April 27 (Bloomberg) -- Exxon Mobil Corp., the world's biggest oil company, said first-quarter net income climbed to $8.4 billion from $7.86 billion as increasing global energy demand lifted prices.

Per-share profit rose to $1.37 from $1.22 a year earlier, Irving, Texas-based Exxon Mobil said today in an e-mailed statement. The company was expected to earn $1.47 a share, the average estimate from 20 analysts surveyed by Thomson Financial.

Oil and natural-gas prices rose amid concern over supply disruptions in Nigeria, Russia and Venezuela. Lingering damage from last year's hurricanes to production platforms in the Gulf of Mexico, the U.S.'s biggest domestic source of oil and gas, reduced supplies.

"Energy prices have been a lot stronger than many people expected, and they should continue to rise through the end of this year and next," Robert Sweet, who helps manage $100 million at Horizon Investment Services LLC in Hammond, Indiana, said in an April 13 interview. "Exxon is the bluest of the blue chips in the energy sector."

Rex Tillerson, who succeeded Lee Raymond as Exxon Mobil's chief executive officer in January, capitalized on high prices by bringing new wells into production in Nigeria and raising output from existing projects in Russia and Angola. The company is attempting to drill a gas well 32,000 feet (9,754 meters) below the floor of the Gulf of Mexico, which would be the deepest ever drilled.

Sustained High Prices

Crude prices in the U.S., which burns a quarter of the world's oil, averaged $63.48 a barrel during the quarter, a 27 percent increase from a year earlier. Gas prices jumped 21 percent to an average of $7.841 per million British thermal units.

Exxon Mobil is the latest major oil company to report first-quarter earnings. London-based BP Plc, the world's No. 2 oil company, on April 25 said net income fell 15 percent to $5.62 billion because of higher taxes and a drop in output. Houston-based ConocoPhillips, the third-biggest U.S. oil company, yesterday said that its first-quarter profit rose 13 percent to $3.29 billion.

Exxon Mobil, Chevron Corp. and other oil companies are raising exploration spending to capitalize on surging energy prices. U.S. oil futures indicate that investors expect prices to stay above $70 a barrel through the end of 2009 after touching a record at $75.35 this month.

Exxon plans to start pumping oil and gas from eight new projects this year, mostly in Africa and the Middle East, after starting eight in 2005. Twenty new projects are slated to begin production in the next three years.

Output Seen Rising

In March, Tillerson told a gathering of analysts in New York that the company's costs for drilling rigs, pipes and other equipment rose about 5 percent in 2005, less than half the increase incurred by Chevron. Tillerson's goal is to raise the company's output by about 5 percent annually for the next five years.

Exxon Mobil pumped more oil last year than every member of OPEC except Saudi Arabia, Iran and Venezuela. The company's cash reserve swelled to $33 billion at the end of 2005, exceeding the gross domestic products of such countries as Lebanon and Bulgaria. Each $1 increase in oil prices boosts Exxon Mobil's per-share earnings by 1.5 percent, according to Citigroup Inc.

The company plans to spend $5 billion this year on refinery expansions and new chemicals plants. The refinery projects will increase the amount of crude the company can process into products such as gasoline and jet fuel. Exxon Mobil also is modifying plants so it can refine more high-sulfur oil, which is cheaper than the low-sulfur grades preferred by many refiners.

Refining Margins Widen

Profit margins on refining are widening after some companies idled plants or reduced output to perform maintenance work delayed by the hurricanes of 2005. Based on futures prices, U.S. profits on processing crude into refined fuels averaged more than $9 a barrel in the first quarter, an 11 percent gain from a year earlier.

Exxon Mobil had the best-performing stock among the world's five biggest oil companies during the first quarter. The shares rose 8.3 percent. BP was next with a 6.8 percent gain. Shares of San Ramon, California-based Chevron, the second-biggest U.S. oil company, rose 2.1 percent in the period.

The earnings statement was released before the opening of regular trading on U.S. stock markets. Shares of Exxon Mobil yesterday fell 85 cents to $63.10 in New York Stock Exchange composite trading. The stock has 20 buy ratings and five hold recommendations from analysts.

To contact the reporter on this story:
Joe Carroll in Houston at  jcarroll8@bloomberg.net.

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