Oil companies earnings stung by recession

Oil companies, long accustomed to making hefty profits, were stung last quarter by weak oil and natural gas prices and lowered demand. Oil companies ExxonMobil Corp. and Royal Dutch Shell PLC, two of the world’s largest public oil companies, reported their worst quarterly earnings in more than five years last quarter.

The Irving, Texas-based ExxonMobil reported earnings of $4.7 billion last quarter, a staggering amount but still 65 percent off last year’s figures. After posting a US record $45.2 billion in profits last year, the latest results were well below what analysts had expected.

A telltale sign of recovery for energy companies is the price and demand of oil. Last quarter, oil prices in the United States hovered under $70 per barrel, whereas in 2008 it exceeded $100 per barrel. Oil demand has weakened due to the economic recession as consumers and businesses cut back on transportation, as well as new initiatives in renewable energy usage.

Despite the downturn, ExxonMobil Chairman Rex Tillerson said that the company will continue its “robust investment program” in oil exploration.

ExxonMobil recently announced a partnership with biotech company Synthetic Genomics Inc. to research and develop biofuels from photosynthetic algae. ExxonMobil plans to invest $600 million in the technology if it proves feasible, the company said.

British oil giant Royal Dutch Shell also announced on Thursday a steep drop in profits. During the third quarter, the company made $2.6 billion, a 68 percent decline from the same period last year.

The company cited a weak economy and lower energy prices for the drop. “Our third quarter results were affected by the weak global economy,” CEO Peter Voser said in a statement. “Our strategy remains on track, although the near-term industry outlook remains challenging.”

Tags:  oil companies