UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
For the transition period from __________to________
Commission File Number 1-2256
EXXON MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
(Address of principal executive offices) (Zip Code)
(972) 444-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer X Accelerated filer Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding as of September 30, 2007
Common stock, without par value 5,463,625,615
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Statement of Income
3
Three and nine months ended September 30, 2007 and 2006
Condensed Consolidated Balance Sheet
4
As of September 30, 2007 and December 31, 2006
Condensed Consolidated Statement of Cash Flows
5
Nine months ended September 30, 2007 and 2006
Notes to Condensed Consolidated Financial Statements
6-16
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
17-21
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
22-23
Unregistered Sales of Equity Securities and Use of Proceeds
23
Item 6.
Exhibits
24
Signature
25
Index to Exhibits
26
-2-
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
Nine Months Ended
September 30,
2007
2006
REVENUES AND OTHER INCOME
Sales and other operating revenue (1)
$
99,130
96,268
278,363
278,609
Income from equity affiliates
2,158
1,778
6,088
5,265
Other income
1,049
1,547
3,459
3,733
Total revenues and other income
102,337
99,593
287,910
287,607
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases
51,973
49,364
139,642
140,365
Production and manufacturing expenses
7,884
7,057
22,845
21,897
Selling, general and administrative expenses
3,656
3,412
10,836
10,435
Depreciation and depletion
3,159
2,730
9,095
8,134
Exploration expenses, including dry holes
349
352
974
810
Interest expense
73
281
272
553
Sales-based taxes (1)
7,970
7,764
23,064
23,639
Other taxes and duties
10,229
10,163
29,708
29,206
Income applicable to minority interests
284
292
722
727
Total costs and other deductions
85,577
81,415
237,158
235,766
INCOME BEFORE INCOME TAXES
16,760
18,178
50,752
51,841
Income taxes
7,350
7,688
21,802
22,591
NET INCOME
9,410
10,490
28,950
29,250
NET INCOME PER COMMON SHARE (dollars)
1.72
1.79
5.21
4.91
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (dollars)
1.70
1.77
5.15
4.86
DIVIDENDS PER COMMON SHARE (dollars)
0.35
0.32
1.02
0.96
(1) Sales-based taxes included in sales and other
operating revenue
The information in the Notes to Condensed Consolidated Financial Statements
is an integral part of these statements.
-3-
CONDENSED CONSOLIDATED BALANCE SHEET
Sept. 30,
Dec. 31,
ASSETS
Current assets
Cash and cash equivalents
31,423
28,244
Cash and cash equivalents - restricted (note 3)
4,604
Marketable securities
190
0
Notes and accounts receivable - net
31,832
28,942
Inventories
Crude oil, products and merchandise
10,883
8,979
Materials and supplies
2,136
1,735
Prepaid taxes and expenses
4,179
3,273
Total current assets
85,247
75,777
Property, plant and equipment - net
119,102
113,687
Investments and other assets
32,312
29,551
TOTAL ASSETS
236,661
219,015
LIABILITIES
Current liabilities
Notes and loans payable
2,095
1,702
Accounts payable and accrued liabilities
43,525
39,082
Income taxes payable
10,300
8,033
Total current liabilities
55,920
48,817
Long-term debt
6,896
6,645
Deferred income tax liabilities
22,329
20,851
Other long-term liabilities
32,913
28,858
TOTAL LIABILITIES
118,058
105,171
Commitments and contingencies (note 3)
SHAREHOLDERS' EQUITY
Common stock, without par value:
Authorized:
9,000 million shares
Issued:
8,019 million shares
4,988
4,786
Earnings reinvested
218,761
195,207
Accumulated other comprehensive income
Cumulative foreign exchange translation adjustment
7,433
Postretirement benefits reserves adjustment
(6,584
)
(6,495
Common stock held in treasury:
2,556 million shares at September 30, 2007
(105,995
2,290 million shares at December 31, 2006
(83,387
TOTAL SHAREHOLDERS' EQUITY
118,603
113,844
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The number of shares of common stock issued and outstanding at September 30, 2007 and
December 31, 2006 were 5,463,625,615 and 5,728,702,212, respectively.
-4-
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Changes in operational working capital, excluding cash and debt
1,283
3,836
All other items - net
1,339
(796
Net cash provided by operating activities
40,667
40,424
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(10,827
(11,301
Sales of subsidiaries, investments, and property, plant and equipment
2,422
2,328
Other investing activities - net
(1,660
(1,791
Net cash used in investing activities
(10,065
(10,764
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt
104
123
Reductions in long-term debt
(111
(31
Additions/(reductions) in short-term debt - net
186
245
Cash dividends to ExxonMobil shareholders
(5,718
(5,775
Cash dividends to minority interests
(252
(207
Changes in minority interests and sales/(purchases)
of affiliate stock
(510
(380
Tax benefits related to stock-based awards
356
270
Common stock acquired
(23,884
(21,208
Common stock sold
891
829
Net cash used in financing activities
(28,938
(26,134
Effects of exchange rate changes on cash
1,515
537
Increase/(decrease) in cash and cash equivalents
3,179
4,063
Cash and cash equivalents at beginning of period
28,671
CASH AND CASH EQUIVALENTS AT END OF PERIOD
32,734
SUPPLEMENTAL DISCLOSURES
Income taxes paid
17,947
18,637
Cash interest paid
376
1,099
-5-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation's 2006 Annual Report on Form 10-K. In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The Corporation's exploration and production activities are accounted for under the "successful efforts" method.
2.
Accounting Change for Uncertainty in Income Taxes
Effective January 1, 2007, the Corporation adopted the Financial Accounting Standards Board’s (FASB) Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes". FIN 48 is an interpretation of FASB Statement No. 109, "Accounting for Income Taxes", and prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements uncertain tax positions that the Corporation has taken or expects to take in its income tax returns. Upon the adoption of FIN 48, the Corporation recognized a transition gain of $267 million in shareholders’ equity. The gain reflected the recognition of several refund claims, partly offset by increased liability reserves.
The Corporation is subject to income taxation in many jurisdictions around the world. The total amount of unrecognized income tax benefits in these jurisdictions at January 1, 2007, was $3.7 billion, almost all of which is classified as long term. Resolution of the related tax positions through negotiations with the relevant tax authorities or through litigation will take many years to complete. Accordingly, it is difficult to predict the timing of resolution for individual tax positions. However, the Corporation does not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months. Given the long time periods involved in resolving individual tax positions, the Corporation does not expect that the recognition of unrecognized tax benefits will have a material impact on the Corporation’s effective income tax rate in any given year.
The unrecognized tax benefits described above will not be included in the Corporation's annual Form 10-K contractual obligations table because the Corporation is unable to make reasonably reliable estimates of the timing of cash settlements with the respective taxing authorities. The total amount of unrecognized tax benefits will be disclosed in a footnote to the contractual obligations table.
The following table summarizes the tax years that remain subject to examination by major tax jurisdiction:
Country of Operation
Open Tax Years
Abu Dhabi
2000-2006
Angola
2002-2006
Australia
Canada
1990-2006
Equatorial Guinea
2004-2006
Germany
1998-2006
Japan
Malaysia
1983-2006
Nigeria
Norway
1993-2006
United Kingdom
United States
1989-2006
The Corporation classifies interest on income tax related balances as interest expense or interest income and classifies tax related penalties as operating expense.
At January 1, 2007, the Corporation had accrued interest payable of $0.5 billion related to income tax reserve balances.
-6-
3.
Litigation and Other Contingencies
Litigation
A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits and tax disputes. Management has regular litigation and tax reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable o utcome is reasonably possible and which are significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a materially adverse effect upon the Corporation’s operations or financial condition.
A number of lawsuits, including class actions, were brought in various courts against Exxon Mobil Corporation and certain of its subsidiaries relating to the accidental release of crude oil from the tanker Exxon Valdez in 1989. All the compensatory claims have been resolved and paid. All of the punitive damage claims were consolidated in the civil trial that began in 1994. The first judgment from the United States District Court for the District of Alaska in the amount of $5 billion was vacated by the United States Court of Appeals for the Ninth Circuit as being excessive under the Constitution. The second judgment in the amount of $4 billion was vacated by the Ninth Circuit panel without argument and sent back for the District Court to reconsider in light of the recent U.S. Supreme Court decision in Campbell v. State Farm. The most recent District Court judgment for punitive damages was for $4.5 billion plus interest an d was entered in January 2004. The Corporation posted a $5.4 billion letter of credit. ExxonMobil and the plaintiffs appealed this decision to the Ninth Circuit, which ruled on December 22, 2006, that the award be reduced to $2.5 billion. On January 12, 2007, ExxonMobil petitioned the Ninth Circuit Court of Appeals for a rehearing en banc of its appeal. On May 23, 2007, with two dissenting opinions, the Ninth Circuit determined not to re-hear ExxonMobil's appeal before the full court. ExxonMobil filed a petition for writ of certiorari to the U.S. Supreme Court on August 20, 2007. On October 29, 2007, the U.S. Supreme Court granted ExxonMobil's petition for a writ of certiorari. While it is reasonably possible that a liability for punitive damages may have been incurred from the Exxon Valdez grounding, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability.
In December 2000, a jury in the 15th Judicial Circuit Court of Montgomery County, Alabama, returned a verdict against the Corporation in a dispute over royalties in the amount of $88 million in compensatory damages and $3.4 billion in punitive damages in the case of Exxon Corporation v. State of Alabama, et al. The verdict was upheld by the trial court in May 2001. In December 2002, the Alabama Supreme Court vacated the $3.5 billion jury verdict. The case was retried and in November 2003, a state district court jury in Montgomery, Alabama, returned a verdict against Exxon Mobil Corporation. The verdict included $63.5 million in compensatory damages and $11.8 billion in punitive damages. In March 2004, the district court judge reduced the amount of punitive damages to $3.5 billion. ExxonMobil appealed the decision to the Alabama Supreme Court. On November 1, 2007, the Alabama Supreme Court reversed the trial court's fraud judgment and instructed the district court to enter judgment for ExxonMobil, eliminating the punitive damage award. The Court also ruled in ExxonMobil's favor on some of the disputed lease issues, reducing the compensatory award to $52 million. In May 2004, the Corporation posted a $4.5 billion supersedeas bond as required by Alabama law to stay execution of the judgment pending appeal. The Corporation pledged to the issuer of the bond collateral consisting of cash and short-term, high-quality securities with an aggregate value of approximately $4.6 billion. This collateral is reported as restricted cash and cash equivalents on the Condensed Consolidated Balance Sheet. Under the terms of the pledge agreement, the Corporation is entitled to receive the income generated from the cash and securities and to make investment decisions, but is restricted from using the pledged cash and securities for any other purpose until such time the bond is canceled. The Company will pursue the cancellation of the bond and the release of the pledged collateral.
-7-
In 2001, a Louisiana state court jury awarded compensatory damages of $56 million and punitive damages of $1 billion to a landowner for damage caused by a third party that leased the property from the landowner. The third party provided pipe cleaning and storage services for the Corporation and other entities. The Louisiana Fourth Circuit Court of Appeals reduced the punitive damage award to $112 million in 2005. The Corporation appealed this decision to the Louisiana Supreme Court which, in March 2006, refused to hear the appeal. ExxonMobil has fully accrued and paid the compensatory and punitive damage awards. The Corporation appealed the punitive damage award to the U.S. Supreme Court, which on February 26, 2007, vacated the judgment and remanded the case to the Louisiana Fourth Circuit Court of Appeals for reconsideration in light of the recent U.S. Supreme Court decision in Williams v. Phillip Morris USA. On August 8, 2007, the Fourth Circuit issued its decision on remand and declined to reduce the punitive damage award. ExxonMobil is seeking further review in the Louisiana Supreme Court.
Tax issues for 1989 to 1993 remain pending before the U.S. Tax Court. The ultimate resolution of these issues is not expected to have a materially adverse effect upon the Corporation’s operations or financial condition.
Other Contingencies
As of September 30, 2007
Equity
Other
Company
Third Party
Obligations
Total
Total guarantees
3,796
697
4,493
The Corporation and certain of its consolidated subsidiaries were contingently liable at September 30, 2007, for $4,493 million, primarily relating to guarantees for notes, loans and performance under contracts. Included in this amount were guarantees by consolidated affiliates of $3,796 million, representing ExxonMobil’s share of obligations of certain equity companies. These guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. The Corporation's outstanding unconditional purchase obligations at September 30, 2007, were similar to those at the prior year-end period. Unconditional purchase obligations as defined by accounting standards are those long-term commitments that are noncancelable or cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services.
The operations and earnings of the Corporation and its affiliates throughout the world have been, and may in the future be, affected from time to time in varying degree by political developments and laws and regulations, such as forced divestiture of assets; restrictions on production, imports and exports; price controls; tax increases and retroactive tax claims; expropriation of property; cancellation of contract rights and environmental regulations. Both the likelihood of such occurrences and their overall effect upon the Corporation vary greatly from country to country and are not predictable.
In accordance with a nationalization decree issued by Venezuela's President Chavez in February of this year, by May 1, 2007, a subsidiary of the Venezuelan National Oil Company (PdVSA) assumed the operatorship of the Cerro Negro Heavy Oil Project. This Project had been operated and owned by ExxonMobil affiliates (ExxonMobil) holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a "mixed enterprise" structure and an increase in PdVSA's or one of its affiliate's ownership interest in the Project, with the stipulation that if an agreement was not reached for the formation of the mixed enterprise during a specified period of time, the government would "directly take on the activities" carried out by the joint venture. ExxonMobil and Venezuela were not able to reach agreement on the formation of a mixed enterprise and on June 27, 2007, the government expropriated ExxonMobil's 41.67 percent interest in the Cerro Negro Project.
Subsequent discussions with Venezuelan authorities have not resulted in an agreement on the amount of compensation to be paid to ExxonMobil. On September 6, 2007, ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes. At this time the net impact of this matter on the Corporation's consolidated financial results cannot be reasonably estimated. However, the Corporation does not expect the resolution to have a material effect upon the Corporation's operations or financial condition. At the time the assets were expropriated, ExxonMobil's remaining net book investment in Cerro Negro producing assets was about $750 million.
-8-
4.
Comprehensive Income
Other comprehensive income
(net of income taxes)
Foreign exchange translation adjustment
2,052
43
3,700
1,933
(excluding amortization)
(119
(694
Amortization of postretirement benefits reserves
adjustment included in net periodic benefit costs
605
Minimum pension liability adjustment
(before December 31, 2006, adoption of FAS 158)
(8
(106
Total comprehensive income
11,533
10,525
32,561
31,077
5.
Earnings Per Share
Net income (millions of dollars)
Weighted average number of common shares
outstanding (millions of shares)
5,470
5,861
5,559
5,967
Net income per common share (dollars)
- ASSUMING DILUTION
Effect of employee stock-based awards
66
61
55
outstanding - assuming dilution
5,536
5,922
5,620
6,022
Net income per common share
- assuming dilution (dollars)
-9-
6.
Pension and Other Postretirement Benefits
Pension Benefits - U.S.
Components of net benefit cost
Service cost
89
85
279
253
Interest cost
172
159
516
476
Expected return on plan assets
(212
(157
(634
(469
Amortization of actuarial loss/(gain)
and prior service cost
67
69
201
205
Net pension enhancement and
curtailment/settlement cost
48
39
143
118
Net benefit cost
164
195
505
583
Pension Benefits - Non-U.S.
109
330
319
261
225
745
661
(283
(247
(816
(729
108
131
331
384
(13
10
(4
12
182
228
586
647
Other Postretirement Benefits
19
83
56
99
79
309
231
(11
(10
(34
(30
86
57
244
163
200
145
602
420
-10-
7.
Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
1,196
1,192
3,595
4,116
Non-U.S.
5,103
5,301
14,698
15,894
Downstream
914
1,272
3,498
3,305
1,087
1,466
3,808
3,189
Chemical
296
458
846
976
906
893
2,605
2,164
All other
(92
(100
(394
Corporate total
SALES AND OTHER OPERATING REVENUE (1)
1,311
1,514
4,109
4,691
5,136
6,059
15,932
21,860
26,243
25,068
73,148
71,852
57,233
54,602
158,346
154,583
3,453
3,565
10,102
10,050
5,743
5,454
16,707
15,559
11
6
14
(1) Includes sales-based taxes
INTERSEGMENT REVENUE
1,868
1,675
5,211
5,614
12,181
11,588
34,446
30,812
3,819
3,619
10,162
9,695
13,225
12,955
37,051
36,287
2,462
2,067
6,376
5,990
2,030
1,874
5,718
5,272
70
65
239
197
8.
Accounting for Suspended Exploratory Well Costs
For the category of exploratory well costs at year-end 2006 that were suspended more than one year, a total of $46 million was expensed in the first nine months of 2007.
-11-
9.
Condensed Consolidating Financial Information Related to Guaranteed Securities Issued by Subsidiaries
Exxon Mobil Corporation has fully and unconditionally guaranteed the deferred interest debentures due 2012 ($1,683 million long-term at September 30, 2007) and the debt securities due 2007-2011 ($52 million long-term and $13 million short-term) of SeaRiver Maritime Financial Holdings, Inc., a 100 percent owned subsidiary of Exxon Mobil Corporation.
The following condensed consolidating financial information is provided for Exxon Mobil Corporation, as guarantor, and for SeaRiver Maritime Financial Holdings, Inc., as issuer, as an alternative to providing separate financial statements for the issuer. The accounts of Exxon Mobil Corporation and SeaRiver Maritime Financial Holdings, Inc. are presented utilizing the equity method of accounting for investments in subsidiaries.
SeaRiver
Exxon Mobil
Maritime
Consolidating
Corporation
Financial
and
Parent
Holdings,
All Other
Eliminating
Guarantor
Inc.
Subsidiaries
Adjustments
Consolidated
Condensed consolidated statement of income for three months ended September 30, 2007
Revenues and other income
Sales and other operating revenue,
including sales-based taxes
4,064
-
95,066
9,588
(2
2,148
(9,576
75
Intercompany revenue
10,424
27
92,089
(102,540
24,151
190,277
(112,116
Costs and other deductions
10,088
138,100
(96,215
Production and manufacturing
expenses
1,758
7,476
(1,350
Selling, general and administrative
629
3,201
(174
455
2,704
Exploration expenses, including dry
holes
276
1,550
50
3,492
(5,019
Sales-based taxes
10,218
14,564
173,721
(102,758
Income before income taxes
9,587
(25
16,556
(9,358
177
(9
7,182
(16
9,374
-12-
Condensed consolidated statement of income for three months ended September 30, 2006
4,286
91,982
10,302
(5
1,774
(10,293
314
1,233
10,558
89,101
(99,685
25,460
21
184,090
(109,978
10,187
132,976
(93,799
1,799
6,464
(1,206
584
2,987
(159
374
2,356
60
1,327
46
3,439
(4,531
10,153
14,341
166,723
(99,695
11,119
17,367
(10,283
(7
7,066
(18
10,301
Condensed consolidated statement of income for nine months ended September 30, 2007
12,063
266,300
28,906
6,051
(28,873
357
3,102
28,172
78
255,917
(284,167
69,498
82
531,370
(313,040
26,587
378,106
(265,051
5,305
21,423
(3,883
1,901
9,498
(563
1,240
7,855
215
759
4,566
151
10,824
(15,269
35
29,673
39,849
481,924
(284,766
29,649
(69
49,446
(28,274
699
(26
21,129
(43
28,317
-13-
Condensed consolidated statement of income for nine months ended September 30, 2006
12,436
266,173
28,646
7
5,256
(28,644
3,011
30,374
251,345
(281,788
72,178
76
525,785
(310,432
28,914
377,212
(265,761
5,588
20,031
(3,722
1,939
8,946
(450
1,027
7,107
595
3,403
137
8,884
(11,871
29,180
41,112
476,321
(281,804
31,066
(61
49,464
(28,628
1,816
(24
20,799
(37
28,665
-14-
Condensed consolidated balance sheet as of September 30, 2007
3,055
28,368
Cash and cash equivalents - restricted
5,585
29,844
(3,607
1,352
11,667
13,019
471
3,898
4,369
10,463
78,381
16,262
102,840
216,886
427
433,474
(618,475
Intercompany receivables
11,258
1,938
439,850
(453,046
Total assets
254,869
2,375
1,054,545
(1,075,128
Notes and loan payables
13
1,821
2,955
1
40,569
13,907
3,216
56,297
4,885
1,636
222
20,471
11,954
20,959
Intercompany payables
119,184
383
333,479
Total liabilities
136,266
2,354
436,091
(456,653
(447
152,343
(151,896
Other shareholders' equity
(100,158
468
466,111
(466,579
Total shareholders' equity
618,454
Total liabilities and
shareholders' equity
Condensed consolidated balance sheet as of December 31, 2006
6,355
21,889
2,057
26,885
1,213
9,501
10,714
2,916
9,982
65,795
16,730
96,957
201,257
423
415,910
(588,039
16,501
1,883
435,221
(453,605
244,470
2,306
1,013,883
(1,041,644
90
1,599
3,025
36,056
548
7,484
3,663
15
45,139
274
1,602
4,769
1,975
237
18,639
8,044
20,814
116,670
387
336,548
130,626
2,241
425,909
(404
144,607
(144,203
(81,363
469
443,367
(443,836
587,974
-15-
Condensed consolidated statement of cash flows for nine months ended September 30, 2007
Cash provided by/(used in) operating
activities
21,063
40,176
(20,632
Cash flows from investing activities
Additions to property, plant and
equipment
(912
(9,915
Sales of long-term assets
187
2,235
Net intercompany investing
4,554
(56
(4,565
All other investing, net
Net cash provided by/(used in)
investing activities
3,829
(13,905
Cash flows from financing activities
Additions/(reductions) in short-term
debt - net
Cash dividends
20,632
Net ExxonMobil shares sold/(acquired)
(22,993
Net intercompany financing activity
71
(67
All other financing, net
(762
(406
financing activities
(28,192
(21,307
20,565
Effects of exchange rate changes
on cash
Increase/(decrease) in cash and cash
equivalents
(3,300
6,479
Condensed consolidated statement of cash flows for nine months ended September 30, 2006
1,122
74
40,556
(1,328
(1,188
(10,113
226
2,102
20,711
(75
(20,745
19,749
(30,547
(151
396
1,328
(20,379
(109
(587
(317
(26,035
(1,319
1,219
(5,164
9,227
-16-
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Third Quarter
First Nine Months
Net Income (U.S. GAAP)
Corporate and financing
REVIEW OF THIRD QUARTER AND FIRST NINE MONTHS 2007 RESULTS
Exxon Mobil Corporation reported third quarter 2007 net income of $9,410 million ($1.70 per share), down 10 percent from the third quarter of 2006, while earnings per share were down 4 percent for the same period. The decrease reflected lower downstream and chemical margins partly offset by higher crude oil realizations. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, production on an oil-equivalent basis increased by 3 percent.
__________________________________________________________
Net income of $28,950 million for the first nine months of 2007 was $300 million lower than the record first nine months of 2006. Earnings per share of $5.15 reflected strong earnings and increased by 6 percent due to the reduction in the number of shares outstanding. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, liquids production increased by 5 percent.
Upstream earnings
6,299
6,493
18,293
20,010
Upstream earnings in the third quarter of 2007 were $6,299 million, down $194 million from the third quarter of 2006 primarily reflecting lower natural gas realizations and higher operating expenses, mostly offset by higher crude oil realizations. On an oil-equivalent basis, production decreased by 2 percent from the third quarter of 2006. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, production was up 3 percent.
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Liquids production of 2,536 kbd (thousands of barrels per day) was 111 kbd lower. Mature field decline and reduced entitlements were partly offset by increased production from projects in Africa and Russia. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, liquids production was up 3 percent.
Third quarter natural gas production was 8,302 mcfd (millions of cubic feet per day), up 163 mcfd from 2006. Increased volume from projects in Qatar was partly offset by the impact of mature field decline. Excluding entitlement and divestment effects, natural gas production increased by 3 percent.
Earnings from U.S. Upstream operations were $1,196 million, $4 million higher than the third quarter of 2006. Non-U.S. Upstream earnings were $5,103 million, down $198 million from 2006.
Upstream earnings for the first nine months of 2007 were $18,293 million, a decrease of $1,717 million from 2006 due to lower natural gas realizations and higher operating expenses, partly offset by higher crude oil realizations and favorable sales mix effects. On an oil-equivalent basis, production decreased 2 percent from last year. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, production was up nearly 3 percent.
Liquids production of 2,649 kbd decreased by 33 kbd from 2006. Higher production from projects in Africa and Russia was offset by mature field decline and reduced entitlements. Excluding the impact of entitlements, divestments, OPEC quota effects and Venezuela, liquids production increased 5 percent.
Natural gas production of 9,043 mcfd decreased 302 mcfd from 2006. Lower volume from mature field decline was partly offset by projects in Qatar, Europe, Canada and Malaysia.
Earnings from U.S. Upstream operations for 2007 were $3,595 million, a decrease of $521 million. Earnings outside the U.S. were $14,698 million, $1,196 million lower than 2006.
Downstream earnings
2,001
2,738
7,306
6,494
Downstream earnings in the third quarter of 2007 were $2,001 million, down $737 million from the third quarter of 2006, driven by lower refining and fuels marketing margins. Petroleum product sales were 7,101 kbd, 201 kbd lower than last year's third quarter.
U.S. Downstream earnings were $914 million, down $358 million from the third quarter of 2006. Non-U.S. Downstream earnings of $1,087 million were $379 million lower.
Downstream earnings for the first nine months of 2007 were a record $7,306 million, an increase of $812 million from 2006 reflecting stronger marketing margins, refinery optimization activities and the sale of the Ingolstadt refinery, partly offset by lower refining margins. Petroleum product sales of 7,090 kbd decreased from 7,180 kbd in 2006.
U.S. Downstream earnings were $3,498 million, up $193 million. Non-U.S. Downstream earnings were $3,808 million, $619 million higher than last year.
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Chemical earnings
1,202
1,351
3,451
3,140
Chemical earnings in the third quarter of 2007 were $1,202 million, down $149 million from the third quarter of 2006 due to lower margins partly offset by favorable tax items. Prime product sales of 6,729 kt (thousands of metric tons) in the third quarter of 2007 were down 23 kt from the prior year.
Chemical earnings for the first nine months of 2007 were a record $3,451 million, up $311 million from 2006 driven by higher margins. Prime product sales were 20,431 kt, down 92 kt from 2006.
Corporate and financing earnings
Corporate and financing expenses in the third quarter of 2007 of $92 million were flat with 2006.
Corporate and financing expenses for the first nine months of 2007 of $100 million decreased $294 million, mainly due to favorable tax items.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Total cash and cash equivalents (at end of period)
36,027
37,338
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
15,063
14,497
Sales of subsidiaries, investments and property,
plant and equipment
749
878
15,812
15,375
43,089
42,752
Because of the ongoing nature of our asset management and divestment program, we believe
it is useful for investors to consider asset sales proceeds together with cash provided by operating
activities when evaluating cash available for investment in the business and financing activities.
-19-
Total cash and cash equivalents, including the $4.6 billion of restricted cash, was $36.0 billion at the end of the third quarter of 2007.
Cash provided by operating activities totaled $40,667 million for the first nine months of 2007, similar to 2006. The major source of funds was net income of $28,950 million, adjusted for the noncash provision of $9,095 million for depreciation and depletion. Net changes in operational working capital and other items in 2007 added $2.6 billion. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.
Investing activities for the first nine months of 2007 used net cash of $10,065 million compared to $10,764 million in the prior year. Spending for additions to property, plant and equipment decreased $474 million to $10,827 million.
Cash flow from operations and asset sales in the third quarter of 2007 of $15.8 billion, including asset sales of $0.7 billion, was comparable to the prior year period. For the first nine months of 2007, cash flow from operations and asset sales was $43.1 billion, including $2.4 billion from asset sales.
Net cash used in financing activities of $28,938 million in the first nine months of 2007 increased $2,804 million reflecting a higher level of purchases of shares of ExxonMobil stock.
During the third quarter of 2007, Exxon Mobil Corporation purchased 90 million shares of its common stock for the treasury at a gross cost of $7.8 billion. These purchases included $7.0 billion to reduce the number of shares outstanding, with the balance used to offset shares issued in conjunction with the company's benefit plans and programs. Shares outstanding were reduced from 5,546 million at the end of the second quarter to 5,464 million at the end of the third quarter.
Gross share purchases in the first nine months of 2007 were $23.9 billion, which reduced shares outstanding by 4.6 percent. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.
The Corporation distributed a total of $8.9 billion to shareholders in the third quarter through dividends of $1.9 billion and share purchases to reduce shares outstanding of $7.0 billion. For the first nine months of 2007 distributions to shareholders totaled $26.7 billion through dividends and share purchases to reduce shares outstanding, an increase of $2.9 billion versus 2006.
Total debt of $9.0 billion at September 30, 2007, increased from $8.3 billion at year-end 2006. The Corporation's debt to total capital ratio was 6.8 percent at the end of the third quarter of 2007 compared to 6.6 percent at year-end 2006.
Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds cover the majority of its financial requirements.
The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses.
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TAXES
Taxes
All other taxes and duties
10,953
10,793
32,026
31,573
26,273
26,245
76,892
77,803
Effective income tax rate
%
44
45
Income, sales-based and all other taxes and duties for the third quarter of 2007 of $26,273 million were flat as compared to 2006. In the third quarter of 2007 income tax expense was $7,350 million and the effective income tax rate was 46 percent, compared to $7,688 million and 44 percent, respectively, in the prior year period.
Income, sales-based and all other taxes and duties for the first nine months of 2007 of $76,892 million were down $911 million compared to 2006. In the first nine months of 2007 income tax expense was $21,802 million and the effective income tax rate was 45 percent, compared to $22,591 million and 45 percent, respectively, in the prior year period.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures
Upstream (including exploration expenses)
3,851
4,142
11,186
12,161
984
658
2,389
1,981
601
1,096
525
31
119
5,441
5,061
14,702
14,786
ExxonMobil continued to actively invest in the third quarter, spending $5.4 billion on capital and exploration projects, an increase of 8 percent over 2006. For the first nine months of 2007, spending on capital and exploration projects was $14.7 billion.
Capital and exploration expenditures for full year 2006 were $19.9 billion and are expected to continue in this range for the next several years. Actual spending could vary depending on the progress of individual projects.
FORWARD-LOOKING STATEMENTS
Statements in this report relating to future plans, projections, events or conditions are forward-looking statements. Actual results, including project plans and related expenditures, resource recoveries, timing and capacities, could differ materially due to changes in long-term oil or gas prices or other market conditions affecting the oil and gas industry; political events or disturbances; reservoir performance; the outcome of commercial negotiations; potential liability resulting from pending or future litigation; wars and acts of terrorism or sabotage; changes in technical or operating conditions; and other factors discussed under the heading "Factors Affecting Future Results" on our website and in Item 1A of ExxonMobil's 2006 Form 10-K. We assume no duty to update these statements as of any future date.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the nine months ended September 30, 2007, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2006.
Item 4. Controls and Procedures
As indicated in the certifications in Exhibit 31 of this report, the Corporation’s chief executive officer, principal financial officer and principal accounting officer have evaluated the Corporation’s disclosure controls and procedures as of September 30, 2007. Based on that evaluation, these officers have concluded that the Corporation’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There were no changes during the Corporation's last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Item 1. Legal Proceedings
On October 9, 2007, ExxonMobil Oil Corporation received a proposed agreed order from the Texas Commission on Environmental Quality (TCEQ) relating to three separate air emissions events (in January, April and May of 2007) at the Beaumont, Texas refinery. The events are associated with, respectively, a power disruption, a feed tank roof landing, and coker flaring due to low feedrate to the Wet Gas Compressor as the coker unit moved into turnaround. The TCEQ alleges that the three events were avoidable. In the proposed order, the TCEQ has assessed a penalty of $106,000. The Company is assessing the appropriate response to the proposed order.
On September 14, 2007, the TCEQ issued a proposed agreed order relating to the Company's Baytown, Texas refinery. The enforcement action relates to three separate air emissions events, occurring in October 2005, June 2006 and October 2006. The events are associated with, respectively, a forced draft fan trip at a fluid catalytic cracking unit, flooding/foaming in the delayed coker unit lean oil absorber, and a power plant relay trip. The TCEQ has assessed an administrative penalty of $160,000 in the aggregate. The Company is contesting enforcement related to the October 2006 power plant event (for which $60,000 of the penalty is being sought), and negotiations are ongoing regarding the amount of penalty for the other two events.
On September 4, 2007, the TCEQ issued a proposed agreed order in which it assessed an administrative penalty of $133,000 relating to two separate air emissions events occurring in February 2007 at the Company's Baytown, Texas refinery. The events are associated with, respectively, a compressor trip at Booster Station 4 and an air blower interval of surge at the Flexicoker. ExxonMobil is not contesting the enforcement of either event, but negotiations are in progress regarding the penalty amount.
Pursuant to a proposed agreed order received in August 2007, the Colorado Department of Public Health and Environment (CDPHE) is pursuing an enforcement action against the Company relating to excess air emissions (VOC, NOx, HAPs) events at the Piceance Creek Unit Gas Plant. The issues were identified during agency inspections and internal reviews in 2006 and 2007. The violations were due to reciprocating engine exhaust catalyst failure and glycol dehydrator control device failure, as well as associated recordkeeping issues. The Company also self-disclosed an issue associated with emissions that were not reflected in the air permit, but discovered during testing. The Company is engaged with the CDPHE in settlement discussions to enter into a Compliance Order on Consent that will require the installation of a new control device (thermal oxidizer) as well as payment of penalties. The initial administrative penalty demand and associated economic benefit penalty demand exceed $500,000, but are under negotiation.
-22-
The Environmental Protection Agency (EPA) is evaluating enforcement under the Toxic Substances Control Act for alleged leaks of PCB-containing oil from transformers and related alleged violations of PCB disposal requirements at the Company's Santa Ynez Unit Platform Hondo facility, offshore California. The EPA has indicated that they intend to seek civil penalties in excess of $100,000.
The Department of Justice (DOJ) and the U.S. Fish and Wildlife Service are evaluating enforcement for alleged violations of the Migratory Bird Treaty Act at the Company's Piceance Creek production unit in Colorado, the LaBarge, Wyoming production facility, and isolated production facilities in Kansas, Oklahoma and Texas. The DOJ has indicated that it intends to seek fines and restitution in excess of $100,000.
Refer to the relevant portions of note 3 on pages 7 and 8 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchase of Equity Securities for the Quarter Ended September 30, 2007
Total Number of
Maximum Number
Shares Purchased
Of Shares that May
Total Number
Average
as Part of Publicly
Yet Be Purchased
Of Shares
Price Paid
Announced Plans
Under the Plans or
Period
Purchased
per Share
or Programs
Programs
July, 2007
29,190,852
$88.53
August, 2007
34,163,690
$84.10
September, 2007
26,635,561
$89.50
89,990,103
$87.14
(See Note 1)
Note 1 -- On August 1, 2000, the Corporation announced its intention to resume purchases of shares of its common stock for the treasury both to offset shares issued in conjunction with company benefit plans and programs and to gradually reduce the number of shares outstanding. The announcement did not specify an amount or expiration date. The Corporation has continued to purchase shares since this announcement and to report purchased volumes in its quarterly earnings releases. Purchases may be made in both the open market and through negotiated transactions, and purchases may be increased, decreased or discontinued at any time without prior notice.
-23-
Item 6. Exhibits
Exhibit
Description
10(iii)(d)
ExxonMobil Executive Life Insurance and Death Benefit Plan.
31.1
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief
Executive Officer.
31.2
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal
Financial Officer.
31.3
Accounting Officer.
32.1
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
32.2
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by
Principal Financial Officer.
32.3
Principal Accounting Officer.
-24-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 7, 2007
By: /s/ Patrick T. Mulva
Name: Patrick T. Mulva
Title: Vice President, Controller and
Principal Accounting Officer
-25-
INDEX TO EXHIBITS
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by
Chief Executive Officer.
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal
-26-