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, 2012
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 June 30, 2012
Common stock, without par value 4,615,939,496
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
Three and six months ended June 30, 2012 and 2011
3
Condensed Consolidated Statement of Comprehensive Income
4
Condensed Consolidated Balance Sheet
As of June 30, 2012 and December 31, 2011
5
Condensed Consolidated Statement of Cash Flows
Six months ended June 30, 2012 and 2011
6
Condensed Consolidated Statement of Changes in Equity
7
Notes to Condensed Consolidated Financial Statements
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
26
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
28
Item 6. Exhibits
Signature
29
Index to Exhibits
30
-2-
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
Six Months Ended
June 30,
2012
2011
REVENUES AND OTHER INCOME
Sales and other operating revenue (1)
$
112,745
121,394
231,934
230,645
Income from equity affiliates
3,651
3,720
7,861
7,547
Other income
10,967
372
11,621
1,298
Total revenues and other income
127,363
125,486
251,416
239,490
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases
66,344
69,447
136,169
129,944
Production and manufacturing expenses
9,787
10,322
19,637
19,842
Selling, general and administrative expenses
3,486
3,681
7,087
7,308
Depreciation and depletion
3,899
3,881
7,741
7,642
Exploration expenses, including dry holes
592
894
926
Interest expense
50
45
157
74
Sales-based taxes (1)
8,027
8,613
16,520
16,529
Other taxes and duties
9,207
10,286
19,505
19,689
Total costs and other deductions
101,172
106,867
207,710
201,954
Income before income taxes
26,191
18,619
43,706
37,536
Income taxes
8,537
7,721
16,253
15,725
Net income including noncontrolling interests
17,654
10,898
27,453
21,811
Net income attributable to noncontrolling interests
1,744
218
2,093
481
Net income attributable to ExxonMobil
15,910
10,680
25,360
21,330
Earnings per common share (dollars)
3.41
2.19
5.41
4.33
Earnings per common share - assuming dilution (dollars)
2.18
4.32
Dividends per common share (dollars)
0.57
0.47
1.04
0.91
(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 STATEMENT OF COMPREHENSIVE INCOME
Other comprehensive income (net of income taxes)
Foreign exchange translation adjustment
(1,367)
778
(322)
2,112
Adjustment for foreign exchange translation (gain)/loss
included in net income
(4,302)
-
(4,235)
Postretirement benefits reserves adjustment
(excluding amortization)
224
(160)
(180)
(565)
Amortization and settlement of postretirement benefits reserves
adjustment included in net periodic benefit costs
1,236
321
1,629
631
Change in fair value of cash flow hedges
10
Realized (gain)/loss from settled cash flow hedges
(14)
(33)
Total other comprehensive income
(4,209)
932
(3,108)
2,155
Comprehensive income including noncontrolling interests
13,445
11,830
24,345
23,966
Comprehensive income attributable to
noncontrolling interests
196
293
521
612
Comprehensive income attributable to ExxonMobil
13,249
11,537
23,824
23,354
-4-
CONDENSED CONSOLIDATED BALANCE SHEET
Dec. 31,
ASSETS
Current assets
Cash and cash equivalents
17,802
12,664
Cash and cash equivalents – restricted
215
404
Notes and accounts receivable – net
33,741
38,642
Inventories
Crude oil, products and merchandise
11,729
11,665
Materials and supplies
3,429
3,359
Other current assets
5,881
6,229
Total current assets
72,797
72,963
Investments, advances and long-term receivables
33,921
34,333
Property, plant and equipment – net
214,940
214,664
Other assets, including intangibles – net
7,987
9,092
Total assets
329,645
331,052
LIABILITIES
Current liabilities
Notes and loans payable
6,704
7,711
Accounts payable and accrued liabilities
51,322
57,067
Income taxes payable
12,110
12,727
Total current liabilities
70,136
77,505
Long-term debt
8,877
9,322
Postretirement benefits reserves
22,117
24,994
Deferred income tax liabilities
36,851
36,618
Other long-term obligations
23,679
21,869
Total liabilities
161,660
170,308
Commitments and contingencies (Note 2)
EQUITY
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares
9,221
9,512
Earnings reinvested
351,421
330,939
Accumulated other comprehensive income
(10,659)
(9,123)
Common stock held in treasury:
3,403 million shares at June 30, 2012
(187,172)
3,285 million shares at December 31, 2011
(176,932)
ExxonMobil share of equity
162,811
154,396
Noncontrolling interests
5,174
6,348
Total equity
167,985
160,744
Total liabilities and equity
The number of shares of common stock issued and outstanding at June 30, 2012 and December 31, 2011 were 4,615,939,496 and 4,733,948,268, respectively.
-5-
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Changes in operational working capital, excluding cash and debt
3,408
1,078
Net (gain) on asset sales
(11,109)
(600)
All other items – net
2,011
(186)
Net cash provided by operating activities
29,504
29,745
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(16,188)
(14,863)
Proceeds associated with sales of subsidiaries, property, plant and
equipment, and sales and returns of investments
6,243
2,838
Additional investments and advances
(397)
(2,949)
Additions to marketable securities
(1,754)
Other investing activities – net
1,235
871
Net cash used in investing activities
(9,107)
(15,857)
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt
389
249
Reductions in long-term debt
(11)
(43)
Additions/(reductions) in short-term debt – net
(214)
1,182
Cash dividends to ExxonMobil shareholders
(4,878)
(4,496)
Cash dividends to noncontrolling interests
(137)
(152)
Changes in noncontrolling interests
198
(12)
Tax benefits related to stock-based awards
171
Common stock acquired
(10,716)
(11,165)
Common stock sold
86
452
Net cash used in financing activities
(15,283)
(13,814)
Effects of exchange rate changes on cash
24
388
Increase/(decrease) in cash and cash equivalents
5,138
462
Cash and cash equivalents at beginning of period
7,825
Cash and cash equivalents at end of period
8,287
SUPPLEMENTAL DISCLOSURES
Income taxes paid
12,327
13,547
Cash interest paid
290
262
-6-
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
ExxonMobil Share of Equity
Accumulated
Other
Common
Compre-
Stock
ExxonMobil
Non-
Earnings
hensive
Held in
Share of
Controlling
Total
Reinvested
Income
Treasury
Equity
Interests
Balance as of December 31, 2010
9,371
298,899
(4,823)
(156,608)
146,839
5,840
152,679
Amortization of stock-based awards
383
133
(535)
(4)
(539)
Net income for the period
Dividends – common shares
(4,648)
Other comprehensive income
2,024
131
Acquisitions, at cost
(11,177)
Dispositions
1,038
Balance as of June 30, 2011
9,352
315,733
(2,799)
(166,735)
155,551
6,284
161,835
Balance as of December 31, 2011
439
23
(753)
(1,450)
(2,203)
(5,092)
(1,536)
(1,572)
(31)
(10,747)
476
Balance as of June 30, 2012
Six Months Ended June 30, 2012
Six Months Ended June 30, 2011
Common Stock Share Activity
Issued
Outstanding
(millions of shares)
Balance as of December 31
8,019
(3,285)
4,734
(3,040)
4,979
Acquisitions
(127)
(136)
9
19
Balance as of June 30
(3,403)
4,616
(3,157)
4,862
-7-
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 2011 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. 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 significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. For purposes of our contingency disclosures, “significant” includes material matters as well as other matters which management believes should be disclosed. 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, financial condition, or financial statements taken as a whole.
On June 30, 2011, a state district court jury in Baltimore County, Maryland returned a verdict against Exxon Mobil Corporation in Allison, et al v. Exxon Mobil Corporation, a case involving an accidental 26,000 gallon gasoline leak at a suburban Baltimore service station. The verdict included approximately $497 million in compensatory damages and approximately $1.0 billion in punitive damages in a finding that ExxonMobil fraudulently misled the plaintiff-residents about the events leading up to the leak, the leak's discovery, and the nature and extent of any groundwater contamination. ExxonMobil believes the verdict is not justified by the evidence and that the amount of the compensatory award is grossly excessive and the imposition of punitive damages is improper and unconstitutional. The trial court denied a post-trial motion that ExxonMobil filed to overturn the punitive damages verdict and entered a Final Judgment in the amount of $1,488 million. ExxonMobil has appealed the verdict and judgment. The appeal is pending before the Maryland Court of Appeals. In an earlier trial involving the same leak and different plaintiffs, the jury awarded compensatory damages but rejected the plaintiffs' punitive damages claims. Those plaintiffs did not appeal the jury's denial of punitive damages. On February 9, 2012, the Maryland Court of Special Appeals reversed in part and affirmed in part the trial court's decision on compensatory damages in that case. The Maryland Court of Appeals granted writs of certiorari to both parties in response to their separate petitions seeking reversals of portions of the Court of Special Appeals' decision. The appeals in both of these cases have been consolidated before the Maryland Court of Appeals. The ultimate outcome of all of this litigation is not expected to have a material adverse effect upon the Corporation's operations, financial condition, or financial statements taken as a whole.
Other Contingencies
The Corporation and certain of its consolidated subsidiaries were contingently liable at June 30, 2012, for guarantees relating to notes, loans and performance under contracts. 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.
-8-
As of June 30, 2012
Company
Third Party
Obligations (1)
Obligations
Guarantees
Debt-related
1,990
64
2,054
3,774
3,977
7,751
5,764
4,041
9,805
(1) ExxonMobil share
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, 2012, 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 the government, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project. ExxonMobil’s remaining net book investment in Cerro Negro producing assets is about $750 million.
On September 6, 2007, affiliates of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID) invoking ICSID jurisdiction under Venezuela’s Investment Law and the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID Tribunal issued a decision on June 10, 2010, finding that it had jurisdiction to proceed on the basis of the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID arbitration proceeding is continuing and a hearing on the merits was held in February 2012. At this time, the net impact of these matters on the Corporation’s consolidated financial results cannot be reasonably estimated. Regardless, the Corporation does not expect the resolution to have a material effect upon the Corporation’s operations or financial condition.
An affiliate of ExxonMobil is one of the Contractors under a Production Sharing Contract (PSC) with the Nigerian National Petroleum Corporation (NNPC) covering the Erha block located in the offshore waters of Nigeria. ExxonMobil's affiliate is the operator of the block and owns a 56.25 percent interest under the PSC. The Contractors are in dispute with NNPC regarding NNPC's lifting of crude oil in excess of its entitlement under the terms of the PSC. In accordance with the terms of the PSC, the Contractors initiated arbitration in Abuja, Nigeria, under the Nigerian Arbitration and Conciliation Act. On October 24, 2011, a three-member arbitral Tribunal issued an award upholding the Contractors' position in all material respects and awarding damages to the Contractors jointly in an amount of approximately $1.8 billion plus $234 million in accrued interest. The Contractors petitioned a Nigerian federal court for enforcement of the award, and NNPC petitioned the same court to have the award set aside. On May 22, 2012, the court set aside the award. The Contractors have appealed that judgment. At this time, the net impact of this matter on the Corporation's consolidated financial results cannot be reasonably estimated. However, regardless of the outcome of enforcement proceedings, the Corporation does not expect the proceedings to have a material effect upon the Corporation's operations or financial condition.
-9-
3. Other Comprehensive Income Information
ExxonMobil Share of Accumulated
Other Comprehensive Income
Cumulative
Post-
Unrealized
Foreign
retirement
Change in
Exchange
Benefits
Fair Value
Translation
Reserves
on Cash
Adjustment
Flow Hedges
5,011
(9,889)
55
Current period change excluding amounts reclassified
from accumulated other comprehensive income
1,939
(492)
1,457
Amounts reclassified from accumulated other
comprehensive income
600
567
Total change in accumulated other comprehensive
income
108
(23)
6,950
(9,781)
32
4,168
(13,291)
(266)
(418)
(2,484)
1,366
(1,118)
(2,750)
1,214
1,418
(12,077)
Income Tax (Expense)/Credit For
Components of Other Comprehensive Income
(51)
(37)
(87)
(71)
60
90
237
(743)
(146)
(932)
(301)
Unrealized change in fair value on cash flow hedges
(3)
(5)
20
(791)
(132)
(879)
-10-
4. Earnings Per Share
Earnings per common share
Net income attributable to ExxonMobil (millions of dollars)
Weighted average number of common shares
outstanding (millions of shares)
4,656
4,906
4,686
4,934
Earnings per common share - assuming dilution
Effect of employee stock-based awards
1
outstanding - assuming dilution
4,657
4,912
4,687
4,941
- assuming dilution (dollars)
-11-
5. Pension and Other Postretirement Benefits
Pension Benefits - U.S.
Components of net benefit cost
Service cost
160
124
316
Interest cost
205
410
396
Expected return on plan assets
(204)
(193)
(394)
(385)
Amortization of actuarial loss/(gain) and prior
service cost
144
247
Net pension enhancement and
curtailment/settlement cost
123
101
246
202
Net benefit cost
428
354
868
709
Pension Benefits - Non-U.S.
166
146
334
285
282
323
580
639
(273)
(296)
(562)
(586)
193
491
377
curtailment/settlement cost (1)
1,423
1,429
1,835
366
2,272
715
Other Postretirement Benefits
36
38
69
204
(10)
(21)
(22)
49
106
182
176
360
352
(1) Non-U.S. net pension enhancement and curtailment/settlement cost for the three months and six months ended June 30, 2012, includes $1,420 million (on a consolidated‑company, before‑tax basis) of accumulated other comprehensive income for the postretirement benefit reserves adjustment that was recycled into earnings and included in the Japan restructuring gain reported in “Other income” (See Note 10).
-12-
6. Financial Instruments
The fair value of financial instruments is determined by reference to observable market data and other valuation techniques as appropriate. The only category of financial instruments where the difference between fair value and recorded book value is notable is long-term debt. The estimated fair value of total long-term debt, including capitalized lease obligations, was $9.4 billion at June 30, 2012, and $9.8 billion at December 31, 2011, as compared to recorded book values of $8.9 billion at June 30, 2012, and $9.3 billion at December 31, 2011. The fair value of long-term debt by hierarchy level at June 30, 2012 is shown below:
Level 1
Level 2
Level 3
Long-term debt fair value
$ 6,555
$ 2,472
$ 378
$ 9,405
The fair value hierarchy for long-term debt is primarily Level 1 and represents quoted prices in active markets. Level 2 includes debt whose fair value is based upon a publicly available index. The Level 3 amount is primarily capitalized leases whose value is typically determined through the use of present value and specific contract terms.
-13-
7. Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
United States
678
1,449
1,688
2,728
Non-U.S.
7,680
7,092
14,472
14,488
Downstream
834
734
1,437
1,428
Non-U.S. (1)
5,812
622
6,795
1,027
Chemical
494
625
927
1,294
955
696
1,223
1,543
All other
(543)
(538)
(1,182)
(1,178)
Corporate total
(1)
2012 periods include gain associated with the Japan restructuring (See Note 10) of $5.3 billion in the non-U.S.
Downstream and $0.6 billion in the non-U.S. Chemical segments.
SALES AND OTHER OPERATING REVENUE(2)
2,607
3,629
5,574
6,915
7,059
8,705
14,955
17,583
30,461
32,038
61,370
59,575
62,809
65,960
129,827
125,151
3,747
4,129
7,674
7,776
6,055
6,926
12,523
13,634
11
(2)
Includes sales-based taxes
INTERSEGMENT REVENUE
2,111
2,598
4,603
4,957
11,896
12,873
24,066
25,178
5,282
5,115
10,792
9,645
14,737
19,632
31,906
36,133
3,000
3,502
6,128
6,318
2,580
2,685
5,273
5,135
67
62
137
126
8. Accounting for Suspended Exploratory Well Costs
For the category of exploratory well costs at year-end 2011 that were suspended more than one year, a total of $95 million was expensed in the first six months of 2012.
-14-
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 September 1, 2012 ($2,808 million) 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 comprehensive income for three months ended June 30, 2012
Revenues and other income
Sales and other operating revenue,
including sales-based taxes
4,241
108,504
16,024
3,620
(16,004)
128
10,839
Intercompany revenue
13,722
99,535
(113,257)
34,115
222,498
(129,261)
Costs and other deductions
14,648
162,006
(110,310)
Production and manufacturing
expenses
1,845
9,425
(1,483)
Selling, general and administrative
783
2,868
(165)
3,489
Exploration expenses, including dry
holes
70
302
130
73
1,159
(1,312)
Sales-based taxes
9,196
17,897
196,472
(113,270)
16,218
(62)
26,026
(15,991)
308
(27)
8,256
Net income including noncontrolling
interests
(35)
17,770
Net income attributable to
16,026
Comprehensive income
attributable to ExxonMobil
13,153
(13,118)
-15-
Condensed consolidated statement of comprehensive income for three months ended June 30, 2011
4,811
116,583
9,169
(9)
3,697
(9,137)
346
14,473
116,608
(131,082)
28,479
(8)
237,234
(140,219)
13,577
184,103
(128,233)
2,003
9,745
(1,426)
707
3,154
425
3,456
47
545
87
1,151
(1,262)
10,275
16,857
221,042
(131,101)
11,622
(77)
16,192
(9,118)
942
(26)
6,805
9,387
9,843
(9,792)
Condensed consolidated statement of comprehensive income for six months ended June 30, 2012
8,720
223,214
25,420
16
7,791
(25,366)
252
11,369
28,129
216,035
(244,165)
62,521
17
458,409
(269,531)
30,032
344,341
(238,204)
3,826
18,744
(2,933)
1,584
5,831
(328)
814
6,927
187
279
2,465
(2,733)
19,484
36,743
415,019
(244,198)
25,778
(129)
43,390
(25,333)
418
(54)
15,889
(75)
27,501
25,408
23,576
(23,501)
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Condensed consolidated statement of comprehensive income for six months ended June 30, 2011
9,058
221,587
20,323
(13)
7,492
(20,255)
56
1,242
26,701
2
224,389
(251,092)
56,138
454,710
(271,347)
27,683
347,874
(245,613)
3,880
18,734
(2,772)
6,223
(352)
811
6,831
111
815
141
2,190
(2,394)
19,669
34,083
418,865
(251,131)
22,055
(148)
35,845
(20,216)
725
15,051
(97)
20,794
20,313
22,096
(21,999)
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Condensed consolidated balance sheet as of June 30, 2012
3,251
14,551
Cash and cash equivalents - restricted
153
Notes and accounts receivable - net
3,157
31,714
(1,156)
1,690
13,468
15,158
777
5,104
8,937
64,990
Property, plant and equipment - net
20,477
194,463
Investments and other assets
282,484
408
502,481
(743,465)
41,908
Intercompany receivables
17,050
2,859
593,250
(613,159)
328,948
3,293
1,355,184
(1,357,780)
1,485
2,808
2,411
3,405
47,890
13,266
4,890
2,835
63,567
8,523
11,879
10,238
1,778
35,073
5,344
18,335
Intercompany payables
141,892
381
470,886
166,137
3,216
606,622
(614,315)
(1,107)
166,047
(164,940)
Other ExxonMobil equity
(188,610)
1,184
577,341
(578,525)
77
743,388
748,562
Condensed consolidated balance sheet as of December 31, 2011
1,354
11,310
239
165
2,719
36,569
(646)
1,634
13,390
15,024
353
5,876
6,299
67,310
19,687
194,977
260,410
393
485,157
(702,535)
43,425
17,325
2,726
543,844
(563,895)
303,721
3,119
1,291,288
(1,267,076)
1,851
2,662
3,198
3,117
57
53,893
13,371
4,968
2,721
70,462
9,029
12,344
12,650
1,450
35,168
5,215
16,654
125,055
386
438,454
149,325
3,107
582,417
(564,541)
(1,032)
141,467
(140,435)
(176,543)
1,044
561,056
(562,100)
12
702,523
708,871
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Condensed consolidated statement of cash flows for six months ended June 30, 2012
Cash provided by/(used in) operating activities
1,866
28,468
(827)
Cash flows from investing activities
(1,790)
(14,398)
Proceeds associated with sales of long-term assets
475
5,768
Net intercompany investing
17,045
(133)
(17,238)
326
All other investing, net
177
661
838
Net cash provided by/(used in)
investing activities
15,907
(25,207)
Cash flows from financing activities
Additions/(reductions) in short-term debt - net
(368)
154
Cash dividends
827
Net ExxonMobil shares sold/(acquired)
(10,630)
Net intercompany financing activity
190
All other financing, net
140
61
(140)
financing activities
(15,876)
136
(44)
501
Increase/(decrease) in cash and cash
equivalents
1,897
3,241
Condensed consolidated statement of cash flows for six months ended June 30, 2011
3,739
26,577
(573)
(1,337)
(13,526)
163
2,675
13,258
(177)
(13,484)
403
(1,323)
(2,509)
(3,832)
10,761
(26,844)
873
309
(572)
572
(10,713)
227
(227)
175
(164)
(175)
(14,165)
170
335
127
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10. Japan Restructuring
On June 1, 2012, the Corporation completed the restructuring of its Downstream and Chemical holdings in Japan. Under the restructuring, TonenGeneral Sekiyu K. K. (TG), a consolidated subsidiary owned 50 percent by the Corporation, purchased for $3.9 billion the Corporation’s shares of a wholly-owned affiliate in Japan, EMG Marketing Godo Kaisha (previously known as ExxonMobil Yugen Kaisha), which resulted in TG acquiring approximately 200 million of its shares currently owned by the Corporation along with other assets. As a result of the restructuring, the Corporation’s effective ownership of TG was reduced to approximately 22 percent and a gain of $6.5 billion was recognized. The gain is included in “Other income” partially offset by amounts included in “Income tax expense” and “Net income attributable to noncontrolling interests”.
The gain includes $1.9 billion of the Corporation’s share of other comprehensive income recycled into earnings (see note 3 below). The gain also includes remeasurement of TG’s shares that the Corporation continues to own to $0.7 billion, based on TG’s share price on the Tokyo Stock Exchange. The Corporation will account for its remaining investment using the equity method.
Summarized balance sheet for the Japan entities subject to the restructuring follows:
Assets
Current assets(1)
6,391
Net property, plant and equipment
4,700
Other assets
989
12,080
Liabilities
Current liabilities (2)
7,398
22
2,066
826
10,312
ExxonMobil share of equity (3)
(256)
1,768
(1) The aggregate replacement cost of inventories exceeded the LIFO carrying values by $2.4 billion at June 1, 2012.
(2) On June 1, 2012, Japan’s unused credit lines for short-term financing were $1.0 billion.
(3) The accumulated other comprehensive income associated with the Japan restructuring was recycled into earnings. At June 1, 2012, ExxonMobil’s share of accumulated other comprehensive income was a benefit of $1.9 billion, including $2.5 billion related to cumulative translation adjustments offset by $0.6 billion related to postretirement benefit reserves adjustments.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Second Quarter
First Six Months
Earnings (U.S. GAAP)
Corporate and financing
Net Income attributable to ExxonMobil (U.S. GAAP)
Earnings per common share - assuming
dilution (dollars)
References in this discussion to total corporate earnings mean net income attributable to ExxonMobil (U.S. GAAP) from the income statement. Unless otherwise indicated, references to earnings, special items, Upstream, Downstream, Chemical and Corporate and Financing segment earnings, and earnings per share are ExxonMobil's share after excluding amounts attributable to noncontrolling interests.
REVIEW OF SECOND QUARTER 2012 RESULTS
ExxonMobil results for the second quarter 2012 reflect our ongoing commitment to develop and deliver the energy needed to help meet global demand and underpin economic recovery and growth. Despite global economic uncertainty, we continue to invest throughout the business cycle taking a long-term view of resource development.
Second quarter earnings of $15.9 billion included a net gain of $7.5 billion associated with divestments and tax-related items. Excluding these items, second quarter earnings were $8.4 billion.
In the second quarter, capital and exploration expenditures were $9.3 billion.
The Corporation distributed $7.7 billion to shareholders in the second quarter through dividends and share purchases to reduce shares outstanding.
_______________________________________________________________________
Earnings in the first six months of 2012 of $25,360 million increased $4,030 million from 2011.
Earnings per share – assuming dilution for the first six months of 2012 increased 25 percent to $5.41.
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Upstream earnings
8,358
8,541
16,160
17,216
Upstream earnings in the second quarter of 2012 were $8,358 million, down $183 million from the second quarter of 2011. Lower liquids and U.S. natural gas realizations decreased earnings by $870 million, while lower sales volumes reduced earnings by $330 million. All other items, including gains on asset sales mainly in Angola, increased earnings by $1.0 billion.
On an oil-equivalent basis, production decreased 5.6 percent from the second quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was essentially flat.
Liquids production totaled 2,208 kbd (thousands of barrels per day), down 143 kbd from the second quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was down about 1 percent, as field decline was mostly offset by lower downtime and ramp-up of Angola and Nigeria projects.
Second quarter natural gas production was 11,661 mcfd (millions of cubic feet per day), down 606 mcfd from 2011. Excluding the impacts of entitlement volumes and divestments, natural gas production was up about 1 percent, as higher demand and lower downtime more than offset field decline.
Earnings from U.S. Upstream operations were $678 million, $771 million lower than the second quarter of 2011. Non-U.S. Upstream earnings were $7,680 million, up $588 million from the prior year.
Upstream earnings in the first six months of 2012 were $16,160 million, down $1,056 million from the first half of 2011. Higher liquids realizations, partially offset by lower gas realizations, increased earnings by $80 million. Lower sales volumes decreased earnings by $1,140 million. Net gains on asset sales, mainly in Angola, were offset by higher operating expenses and unfavorable tax effects.
On an oil-equivalent basis, production in the first six months of 2012 was down 5.5 percent compared to the same period in 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was down about 1 percent.
Liquids production in the first six months of 2012 of 2,211 kbd decreased 164 kbd compared with 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was down about 1 percent, as field decline was mostly offset by project ramp-up and lower downtime.
Natural gas production in the first six months of 2012 of 12,849 mcfd decreased 541 mcfd from 2011. Excluding the impacts of entitlement volumes and divestments, natural gas production was down about 1 percent, with field decline partly offset by higher demand and lower downtime.
Earnings in the first six months of 2012 from U.S. Upstream operations were $1,688 million, down $1,040 million from 2011. Earnings outside the U.S. were $14,472 million, essentially flat with the prior year.
Downstream earnings
6,646
1,356
8,232
2,455
-22-
Second quarter 2012 Downstream earnings of $6,646 million were up $5.3 billion from the second quarter of 2011. The gain associated with the Japan restructuring contributed $5.3 billion. Improved margins and volume and mix effects increased earnings by $670 million. All other items, including unfavorable foreign exchange effects, higher operating expenses, and one-time tax items, decreased earnings $670 million. Petroleum product sales of 6,171 kbd were 160 kbd lower than last year's second quarter.
Earnings from the U.S. Downstream were $834 million, up $100 million from the second quarter of 2011. Non-U.S. Downstream earnings of $5,812 million were $5,190 million higher than last year.
______________________________________________________________________
Downstream earnings in the first six months of 2012 of $8,232 million increased $5,777 million from 2011. The gain associated with the Japan restructuring contributed $5.3 billion. Higher margins increased earnings by $610 million, while volume and mix effects increased earnings by $220 million. All other items, including higher operating expenses, one-time tax items, and unfavorable foreign exchange effects, partially offset by other asset management gains, decreased earnings by $360 million. Petroleum product sales of 6,243 kbd decreased 56 kbd from 2011.
U.S. Downstream earnings in the first six months of 2012 were $1,437 million, consistent with 2011. Non-U.S. Downstream earnings were $6,795 million, an increase of $5,768 million from last year.
Chemical earnings
1,321
2,150
2,837
Second quarter 2012 Chemical earnings of $1,449 million were $128 million higher than the second quarter of 2011. The gain associated with the Japan restructuring increased earnings by $630 million, while weaker margins decreased earnings by $150 million. Volume and mix effects lowered earnings by $100 million. All other items, mainly unfavorable foreign exchange effects, decreased earnings by $250 million. Second quarter prime product sales of 5,972 kt (thousands of metric tons) were 209 kt lower than last year's second quarter.
_____________________________________________________________________
Chemical earnings in the first six months of 2012 of $2,150 million were $687 million lower than 2011. The gain associated with the Japan restructuring increased earnings by $630 million, while weaker margins decreased earnings by $750 million. Lower volumes decreased earnings by $70 million. All other items, including unfavorable foreign exchange effects, higher operating expenses, and tax items, decreased earnings by $500 million. Prime product sales of 12,309 kt were down 194 kt from 2011.
Corporate and financing earnings
Corporate and financing expenses of $543 million in the second quarter of 2012 were flat with the second quarter of 2011, as the benefit from the Japan restructuring was offset by one-time tax items.
Corporate and financing expenses were $1,182 million for the first six months of 2012, flat with the first half of 2011 as the benefit from the Japan restructuring was offset by one-time tax items.
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LIQUIDITY AND CAPITAL RESOURCES
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Cash and cash equivalents (at end of period)
Cash and cash equivalents – restricted (at end of period)
Total cash and cash equivalents (at end of period)
18,017
8,533
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
10,217
12,889
Proceeds associated with sales of subsidiaries, property,
plant & equipment, and sales and returns of investments
3,730
1,497
13,947
14,386
35,747
32,583
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.
Total cash and cash equivalents of $18.0 billion at the end of the second quarter of 2012 compared to $8.5 billion at the end of the second quarter of 2011.
Cash provided by operating activities totaled $29.5 billion for the first six months of 2012, $0.2 billion lower than 2011. The major source of funds was net income including noncontrolling interests of $27.5 billion, an increase of $5.6 billion from the prior year period. The adjustment for the noncash provision of $7.7 billion for depreciation and depletion was essentially flat with 2011. Changes in operational working capital added to cash flows in both periods. These items were partially offset by the net gain on asset sales of $11.1 billion in 2012 and $0.6 billion in 2011. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 6.
Investing activities for the first six months of 2012 used net cash of $9.1 billion, a decrease of $6.8 billion compared to the prior year. Spending for additions to property, plant and equipment increased $1.3 billion to $16.2 billion. Proceeds from asset sales of $6.2 billion, increased $3.4 billion reflecting the impact of the Japan restructuring. Additional investment and advances decreased by $2.6 billion to $0.4 billion.
Cash flow from operations and asset sales in the second quarter of 2012 of $13.9 billion, including asset sales of $3.7 billion, decreased $0.4 billion from the comparable 2011 period. Cash flow from operations and asset sales in the first six months of 2012 of $35.7 billion, including asset sales of $6.2 billion, increased $3.2 billion from the comparable 2011 period.
Net cash used in financing activities of $15.3 billion in the first six months of 2012 was $1.5 billion higher than 2011, mostly reflecting the absence of 2011 net short-term debt issuance.
During the second quarter of 2012, Exxon Mobil Corporation purchased 60 million shares of its common stock for the treasury at a gross cost of $5.0 billion. These purchases were to reduce the number of shares outstanding. Shares outstanding decreased from 4,676 million at the end of the first quarter to 4,616 million at the end of the second quarter 2012. 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.
-24-
The Corporation distributed to shareholders a total of $7.7 billion in the second quarter of 2012 through dividends and share purchases to reduce shares outstanding.
Total debt of $15.6 billion compared to $17.0 billion at year-end 2011. The Corporation's debt to total capital ratio was 8.5 percent at the end of the second quarter of 2012 compared to 9.6 percent at year-end 2011.
Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds are expected to cover the majority of its net near-term 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. Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time. Key criteria for evaluating acquisitions include potential for future growth and attractive current valuations. Acquisitions may be made with cash, shares of the Corporation’s common stock, or both.
Litigation and other contingencies are discussed in Note 2 to the unaudited condensed consolidated financial statements.
TAXES
Effective income tax rate
%
41
46
All other taxes and duties
10,036
11,175
21,239
21,491
26,600
27,509
54,012
53,745
Income, sales-based and all other taxes and duties totaled $26.6 billion for the second quarter of 2012, a decrease of $0.9 billion from 2011. Income tax expense increased by $0.8 billion to $8.5 billion with the impact of higher earnings mostly offset by the lower effective tax rate. The effective income tax rate was 36 percent compared to 45 percent in the prior year period, due to a lower effective tax rate on divestments. Sales-based taxes and all other taxes and duties decreased by $1.7 billion to $18.1 billion reflecting lower prices and the Japan restructuring.
________________________________________________________________________
Income, sales-based and all other taxes and duties totaled $54.0 billion for the first six months of 2012, an increase of $0.3 billion from 2011. Income tax expense increased by $0.5 billion to $16.3 billion with the impact of higher earnings mostly offset by the lower effective tax rate. The effective income tax rate was 41 percent compared to 46 percent in the prior year due to a lower effective tax rate on divestments. Sales-based and all other taxes decreased by $0.3 billion.
CAPITAL AND EXPLORATION EXPENDITURES
Upstream (including exploration expenses)
8,393
9,436
16,472
16,336
569
484
1,008
934
368
681
801
34
9,339
10,306
18,173
18,127
Capital and exploration expenditures in the second quarter of 2012 were $9.3 billion, down 9 percent from the second quarter of 2011.
Capital and exploration expenditures were a record $18.2 billion for the first six months of 2012 as ExxonMobil progresses plans to invest about $37 billion per year over the next five years to help meet the global demand for energy. Actual spending could vary depending on the progress of individual projects.
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FORWARD-LOOKING STATEMENTS
Statements relating to future plans, projections, events or conditions are forward-looking statements. Actual results, including project plans, costs, timing, and capacities; capital and exploration expenditures; resource recoveries; and share purchase levels, could differ materially due to factors including: changes in oil or gas prices or other market or economic conditions affecting the oil and gas industry, including the scope and duration of economic recessions; the outcome of exploration and development efforts; changes in law or government regulation, including tax and environmental requirements; the outcome of commercial negotiations; changes in technical or operating conditions; and other factors discussed under the heading "Factors Affecting Future Results" in the “Investors” section of our website and in Item 1A of ExxonMobil's 2011 Form 10-K. We assume no duty to update these statements as of any future date.
Information about market risks for the six months ended June 30, 2012, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2011.
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, 2012. 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.
-26-
Chalmette Refining, LLC, owner of the Chalmette Refinery (operated by ExxonMobil Oil Corporation), is in discussions with the Louisiana Department of Environmental Quality (LDEQ) to resolve self-reported deviations arising from refinery operations and relating to certain Clean Air Act Title V permit conditions, limits, and other requirements. The matter involves deviations reported to the Agency in semi-annual reports covering the time period from 2006 through 2011. It is anticipated that LDEQ will assess an administrative penalty in this matter in excess of $100,000.
The New Mexico Environment Department (NMED) has issued a notice of violation for alleged violations of the New Mexico Air Quality Control Act and air permits for compressor engines at the XTO Energy Inc. Valencia Canyon Compressor Station in Rio Arriba County, New Mexico. The NMED is also seeking civil penalties in excess of $100,000 to resolve these alleged air permitting violations. XTO Energy Inc. plans to meet with the NMED in an effort to resolve this matter.
Refer to the relevant portions of Note 2 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
-27-
Issuer Purchase of Equity Securities for Quarter Ended June 30, 2012
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, 2012
18,687,988
$85.03
May, 2012
21,049,962
$82.90
June, 2012
20,582,440
$81.53
60,320,390
$83.09
(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. In its most recent earnings release dated July 26, 2012, the Corporation stated that third quarter 2012 share purchases to reduce shares outstanding are anticipated to equal $5 billion. 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.
Exhibit
Description
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
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal Accounting Officer.
32.1
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief Executive Officer.
32.2
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Financial Officer.
32.3
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Accounting Officer.
Interactive Data Files.
-28-
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 2, 2012
By:
/s/ Patrick T. Mulva
Name:
Patrick T. Mulva
Title:
Vice President, Controller and
Principal Accounting Officer
-29-
INDEX TO EXHIBITS
-30-