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High oil prices fuel ExxonMobil bumper profits

Exelon buys Constellation in major energy deal
Washington (AFP) April 28, 2011 - US nuclear power giant Exelon announced Thursday it would buy rival power generator Constellation Energy in a $7.9 billion stock-swap deal, the latest in a spate of energy sector mergers.

The deal would create a giant power generator and distributor serving 38 of the country's 50 states, as well as two Canadian provinces, with more than half of its 34,000 megawatts capacity coming from nuclear power.

"This merger creates the number-one competitive energy provider with one of the industry's cleanest and lowest-cost power generation fleets and one of the largest commercial, industrial and residential customer bases in the United States," said Exelon chairman and chief executive John Rowe in a statement.

The stock-for-stock deal would reward Constellation shareholders with a roughly 18 percent premium on their company's average share price over the past month.

Current Exelon shareholders would control 78 percent and Constellation shareholders, 22 percent, of the combined company, which would have a market value of $34 billion.

The new company will be called Exelon and be based in Exelon's current Chicago headquarters.

The deal comes on the tail of two other major energy sector acquisitions in recent months: Duke Energy's $13.7 billion takeover of Progress Energy, and AES's $3.5 billion acquisition of DPL, which controls Dayton Power & Light.

by Staff Writers
New York (AFP) April 28, 2011
ExxonMobil reported nearly $11 billion in quarterly profit Thursday on the back of a surge in oil prices that has put the company in the crosshairs of US politicians, including President Barack Obama.

As Americans struggle to cover the higher price of gasoline, Exxon reported net income of $10.65 billion in the first quarter, a leap of 69 percent from the year-ago period.

Even as Obama has vowed to strip oil companies of a $4 billion tax break, banner profits for energy companies were all-but-certain this month as Arab unrest this year drove oil prices toward the record $147 a barrel high set in July 2008.

ConocoPhillips posted Wednesday a 43 percent rise in first-quarter profit to $3 billion. Chevron, the second-largest US energy producer, is set to report earnings Friday.

"Now investors get to digest the earnings report from Big Oil, and you will get to see why oil companies are easy targets from politicians, whether it is political chicanery or not," said Jon Ogg at 24/

Higher fuel prices are pressuring growth in the global economy and weigh particularly hard on the poor, as well as Americans struggling to recover from recession.

Chafing under gasoline prices that have climbed a dollar from a year ago to about an average $4 a gallon (3.8 liters) at the pump, consumers are complaining and politicians are listening.

Obama and potential opponents in next year's presidential election have pushed the issue onto the front burner.

On Tuesday Obama called on Congress to cut $4 billion in subsidies to profit-churning oil firms, as higher gasoline prices pressure his own political prospects.

"We have got a real problem here. Families day-to-day, they are driving to work. They are just watching their paychecks get whittled away. They need some relief," Obama told a Detroit television station.

Earlier the president wrote to Republican and Democratic leaders on Capitol Hill, urging them to eliminate "unwarranted tax breaks" to the oil and gas industry, and to reinvest in clean energy to cut US dependence on foreign oil.

But Republicans countered that Obama's budget prescriptions would in fact send gas prices even higher and reduce US domestic drilling.

The oil and gas industry has also warned that cutting tax breaks for exploration and subsidies will cost jobs at a time of high unemployment after the worst economic crisis in decades.

For ExxonMobil, the world's largest publicly traded company by market value, first-quarter earnings per share leaped 61 percent to $2.14, beating the average analyst estimate of $2.06.

Revenue climbed to $114.0 billion, compared with $90.25 billion in the 2010 first quarter, missing expectations of $114.85 billion.

Shares in ExxonMobil, the biggest blue chip on the Dow Jones Industrial Average, fell 1.3 percent to $86.65 in afternoon New York trade.

"ExxonMobil's earnings reflect continued leadership in operational performance during a period of strong commodity prices," Rex Tillerson, the company's chairman, said in the statement.

Capital and exploration spending climbed 14 percent to $7.8 billion for the first quarter as demand booms, the Irving, Texas-based company said.

"We continue with plans to invest between $33 billion and $37 billion per year over the next five years to develop new energy supplies to meet future demand growth," Tillerson said.

In a conference call with analysts, the firm's head of investor relations, David Rosenthal, said: "Margins are firm... times are really good now and we're taking advantage of them."

However, he said that refinery volumes were lower due to normal maintenance downtime and "the tragic event" in Japan, referring to the March earthquake, tsunami and nuclear plant crisis.

"I can't tell you all our facilities in Japan are up and running full-board," but the company is working to bring back normal operations, he said.

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