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The largest and most valuable company in the US announced
record profits in the wake of high gasoline prices and faced
increased criticism from some US politicians and the general
public. |
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On May 09, 2006, the Wall Street Journal
reported that Exxon Mobil (Exxon), the largest company in
the US, was close to displacing Microsoft Corporation
(Microsoft) as the non-financial company with the world’s
largest cash reserves1. As on March 31, 2006,
Exxon’s cash reserves were US$ 31.9 billion, while
Microsoft’s cash and short-term investments were US$ 34.8
billion. The Wall Street Journal also reported that Exxon
was increasing its cash reserves at a fast rate and could
overtake Microsoft by July 2006.
The period 2005 had proved to be a bountiful year for Exxon
and other US oil companies like Chevron, and ConocoPhillips.
The high oil prices had resulted in increased profits for
these oil firms. For FY 2005, Exxon posted a record profit
of US$ 36.13 billion, the highest reported annual profit for
a company in the corporate history of the US. |
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The previous record was US$ 25.3 in annual net income that was also set by
Exxon in 2004. Also, in 2005, Exxon had overtaken General Electric Co. in
terms of market capitalization, to become the most valuable company in the
US. According to the company, in 2005, its average price for crude oil and
natural gas in the US was US$52.23 a barrel2 and US$11.34 per
1,000 cubic feet respectively. In 2004, the prices were US$38.85 per barrel
for crude oil and US$6.61 per 1,000 cubic feet for natural gas.
However, Exxon’s representatives mentioned that though the rise in oil
prices helped the company achieve record profits, the company’s good
performance was also due to its ability to complete projects on time and
keep costs in check. “We continue to identify world-class projects, post
industry-leading returns, and are well-placed for continued growth. Our
record results show a disciplined approach and we continue to deliver
superior value to our shareholders,”3 explained Henry Hubble
(Hubble), Exxon’s vice president of investor relations.
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[1] Berkshire Hathaway Inc., an insurance and investments management
company, had the largest cash reserves of around US$ 43 billion in cash and
other short term investments as of March 31, 2006.
[2] barrel is equal to 42 US gallons or 158.97 liters.
[3] “Exxon Mobil Posts Record Profit of $10.7 Billion,” www.msnbc.msn.com,
January 30, 2006.
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