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Exxon rises above GE to the market's highest peak

EXXONMOBIL has seized the mantle of the world’s largest public company, in terms of stock market value, from General Electric.

A surge in the oil company’s stock over the past year, driven by record oil prices, has pushed GE from its pedestal, a position the jet engines to light bulbs conglomerate has occupied for the past three years.

Exxon shares gained almost $1 to $58.98, valuing the oil company at $380 billion (£200.7 billion). A surge in the crude oil price above $48 per barrel amid speculation that Opec might reduce it production quotas, pushed the stock price to record levels. Exxon held the title previously in the early 1990s, before its merger with Mobil but was unseated by Microsoft during the hi-tech stock market boom.

Exxon’s ascent to the stock market’s highest peak was marked yesterday by the release of its annual reserve replacement figures, which again exposed the oil industry’s conflict with its US stock market regulator.

The Western world’s largest oil producer said that it had more than replaced its annual production for the 11th consecutive year but Exxon was forced to comply with new reserve reporting rules according to which its reserve replacement ratio was only 83 per cent.

Using the new guidance issued by the US Securities and Exchange Commission (SEC), Exxon has been forced to reduce the volume of oil and gas it added to reserves by 500 million barrels to 1.3 billion barrels.

The oil company, which has been embroiled in lengthy arguments with the SEC about the new rules, criticised the new guidance, which requires that companies use a snapshot oil price at the year end to account for their reserves.

Exxon said: “The use of prices from a single date is not relevant to the investment decisions made by the corporation and annual variations in reserves are not of consequence in how the business is actually managed.”

The SEC’s recent decision to impose year-end pricing also affected the reserves of BP and Shell. The Anglo-Dutch firm was forced to admit that it had barely replaced half of its annual output with new reserves, while BP issued two replacement ratios — according to UK listing rules the company had replaced its reserves at the rate of 106 per cent but its SEC-compliant figure was 87 per cent.

The issue of oil price affects production sharing contracts, agreements widely used by oil companies in their dealings with state oil companies in Asia and Africa. Under these contracts, oil companies are compensated for the cost of development in barrels of oil — the number of which diminishes as the oil price increases. In the case of Exxon, the issue related to a weakness in the price of bitumen at the year-end, affecting an oil-bitumen project in Canada.

Excluding the effect of single-day pricing, Exxon said that it had replaced its production at the rate of 112 per cent. The biggest impact came from the addition of 1.7 billion barrels worth of natural gas from Qatar’s North Dome field.

The world’s biggest known gas deposit, North Dome is tipped to supply Britain by the end of the decade from a vast liquefied natural gas plant under construction by Exxon and its local partner Qatargas.

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