Thread: Oil companies post record profits.

http://www.baltimoresun.com/business...ck=1&cset=true

Exxon Mobil Profit, Sales Soar to Records
By STEVE QUINN
Associated Press Writer
Originally published October 27, 2005, 10:19 PM EDT
DALLAS // Exxon Mobil Corp. rewrote the corporate record books Thursday as the oil company's third-quarter earnings soared to almost $10 billion and it became the first public company ever with quarterly sales topping $100 billion. Anglo-Dutch competitor Royal Dutch Shell PLC wasn't far behind, posting a profit of $9 billion for the quarter.

Those results led Democrats in Congress to demand a new windfall profits tax. "Big oil behemoths are making out like bandits, while the average American family is getting killed by high gas prices, and soon-to-be record heating oil prices," Sen. Chuck Schumer, D-N.Y., said in a statement.



But Energy Secretary Samuel Bodman said President Bush opposes such a move and is instead considering a wide range of proposals to help cushion consumers, including the creation of an emergency reserve of gasoline and other refined products.

Thursday's outsized earnings are a result of surging oil and natural gas prices that pushed pump prices to record territory after Hurricane Katrina. They come on the heels of similar eye-popping gains reported this week by BP PLC, ConocoPhillips Inc. and Marathon Oil Corp. Chevron Corp. reports its earnings on Friday.

Some Republican members of Congress called on the industry to invest in ways that will increase production so that consumers get a break at the pumps or when they pay their heating bills. But analysts said telling the industry how to spend its money was unfair, if not futile.

"Exxon is a good corporate citizen but it does not work for the welfare of the country," said oil analyst Fadel Gheit at Oppenheimer & Co. in New York.

Exxon Chairman and Chief Executive Lee R. Raymond did not mention of the record results in the company's earnings release. Instead, he noted that the world's largest publicly traded oil company "acted responsibly in pricing at our company operated service stations, and we also encouraged our independent retailers and distributors to do the same."

Henry Hubble, Exxon's vice president of investor relations, did note on a conference call the company's record profit, which rose 75 percent in the quarter to $9.92 billion from $5.68 billion a year ago. He said the gains "reflect the strong commodity prices and our fundamental business model that is disciplined, straightforward and focused on generating value while managing risk."

The previous oil-industry earnings record was Exxon's 2004 fourth-quarter profit of $8.42 billion. Third-quarter revenue jumped to $100.72 billion from $76.38 billion in the prior-year period.

To put its performance into perspective, Exxon's revenue for the three-month period was greater than the annual gross domestic product of some of the largest oil producing nations, including the United Arab Emirates and Kuwait -- even though it lost considerable production because of a string of hurricanes that battered the U.S. Gulf coast.

Robert Kaufmann, a professor at Boston University's Center for Energy and Environmental Studies, says production will return to pre-hurricane levels and hurricane-related losses will disappear in future earnings reports, but profits will remain high.

"A lot of the capacity was being built when oil was trading at $20 to $30 a barrel range, so by definition those fields are much more profitable," he said. "Nobody should be surprised by this."

Despite the profit surge, Exxon's performance fell short of analysts' expectations and its shares fell 60 cents to $55.60 in trading Thursday on the New York Stock Exchange, while U.S.-traded Class A shares of Shell rose $1.15, or 1.9 percent, to $60.65 on the NYSE.

With oil futures above $60 a barrel for much of the third quarter, Exxon's profits from petroleum exploration and production increased by $1.8 billion to $5.7 billion. Soaring prices for gasoline, diesel and jet fuel lifted refining and marketing profits by $727 million to $2.13 billion.

However, income at the company's chemicals unit declined by $537 million to $472 million, a reflection of the higher prices for raw materials.

Exxon said hurricanes slashed U.S. production volumes by 5 percent from a year ago, while global daily production slipped to 2.45 million barrels of oil equivalent from 2.51 million barrels. By the end of the year, it will cost the company about $100 million after taxes, the company estimated.

At Shell, third-quarter net income grew 68 percent to $9.03 billion from $5.37 billion a year earlier. Revenue at the London-based company, which has extensive operations in the United States, rose 8 percent to $76.44 billion.

"We are capturing the benefits of high oil and gas prices and refining margins," Shell Chief Financial Officer Peter Voser said, referring to the profit margin on each barrel of crude that is refined into gasoline, diesel and jet fuel.

Shells profits from exploration and production increased by $2.6 billion to $5 billion in spite of an 11 percent decline in oil and natural-gas output. Its refining and marketing profit climbed by $201 million to $1.7 billion. Its chemicals business saw profits decline by $251 million to $321 million.

Shell said hurricane damage would cost it about $350 million, although much of the expense would be covered by insurance.

Also on Thursday, Marathon said third-quarter profit more than tripled to $770 million, up from $222 million a year earlier. Most of the profit came from its oil and natural-gas production unit. However, the results fell short of Wall Street's aggressive estimates and Marathon's stock slumped $3.80, or 6.2 percent, to $57.28 on the NYSE.

this upsets me so. They made record profits yet, we are paying higher gas prices.

Originally Posted by 3lilpigs

Gas here has gone DOWN 50 cents in the last week!

There is also talk of natural gas and heating oil going down too.

I guess they are trying to make up for ripping us off thru the summer.

It has here too... but at $2.33 I'm bettin it's still hurting *alot* of ppl.

Speaking of heating a home, we heat ours with kerosene, hubby just bought back 5 gal. worth he said it was 4.00 a gallon.

Insurance limbo delays Gulf rebuilding
By RUKMINI CALLIMACHI, Associated Press Writer

NEW ORLEANS - The owners of the sagging, flood-stained home aren't in. Above the front door, a banner explains their absence, and the lack of progress: "Allstate paid $10,113.34 on this house for storm damage."

Like the home next to it and the one after that, the house was disemboweled nine months ago by Hurricane Katrina. The force of the gushing water punched the refrigerator into the kitchen wall, and it still sits leaning through the house's broken ribcage. Inside, mud has hardened into a crusty carpet, covering a designer sofa and a leather swivel chair.

"I want people to drive by my home and decide for themselves: Could I repair this for $10,000?" asks Eric Moskau, the home's exiled owner who had over $1.2 million in coverage on his 3,000-square-foot home.

Behind the sign he hung from his porch is a story all-too-common in this once-posh neighborhood of pummeled homes: Even New Orleans' affluent homeowners, who thought they had done the right thing by properly insuring their investment, are finding that technicalities are keeping them from securing enough from their insurers to rebuild.

The insurance industry says it has settled over 90 percent of its Hurricane Katrina claims, proving it's meeting its obligations to policyholders. But consumer advocates say insurers settled numerous claims for only a fraction of the actual damages, using numerous exclusions to reduce payouts. Insurance modeling firm ISO estimates Louisiana had $24.3 billion in insured losses, but the state department of insurance says only $12.5 billion had been paid out as of the end of April, the last month for which figures were available.

Without enough money from their insurers to rebuild, homeowners are left with two choices: Give up and leave, or else rebuild by hand, using their savings to pay for labor and materials. "It's basically self-insurance," said Moskau, who had what he thought was plenty of coverage on his $600,000 two-story house and now counts himself among those who have abandoned their homes on once-stylish Bellaire Avenue.

Exactly 63 buckled, warped and mud-filled homes separate Moskau from the nearest neighbor who is now repairing his home. "With this," says 79-year-old Pascal Warner, holding up his large, lined hands, as the light streams in through the ribs of his still unfinished walls.

He and his 71-year-old wife, Irma, have dragged their sopping furniture to the curb, ripped the wet wallboard off the walls and stripped the house to the studs. With only a pittance from their homeowner's insurance, they had just enough money for supplies, not labor.

After last year's floodwaters receded, politicians initially blamed the residents of this below-sea-level city, claiming too few had purchased federal flood insurance on top of their homeowners policies, which cover only wind damage.

Yet an analysis by the office of Donald Powell, the Bush administration's Gulf Coast recovery czar, found few communities were better insured against flooding than New Orleans: Two out of three homes had flood insurance, 13 times more than the national average of 5 percent. It's also far more than in many other communities historically prone to flooding. For example, Harris County, Texas, has one of the highest rates of repetitive flooding in the nation and yet only a quarter of homeowners have flood coverage.

Moskau, a well-to-do real estate appraiser, thought he had taken every precaution: He had the maximum federal flood insurance of $250,000. But when the government issued that check, it was issued in two names: Moskau's and his bank's. His bank applied the check to his $600,000 mortgage, leaving him with an outstanding note of $350,000 and no money for repairs.

According to a spokesman at Freddie Mac, which over the last five years has bought over $7.5 billion in mortgages in Louisiana, banks are required to put insurance checks into an escrow account, disbursing the funds as repairs are completed. An exception is allowed if the home is in an area where rebuilding has been prohibited. In that case, the insurance check can be applied to the outstanding mortgage, said spokesman Brad German.

Flanking one of the city's buckled levees, portions of Bellaire Avenue are still in rebuilding limbo.

Warner, who has lived in the same ranch-style house for 40 years, had just $3,000 after his flood insurance settlement was used to pay off his remaining mortgage. He also received around $18,000 from his homeowners for wind damage, enough for construction materials but not labor.

Moskau's house, like most on Bellaire, swallowed less than 6 feet of water. It was enough to destroy the first floor, but not the second. The second floor, however, got wet, too. Water seeped in through the vents, pushed in by the hurricane's 140 mile-per-hour winds, he said. The roof was damaged and windows were punched out — damage, says Moskau, which should be covered under the wind-only policy. Allstate told him it was all due to flooding. "I agree that the first floor flooded. I used to be an insurance adjuster and I know the rules, so I didn't expect Allstate to pay me for that. But the second floor clearly didn't. So shouldn't I at least get 50 percent of my policy?" asked Moskau. He said that would be enough to pay off the mortgage and cover much of the rebuilding cost.

The CEOs of the State Farm Insurance Co. and Allstate Corp., the nation's No. 1 and No. 2 insurers, declined to discuss specific claims. Together, they control half the insurance market in Louisiana. "When you track our claim satisfaction, it is very high in those areas. Ninety-three to 94 percent of our Katrina claims have been settled," said Allstate CEO Edward M. Liddy.

That hasn't stopped critical reviews by insurance regulators and lawsuits by policyholders. Louisiana's top insurance regulator recently ordered reviews of consumer complaints regarding Allstate and St. Paul Travelers Cos. In District Court in New Orleans, a class action lawsuit was filed last month against 15 insurers, claiming they capriciously denied claims.

In Mississippi, U.S. Sen. Trent Lott, whose Pascagoula home was torn off its foundation, is joining hundreds of his constituents in suing State Farm for unpaid wind damage.


Part of what really rankles consumers is the record profits property-and-casualty insurers are posting despite the unprecedented losses inflicted by Katrina.

The industry cleared a $43 billion profit in 2005, an 11.7 percent increase over the previous year and a 15-year high, according to the trade group, the Insurance Information Institute. "I would say it's definitely good times in the property-and-casualty insurance industry," said Donald Light, a senior analyst at Celent LLC, a research and consulting firm.

But insurers say the profit numbers are only half the story: Nearly half the $58 billion in insured losses along the Gulf Coast resulting from last year's hurricanes were absorbed by reinsurers, companies that insure insurance companies.

Those same reinsurers are now jacking the rates they charge insurance companies by an average 80 percent in coastal regions, according to an analysis by Guy Carpenter & Co., a division of insurance-brokerage firm Marsh & McLennan Cos.

For some companies, the price has tripled: Allstate will spend $600 million on reinsurance this year, compared to under $200 million in 2005. To offset that cost, Allstate announced plans to seek premium increases in a majority of the 49 states in which it operates. It also canceled 30,000 policies in coastal counties of New York, including Brooklyn, even though a major hurricane has not hit there since 1938.

In the past year in Florida, insurers have left the state by the dozen, while those that are staying are seeking steep rate increases. State Farm is seeking a 70 percent hike in premiums.

"We're paying the price for hurricanes that hit thousands of miles away from New England," said George A. Cole III, Senior Vice President of Massachusetts-based Hingham Mutual. Cole explained that the company had no choice but to cancel 6,500 of their customers, most on Cape Cod, after being hit with a 50 percent rate increase from their own reinsurer.

Back in New Orleans, homeowners fight over money and the fret over deep financial losses is taking an emotional toll.

Moskau, who is living in Idaho with his wife and two boys, literally hasn't been able to sit still since Allstate cut him the check for $10,113.34 several months ago. He still does not know what to do with his buckled home, for which he is still paying a $3,500-a-month mortgage, and is instead making plans to build a new house an hour's drive outside New Orleans.

"My wife is always telling me, 'Will you please stop moving your foot?' We'll be sitting at the lunch table and the whole thing is moving," he said. "All from the anxiety."

http://news.yahoo.com/s/ap/20060612/...tkBHNlYwM3MTg-

Gas prices are still at 2.96 here in phoenix, az. IT IS crazzzzy, I am more than pissed off. We are looking at alternate fuel vehicals, I would rather pay them the same amount and be nicer to the enviroment, than pay the Dang oil companies!!!!!!!!!

We should all do that, then the oil companies will really be hurt!