Prices Pump shadow big profits
11:15 PM
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As BP, ConocoPhillips report earnings, critics cry foul
BP and ConocoPhillips said their profits rose in the first quarter because of soaring crude prices and other factors, igniting the ire of politicians and activists who accuse the oil industry of profiteering while Americans pay nearly $4 a gallon for gasoline.
BP said its profit rose 17 percent, helped by billions in asset sales to cover the still-mounting costs of the deadly Gulf of Mexico oil spill a year ago. ConocoPhillips reported a 43 percent jump in profit because of higher oil prices and refining margins, which offset a decline in oil and natural gas production.
The results set the stage for a week of earnings reports, with the largest oil companies' profits expected to come in at near-record levels.
Right on cue, critics were ready to pounce.
"While Big Oil rakes in windfall profit margins, they do nothing to ease the record-high prices facing American consumers at the pump and slowing our economic recovery," said the Center for American Progress, a left-leaning Washington think tank.
Members of Congress and President Barack Obama used the reports to step up calls for the repeal of $4 billion in annual tax breaks for oil producers.
"When BP makes billions in profits, even after the year they just had, you know it's time to cap the gusher of tax breaks that have been subsidizing the biggest oil companies for decades," U.S. Rep. Ed Markey, D-Mass., said.
Oil prices have recently topped $100 a barrel, after trading closer to $80 a year ago, amid civil unrest in the Middle East and North Africa, a weakening U.S. dollar and strengthening global demand for petroleum products following the recession. On Wednesday, benchmark crude rose 55 cents to settle at $112.76 a barrel.
BP said every $1 increase in the price of London-traded Brent crude translates to about $380 million in pretax profit. With BP's daily output at 3.58 million barrels of oil equivalent per day, it's easy to see how such a rise in prices can turbo-charge profits.
Jeff Sheets, chief financial officer of ConocoPhillips, said that while the industry's profits are higher, the margins are still slim compared to the amount of assets oil companies maintain, and profits haven't risen as fast as gasoline prices.
When critics focus only on the bottom-line number, they "lose the scope of what's required to produce that profit," Sheets said in an interview.
The industry further argues that ending tax breaks would cut investment in new oil and natural gas projects, cost new jobs and decrease oil and natural gas production.
$3.81 a gallon in Houston
Rising pump prices are pressuring lawmakers, however, and the tax breaks are clearly in the cross hairs. Regular gasoline averaged $3.88 a gallon nationwide on Wednesday, and $3.81 in Houston, according to AAA.
Senate Majority Leader Harry Reid, D-Nev., said the Senate as early as next week could take up Obama's proposal to halt the tax breaks. Obama said the $4 billion a year in oil subsidies would be better spent on alternative energy investments.
Senate Majority Leader Harry Reid, D-Nev., said the Senate as early as next week could take up Obama's proposal to halt the tax breaks. Obama said the $4 billion a year in oil subsidies would be better spent on alternative energy investments.
ConocoPhillips said its first-quarter profit rose to $3 billion from $2.1 billion in the January-to-March period in 2010. Revenue increased 27 percent to $58.25 billion. Excluding gains from asset sales, its first-quarter earnings were $2.6 billion.
The Houston oil giant saw profit gains even though oil and natural gas output fell to 1.7 million barrels of oil equivalent a day, down 125,000 barrels a day from a year ago. Unplanned downtime from a temporary pipeline shutdown in Alaska and civil unrest in Libya were partially to blame, as were asset sales.
Last month, ConocoPhillips said it would sell up to $10 billion in additional assets over the next two years, sharply raising a previous target, as it steers more money to capital projects and stock buybacks. Sheets said Wednesday that the company is "actively working several different assets currently," but would not give more specifics about potential assets to be sold.
BP profit up $1 billion
BP, meanwhile, reported $7.1 billion in profit, up from $6.1 billion in the first quarter of 2010. Revenue rose 18 percent to $88.3 billion after the company sold more than $24 billion in assets to pay for the Gulf spill.
Partly as a result of its smaller size, BP's oil and natural gas production fell 11 percent in the quarter. BP also continued to pay for the catastrophe, saying it will set aside another $400 million to cover spill costs on top of the $40.9 billion it has already earmarked. BP reaffirmed it has applied for new Gulf drilling permits and hopes to resume such operations in the year's second half.
Exxon Mobil Corp. and Royal Dutch Shell will release results today. Chevron Corp. is scheduled to report Friday.
Houston Chronicle Reporter Tom Fowler and the Associated Press contributed to this report.
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