High Crude Prices Driving Profit for Oil Companies

Pulling oil from the ground is proving to be easier and more profitable than getting drivers to fill up their cars and trucks with gasoline and diesel fuel.

Exxon Mobil and ConocoPhillips, the No. 1 and No. 3 oil companies in the U.S., said Thursday that first-quarter profit jumped because oil prices were substantially higher than a year ago. That was more than enough to offset losses both had from their struggling refining businesses, which have been unable to pass along all of their costs for higher crude prices to consumers.

Exxon's U.S. downstream operations, which include refineries, lost $60 million in the first quarter, compared with a profit of $352 million a year ago. ConocoPhillips' refining and marketing business lost $4 million in the quarter. In the same quarter of 2009 it had a profit of $205 million.

The No. 4 oil company, Occidental Petroleum, has no refining operations. It reported profit nearly tripled to $1.06 billion for the quarter.

Oil companies are becoming more profitable as the price of oil has skyrocketed from $33 a barrel in the first quarter of last year during the depths of the Great Recession to above $85 a barrel Thursday. But integrated oil companies, which refine oil as well as explore for it, have seen their refining businesses decline because of soft demand for gasoline and diesel. U.S. petroleum consumption dropped in the first quarter for the third year in a row, according to the Energy Information Administration.

Exxon, based in Irving, Texas, said its first-quarter profit climbed 38 percent to $6.3 billion from $4.55 billion a year ago. Two years ago, Exxon earned $10.89 billion in the first quarter when oil prices were on their way to a record $147 a barrel. Exxon's revenue rose 41 percent to $90.25 billion.

ConocoPhillips, based in Houston, said its profit more than doubled to $2.1 billion. A year ago the company made $840 million. Revenue totaled $44.8 billion in the quarter.

ConocoPhillips CEO Jim Mulva told analysts on a conference call that opportunities for profitable investments for large, integrated oil companies like his have changed dramatically in the past few years.

"The question for our company is how do we create value for our shareholders in this type of environment given the assets, the resources, and the opportunities we already have in our existing portfolio," he said.

Exxon and Occidental said production rose about 5 percent from the year-ago quarter. ConocoPhillips said its production fell by the same amount.

Earlier this week Royal Dutch Shell and BP reported bigger profits because of higher oil prices. Shell posted earnings of $5.48 billion, a 57 percent increase. First-quarter profit for BP, which is dealing with an environmental catastrophe in the Gulf of Mexico after a rig it hired sank, more than doubled to $6.1 billion.

Exxon shares lost 53 cents to close at $68.66. ConocoPhillips rose 55 cents to close at $59.10. At one point in the session, they reached a new high for the past year of $60.15. Occidental shares added $1.35 to close at $86.25.