Exxon Mobil Corp. rode higher oil prices to a $30 billion profit last year. But shareholders at its annual meeting Wednesday are likely to ask pointed questions about its big push into natural gas.
Since buying XTO Energy last year for $29 billion, Exxon has become the largest natural gas company in the United States. It now owns more gas than crude oil.
So far, the deal has backfired. Natural gas prices are below where they were when the deal closed. That's one reason, analysts say, Exxon's stock has lagged behind that of rivals Chevron and ConocoPhillips.
Gas drilling is also attracting more attention from environmentalists and government officials because of the potential for contaminating underground water supplies.
Exxon shareholders will vote Wednesday on whether to disclose more information about hydraulic fracturing or "fracking" — the pumping of tons of water and chemicals into the ground to break open rock formations and extract the gas. Chevron, which has boosted its own natural gas business in the past year, faces a similar vote at its own shareholder meeting Wednesday.
A shareholder resolution asks the Exxon board to report this fall on the known and potential environmental risks and what the company is doing about them. The board opposes the measure, saying gas can be produced in an environmentally safe way.
Such controversies are not new at Exxon Mobil meetings. Every year, shareholders face a long list of resolutions on everything from greenhouse gas emissions to gay rights.
CEO Rex Tillerson will review 2010, a comeback year of sorts for Exxon after it made $19.3 billion in 2009, its smallest profit in seven years.
Exxon shares rose 7 percent last year compared with a 19 percent gain at Chevron and 33 percent at ConocoPhillips. They've been more competitive so far this year. Still, only four of 17 analysts surveyed by FactSet have a "Buy" rating for Exxon.
Benchmark Co. analyst Mark Gilman said Exxon Mobil's share price — it closed Tuesday at $81.29 — isn't justified by future growth potential.
Argus Research analyst Phil Weiss said Exxon Mobil has lots of cash, little debt and a tradition of efficient operations. He has a "Buy" rating on the stock. But he's concerned about the short-term effects of the XTO deal, which could be an even bigger handicap if natural gas prices remain low.
"In the current environment, that's a big disadvantage," he said.
Weiss said Exxon also appears to be having a hard time finding new sources of oil. The company increased its petroleum reserves last year mostly by buying companies instead of discovering new fields, he said.
But a 40 percent jump in oil prices over the past 12 months has helped offset the weakness in natural gas prices. Exxon Mobil earned $10.65 billion in the first quarter of this year, its biggest quarterly profit since a record $14.83 billion in the third quarter of 2008.
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