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Exxon Valdez: How That Disaster Destroyed The Economy 20 Years Later

Huff Post- Jason Linkins

First Posted: 06- 8-10 05:55 PM   |   Updated: 06- 8-10 09:36 PM

Hopefully, by now, you’ve already read the oil spill apocalypse pieces penned by our own Ryan Grim — who documented “BP’s Long History Of Destroying The World” — and Sam Stein, who got the following diagnosis from a top lawyer in Exxon Valdez litigation: “[I]f you were affected in Louisiana, to use a legal term, you are just f–ked”.

Well, here’s something else depressing that you can add to your oil spill woes. The Exxon Valdez disaster, which occurred on March 24, 1989, played a major role in the collapse of the economy some 19 years later. See, as Stein documented, after lengthy litigation, Exxon managed to get the amount of punitive compensatory damages reduced from the hoped-for $5 billion to a paltry $500 million. But, back when Exxon had reason to imagine it might actually have to part with the $5 billion, the oil giant needed to find a way to cover its hindquarters. Exxon found a savior in the form of J.P. Morgan & Co., who extended the beleaguered company a line of credit in the amount of $4.8 billion.

Of course, that put J.P. Morgan on the hook for any potential judgment against Exxon. So the bank went looking for a way to mitigate that risk. Its solution made history, which you can read about in a June 2009 piece from the New Yorker‘s John Lancaster, entitled “Outsmarted.” Here’s the relevant portion:

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Exxon Mobil Reports Record $45.2 Billion Profit For 2008

JOHN PORRETTO | January 30, 2009 10:02 AM EST | AP

HOUSTON — Exxon Mobil Corp. on Friday reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company, even as its fourth-quarter earnings fell 33 percent from a year ago.

The previous record for annual profit was $40.6 billion, which the world’s largest publicly traded oil company set in 2007.

The extraordinary full-year profit wasn’t a surprise given crude’s triple-digit price for much of 2008, peaking near an unheard of $150 a barrel in July. Since then, however, prices have fallen roughly 70 percent amid a deepening global economic crisis.

In the fourth quarter alone crude tumbled 60 percent, prompting spending and job cuts in an industry that was reporting robust, often record, profits as recently as last summer.

With piles of cash and diversified operations, the majors like Exxon Mobil have fared better than many smaller oil and gas companies, but Friday’s results show no one is completely insulated from the ongoing malaise.

Irving, Texas-based Exxon said net income slid sharply to $7.8 billion, or $1.55 a share, in the October-December period. That compared with $11.7 billion, or $2.13 a share, in the same period a year ago, when Exxon set a U.S. record for quarterly profit. It has since topped that mark twice, first in last year’s second quarter and then with earnings of $14.83 billion in the third quarter.

Revenue in the most-recent quarter fell 27 percent to $84.7 billion.

Both the per-share and revenue results topped Wall Street forecasts. On average, analysts expected the company to earn $1.45 a share in the latest quarter on revenue of $69.1 billion, according to Thomson Reuters.

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