya. The contracted area comprises 2.5 million acres offshore in water depths ranging from approximately 10 feet to more than 10,000 feet. The company also announced in 2005 that it began production from oil fields in West Africa and Eastern Russia. The company will produce 250,000 barrels of oil per day by the end of 2006 from the Eastern Russia Chayvo field. Domestic gas sales in Eastern Russia started at 60 million cubic feet per day and are expected to increase to approximately 250 million cubic feet per day by 2010. Earlier in 2005 the company broke ground on a new refinery in the Fujian Province of China. The company also has proposed constructing a new refinery in Arizona.
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