Oil giants Exxon Mobil and Royal Dutch Shell on Thursday added to the industry's worst midyear showing in years, stung by slumping global energy demand that threatens to further slow exploration and production.
For Exxon, the world's biggest publicly traded oil company, a 66 percent profit plunge for the second quarter marked its lowest result in nearly six years. The Irving, Texas-based company vowed to maintain its aggressive spending plans but acknowledged the tough economic environment has made that difficult.
Its quarterly production fell too -- bad news considering it generates more than two-thirds of its earnings from oil and gas output.
"The results were very disappointing," said Brian Youngberg, an energy analyst at Edward Jones. He noted Exxon has an extensive list of projects in various stages, "but now they need to start delivering."
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Production fell 6 percent for Shell, Europe's biggest oil company, and executives said more drastic steps will be taken to adjust to the downturn. CEO Peter Voser promised Thursday to cut jobs and reduce capital spending next year. He said Shell would still increase production by 2 percent to 3 percent a year through 2012, reversing 7 years of declines.
"We simply don't know when the global economy will recover, and we have to plan on the basis that this downturn could last quite some time," Voser said.
When demand does rebound, however, the reduction in spending on exploration and drilling could lead to supply shortages and prices spikes like those of 2008.
Exxon Mobil said earnings for the April-June period came to $3.95 billion, or 81 cents a share, down from $11.68 billion, or $2.22 a share, a year ago, a record at the time. Excluding one-time items, net income in the most-recent quarter amounted to $4.09 billion, or 84 cents a share.