America's thirst for fossil fuels dropped considerably during the recession and it hasn't come close to recovering fully. Throughout most of 2009, storage houses have been crammed with oil and gas.
Exxon Mobil Corp. said Thursday that net income slumped 68 percent to $4.73 billion, or 98 cents per share, when compared with the same July-September period in 2008, the most lucrative ever for the oil industry.
Last year, crude spiked to near $150 a barrel, helping Exxon break its own profit records.
Royal Dutch Shell PLC, Europe's largest oil company, said that its profit was more than halved to $3.25 billion and sales tumbled 43 percent. The bad year for major producers has led to thousands of job cuts from the Gulf of Mexico to Amsterdam.
Shell said Thursday it would cut 5,000 jobs and that 15,000 employees must reapply for employment. Those cuts come on top of 500 layoffs among senior management earlier this year.
ConocoPhillips said Wednesday that it was selling off $10 billion in assets and becoming a smaller company.
Even the rising energy prices which usually fatten profits at companies like Exxon have come with a price this year. The refining side of the business is getting hit hard because it must pay more for crude to make fuel, but demand for fuel has not rebounded strongly.
The current price of crude has bought oil companies time to pare down where they can, though the reason for higher prices is not because of a healthy rebound in demand.
Rather it is the dollar, which is used to buy and sell crude, that has driven energy prices up. When the dollar falls, investors holding euros or other relatively strong currencies can buy more crude.
It is not clear how long dollar-driven oil demand can last without a significant rebound in real demand.
A number of independent refiners have already shut down operations because of low demand and high oil prices.
Exxon's refining business took an especially large hit from July to September, with profits dropping 89 percent.
But the oil giant which pumps about 3 percent of the world's crude seems to have weathered the downturn better than others.
It increased oil and gas production in the third quarter, even though crude prices had dropped by $50 a barrel when compared with 2008. Crude was starting to rally during the summer, however, and the boost in production added a layer of revenue that some oil companies missed.
Exxon, based in Irving, Texas, said Thursday its fourth quarter dividend would be the same as the third quarter's 42 cents per share, and company officials said they expect to invest as much in capital expenditures as last year.
"We're pleased with how we're sitting and don't see a whole lot of change in the near term," David Rosenthal, Exxon's investor relations chief, said in a conference call with analysts. "I think it's important that we don't get too excited about short term changes, or people looking down the road a quarter or two."
Those comments were echoed by almost every oil executive speaking this week.
"In Europe there are few if any signs of demand recovering," Shell Chief Financial Officer Simon Henry said. In the U.S., there might be some improvement in demand, but it's not "firm enough to call a recovery," Henry said.
Analysts noted that Shell appeared to be behind the curve in restructuring for the downturn compared to its main European rival, BP. BP said earlier in the week it had cut costs and boosted oil production, leading to a third-quarter profit of $5.3 billion.
Until oil demand picks up, petroleum companies must find a way to cut costs while boosting production, said Jason Gammel, an analyst with Macquarie Research.
Crude prices will likely remain well above the first quarter of this year, which will help oil companies post higher quarterly profits in 2010.
Elsewhere, ConocoPhillips said it would slim down its business before reporting Wednesday that third-quarter profits dropped 71 percent.
The nation's third-largest oil company behind Exxon Mobil and Chevron Corp. said it would shed $10 billion in assets and slash capital expenditures next year by 12 percent. ConocoPhillips also may sell part of its exploration and production operations, pipelines and terminals in North America.
Occidental Petroleum said it boosted production in the third quarter, though its profit dropped 59 percent to $927 million.
Chevron will release its quarterly earnings report on Friday.
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