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 March 31, 2008
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, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer X
Accelerated filer
Non-accelerated filer
Smaller reporting company
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 March 31, 2008
Common stock, without par value 5,283,694,459
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Statement of Income
3
Three months ended March 31, 2008 and 2007
Condensed Consolidated Balance Sheet
4
As of March 31, 2008 and December 31, 2007
Condensed Consolidated Statement of Cash Flows
5
Notes to Condensed Consolidated Financial Statements
6-14
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
15-18
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
19
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
Unregistered Sales of Equity Securities and Use of Proceeds
20
Item 6.
Exhibits
21
Signature
22
Index to Exhibits
23
-2-
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
March 31,
2008
2007
REVENUES AND OTHER INCOME
Sales and other operating revenue (1)
$
113,223
84,174
Income from equity affiliates
2,809
1,915
Other income
822
1,134
Total revenues and other income
116,854
87,223
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases
60,971
40,042
Production and manufacturing expenses
8,893
7,283
Selling, general and administrative expenses
3,802
3,392
Depreciation and depletion
3,104
2,942
Exploration expenses, including dry holes
342
272
Interest expense
130
103
Sales-based taxes (1)
8,432
7,284
Other taxes and duties
10,706
9,591
Income applicable to minority interests
282
250
Total costs and other deductions
96,662
71,159
INCOME BEFORE INCOME TAXES
20,192
16,064
Income taxes
9,302
6,784
NET INCOME
10,890
9,280
NET INCOME PER COMMON SHARE (dollars)
2.05
1.64
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (dollars)
2.03
1.62
DIVIDENDS PER COMMON SHARE (dollars)
0.35
0.32
(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
40,913
33,981
Marketable securities
480
519
Notes and accounts receivable - net
36,428
36,450
Inventories
Crude oil, products and merchandise
13,075
8,863
Materials and supplies
2,303
2,226
Prepaid taxes and expenses
4,559
3,924
Total current assets
97,758
85,963
Property, plant and equipment - net
122,935
120,869
Investments and other assets
37,509
35,250
TOTAL ASSETS
258,202
242,082
LIABILITIES
Current liabilities
Notes and loans payable
2,771
2,383
Accounts payable and accrued liabilities
53,613
45,275
Income taxes payable
14,599
10,654
Total current liabilities
70,983
58,312
Long-term debt
7,235
7,183
Deferred income tax liabilities
24,008
22,899
Other long-term liabilities
32,837
31,926
TOTAL LIABILITIES
135,063
120,320
Commitments and contingencies (note 3)
SHAREHOLDERS' EQUITY
Common stock, without par value:
Authorized:
9,000 million shares
Issued:
8,019 million shares
4,745
4,933
Earnings reinvested
237,529
228,518
Accumulated other comprehensive income
Cumulative foreign exchange translation adjustment
9,449
7,972
Postretirement benefits reserves adjustment
(5,945
)
(5,983
Common stock held in treasury:
2,736 million shares at March 31, 2008
(122,639
2,637 million shares at December 31, 2007
(113,678
TOTAL SHAREHOLDERS' EQUITY
123,139
121,762
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The number of shares of common stock issued and outstanding at March 31, 2008 and
December 31, 2007 were 5,283,694,459 and 5,381,795,265, respectively.
-4-
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Changes in operational working capital, excluding cash and debt
7,803
1,843
All other items - net
(377
221
Net cash provided by operating activities
21,420
14,286
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(3,979
(3,106
Sales of subsidiaries, investments, and property, plant and equipment
413
538
Other investing activities - net
(734
(670
Net cash used in investing activities
(4,300
(3,238
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt
35
93
Reductions in long-term debt
(46
(36
Additions/(reductions) in short-term debt - net
190
274
Cash dividends to ExxonMobil shareholders
(1,879
(1,825
Cash dividends to minority interests
(105
(74
Changes in minority interests and sales/(purchases)
of affiliate stock
(214
(149
Common stock acquired
(9,465
(7,960
Common stock sold
131
172
Net cash used in financing activities
(11,353
(9,505
Effects of exchange rate changes on cash
1,165
207
Increase/(decrease) in cash and cash equivalents
6,932
1,750
Cash and cash equivalents at beginning of period
28,244
CASH AND CASH EQUIVALENTS AT END OF PERIOD
29,994
SUPPLEMENTAL DISCLOSURES
Income taxes paid
4,849
3,998
Cash interest paid
184
137
-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 2007 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.
Fair Value Measurements
Effective January 1, 2008, the Corporation adopted the Financial Accounting Standards Board's (FASB) Statement No. 157 (FAS 157), “Fair Value Measurements” for financial assets and liabilities that are measured at fair value and nonfinancial assets and liabilities that are measured at fair value on a recurring basis. FAS 157 defines fair value, establishes a framework for measuring fair value when an entity is required to use a fair value measure for recognition or disclosure purposes and expands the disclosures about fair value measurements. The initial application of FAS 157 is limited to the Corporation's investments in derivative instruments and some debt and equity securities. The fair value measurements for these instruments are based on quoted prices or observable market inputs. The value of these instruments is immaterial to the Corporation's financial statements and the related gains or losses from periodic measurement at fair value are de minimis.
On January 1, 2009, the Corporation will adopt FAS 157 for nonfinancial assets and liabilities that are not measured at fair value on a recurring basis. The application of FAS 157 to the Corporation's nonfinancial assets and liabilities will mostly be limited to the recognition and measurement of nonmonetary exchange transactions, asset retirement obligations and asset impairments. The Corporation does not expect the adoption to have a material impact on the Corporation’s financial statements.
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. Management has regular litigation 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 outcome is reasonably possible and which are sig nificant, 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.
-6-
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 and was entered in Janua ry 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. Oral argument was held on February 27, 2008. 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.
Other Contingencies
As of March 31, 2008
Equity
Other
Company
Third Party
Obligations
Total
Total guarantees
6,466
775
7,241
The Corporation and certain of its consolidated subsidiaries were contingently liable at March 31, 2008, for $7,241 million, primarily relating to guarantees for notes, loans and performance under contracts. Included in this amount were guarantees by consolidated affiliates of $6,466 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 March 31, 2008, 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 in February 2007, 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 holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a “mixed enterprise” and an increase in PdVSA’s or one of its affiliate’s ownership interest in the Project, with the stipulation that if ExxonMobil refused to accept the terms for the formation of the mixed enterprise within a specified period of time, the government would “directly assume the activities” carried out by the joint venture. ExxonMobil refused to accede to the terms proffered by PdVSA, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project.
-7-
To date, 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. ExxonMobil has also filed an arbitration under the rules of the International Chamber of Commerce against PdVSA and a PdVSA affiliate for breach of their contractual obligations under certain Cerro Negro Project agreements. 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.
4.
Comprehensive Income
Other comprehensive income
(net of income taxes)
Foreign exchange translation adjustment
1,477
423
(excluding amortization)
(151
(408
Amortization of postretirement benefits reserves
adjustment included in net periodic benefit costs
189
201
Total comprehensive income
12,405
9,496
5.
Earnings Per Share
Net income (millions of dollars)
Weighted average number of common shares
outstanding (millions of shares)
5,301
5,650
Net income per common share (dollars)
- ASSUMING DILUTION
Effect of employee stock-based awards
61
64
outstanding - assuming dilution
5,362
5,714
Net income per common share
- assuming dilution (dollars)
-8-
6.
Pension and Other Postretirement Benefits
Pension Benefits - U.S.
Components of net benefit cost
Service cost
95
97
Interest cost
182
Expected return on plan assets
(229
(210
Amortization of actuarial loss/(gain)
and prior service cost
59
67
Net pension enhancement and
curtailment/settlement cost
44
47
Net benefit cost
151
173
Pension Benefits - Non-U.S.
113
109
301
237
(318
(263
101
112
0
197
195
Other Postretirement Benefits
29
27
108
(12
(15
84
78
209
202
-9-
7.
Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
United States
1,631
1,177
Non-U.S.
7,154
4,864
Downstream
398
839
768
1,073
Chemical
284
346
744
890
All other
(89
91
Corporate total
SALES AND OTHER OPERATING REVENUE (1)
1,764
1,362
8,399
5,493
28,458
21,260
64,517
47,641
3,652
3,189
6,429
5,224
(1) Includes sales-based taxes
INTERSEGMENT REVENUE
2,561
1,563
14,881
10,595
3,861
2,782
16,543
10,941
2,428
1,697
2,432
1,522
79
-10-
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 ($1,777 million long-term at March 31, 2008) and the debt securities due 2008-2011 ($39 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 March 31, 2008
Revenues and other income
Sales and other operating revenue,
including sales-based taxes
4,515
-
108,708
11,068
1
2,798
(11,058
25
797
Intercompany revenue
11,600
17
112,600
(124,217
27,208
18
224,903
(135,275
Costs and other deductions
11,850
167,242
(118,121
Production and manufacturing
expenses
1,911
8,329
(1,347
Selling, general and administrative
702
3,313
(213
393
2,711
Exploration expenses, including dry
holes
263
1,194
53
3,510
(4,627
Sales-based taxes
15
10,691
16,144
204,773
(124,308
Income before income taxes
11,064
(35
20,130
(10,967
174
9,140
(23
10,990
-11-
Condensed consolidated statement of income for three months ended March 31, 2007
3,857
80,317
9,167
7
1,904
(9,163
222
912
8,281
26
77,889
(86,196
21,527
33
161,022
(95,359
7,880
112,246
(80,084
1,714
6,792
(1,223
591
2,986
(185
388
2,554
100
1,446
50
3,488
(4,881
13
9,578
12,132
145,350
(86,373
9,395
(17
15,672
(8,986
115
(8
6,677
(9
8,995
-12-
Condensed consolidated balance sheet as of March 31, 2008
294
40,619
3,591
8
34,204
(1,375
1,479
13,899
15,378
456
4,103
5,820
93,305
16,222
106,713
220,181
474
430,485
(613,631
Intercompany receivables
11,511
2,015
467,804
(481,330
Total assets
253,734
2,497
1,098,307
(1,096,336
Notes and loan payables
2
2,756
3,287
50,326
15,974
3,289
69,056
276
1,816
5,143
1,774
206
22,028
11,410
21,427
Intercompany payables
113,846
383
367,101
Total liabilities
130,595
2,418
484,755
(482,705
(490
124,482
(123,992
Other shareholders' equity
(114,390
569
489,070
(489,639
Total shareholders' equity
613,552
Total liabilities and
shareholders' equity
Condensed consolidated balance sheet as of December 31, 2007
1,393
32,588
3,733
34,338
(1,623
1,198
9,891
11,089
373
3,551
6,697
80,887
16,291
104,578
208,283
427,046
(600,492
14,577
1,961
437,433
(453,971
245,848
2,376
1,049,944
(1,056,086
2,367
3,038
42,236
12,277
3,041
14
56,880
1,766
5,141
1,829
212
20,858
11,308
20,618
107,632
382
345,957
124,086
2,374
449,454
(455,594
(467
114,037
(113,570
(106,756
469
486,453
(486,922
600,490
-13-
Condensed consolidated statement of cash flows for three months ended March 31, 2008
Cash provided by/(used in) operating
activities
1,400
20,552
(545
Cash flows from investing activities
Additions to property, plant and
equipment
(352
(3,627
Sales of long-term assets
Net intercompany investing
9,046
(114
(9,093
161
All other investing, net
Net cash provided by/(used in)
investing activities
8,714
(13,061
Cash flows from financing activities
Additions/(reductions) in short-term
debt - net
Cash dividends
545
Net ExxonMobil shares sold/(acquired)
(9,334
Net intercompany financing activity
60
(61
All other financing, net
(319
(100
financing activities
(11,213
(625
384
Effects of exchange rate changes
on cash
Increase/(decrease) in cash and cash
equivalents
(1,099
8,031
Condensed consolidated statement of cash flows for three months ended March 31, 2007
1,017
13,413
(163
(301
(2,805
441
5,190
(16
(5,202
28
4,986
(8,236
168
106
163
(7,788
(3
31
(28
(223
(9,445
(192
135
(3,442
5,192
-14-
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
First Three Months
Net Income (U.S. GAAP)
Corporate and financing
REVIEW OF FIRST QUARTER 2008 RESULTS
Exxon Mobil Corporation reported record first quarter 2008 net income of $10,890 million, up 17 percent from the first quarter of 2007. Earnings per share were up 25 percent to $2.03 reflecting strong earnings and the impact of the continuing share purchase program. Higher crude oil and natural gas realizations, driven by record worldwide crude oil prices, were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs. Share purchases to reduce shares outstanding were increased to $8.0 billion in the first quarter of 2008 and reduced shares outstanding by 1.8 percent.
Upstream earnings
8,785
6,041
Upstream earnings were $8,785 million, up $2,744 million from the first quarter of 2007. Record high crude oil and natural gas realizations increased earnings approximately $4.4 billion. Volume and mix effects decreased earnings about $800 million, as increased natural gas volumes were more than offset by lower crude volumes. Earnings also decreased due to $300 million of higher taxes, $250 million of increased operating costs and $200 million of lower gains on asset sales.
On an oil-equivalent basis, production decreased 5.6 percent from the first quarter of 2007. Excluding the Venezuela expropriation, divestments, OPEC quota effects and price and spend impacts on volumes, production was down 3 percent.
Liquids production totaled 2,474 kbd (thousands of barrels per day), down 272 kbd from the first quarter of 2007. Excluding the Venezuela expropriation, divestments, OPEC quota effects and price and spend impacts on volumes, liquids production was down 6 percent. Increased production from projects in west Africa and the North Sea was more than offset by mature field decline, PSC net interest reductions and maintenance activities.
First quarter natural gas production was 10,246 mcfd (millions of cubic feet per day), up 132 mcfd from 2007. Higher European demand and North Sea project additions were partly offset by mature field decline.
Earnings from U.S. Upstream operations were $1,631 million, $454 million higher than the first quarter of 2007. Non-U.S. Upstream earnings were $7,154 million, up $2,290 million from 2007.
-15-
Downstream earnings
1,166
1,912
Downstream earnings of $1,166 million were $746 million lower than the first quarter of 2007. Significantly lower worldwide refining margins decreased earnings approximately $1.0 billion, while improved refinery operations increased earnings about $350 million. Petroleum product sales of 6,821 kbd were 377 kbd lower than last year's first quarter, mainly reflecting asset sales.
U.S. Downstream earnings were $398 million, down $441 million from the first quarter of 2007. Non-U.S. Downstream earnings of $768 million were $305 million lower.
Chemical earnings
1,028
1,236
Chemical earnings of $1,028 million were $208 million lower than the first quarter of 2007. Lower margins, which decreased earnings approximately $350 million, were partly offset by favorable foreign exchange and tax effects. Prime product sales of 6,578 kt (thousands of metric tons) in the first quarter of 2008 were 227 kt lower than the prior year.
Corporate and financing earnings
Corporate and financing expenses were $89 million, up $180 million, mainly due to higher corporate costs and tax items.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Cash and cash equivalents - restricted
4,604
Total cash and cash equivalents (at end of period)
34,598
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
Sales of subsidiaries, investments and property,
plant and equipment
21,833
14,824
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.
-16-
Total cash and cash equivalents of $40.9 billion at the end of the first quarter of 2008 compared to $34.6 billion, including the $4.6 billion of restricted cash, at the end of the first quarter of 2007.
Cash provided by operating activities totaled $21,420 million for the first three months of 2008, $7,134 million higher than 2007. The major source of funds was net income of $10,890 million, adjusted for the noncash provision of $3,104 million for depreciation and depletion, both of which increased. The effects of higher prices on the timing of payments of accounts and other payables and the timing of income taxes payable added to cash provided by operating activities. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.
Investing activities for the first three months of 2008 used net cash of $4,300 million compared to $3,238 million in the prior year. Spending for additions to property, plant and equipment increased $873 million to $3,979 million. Proceeds from asset divestments of $413 million in 2008 were lower.
Cash flow from operations and asset sales in the first three months of 2008 was $21.8 billion, including asset sales of $0.4 billion, and increased $7.0 billion from the comparable 2007 period.
Net cash used in financing activities of $11,353 million in the first three months of 2008 increased $1,848 million reflecting a higher level of purchases of shares of ExxonMobil stock.
During the first quarter of 2008, Exxon Mobil Corporation purchased 110 million shares of its common stock for the treasury at a gross cost of $9.5 billion. These purchases included $8.0 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 5,382 million at the end of the fourth quarter to 5,284 million at the end of the first quarter. 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 $9.9 billion to shareholders during the quarter through dividends and share purchases to reduce shares outstanding, an increase of 13 percent or $1.1 billion versus the first quarter of 2007.
Total debt of $10.0 billion at March 31, 2008, increased from $9.6 billion at year-end 2007. The Corporation's debt to total capital ratio was 7.3 percent at the end of the first quarter of 2008 compared to 7.1 percent at year-end 2007.
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.
In accordance with a nationalization decree issued by Venezuela’s president in February 2007, 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 holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a “mixed enterprise” and an increase in PdVSA’s or one of its affiliate’s ownership interest in the Project, with the stipulation that if ExxonMobil refused to accept the terms for the formation of the mixed enterprise within a specified period of time, the government would “directly assume the activities” carried out by the joint venture. ExxonMobil refused to accede to the terms proffered by PdVSA, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project .
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TAXES
All other taxes and duties
11,607
10,408
29,341
24,476
Effective income tax rate
49
%
Income, sales-based and all other taxes and duties for the first quarter of 2008 of $29,341 million were higher than 2007. In the first quarter of 2008 income tax expense increased to $9,302 million and the effective income tax rate was 49 percent, compared to $6,784 million and 44 percent, respectively, in the prior year period. The change in the effective income tax rate reflects an increased share of total income from the non-U.S. Upstream segment. Sales-based taxes and all other taxes and duties increased in 2008 reflecting higher prices and foreign exchange.
CAPITAL AND EXPLORATION EXPENDITURES
Upstream (including exploration expenses)
4,095
3,469
827
531
566
219
5,491
4,222
Spending on capital and exploration projects was $5.5 billion in the first quarter of 2008, up 30 percent from last year, as we continued to actively invest in projects to bring additional crude oil, natural gas and finished products to market.
Capital and exploration expenditures for full year 2007 were $20.9 billion and are expected to range from $25 billion to $30 billion for the next several years. Actual spending could vary depending on the progress of individual projects.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In December 2007, the FASB issued Statement No. 160 (FAS 160), “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51.” FAS 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 160 must be adopted by the Corporation no later than January 1, 2009. FAS 160 requires retrospective adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of FAS 160 will be applied prospectively. The Corporation does not expect the adoption of FAS 160 to have a material impact on the Corporation’s financial statements.
FORWARD-LOOKING STATEMENTS
Statements in this report relating to future plans, projections, events or conditions are forward-looking statements. Actual results, including project plans, capacities, and timing and resource recoveries 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; 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 2007 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 three months ended March 31, 2008, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2007.
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 March 31, 2008. 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 quar ter that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Item 1. Legal Proceedings
On February 15, 2008, the Texas Commission on Environmental Quality (TCEQ) filed a Preliminary Report and Petition seeking an administrative penalty and corrective action related to a July 24, 2004, emissions event and alleged violations discovered in a 2005 TCEQ inspection at the Baytown Refinery. TCEQ is seeking an administrative penalty of $192,720. ExxonMobil has filed its Answer to the Petition and requested a contested case hearing. The matter is now pending before the State Office of Administrative Hearings.
Refer to the relevant portions of note 3 on pages 6 and 7 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchase of Equity Securities for Quarter Ended March 31, 2008
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
January, 2008
33,240,511
$87.76
February, 2008
32,410,499
$85.75
March, 2008
43,923,186
$85.81
109,574,196
$86.38
(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 the Company's 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. In its most recent earnings release dated May 1, 2008, the Corporation stated that share purchases to reduce shares outstanding were increased to $8.0 billion in the first quarter of 2008. 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.
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Item 6. Exhibits
Exhibit
Description
10(iii)(a.1)
2003 Incentive Program, as approved by shareholders May 28, 2003.
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.
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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: May 6, 2008
By: /s/ Patrick T. Mulva
Name: Patrick T. Mulva
Title: Vice President, Controller and
Principal Accounting Officer
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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
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