Exxon, Chevron profits top view

HOUSTON/SAN FRANCISCO (Reuters) - Oil giants Exxon Mobil Corp and CHEVRON (CVX.NY)Corp posted higher-than-expected quarterly earnings on Friday as refining profits helped offset a steep decline in crude oil prices.

Exxon, the world's largest publicly traded company, said fourth-quarter earnings fell by a third, but full-year profit of $45.2 billion set a new company and U.S. record.

"The results speak for themselves," said Fred Burke, president of Johnston Lemon Asset Management in Washington, D.C. "I still think Exxon is a low-cost producer, and at some point the price of oil will increase. They are doing all the right things right now."

The sector has been hit hard by the twin blows of plunging oil and gas prices and the credit crunch, but the big companies, with billions in cash, are well-suited to weather the slump. Exxon had $31 billion in cash at the end of 2008.

"Exxon has lots of strength and flexibility," said Brian Youngberg, senior energy analyst at Edward Jones in St. Louis.

Exxon's net profit fell to $7.8 billion, or $1.55 per share, versus $11.7 billion, or $2.13 per share, a year ago. Analysts on average had expected $1.45 per share, according to Reuters Estimates. Sales fell 27 percent to $84.7 billion.

Exxon said it plans to spend about $7 billion buying back stock this quarter, down from $8 billion spent in the fourth quarter. Chevron, Exxon's nearest U.S. rival, said it would halt share buybacks in the first quarter.

Patricia Yarrington, Chevron's new chief financial officer, said financial priorities are to sustain and build the dividend, fund the capital program, and stay flexible.

"So we've always seen the share repurchase program as sort of the discretionary part of that," she said on a call.

Chevron's quarterly profit rose to $4.9 billion, or $2.44 per share, from $4.88 billion, or $2.32 per share, helped by a one-time gain of $600 million from an asset swap in which it received stock for a producing field.

Excluding that gain, it earned $2.23 per share, down from a year earlier but topping analysts' average forecast of $1.79.

REFINERY SURPRISE

Exxon's refining operations benefited from the decline in crude oil prices versus the price for products such as gasoline and diesel, widening its profit margins and boosting quarterly profit from refining by $147 million to $2.41 billion.

But in oil and gas production, profit tumbled $2.57 billion to $5.63 billion as average crude oil prices fell to about $59 a barrel in the fourth quarter from about $90 a year earlier.

Oil production fell 45,000 barrels per day to 2.47 million bpd, largely because of asset sales and cuts in OPEC quotas in countries where Exxon operates.

Including natural gas, Irving, Texas-based Exxon's total production fell to 4.11 million barrels of oil equivalent per day (boed) from 4.25 million a year earlier. Still, the output figures showed promise.

"Exxon's production decline was less than what it has been in previous quarters," Edward Jones' Youngberg said. "That's been a concern so far this year. But hopefully the ramp-up in capital spending over the last few years will bear fruit down the road."

Exxon said its 2008 exploration budget was $26.1 billion, up 25 percent from 2007.

Chevron's production fell about 70,000 barrels per day to 2.54 million boed, largely from reductions in the Gulf of Mexico due to the hurricanes that hit the region in September.

That knocked down earnings from production by 35 percent to $3.15 billion, but the decline was more than offset by a jump in refining profit to $2.08 billion from $204 million.

The San Ramon, California-based company expects to produce 2.63 million boed in 2009, but said it would not now meet its 3 percent compound annual production growth target for 2005 to 2010.

Shares of Exxon were up 2 percent at $78.33 in midday trade on the New York Stock Exchange, while Chevron stock was up 1.9 percent at $71.94.

On Thursday, European major Royal Dutch Shell Plc said quarterly profit fell 28 percent to $4.79 billion. Britain's BP Plc is due to report earnings on Tuesday.

(Reporting by Anna Driver in Houston and Braden Reddall in San Francisco; Additional reporting by Matt Daily in New York; Editing by Dave Zimmerman, John Wallace and Matthew Lewis)