Higher commodity prices boost oil company profits

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NEW YORK --- The major oil companies racked up significant gains in net income for the third quarter by charging more for oil than they could a year ago, and making money refining it.

The companies also earned more from producing natural gas, but a couple have signaled that the current low price for gas could force a change in strategy.

Both oil and gas increased in price when compared with the average price from last year. Oil prices rose about 12 percent while natural gas increased 23 percent. As a result, Exxon Mobil Corp. on Thursday reported 55 percent higher profits for the third quarter, while on Wednesday, ConocoPhillips said profit doubled.

The ability to sell crude oil for more money helped Royal Dutch Shell overcome a billion-dollar asset write-off. It also offset expenses and a drop in Gulf of Mexico production tied to the government's monthslong ban on deepwater drilling in response to BP's giant oil spill. The moratorium was lifted two weeks ago, but tough new regulations should slow down exploration along the Gulf Coast.

Exxon, Shell, Conoco and others like Occidental Petroleum have joined the rush to develop America's underground deposits of shale, lured by the promise of large volumes of untapped gas. That's helped pump up U.S. supplies well above average and beyond what the country needs for its power plants and home heaters.

While supplies remain ample, U.S. natural gas demand will be flat next year, according to the Energy Information Administration.

This is good news for consumers, who should see prices continue to slide this year. But oil executives, who worry about declining profits, have been looking for ways to soften the blow.

Conoco CEO Jim Mulva said he's going to wait for natural gas prices to "become less dysfunctional" before putting Conoco's natural gas rigs back online.

"We're not willing to just push volumes to push volumes and essentially just break even," Mulva said. He wants to see gas consistently between $4 and $5 per 1,000 cubic feet before boosting production. Gas is now priced at $3.89 per 1,000 cubic feet.

Earnings reports

- Exxon Mobil Corp. earned $7.35 billion in the third quarter as revenue rose 15.8 percent to $95.3 billion. The Irving, Texas, giant also cranked up oil production year-over-year.

- Royal Dutch Shell's quarterly profits climbed by 6.5 percent to $3.46 billion. Without special charges, earnings rose 88 percent.

- ConocoPhillips reported Wednesday that net income more than doubled for the third straight quarter, earning $3.06 billion for the July-September period.

- Occidental said last week that profits rose 28 percent as it set new company records in oil production.

UPCOMING REPORTS: Chevron Corp. is expected to report a 12 percent increase in third-quarter earnings today. BP PLC will report its financial results Tuesday.

-- Associated Press


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