May 02, 2008 17:47 IST
The world's biggest oil company, Exxon, has started showing its weakness with its oil production coming down by around 10 per cent.
According to reports, the world's biggest energy group announced a first-quarter record profit of $10.9 billion but its oil production fell almost 10 per cent in the first three months of the year. Moreover, its refining profits also slumped.
Reports said that the company's broader market rallied, but Exxon shares fell 3.6 per cent to $89.70.
According to market analysts, the company might fail to grow at all in the next five years.
Over the next five years the company's slow production growth guidance may not come to pass at these high oil prices given production sharing agreements.
The disappointment was deepened by the fact that BP and Royal Dutch Shell, Exxon's closest rivals, had kept production flat or growing and had beaten expectations.
Exxon's overall oil and gas production fell 5.6 per cent from the year-earlier quarter.
Production in Africa, a key new area of investment, fell 20 per cent as high oil prices and contract stipulations forced it to hand over more of its production to host country governments.
Venezuela's nationalisation of its oil fields also hurt the group's volumes, as did declines at Canadian gas fields.
Unlike Royal Dutch Shell, which is stressing its research in second generation biofuels, and is a leader in making natural gas into transport fuels, Exxon has long argued that traditional alternatives, such as wind power, have proved uneconomic.
The figures are likely to increase pressure from investors for Exxon to raise dividends. It devoted $8 billion to buying back its own shares and $1.9 billion to dividends while adding another $6.9 billion to its now $40.9 billion cash pile.
The $8 billion in share buybacks dwarfed the company's $5.5 billion spending on capital and exploration.
Exxon earned $2.03 a share, up 25 per cent from last year, but less than the $2.14 expected by analysts. Its net income of $10.9bn was up 17 per cent from last year.