UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
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 September 30, 2013
Common stock, without par value
4,368,513,787
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
Three and nine months ended September 30, 2013 and 2012
3
Condensed Consolidated Statement of Comprehensive Income
4
Condensed Consolidated Balance Sheet
As of September 30, 2013 and December 31, 2012
5
Condensed Consolidated Statement of Cash Flows
Nine months ended September 30, 2013 and 2012
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
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
21
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
23
Item 6. Exhibits
Signature
24
Index to Exhibits
25
2
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
Nine Months Ended
September 30,
2013
2012
Revenues and other income
Sales and other operating revenue (1)
108,390
110,989
314,818
342,348
Income from equity affiliates
3,444
3,386
10,960
11,247
Other income
538
766
1,617
12,387
Total revenues and other income
112,372
115,141
327,395
365,982
Costs and other deductions
Crude oil and product purchases
63,961
64,615
183,088
200,209
Production and manufacturing expenses
9,842
9,128
29,856
28,765
Selling, general and administrative expenses
3,150
3,468
9,536
10,555
Depreciation and depletion
4,287
4,037
12,802
11,778
Exploration expenses, including dry holes
486
494
1,385
1,388
Interest expense
52
59
161
216
Sales-based taxes (1)
7,882
8,137
22,926
24,657
Other taxes and duties
8,523
7,883
24,646
27,388
Total costs and other deductions
98,183
97,821
284,400
304,956
Income before income taxes
14,189
17,320
42,995
61,026
Income taxes
6,120
7,394
18,190
23,647
Net income including noncontrolling interests
8,069
9,926
24,805
37,379
Net income attributable to noncontrolling interests
199
356
575
2,449
Net income attributable to ExxonMobil
7,870
9,570
24,230
34,930
Earnings per common share (dollars)
1.79
2.09
5.46
7.50
Earnings per common share - assuming dilution (dollars)
Dividends per common share (dollars)
0.63
0.57
1.83
1.61
(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.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Other comprehensive income (net of income taxes)
Foreign exchange translation adjustment
1,229
1,620
(2,317)
1,298
Adjustment for foreign exchange translation (gain)/loss
included in net income
-
(119)
(4,354)
Postretirement benefits reserves adjustment
(excluding amortization)
(222)
(224)
(58)
(404)
Amortization and settlement of postretirement benefits reserves
adjustment included in net periodic benefit costs
455
454
1,353
2,083
Total other comprehensive income
1,462
1,731
(1,022)
(1,377)
Comprehensive income including noncontrolling interests
9,531
11,657
23,783
36,002
Comprehensive income attributable to
noncontrolling interests
331
541
420
1,062
Comprehensive income attributable to ExxonMobil
9,200
11,116
23,363
34,940
CONDENSED CONSOLIDATED BALANCE SHEET
Sept. 30,
Dec. 31,
Assets
Current assets
Cash and cash equivalents
5,310
9,582
Cash and cash equivalents – restricted
439
341
Notes and accounts receivable – net
33,230
34,987
Inventories
Crude oil, products and merchandise
12,829
10,836
Materials and supplies
4,038
3,706
Other current assets
5,457
5,008
Total current assets
61,303
64,460
Investments, advances and long-term receivables
37,048
34,718
Property, plant and equipment – net
240,981
226,949
Other assets, including intangibles – net
8,232
7,668
Total assets
347,564
333,795
Liabilities
Current liabilities
Notes and loans payable
13,889
3,653
Accounts payable and accrued liabilities
51,260
50,728
Income taxes payable
7,600
9,758
Total current liabilities
72,749
64,139
Long-term debt
7,404
7,928
Postretirement benefits reserves
25,319
25,267
Deferred income tax liabilities
39,506
37,570
Long-term obligations to equity companies
4,636
3,555
Other long-term obligations
22,472
23,676
Total liabilities
172,086
162,135
Commitments and contingencies (Note 2)
Equity
Common stock without par value
(9,000 million shares authorized, 8,019 million shares issued)
10,062
9,653
Earnings reinvested
381,832
365,727
Accumulated other comprehensive income
(13,051)
(12,184)
Common stock held in treasury
(3,650 million shares at Sept. 30, 2013 and
3,517 million shares at Dec. 31, 2012)
(209,598)
(197,333)
ExxonMobil share of equity
169,245
165,863
Noncontrolling interests
6,233
5,797
Total equity
175,478
171,660
Total liabilities and equity
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Changes in operational working capital, excluding cash and debt
(2,676)
3,119
Net (gain) on asset sales
(511)
(11,693)
All other items – net
286
2,363
Net cash provided by operating activities
34,706
42,946
Cash flows from investing activities
Additions to property, plant and equipment
(25,243)
(24,214)
Proceeds associated with sales of subsidiaries, property, plant and
equipment, and sales and returns of investments
871
6,850
Additional investments and advances
(3,644)
(409)
Other investing activities – net
527
1,174
Net cash used in investing activities
(27,489)
(16,599)
Cash flows from financing activities
Additions to long-term debt
206
597
Reductions in long-term debt
(15)
Additions/(reductions) in short-term debt – net
9,483
(3,506)
Cash dividends to ExxonMobil shareholders
(8,125)
(7,500)
Cash dividends to noncontrolling interests
(225)
(287)
Changes in noncontrolling interests
(1)
198
Tax benefits related to stock-based awards
Common stock acquired
(12,696)
(15,814)
Common stock sold
46
184
Net cash used in financing activities
(11,298)
(26,143)
Effects of exchange rate changes on cash
(191)
187
Increase/(decrease) in cash and cash equivalents
(4,272)
391
Cash and cash equivalents at beginning of period
12,664
Cash and cash equivalents at end of period
13,055
Supplemental Disclosures
Income taxes paid
19,871
17,895
Cash interest paid
318
387
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
Interests
Balance as of December 31, 2011
9,512
330,939
(9,123)
(176,932)
154,396
6,348
160,744
Amortization of stock-based awards
618
Tax benefits related to stock-based
awards
252
(737)
(1,450)
(2,187)
Net income for the period
Dividends – common shares
(7,787)
Other comprehensive income
10
(1,387)
Acquisitions, at cost
(31)
(15,845)
Dispositions
558
Balance as of September 30, 2012
9,645
358,369
(9,113)
(192,188)
166,713
5,642
172,355
Balance as of December 31, 2012
593
200
(384)
242
(142)
(8,350)
(867)
(155)
(12,697)
431
Balance as of September 30, 2013
Nine Months Ended September 30, 2013
Nine Months Ended September 30, 2012
Common Stock Share Activity
Issued
Outstanding
(millions of shares)
Balance as of December 31
8,019
(3,517)
4,502
(3,285)
4,734
Acquisitions
(141)
(185)
Balance as of September 30
(3,650)
4,369
(3,460)
4,559
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 2012 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. Prior data has been reclassified in certain cases to conform to the current presentation basis.
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 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 September 30, 2013, for guarantees relating to notes, loans and performance under contracts. Where guarantees for environmental remediation and other similar matters do not include a stated cap, the amounts reflect management’s estimate of the maximum potential exposure. 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.
As of September 30, 2013
Company
Third Party
Obligations(1)
Obligations
Guarantees
Debt-related
3,002
3,054
3,572
4,774
8,346
6,574
4,826
11,400
(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 September 30, 2013, 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. In June 2013, the Contractors filed a lawsuit against NNPC in the Nigerian federal high court in order to preserve their ability to seek enforcement of the PSC in the courts if necessary. 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
Cumulative
Post-
Foreign
retirement
Exchange
Benefits
ExxonMobil Share of Accumulated Other
Translation
Reserves
Comprehensive Income
Adjustment
4,168
(13,291)
Current period change excluding amounts reclassified
from accumulated other comprehensive income
1,159
(351)
808
Amounts reclassified from accumulated other
comprehensive income
(2,603)
1,805
(798)
Total change in accumulated other comprehensive income
(1,444)
1,454
2,724
(11,837)
2,410
(14,594)
(2,118)
(52)
(2,170)
1,303
1,251
292
(13,343)
Amounts Reclassified Out of Accumulated Other
Comprehensive Income - Before-tax Income/(Expense)
Foreign exchange translation gain/(loss) included in net income
(Statement of Income line: Other income)
119
4,354
adjustment included in net periodic benefit costs (1)
(648)
(654)
(1,951)
(3,215)
(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost. (See Note 5 – Pension and Other Postretirement Benefits for additional details.)
Income Tax (Expense)/Credit For
Components of Other Comprehensive Income
(16)
(55)
100
(92)
85
28
190
(193)
(200)
(598)
(1,132)
(124)
(470)
(1,034)
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)
4,395
4,597
4,438
4,657
Earnings per common share - assuming dilution
Effect of employee stock-based awards
outstanding - assuming dilution
11
5. Pension and Other Postretirement Benefits
Pension Benefits - U.S.
Components of net benefit cost
Service cost
173
581
489
Interest cost
188
205
562
615
Expected return on plan assets
(209)
(196)
(626)
(590)
Amortization of actuarial loss/(gain) and prior
service cost
165
146
493
436
Net pension enhancement and
curtailment/settlement cost
182
123
546
369
Net benefit cost
532
451
1,556
1,319
Pension Benefits - Non-U.S.
170
156
521
490
265
279
803
859
(278)
(269)
(841)
(831)
239
228
724
719
curtailment/settlement cost (1)
1
109
1,538
397
503
1,209
2,775
Other Postretirement Benefits
44
31
87
89
264
293
(10)
(9)
(30)
61
48
186
159
543
519
(1) Non-U.S. net pension enhancement and curtailment/settlement cost for the nine months ended September 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”.
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, excluding capitalized lease obligations, was $7,318 million at September 30, 2013, and $8,027 million at December 31, 2012, as compared to recorded book values of $7,014 million at September 30, 2013, and $7,497 million at December 31, 2012.
The fair value of long-term debt by hierarchy level at September 30, 2013, is: Level 1 $5,984 million; Level 2 $1,270 million; and Level 3 $64 million. Level 1 represents quoted prices in active markets. Level 2 includes debt whose fair value is based upon a publicly available index. Level 3 involves using internal data augmented by relevant market indicators if available.
During the third quarter, the Corporation established a $5.0 billion committed line of credit in the U.S., and reduced its previous U.S. line of credit from $2.7 billion at December 31, 2012 to $0.6 billion at September 30, 2013. The committed line of credit was unused as of September 30, 2013.
12
7. Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
United States
1,050
633
3,005
2,321
Non-U.S.
5,663
5,340
17,050
19,812
Downstream
315
1,441
1,602
2,878
Non-U.S. (1)
277
1,749
931
8,544
Chemical
680
565
1,947
1,492
345
225
971
1,448
All other
(460)
(383)
(1,276)
(1,565)
Corporate total
Nine months ended September 30, 2012, includes the gain associated with the Japan restructuring 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)
3,416
2,718
9,516
8,108
5,829
6,755
18,931
21,319
32,032
31,621
92,995
92,991
57,179
60,763
164,066
190,590
3,873
3,493
11,479
11,167
6,058
5,634
17,813
18,157
18
16
(2)
Includes sales-based taxes
INTERSEGMENT REVENUE
2,015
1,935
6,324
6,538
12,505
11,105
35,097
35,171
5,056
5,422
15,312
16,214
14,099
15,309
39,263
47,215
2,971
3,301
9,157
9,429
2,352
2,292
6,407
7,565
66
75
204
212
13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Third Quarter
First Nine Months
Earnings (U.S. GAAP)
Corporate and financing
Net Income attributable to ExxonMobil (U.S. GAAP)
References in this discussion to corporate earnings mean net income attributable to ExxonMobil (U.S. GAAP) from the consolidated income statement. Unless otherwise indicated, references to earnings, 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 THIRD QUARTER 2013 RESULTS
ExxonMobil’s results for the third quarter of 2013 reflect our continued progress across a diverse set of profitable growth opportunities, which positions us well to deliver shareholder value. We maintain a long-term perspective on our business with a relentless focus on operational excellence and disciplined investing.
Third quarter earnings were $7.9 billion, down 18 percent from the third quarter of 2012. Production of oil and natural gas increased from a year earlier as new projects were brought on line and maintenance-related downtime decreased. Significantly weaker refining margins as a result of increased industry capacity negatively impacted ExxonMobil’s Downstream earnings.
In the third quarter, capital and exploration expenditures were $10.5 billion, in line with anticipated spending plans.
The Corporation distributed $5.8 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding.
Earnings in the first nine months of 2013 of $24,230 million decreased $10,700 million from 2012.
Earnings per share – assuming dilution for the first nine months of 2013 decreased 27 percent to $5.46.
Upstream earnings
6,713
5,973
20,055
22,133
Upstream earnings were $6,713 million in the third quarter of 2013, up $740 million from the third quarter of 2012. Higher liquids and natural gas realizations increased earnings by $440 million. Production volume and mix effects increased earnings by $20 million. All other items, including favorable tax and foreign exchange impacts, partly offset by higher operating expenses, increased earnings by $280 million.
On an oil-equivalent basis, production increased 1.5 percent from the third quarter of 2012. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production increased 2.7 percent.
Liquids production totaled 2,199 kbd (thousands of barrels per day), up 83 kbd from the third quarter of 2012. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up 5.3 percent, as lower downtime and project ramp-up in Canada and Nigeria were partially offset by field decline.
Third quarter natural gas production was 10,914 mcfd (millions of cubic feet per day), down 147 mcfd from 2012. Excluding the impacts of entitlement volumes and divestments, natural gas production was down 0.3 percent, as field decline was mostly offset by lower downtime and project ramp-up.
Earnings from U.S. Upstream operations were $1,050 million, $417 million higher than the third quarter of 2012. Non‑U.S. Upstream earnings were $5,663 million, up $323 million from the prior year.
Upstream earnings in the first nine months of 2013 were $20,055 million, down $2,078 million from 2012. Higher gas realizations, partially offset by lower liquids realizations, increased earnings by $350 million. Lower sales volumes decreased earnings by $400 million. All other items, including lower net gains from asset sales, mainly in Angola, and higher expenses, reduced earnings by $2.0 billion.
On an oil-equivalent basis, production was down 1.4 percent compared to the same period in 2012. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up 0.4 percent.
Liquids production of 2,192 kbd increased 13 kbd compared with 2012. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up 1.3 percent, as project ramp-up and lower downtime were partially offset by field decline.
Natural gas production of 11,818 mcfd decreased 431 mcfd from 2012. Excluding the impacts of entitlement volumes and divestments, natural gas production was down 0.8 percent, as field decline was partially offset by lower downtime, higher demand, and project ramp-up.
Earnings in the first nine months of 2013 from U.S. Upstream operations were $3,005 million, up $684 million from 2012. Earnings outside the U.S. were $17,050 million, down $2,762 million from the prior year.
15
Upstream additional information
(thousands of barrels daily)
Volumes reconciliation (Oil-equivalent production)(1)
3,960
4,220
Entitlements - Net Interest
(13)
(51)
Entitlements - Price / Spend
(8)
Quotas
Divestments
(28)
(26)
Net growth
107
4,018
4,162
(1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels.
Listed below are descriptions of ExxonMobil’s entitlement volume effects. These descriptions are provided to facilitate understanding of the terms.
Production Sharing Contract (PSC) Net Interest Reductionsare contractual reductions in ExxonMobil’s share of production volumes covered by PSCs. These reductions typically occur when cumulative investment returns or production volumes achieve thresholds as specified in the PSCs. Once a net interest reduction has occurred, it typically will not be reversed by subsequent events, such as lower crude oil prices.
Price and Spend Impacts on Volumes are fluctuations in ExxonMobil’s share of production volumes caused by changes in oil and gas prices or spending levels from one period to another. For example, at higher prices, fewer barrels are required for ExxonMobil to recover its costs. According to the terms of contractual arrangements or government royalty regimes, price or spending variability can increase or decrease royalty burdens and/or volumes attributable to ExxonMobil. These effects generally vary from period to period with field spending patterns or market prices for crude oil or natural gas.
Downstream earnings
592
3,190
2,533
11,422
Third quarter 2013 Downstream earnings were $592 million, down $2,598 million from the third quarter of 2012. Weaker margins, mainly in refining, decreased earnings by $2.4 billion. Volume and mix effects increased earnings by $150 million. All other items, including lower gains on asset sales and foreign exchange impacts, decreased earnings by $380 million. Petroleum product sales of 6,031 kbd were 74 kbd lower than last year's third quarter reflecting divestment-related impacts.
Earnings from the U.S. Downstream were $315 million, down $1,126 million from the third quarter of 2012. Non‑U.S. Downstream earnings of $277 million were $1,472 million lower than last year.
Downstream earnings in the first nine months of 2013 of $2,533 million decreased $8,889 million from 2012 driven by the absence of the $5.3 billion gain associated with the Japan restructuring. Lower margins, mainly refining, decreased earnings by $2.2 billion. Volume and mix effects decreased earnings by $430 million. All other items, including higher operating expenses, unfavorable foreign exchange impacts, and lower divestments, decreased earnings by $970 million. Petroleum product sales of 5,851 kbd decreased 346 kbd from 2012.
U.S. Downstream earnings in the first nine months of 2013 were $1,602 million, down $1,276 million from 2012. Non‑U.S. Downstream earnings were $931 million, a decrease of $7,613 million from last year.
Chemical earnings
1,025
790
2,918
2,940
Third quarter 2013 Chemical earnings of $1,025 million were $235 million higher than the third quarter of 2012 due primarily to higher commodity margins. Third quarter prime product sales of 6,245 kt (thousands of metric tons) were 298 kt higher than last year's third quarter.
Chemical earnings in the first nine months of 2013 of $2,918 million were $22 million lower than 2012. The absence of the gain associated with the Japan restructuring decreased earnings by $630 million. Higher margins increased earnings by $520 million, while volume and mix effects increased earnings by $80 million. All other items increased earnings by $10 million. Prime product sales of 17,986 kt were down 270 kt from 2012.
Corporate and financing earnings
Corporate and financing expenses of $460 million in the third quarter of 2013 were up $77 million from the third quarter of 2012, reflecting unfavorable tax impacts.
Corporate and financing expenses were $1,276 million in the first nine months of 2013, down $289 million from 2012, as favorable tax impacts were partially offset by the absence of the Japan restructuring gain.
17
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by/(used in)
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)
5,749
13,261
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
13,431
13,442
Proceeds associated with sales of subsidiaries, property,
plant & equipment, and sales and returns of investments
607
13,637
14,049
35,577
49,796
Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider proceeds associated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities, including shareholder distributions.
Cash provided by operating activities totaled $34.7 billion for the first nine months of 2013, $8.2 billion lower than 2012. The major source of funds was net income including noncontrolling interests of $24.8 billion, a decrease of $12.6 billion from the prior year period. The adjustment for the noncash provision of $12.8 billion for depreciation and depletion increased by $1.0 billion. Changes in operational working capital decreased cash flows by $2.7 billion in 2013, primarily due to an increase in inventory. Changes in operational working capital increased cash flows by $3.1 billion in 2012 primarily due to changes in payable balances partially offset by an increase in inventory. Net gain on asset sales was $0.5 billion in 2013 and $11.7 billion in 2012. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 6.
Investing activities for the first nine months of 2013 used net cash of $27.5 billion, an increase of $10.9 billion compared to the prior year. Spending for additions to property, plant and equipment of $25.2 billion was $1.0 billion higher than 2012. Proceeds from asset sales of $0.9 billion decreased $6.0 billion. Additional investment and advances increased $3.2 billion to $3.6 billion reflecting the impact of the acquisition of Celtic Exploration Ltd.
Cash flow from operations and asset sales in the first nine months of 2013 of $35.6 billion, including asset sales of $0.9 billion, decreased $14.2 billion. This reflects the change in cash flows from operating activities described above and the lower proceeds from asset sales, driven by the 2012 Japan restructuring.
Net cash used in financing activities of $11.3 billion in the first nine months of 2013 was $14.8 billion lower than 2012, reflecting short-term debt issuance in 2013, short-term debt reduction in 2012, and a lower level of purchases of shares of ExxonMobil stock in 2013.
During the third quarter of 2013, Exxon Mobil Corporation purchased 34 million shares of its common stock for the treasury at a gross cost of $3.0 billion. These purchases were to reduce the number of shares outstanding. Shares outstanding decreased from 4,402 million at the end of the second quarter to 4,369 million at the end of the third quarter 2013. 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 to shareholders a total of $5.8 billion in the third quarter of 2013 through dividends and share purchases to reduce shares outstanding.
Total cash and cash equivalents of $5.7 billion at the end of the third quarter of 2013 compared to $13.3 billion at the end of the third quarter of 2012.
Total debt of $21.3 billion compared to $11.6 billion at year-end 2012. The Corporation's debt to total capital ratio was 10.8 percent at the end of the third quarter of 2013 compared to 6.3 percent at year-end 2012.
Although the Corporation issues long-term debt from time to time, the Corporation currently expects to cover its near-term financial requirements predominantly with internally generated funds, supplemented by its revolving commercial paper program. During the third quarter, the Corporation established a $5.0 billion committed line of credit in the U.S., and reduced its previous U.S. line of credit from $2.7 billion at December 31, 2012 to $0.6 billion at September 30, 2013. The committed line of credit was unused as of September 30, 2013.
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
%
47
43
Sales-based taxes
All other taxes and duties
9,252
8,652
27,019
29,891
23,254
24,183
68,135
78,195
Income, sales-based and all other taxes and duties totaled $23.3 billion for the third quarter of 2013, a decrease of $0.9 billion from 2012. Income tax expense decreased by $1.3 billion to $6.1 billion with the impact of lower earnings partially offset by the higher effective tax rate. The effective income tax rate was 48 percent compared to 47 percent in the prior year period. Sales-based taxes and all other taxes and duties increased by $0.3 billion to $17.1 billion.
Income, sales-based and all other taxes and duties totaled $68.1 billion for the first nine months of 2013, a decrease of $10.1 billion from 2012. Income tax expense decreased by $5.5 billion to $18.2 billion with the impact of lower earnings partially offset by the higher effective tax rate. The effective income tax rate was 48 percent compared to 43 percent in the prior year due to the absence of the lower effective tax rate on divestments. Sales-based and all other taxes decreased by $4.6 billion reflecting the Japan restructuring.
19
CAPITAL AND EXPLORATION EXPENDITURES
Upstream (including exploration expenses)
9,475
8,248
29,599
24,720
556
583
1,740
1,591
509
350
1,215
1,031
10,546
9,183
32,565
27,356
Capital and exploration expenditures in the third quarter of 2013 were $10.5 billion, up 15 percent from third quarter of 2012, in line with anticipated spending plans.
Capital and exploration expenditures in the first nine months of 2013 were $32.6 billion, up 19 percent from the first nine months of 2012, in line with anticipated spending plans and included $3.1 billion for the acquisition of Celtic Exploration Ltd. The Corporation anticipates an investment profile of about $38 billion per year for the next several years. Actual spending could vary depending on the progress of individual projects and property acquisitions.
20
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 2012 Form 10-K. We assume no duty to update these statements as of any future date.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
Information about market risks for the nine months ended September 30, 2013, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2012.
As indicated in the certifications in Exhibit 31 of this report, the Corporation’s Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer have evaluated the Corporation’s disclosure controls and procedures as of September 30, 2013. 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.
On September 10, 2013, the Pennsylvania Office of Attorney General filed eight criminal charges against XTO Energy Inc. (XTO) related to the discharge of fluids at the Marquardt Well Site of XTO in Penn Township, Pennsylvania, a matter which the Corporation previously reported in its 2010 Form 10-K and its Forms 10-Q for the third quarter of 2012 and the second quarter of 2013. The charges included five counts of unlawful conduct under the Clean Streams Act and three counts under the Solid Waste Management Act. XTO believes criminal charges are unwarranted and plans to vigorously challenge the charges.
On August 23, 2013, the Louisiana Department of Environmental Quality (LDEQ) accepted a settlement proposal of ExxonMobil Refining and Supply Company and ExxonMobil Chemical Company, both divisions of Exxon Mobil Corporation (the “Corporation”), resolving a number of alleged exceedances of permit and regulatory limits for certain compounds reported from January 1, 2008, to March 31, 2013, as well as Consolidated Compliance Orders & Notices of Potential Penalties issued by LDEQ from 2008 through 2012 to the Baton Rouge Refinery (BRRF), the Baton Rouge Chemical Plant, the Baton Rouge Anchorage Tank Farm and the Baton Rouge Resins Finishing Plant, including the BRRF matter previously reported in the Corporation’s Form 10-Q for the third quarter of 2009. The Corporation had previously self-disclosed these matters to the LDEQ along with a proposed number of specific corrective action steps. The settlement terms include payment of a $300,000 penalty, an agreement to complete certain on-site improvement projects valued at $1,000,000, Beneficial Environmental Projects valued at $1,029,000 and a Stipulated Penalty Agreement to address any future environmental non-compliance. The settlement will be the subject of public notice and comment for 45 days before becoming final.
On October 2, 2013, ExxonMobil Oil Corporation’s Joliet Refinery in Channahon, Illinois, received a Notice from the United States Environmental Protection Agency (USEPA) alleging that the Refinery was out of compliance with several requirements of a Consent Decree entered into with the USEPA (United States v. Exxon Mobil Corp., CA No. 05-C-5809 (N.D. Ill.)) in December 2005 and reported in the Corporation’s Form 10-Q for the third quarter of 2005. The USEPA alleges violations of the requirements for continuous emissions and opacity monitoring, leak detection and repair requirements, and prohibitions against using emission reduction credits from Consent Decree projects in permitting. USEPA has indicated that it plans to propose penalties up to $1,242,500. ExxonMobil will contest the proposed penalties.
On October 3, 2013, ExxonMobil Oil Corporation’s Joliet Refinery received a Notice and Finding of Violation from the USEPA alleging that Joliet Refinery flares were modified and thereby triggered New Source Performance Standards (NSPS) requirements for refineries, and that the flares do not comply with federal and state combustion efficiency standards. The Notice also alleged that certain tanks at the Refinery were modified and triggered NSPS for tanks, that Prevention of Significant Deterioration Program permitting requirements were not met for projects involving the Refinery’s Fluid Catalytic Cracking Unit, and other leak detection and repair violations. Penalties sought will likely exceed $100,000.
In July 2013, ExxonMobil Oil Corporation’s Torrance Refinery in California confirmed and then self-reported that it may have failed to measure and report flow from parallel flare lines at the Refinery to the South Coast Air Quality Management District (AQMD) as required by AQMD Rule 1118. The Refinery is currently working with the AQMD to resolve the matter, but it is anticipated that a civil penalty in excess of $100,000 will be assessed.
Regarding the Notice of Enforcement and Proposed Agreed Order issued on January 30, 2013, by the Texas Commission on Environmental Quality (TCEQ) concerning three emission events in May and June 2012 at ExxonMobil Oil Corporation’s Beaumont Refinery previously reported in the Corporation’s Form 10-Q for the first quarter of 2013, the parties have agreed upon a full settlement of the enforcement action and a penalty of $126,250, which will become final after endorsement by the TCEQ at an upcoming agenda meeting.
In the enforcement action filed by the United States, on behalf of the USEPA, and the State of Arkansas, on behalf of the Arkansas Department of Environmental Quality (ADEQ), against ExxonMobil Pipeline Company (EMPCo) related to the discharge of crude oil from the Pegasus Pipeline in Mayflower, Faulkner County, Arkansas, previously reported in the Corporation’s Forms 10-Q for the first and second quarters of 2013, the court has set a trial date of February 15, 2015.
On September 16, 2013, the United States Department of Justice (USDOJ), based on a referral from the USEPA, advised that a civil enforcement investigation had been opened into the discharge of crude oil from the EMPCo’s North Line Pipeline near Torbert in Pointe Coupee Parish, Louisiana, on April 28, 2012. The USDOJ is investigating whether the discharge of oil contaminated waterways resulting in violations of the Clean Water Act. Penalties sought likely will be in excess of $100,000.
Refer to the relevant portions of Note 2 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
Issuer Purchase of Equity Securities for Quarter Ended September 30, 2013
Total Number of
Maximum Number
Shares Purchased
of Shares that May
Total Number
Average
as Part of Publicly
Yet Be Purchased
of Shares
Price Paid
Announced Plans
Under the Plans or
Period
Purchased
per Share
or Programs
Programs
July 2013
13,277,502
$93.24
August 2013
10,625,871
$88.98
September 2013
9,787,418
$87.98
33,690,791
$90.37
(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 October 31, 2013, the Corporation stated that fourth quarter 2013 share purchases to reduce shares outstanding are anticipated to equal $3 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.
101
Interactive Data Files.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 5, 2013
By:
/s/ PATRICK T. MULVA
Patrick T. Mulva
Vice President, Controller and
Principal Accounting Officer
INDEX TO EXHIBITS