Exxon and Phillips Report Sharply Lower Net Income

Exxon, the world’s largest industrial company, said its profit tumbled 44.8% as it set up a contingency fund for losses that may result from a court judgment, now being appealed, that said it overpriced crude oil between 1975 and 1981.

Phillips Petroleum said its profit dropped 52.4% because of the sharply higher interest expenses associated with a $4.5-billion stock buy-back program that it implemented to escape from two hostile takeover bids.

New York-based Exxon said profit in the second quarter fell to $745 million on revenue of $22.97 billion, against profit of $1.35 billion on revenue of $24.31 billion reported for the like 1984 period.

It said $545 million of the decline in earnings reflected an extraordinary charge against earnings to establish a contingency for losses in the oil-pricing case. Without that charge, earnings would have been $1.29 billion.

Earlier this month, a special federal court ordered Exxon to pay more than $2 billion for overpricing crude oil produced in the Hawkins Field of east Texas in what is believed to be the largest such judgment against a single defendant.

Exxon has complained that it is the victim of retroactive government interpretation of vague rules adopted during the energy shortages of the last decade.

Earnings per share were not hit as hard as net income because of a continuing stock buy-back program.

Exxon said it purchased 14.15 million additional shares of its stock in the second quarter and another 5.18 million shares in the first 19 days of this month. Since July, 1983, when the program began, Exxon has spent about $5.3 billion to buy back nearly 122 million of its shares. Exxon still has 750 million shares outstanding.

Phillips, based in Bartlesville, Okla., and the nation’s eighth-largest oil company, said second-quarter profit fell to $110 million on revenue of $3.99 billion, against profit of $231 million on revenue of $4.05 billion a year earlier. Earnings per share from the previous year were adjusted for a recent 3-for-1 stock split.

Phillips said earnings were reduced by a $126-million increase in interest expense, primarily resulting from a stock buy-back program completed March 29.