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 June 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 June 30, 2007
Common stock, without par value 5,546,261,560
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Statement of Income
3
Three and six months ended June 30, 2007 and 2006
Condensed Consolidated Balance Sheet
4
As of June 30, 2007 and December 31, 2006
Condensed Consolidated Statement of Cash Flows
5
Six months ended June 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
Submission of Matters to a Vote of Security Holders
24-26
Item 6.
Exhibits
26
Signature
27
Index to Exhibits
28
-2-
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
Six Months Ended
June 30,
2007
2006
REVENUES AND OTHER INCOME
Sales and other operating revenue (1)
$
95,059
96,024
179,233
182,341
Income from equity affiliates
2,015
1,687
3,930
3,487
Other income
1,276
1,323
2,410
2,186
Total revenues and other income
98,350
99,034
185,573
188,014
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases
47,627
48,180
87,669
91,001
Production and manufacturing expenses
7,678
7,416
14,961
14,840
Selling, general and administrative expenses
3,788
3,557
7,180
7,023
Depreciation and depletion
2,994
2,760
5,936
5,404
Exploration expenses, including dry holes
353
176
625
458
Interest expense
96
107
199
272
Sales-based taxes (1)
7,810
8,211
15,094
15,875
Other taxes and duties
9,888
10,170
19,479
19,043
Income applicable to minority interests
188
253
438
435
Total costs and other deductions
80,422
80,830
151,581
154,351
INCOME BEFORE INCOME TAXES
17,928
18,204
33,992
33,663
Income taxes
7,668
7,844
14,452
14,903
NET INCOME
10,260
10,360
19,540
18,760
NET INCOME PER COMMON SHARE (dollars)
1.85
1.74
3.49
3.12
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (dollars)
1.83
1.72
3.45
3.09
DIVIDENDS PER COMMON SHARE (dollars)
0.35
0.32
0.67
0.64
(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
Dec. 31,
ASSETS
Current assets
Cash and cash equivalents
28,959
28,244
Cash and cash equivalents - restricted (note 3)
4,604
Notes and accounts receivable - net
30,315
28,942
Inventories
Crude oil, products and merchandise
10,866
8,979
Materials and supplies
2,029
1,735
Prepaid taxes and expenses
3,947
3,273
Total current assets
80,720
75,777
Property, plant and equipment - net
116,058
113,687
Investments and other assets
31,537
29,551
TOTAL ASSETS
228,315
219,015
LIABILITIES
Current liabilities
Notes and loans payable
2,033
1,702
Accounts payable and accrued liabilities
41,247
39,082
Income taxes payable
8,636
8,033
Total current liabilities
51,916
48,817
Long-term debt
6,757
6,645
Deferred income tax liabilities
21,548
20,851
Other long-term liabilities
31,744
28,858
TOTAL LIABILITIES
111,965
105,171
Commitments and contingencies (note 3)
SHAREHOLDERS' EQUITY
Common stock, without par value:
Authorized:
9,000 million shares
Issued:
8,019 million shares
4,795
4,786
Earnings reinvested
211,283
195,207
Accumulated other comprehensive income
Cumulative foreign exchange translation adjustment
5,381
3,733
Postretirement benefits reserves adjustment
(6,655
)
(6,495
Common stock held in treasury:
2,473 million shares at June 30, 2007
(98,454
2,290 million shares at December 31, 2006
(83,387
TOTAL SHAREHOLDERS' EQUITY
116,350
113,844
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The number of shares of common stock issued and outstanding at June 30, 2007 and
December 31, 2006 were 5,546,261,560 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
(366
1,002
All other items - net
494
761
Net cash provided by operating activities
25,604
25,927
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(6,892
(7,586
Sales of subsidiaries, investments, and property, plant and equipment
1,673
1,450
Other investing activities - net
(1,104
(640
Net cash used in investing activities
(6,323
(6,776
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt
99
72
Reductions in long-term debt
(75
(27
Additions/(reductions) in short-term debt - net
246
106
Cash dividends to ExxonMobil shareholders
(3,786
(3,883
Cash dividends to minority interests
(142
(125
Changes in minority interests and sales/(purchases)
of affiliate stock
(319
(252
Tax benefits related to stock-based awards
237
128
Net ExxonMobil shares acquired
(15,421
(12,394
Net cash used in financing activities
(19,161
(16,375
Effects of exchange rate changes on cash
595
666
Increase/(decrease) in cash and cash equivalents
715
3,442
Cash and cash equivalents at beginning of period
28,671
CASH AND CASH EQUIVALENTS AT END OF PERIOD
32,113
SUPPLEMENTAL DISCLOSURES
Income taxes paid
12,382
12,221
Cash interest paid
988
-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
1996-2006
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 will now proceed with a petition for writ of certiorari to the U.S. Supreme Court. 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 believes the judgment is not justified by the evidence, that any punitive damage award is not justified by either the facts or the law, and that the amount of the award is grossly excessive and unconstitutional. ExxonMobil has appealed the decision to the Alabama Supreme Court. The Alabama Supreme Court heard oral arguments on February 6, 2007. Management believes that the likelihood of the judgment being upheld is remote. While it is reasonably possible that a liability may have been incurred by ExxonMobil from this dispute over royalties, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability. 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 has 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 i s 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.
-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.
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 June 30, 2007
Equity
Other
Company
Third Party
Obligations
Total
Total guarantees
4,030
739
4,769
The Corporation and certain of its consolidated subsidiaries were contingently liable at June 30, 2007, for $4,769 million, primarily relating to guarantees for notes, loans and performance under contracts. Included in this amount were guarantees by consolidated affiliates of $4,030 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 June 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, a subsidiary of the Venezuelan National Oil Company (PdVSA) assumed the operatorship of the Cerro Negro heavy oil development on May 1, 2007. This development had been operated and owned by ExxonMobil affiliates holding a 41.67 percent ownership interest in the project. ExxonMobil's net investment in Cerro Negro producing assets is about $750 million, which is less than one percent of ExxonMobil's worldwide property, plant and equipment.
The decree also required conversion of the Cerro Negro project into a "mixed enterprise" structure and an increase in PdVSA's or another Venezuelan state-owned oil company'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's affiliate was not able to reach agreement on the formation of a mixed enterprise and on June 27, 2007, the government took over ExxonMobil's 41.67 percent interest in the Cerro Negro project. Discussions with Venezuelan authorities over the compensation to be paid to ExxonMobil have not yet been completed. At this time the net impact of this matter on the Corporation's consolidated financial results cannot be reasonably estimated. However, the Corpo ration does not expect the resolution to have a material effect upon the Corporation's operations or financial condition.
-8-
4.
Comprehensive Income
Other comprehensive income
(net of income taxes)
Foreign exchange translation adjustment
1,225
1,476
1,648
1,890
(excluding amortization)
(167
0
(575
Amortization of postretirement benefits reserves
adjustment included in net periodic benefit costs
214
415
Minimum pension liability adjustment
(before December 31, 2006, adoption of FAS 158)
(81
(98
Total comprehensive income
11,532
11,755
21,028
20,552
5.
Earnings Per Share
Net income (millions of dollars)
Weighted average number of common shares
outstanding (millions of shares)
5,555
5,971
5,603
6,019
Net income per common share (dollars)
- ASSUMING DILUTION
Effect of employee stock-based awards
65
59
62
57
outstanding - assuming dilution
5,620
6,030
5,665
6,076
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
93
83
190
168
Interest cost
172
158
344
317
Expected return on plan assets
(212
(155
(422
(312
Amortization of actuarial loss/(gain)
and prior service cost
67
134
136
Net pension enhancement and
curtailment/settlement cost
48
40
95
79
Net benefit cost
193
341
388
Pension Benefits - Non-U.S.
112
221
210
247
484
436
(270
(245
(533
(482
111
127
223
9
1
2
209
211
404
419
Other Postretirement Benefits
30
19
37
98
75
152
(8
(10
(23
(20
80
53
200
137
402
275
-10-
7.
Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
1,222
1,644
2,399
2,924
Non-U.S.
4,731
5,490
9,595
10,593
Downstream
1,745
1,354
2,584
1,131
2,721
1,723
Chemical
204
189
550
518
809
651
1,699
1,271
All other
(99
(302
Corporate total
SALES AND OTHER OPERATING REVENUE (1)
1,436
1,400
2,798
3,177
5,303
8,262
10,796
15,801
25,645
25,656
46,905
46,784
53,472
52,277
101,113
99,981
3,460
3,260
6,649
6,485
5,740
5,165
10,964
10,105
8
(1) Includes sales-based taxes
INTERSEGMENT REVENUE
1,780
2,085
3,343
3,939
11,670
10,350
22,265
19,224
3,561
3,294
6,343
12,885
12,349
23,826
23,332
2,217
2,100
3,914
3,923
2,166
1,816
3,688
3,398
90
64
169
132
-11-
8.
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 ($1,639 million long-term at June 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 June 30, 2007
Revenues and other income
Sales and other operating revenue,
including sales-based taxes
4,142
-
90,917
10,151
(1
1,999
(10,134
60
1,216
Intercompany revenue
9,467
25
85,939
(95,431
23,820
24
180,071
(105,565
Costs and other deductions
8,619
127,760
(88,752
Production and manufacturing
expenses
1,833
7,155
(1,310
Selling, general and administrative
681
3,311
(204
397
2,597
Exploration expenses, including dry
holes
42
311
1,570
51
3,844
(5,369
Sales-based taxes
11
9,877
13,153
162,853
(95,635
Income before income taxes
10,667
17,218
(9,930
407
(9
7,270
(18
9,948
-12-
Condensed consolidated statement of income for three months ended June 30, 2006
3,929
92,095
9,901
1,685
(9,902
217
1,106
11,047
84,441
(95,511
25,094
179,327
(105,413
10,273
128,037
(90,130
1,752
6,951
(1,287
669
3,039
(151
342
2,418
49
1,083
46
(3,946
10
10,160
14,178
162,120
(95,514
10,916
17,207
(9,899
556
7,296
(12
9,911
Condensed consolidated statement of income for six months ended June 30, 2007
7,999
171,234
19,318
6
3,903
(19,297
282
2,128
17,748
163,828
(181,627
45,347
341,093
(200,924
16,499
240,006
(168,836
3,547
13,947
(2,533
1,272
6,297
(389
785
5,151
142
483
3,016
101
7,332
(10,250
19,455
25,285
308,203
(182,008
20,062
(44
32,890
(18,916
522
(17
18,943
-13-
Condensed consolidated statement of income for six months ended June 30, 2006
8,150
174,191
18,344
12
3,482
(18,351
408
1,778
19,816
43
162,244
(182,103
46,718
55
341,695
(200,454
18,727
244,236
(171,962
3,789
13,567
(2,516
1,355
5,959
(291
653
4,751
155
303
2,076
91
5,445
(7,340
16
19,027
26,771
309,598
(182,109
19,947
(36
32,097
(18,345
1,187
13,733
(19
18,364
-14-
Condensed consolidated balance sheet as of June 30, 2007
6,272
22,687
Cash and cash equivalents - restricted
4,159
28,253
(2,103
1,383
11,512
12,895
459
3,488
12,273
70,544
16,397
99,661
225,671
429
409,650
(604,213
Intercompany receivables
10,527
1,918
461,048
(473,493
Total assets
264,868
2,353
1,040,903
(1,079,809
Notes and loan payables
135
13
1,885
2,807
38,439
10,739
2,942
14
51,063
276
1,691
4,790
1,679
227
19,642
11,773
19,971
Intercompany payables
131,848
383
341,262
Total liabilities
148,518
2,315
436,728
(475,596
(431
163,152
(162,721
Other shareholders' equity
(94,933
469
441,023
(441,492
Total shareholders' equity
38
604,175
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
357
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
1,599
3,025
36,056
548
7,484
3,663
15
45,139
274
1,602
1,975
18,639
8,044
20,814
116,670
387
336,548
130,626
2,241
425,909
(404
144,607
(144,203
(81,363
443,367
(443,836
587,974
-15-
Condensed consolidated statement of cash flows for six months ended June 30, 2007
Cash provided by/(used in) operating
activities
1,135
39
24,879
(449
Cash flows from investing activities
Additions to property, plant and
equipment
(622
(6,270
Sales of long-term assets
156
1,517
Net intercompany investing
18,178
(35
(18,189
All other investing, net
Net cash provided by/(used in)
investing activities
17,712
(24,046
Cash flows from financing activities
Additions/(reductions) in short-term
debt - net
206
Cash dividends
449
Net ExxonMobil shares sold/(acquired)
Net intercompany financing activity
(4
50
(46
All other financing, net
(461
(224
financing activities
(18,930
(630
403
Effects of exchange rate changes
on cash
Increase/(decrease) in cash and cash
equivalents
(83
798
Condensed consolidated statement of cash flows for six months ended June 30, 2006
54
25,330
(1,144
(755
(6,831
12,576
(55
(12,611
11,917
(18,728
(122
228
1,144
89
(90
(377
(249
(16,271
(1,159
1,054
(2,667
6,109
-16-
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Second Quarter
First Six Months
Net Income (U.S. GAAP)
Corporate and financing
REVIEW OF SECOND QUARTER AND FIRST SIX MONTHS 2007 RESULTS
Exxon Mobil Corporation reported second quarter 2007 net income of $10,260 million. Earnings per share were up 6 percent from the second quarter of 2006 to $1.83 reflecting the reduced number of shares outstanding. Lower natural gas realizations were mostly offset by higher refining, marketing and chemical margins. Excluding cumulative entitlement and divestment impacts, as well as OPEC quota effects, liquids production increased by 5 percent.
__________________________________________________________
Record first half net income of $19,540 million increased by 4 percent versus 2006. Earnings per share of $3.45 increased by 12 percent due to strong earnings and the reduction in the number of shares outstanding. Excluding cumulative entitlement and divestment impacts, as well as OPEC quota effects, liquids production increased by 6 percent.
Upstream earnings
5,953
7,134
11,994
13,517
Upstream earnings in the second quarter of 2007 were $5,953 million, down $1,181 million from 2006, primarily reflecting lower gas realizations, lower gains on asset sales and the absence of prior period tax items. On an oil-equivalent basis, production decreased by 1 percent from the second quarter of 2006. Excluding the cumulative impact of entitlements and divestments, as well as OPEC quota effects, production was up nearly 4 percent.
Liquids production of 2,668 kbd (thousands of barrels per day) was 34 kbd lower. Mature field decline was partly offset by increased production from projects in Russia and Qatar. Excluding cumulative entitlement and divestment effects, as well as OPEC quota impacts, liquids production increased by 5 percent.
-17-
Second quarter natural gas production was 8,711 mcfd (millions of cubic feet per day) compared with 8,754 mcfd last year. The impact of mature field decline and lower European demand was offset by higher volumes from projects in Qatar, Canada and Malaysia and the absence of planned maintenance activity in 2006. Excluding cumulative entitlement and divestment effects natural gas production increased by nearly 1 percent.
Earnings from U.S. Upstream operations were $1,222 million, $422 million lower than the second quarter of 2006. Non-U.S. Upstream earnings were $4,731 million, down $759 million from 2006.
Upstream earnings for the first six months of 2007 were $11,994 million, a decrease of $1,523 million from 2006 due to lower liquids and natural gas realizations and lower gains from asset sales. On an oil-equivalent basis, production decreased 2 percent from last year. Excluding cumulative entitlement and divestment effects, as well as OPEC quota impacts, production increased by 2 percent.
Liquids production of 2,707 kbd increased by 7 kbd from 2006. Higher production from projects in West Africa and Russia was partly offset by mature field decline. Excluding cumulative entitlement and divestment effects, as well as OPEC quota impacts, liquids production increased 6 percent.
Natural gas production of 9,409 mcfd decreased 549 mcfd from 2006. Lower volumes from mature field decline and lower European demand were partly offset by projects in Qatar, Canada and Malaysia.
Earnings from U.S. Upstream operations for 2007 were $2,399 million, a decrease of $525 million. Earnings outside the U.S. were $9,595 million, $998 million lower than 2006.
Downstream earnings
3,393
2,485
5,305
3,756
Downstream earnings in the second quarter of 2007 were $3,393 million, up $908 million from 2006, driven by higher refining and marketing margins and the sale of the Ingolstadt refinery in Germany. Petroleum product sales were 6,974 kbd, 86 kbd lower than last year's second quarter.
U.S. Downstream earnings were $1,745 million, up $391 million from the second quarter of 2006. Non-U.S. Downstream earnings of $1,648 million were $517 million higher.
Downstream earnings in the first six months of 2007 were $5,305 million, an increase of $1,549 million from 2006 reflecting stronger worldwide refining and marketing margins and the sale of the Ingolstadt refinery in Germany. Petroleum product sales of 7,085 kbd decreased from 7,118 kbd in 2006.
U.S. Downstream earnings were $2,584 million, up $551 million. Non-U.S. Downstream earnings were $2,721 million, $998 million higher than last year.
-18-
Chemical earnings
1,013
840
2,249
1,789
Chemical earnings in the second quarter of 2007 were $1,013 million, up $173 million from 2006 due to improved margins. Prime product sales of 6,897 kt (thousands of metric tons) in the second quarter of 2007 were up 42 kt from the prior year.
Chemical earnings for the first six months of 2007 were $2,249 million, up $460 million from 2006 driven by higher margins. Prime product sales were 13,702 kt, down 69 kt from 2006.
Corporate and financing earnings
Corporate and financing expenses in the second quarter of 2007 of $99 million were flat with 2006.
Corporate and financing expenses for the first six months of 2007 were $8 million, a decrease of $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)
33,563
36,717
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
11,318
11,296
Sales of subsidiaries, investments and property,
plant and equipment
1,056
12,453
12,352
27,277
27,377
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 $33.6 billion at the end of the second quarter of 2007.
Cash provided by operating activities totaled $25,604 million for the first six months of 2007, similar to 2006. The major source of funds was net income of $19,540 million, adjusted for the noncash provision of $5,936 million for depreciation and depletion, both of which increased. Net changes in operational working capital in 2007 compared to 2006 provided an offset. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.
Investing activities for the first six months of 2007 used net cash of $6,323 million compared to $6,776 million in the prior year. Spending for additions to property, plant and equipment decreased $694 million to $6,892 million. Proceeds from asset divestments of $1,673 million in 2007 were higher.
Cash flow from operations and asset sales in the first six months of 2007 of $27.3 billion, including asset sales of $1.7 billion, was comparable to the prior year period. Cash flow from operations and asset sales in the second quarter of 2007 was $12.5 billion, including asset sales of $1.1 billion.
Net cash used in financing activities of $19,161 million in the first six months of 2007 increased $2,786 million reflecting a higher level of purchases of shares of ExxonMobil stock.
During the second quarter of 2007, Exxon Mobil Corporation purchased 99 million shares of its common stock for the treasury at a gross cost of $8.1 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 5,633 million at the end of the first quarter to 5,546 million at the end of the second quarter.
Gross share purchases in 2007 were $16.0 billion which reduced shares outstanding by 3.2 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 $9.0 billion to shareholders in the second quarter through dividends of $2.0 billion and share purchases to reduce shares outstanding of $7.0 billion, an increase of 14 percent versus the second quarter of 2006. For the first half of 2007, distributions to shareholders totaled $17.8 billion, an increase of $2.9 billion versus 2006.
Total debt of $8.8 billion at June, 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 second 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 decree also required conversion of the Cerro Negro project into a "mixed enterprise" structure and an increase in PdVSA's or another Venezuelan state-owned oil company'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's affiliate was not able to reach agreement on the formation of a mixed enterprise and on June 27, 2007, the government took over ExxonMobil's 41.67 percent interest in the Cerro Negro project. Discussions with Venezuelan authorities over the compensation to be paid to ExxonMobil have not yet been completed. 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 t o have a material effect upon the Corporation's operations or financial condition.
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.
-20-
TAXES
Taxes
All other taxes and duties
10,665
11,033
21,073
20,780
26,143
27,088
50,619
51,558
Effective income tax rate
44
%
Income, sales-based and all other taxes and duties for the second quarter of 2007 of $26,143 million were down $945 million compared to 2006. In the second quarter of 2007 income tax expense was $7,668 million and the effective income tax rate was 44 percent, compared to $7,844 million and 44 percent, respectively, in the prior year period.
Income, sales-based and all other taxes and duties for the first six months of 2007 of $50,619 million were down $939 million compared to 2006. In the first six months of 2007 income tax expense was $14,452 million and the effective income tax rate was 44 percent, compared to $14,903 million and 46 percent, respectively, in the prior year period. Resolution of income tax related issues resulted in charges in the first six months of 2006.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures
Upstream (including exploration expenses)
3,866
3,932
7,335
8,019
874
742
1,405
186
495
330
41
5,039
4,901
9,261
9,725
ExxonMobil continued to actively invest in the second quarter, spending $5.0 billion on capital and exploration projects. For the first six months of 2007, spending on capital and exploration projects was $9.3 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.
-21-
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the six months ended June 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 June 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 quart er that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Item 1. Legal Proceedings
Regarding previously reported matters, the Corporation and Chalmette Refining, L.L.C. (which is fifty-percent owned by the Corporation) have identified and reported noncompliance with certain air pollution control provisions for certain streams at their U.S. refineries under their respective 2005 and 2006 consent decrees with the U.S. Environmental Protection Agency ("EPA") et al. relating to EPA's New Source Review Enforcement Initiative. Although penalties have not yet been assessed and no formal enforcement proceedings have been commenced under these consent decrees, the total penalties associated with disclosed noncompliance items are likely to exceed $100,000.
Regarding another previously reported matter, on June 15, 2007, ExxonMobil Oil Corporation ("EMOC") entered into a Consent Order with the New York State Department of Environmental Conservation ("NYSDEC") to resolve the penalty phase of an enforcement action that had commenced in 2002. In June 2002, the NYSDEC issued a Notice of Hearing and Complaint with respect to EMOC's distribution terminal in New Windsor, New York, alleging discharges of petroleum into waters of the State that were allegedly neither timely reported nor immediately contained. In 2003, EMOC entered into a Consent Order with the State and agreed to a scope of work, with the issue of penalties reserved. The present Consent Order settles the outstanding penalty issue for $250,000.
Regarding the previously reported matter concerning the Corporation's Brooklyn, New York, terminal, on July 17, 2007, the New York Attorney General ("AG") filed a civil lawsuit against the Corporation in U.S. District Court for the Eastern District of New York. The AG alleges that (1) the Corporation wrongfully discharged, and has failed to timely investigate and remediate, several million gallons of petroleum and non-petroleum “pollutants,” which have contaminated air, subsurface soils, groundwater, wetlands and surface water in Greenpoint; (2) the plume continues to migrate into Newtown Creek; (3) the Corporation has wrongfully discharged certain petroleum constituents from its remediation system into Newtown Creek; (4) the Corporation violated its Consent Orders (and state law) by suspending operation of its remediation system in 2007; and (5) the discharge has placed area residents at risk due to potentia l toxic vapors from the contamination. The complaint alleges that the Corporation violated several federal laws (RCRA, CWA, CERCLA and the Oil Pollution Act) and state statutes (i.e., New York Navigation Law and Environmental Conservation Law) and that the Corporation is liable under common law theories of public nuisance, indemnification and restitution. The State seeks, among other things, reimbursement of past and future remediation expenses, civil penalties under various state and federal statutes, natural resource damages and costs of restoration, injunctive relief and attorney fees. The complaint does not specify an amount of penalties or damages sought.
-22-
On May 16, 2007, the ExxonMobil Baytown Olefins Plant received a proposed Agreed Order from the Texas Commission on Environmental Quality ("TCEQ") relating to two alleged unauthorized air emissions events (January 1, 2006, and December 10, 2005), and one alleged violation of the related release reporting requirements for the December event. The Corporation is contesting the enforcement relating to the January 1, 2006, emissions event. TCEQ has argued for a total administrative penalty of $170,190, of which $160,000 is related to the contested issues. The TCEQ referred the matter to its litigation division in July.
The U.S. Coast Guard, U.S. Environmental Protection Agency and the Department of Justice have alleged that the Company is responsible for a spill that occurred on or about January 10, 2006, on the Island End River near the Company's Everett Terminal facility in Everett, Massachusetts. The Department of Justice has indicated that it intends to seek corrective action and penalties 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 June 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
April, 2007
31,928,312
$78.12
May, 2007
34,594,451
$81.73
June, 2007
32,952,608
$83.79
99,475,371
$81.25
(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 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 30, 2007, the following proposals were voted upon. Percentages are based on the total of the shares voted For and Against.
Concerning Election of Directors
Votes
Nominees
Cast For
Withheld
Michael J. Boskin
4,450,845,595
93.0%
332,662,710
William W. George
4,680,858,322
97.9%
102,649,983
James R. Houghton
4,618,790,650
96.6%
164,717,655
William R. Howell
4,594,185,591
96.0%
189,322,714
Reatha Clark King
4,645,666,846
97.1%
137,841,459
Philip E. Lippincott
4,624,158,297
96.7%
159,350,008
Marilyn Carlson Nelson
4,654,418,611
97.3%
129,089,694
Samuel J. Palmisano
4,682,322,635
101,185,670
Steven S Reinemund
4,689,466,769
98.0%
94,041,536
Walter V. Shipley
4,666,385,008
97.6%
117,123,297
J. Stephen Simon
4,661,892,049
97.5%
121,616,256
Rex W. Tillerson
4,650,935,732
97.2%
132,572,573
Concerning Ratification of Independent Auditors
Votes Cast For:
4,629,664,471
Votes Cast Against:
95,430,383
2.0%
Abstentions:
58,413,451
Broker Non-Votes:
Concerning Cumulative Voting
1,188,070,531
31.9%
2,536,616,551
68.1%
84,426,805
974,394,418
Concerning Special Shareholder Meetings
1,776,227,449
47.7%
1,944,489,736
52.3%
88,396,702
Concerning Board Chairman and CEO
1,490,198,067
40.0%
2,231,565,469
60.0%
87,350,351
Concerning Dividend Strategy
211,258,526
5.7%
3,504,312,677
94.3%
93,542,684
Concerning Shareholder Advisory Vote on Executive Compensation
1,487,477,280
41.3%
2,118,376,225
58.7%
203,260,382
-24-
Concerning CEO Compensation Decisions
261,431,225
7.1%
3,404,006,556
92.9%
143,676,106
Concerning Executive Compensation Report
430,534,450
11.6%
3,275,987,445
88.4%
102,591,992
Concerning Executive Compensation Limit
188,478,071
5.1%
3,517,698,843
94.9%
102,936,973
Concerning Incentive Pay Recoupment
1,754,228,659
47.2%
1,965,507,487
52.8%
89,377,741
Concerning Political Contributions Report
826,910,014
25.4%
2,422,502,196
74.6%
559,701,677
Concerning Amendment of EEO Policy
1,342,391,658
37.7%
2,219,078,352
62.3%
247,643,877
Concerning Community Environmental Impact
318,824,219
9.8%
2,932,668,098
90.2%
557,621,570
Concerning Greenhouse Gas Emissions Goals
1,020,056,278
31.1%
2,257,532,822
68.9%
531,224,787
974,694,418
Concerning CO2 Information at the Pump
234,982,362
3,071,486,949
502,644,576
-25-
Concerning Renewable Energy Investment Levels
237,673,643
7.3%
3,020,099,642
92.7%
551,340,602
For additional information, see the registrant's definitive proxy statement dated April 11, 2007, "Item 1 - Election of Directors" (beginning on page 12) and the items beginning with "Item 2 - Ratification of Independent Auditors", on page 44, through "Item 17 - Renewable Energy Investment Levels", ending on page 64.
Item 6. Exhibits
Exhibit
Description
3(ii)
By-Laws, as revised to July 31, 2002.
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.
-26-
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: August 7, 2007
By: /s/ Patrick T. Mulva
Name: Patrick T. Mulva
Title: Vice President, Controller and
Principal Accounting Officer
-27-
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
-28-