By Isabel Ordonez

Of DOW JONES NEWSWIRES

BP, Royal Dutch Shell and ConocoPhillips all reporting big gains this week. Most of these gains came as oil prices averaged nearly $100 a barrel in the first quarter, compared with $58 in the period a year ago. They recently rose to close at $120 a barrel.

But in a rare slip, Exxon did not do as well as its rivals.

HOUSTON -(Dow Jones)- Exxon Mobil Corp. (XOM) posted a 17% rise in first- quarter net income, driven by surging crude oil prices.

But the U.S. oil giant also reported a sharp decline in production and week refining profits.

Exxon Mobil’s results worsen Wall Street expectations. Its shares closed Thursday down 3.6% to $89.70 and in recent late trading are at $89.80. This movement came on a day when petroleum equities traded lower due mainly to a sharp drop of oil prices that traded under $111.

The world’s largest company on a market capitalization basis reported net income of $10.89 billion, or $2.03a share, up from $9.28 billion, or $1.62 a share, a year earlier. The latest results mark the best first quarter ever for the energy giant. However, the mean estimate of analysts polled by Thomson Reuters was for earnings of $2.14 a share.

Revenue climbed to $116.85 billion from $87.22 billion.

Exxon Mobil’s production decreased 5.6% from the first quarter of 2007, which included the expropriation of the company’s assets in Venezuela in June and the effects of production sharing contracts. Excluding these factors production was down 3%.

Under production-sharing agreements, international oil companies like Exxon Mobil must pay higher royalties to host nations when oil prices increase.

“Exxon reports the steepest decline in production among all the majors that has reported so far,” said Fadel Gheit, analyst at Oppenheimer & Co. Inc.

Royal Dutch (RDSA), which has suffered attacks on its pipelines in Nigeria, surprised analysts by announcing a 1% increase in production this week, while BP’s (BP) that is also vulnerable to production sharing contracts posted a 5% decline in output volumes in the first quarter.

Some analysts said Exxon’s earnings were modest compared with Shell’s and BP’s profits, which this week surged 25% and 63%, respectively. But the European companies show bigger improvements than Exxon in part because they come from a lower performance base after facing operating problems, Gheit says.

Exxon Not Immune To Cost Pressures

Addressing analysts during an earnings conference call Thursday, executives from Exxon Mobil said the oil giant is not “immune” to the rising cost affecting the entire industry and confirmed two liquefied natural gas projects in Qatar scheduled to start production in the second quarter of this year are on time.

During the call company officials addressed the public criticism Exxon Mobil received this week from members of the Rockefeller family saying that the issue has been blown up by the press.

The descendants of John D. Rockefeller, the founder of Standard Oil, forerunner of today’s Exxon Mobil Corp., have supported resolutions urging the company to seek to separate the roles of chief executive and chairman of the board.

“We are talking about a handful of family members that are participating in the shareholders’ proposal, and most of the shares are owned by two individuals, and the total ownership of the group we are talking about here is 0.006%,” said Ken Cohen, Exxon Mobil’s vice president of public affairs.

Exxon Mobil’s strong quarterly earnings were partially offset by a sharp decline in refining margins because the price of gasoline didn’t keep pace with the price of oil during the first three months of the year.

Profits in the refining segment plunged 39% to $1.17 billion. Earnings at the chemicals arm dipped 17%, also on lower margins.

Exxon spent $5.5 billion in the first quarter on capital and exploration projects, up 30%. The increase comes as Exxon starts trying to shake off its reputation for having a stingy approach to capital spending - amid skyrocketing oil prices - that could be a target of second-guessing for years to come. Analysts generally have cheered the company’s financial conservatism, on the notion that big oil companies tend to waste money when they start drilling with too much gusto. But some now wonder if Exxon played it too safe.

Meanwhile, the oil giant has been pouring cash into stock buybacks. Thursday, the company said it repurchased $8 billion in shares in the first quarter. In 2007, Exxon repurchased $31.8 billion of its shares, up fivefold from the amount acquired in 2003.

-By Isabel Ordonez, Dow Jones Newswires; 713-314-6090; isabel.ordonez@ dowjones.com

(Donna Kardos contributed to this report.)

  (END) Dow Jones Newswires
  05-01-08 1723ET
  Copyright (c) 2008 Dow Jones & Company, Inc.

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