LITTLE ROCK — Exxon Mobil Corp. and Chevron Corp., the largest U.S. energy producers, are increasing their profits with oil refineries that some analysts and investors urged them to divest as recently as last year.
Earnings from processing crude into fuels such as gasoline and diesel more than made up for lagging returns from oil and natural gas exploration during the final three months of 2012, Exxon and Chevron reported Friday.
Fuel refining helped propel fourth-quarter net income to a five-year high of almost $9.95 billion for Exxon and a record $7.25 billion for Chevron.
Exxon, the world’s biggest refiner, and Chevron, operator of fuel plants from South Korea to Mississippi, have resisted the trend among peers such as Marathon Oil Corp. and Conoco Phillips of spinning off refineries to focus on oil drilling. The persistence is paying off: Exxon posted the second-highest annual profit in U.S. history last year, surpassed only by its own all-time high from 2008, according to data compiled by Bloomberg.
“Even though refining has long been seen by some as a drag on earnings, it has now been vindicated,” said Ernie Cecilia, who helps manage $6.7 billion as chief investment officer at Bryn Mawr Trust Co. in Bryn Mawr, Pa. “We like integration.”
Arjun Murti at Goldman Sachs Group Inc. was among analysts who questioned Exxon’s dedication to the so-called integrated model during a presentation by Exxon Chief Executive Officer Rex Tillerson last March in New York.
Tillerson defended the arrangement that joins refineries to chemical plants and oil production, saying it enables the company to capture the “highest value of each molecule.”
“There’s no doubt in my mind that the integrated model adds incremental value to everything we do,” Tillerson said during the event.
Exxon’s full-year net income rose 9.3 percent to $44.88 billion,just $340 million shy of the U.S. profit record the company set in 2008 when it raked in $45.22 billion.
Chevron earned $26.2 billion in 2012, the second-highest result in company history, according to data compiled by Bloomberg.
The year was 2.7 percent below Chevron’s biggest-ever profit of $26.9 billion, posted in 2011, according to data compiled by Bloomberg.
Exxon shares rose 7 cents to close at $90.04. Chevron shares rose $1.35 to close at $116.50.
Friday’s announcements by the giants of the U.S. energy industry capped a week in which refining companies that don’t explore for crude or make chemicals disclosed outsized profits.
Valero Energy Corp. on Tuesday posted a 20-fold increase in fourth-quarter net income as expanding supplies of crude from U.S. shale formations reduced input costs. The San Antonio-based company’s shares surged 13 percent that day for the largest daily advance in 15 months.
Marathon Petroleum Corp., the Findlay, Ohio-based refiner spun off by Marathon Oil in June 2011, reported a $755 million profit during the quarter after a $75 million loss a year earlier, according to a Wednesday statement.
U.S. refinery margins rose 46 percent during the October to-December period, in part because rising production from North American shale pressured domestic oil prices.
Exxon’s refineries earned $1.77 billion during the period, a four-fold increase from $425 million a year earlier. That profit growth occurred even as the Irving, Texas-based company lowered the amount of crude it processed by 7.9 percent to 4.837 million barrels a day compared with the same period of 2011.
Chevron said its refining unit returned to profit after recording a loss a year ago. The San Ramon, Calif.-based company’s fuel plants earned $925 million during the period, compared with a $61 million loss in the fourth quarter of 2011.
Business, Pages 30 on 02/02/2013