A Crude Quarter for Big Oil

This earnings period hasn't been pleasant for Big Oil. On Thursday, the trend came to a head when the biggest of the publicly traded companies, ExxonMobil (NYSE: XOM  ) , checked in with earnings that were a full 68% below those of the same quarter in 2008.

For the period, the company earned $4.7 billion, or $0.98 per share, down from the $14.8 billion, or $2.85 per share, for the same quarter a year ago. And even with special items eliminated, its income still declined by 65% from the 2008's third quarter.

However, Exxon isn't alone in its slippage. Royal Dutch Shell (NYSE: RDS-A  ) saw its earnings sliced in half relative to its year-ago results. At the same time, ConocoPhillips (NYSE: COP  ) turned in a year-over-year decline that was somewhat covered up by the company's discussion of its plans to downsize and restructure. And even BP (NYSE: BP  ) , which is fast becoming my favorite among the super-majors, saw its earnings dip, although to a lesser extent than had been expected.

Exxon's upstream earnings were (excluding special items) $4.0 billion in the quarter, versus $9.3 billion a year ago. Obviously, most of the reduction was tied to lower crude prices and natural gas prices. Nevertheless, the quarter's production rose by almost 3%. And without the effects of OPEC's quotas and divestments, production improved by about 5%.

Downstream -- refining and marketing -- the company's earnings declined to $325 million, from about $3.0 billion last year. As you might suspect, lower margins were the primary culprit there.

But the quarter was still a busy one for Exxon. For instance, a pair of liquefied natural gas (LNG) facilities in which it has an interest began production in Qatar. And the trio of participants in Australia's big Gorgon LNG project -- Chevron (NYSE: CVX  ) and Shell, along with Exxon -- approved a development plan and established sales agreements. Further, Exxon agreed to participate with Synthetic Genomics to attempt the development of biofuels from photosynthetic algae.

The good news for ExxonMobil and its peers -- only Total (NYSE: TOT  ) is left to report among the super-majors -- is that from here on, because of the slide in commodities prices during second half of last year, comparisons are about to become far more favorable. My inclination is that crude will continue to move slowly upward, and that Exxon is one of the better ways to participate in that change.

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