UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
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 March 31, 2014
Common stock, without par value
4,294,374,730
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
Three months ended March 31, 2014 and 2013
3
Condensed Consolidated Statement of Comprehensive Income
4
Condensed Consolidated Balance Sheet
As of March 31, 2014 and December 31, 2013
5
Condensed Consolidated Statement of Cash Flows
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
13
Item 3. Quantitative and Qualitative Disclosures About Market Risk
18
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
20
Item 6. Exhibits
Signature
21
Index to Exhibits
22
2
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
March 31,
2014
2013
Revenues and other income
Sales and other operating revenue (1)
101,760
103,378
Income from equity affiliates
4,108
4,418
Other income
905
561
Total revenues and other income
106,773
108,357
Costs and other deductions
Crude oil and product purchases
58,314
59,449
Production and manufacturing expenses
10,088
9,736
Selling, general and administrative expenses
3,132
3,118
Depreciation and depletion
4,192
4,110
Exploration expenses, including dry holes
317
445
Interest expense
66
24
Sales-based taxes (1)
7,416
7,492
Other taxes and duties
8,021
7,945
Total costs and other deductions
91,546
92,319
Income before income taxes
15,227
16,038
Income taxes
5,857
6,277
Net income including noncontrolling interests
9,370
9,761
Net income attributable to noncontrolling interests
270
261
Net income attributable to ExxonMobil
9,100
9,500
Earnings per common share (dollars)
2.10
2.12
Earnings per common share - assuming dilution (dollars)
Dividends per common share (dollars)
0.63
0.57
(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
(786)
(1,209)
Adjustment for foreign exchange translation (gain)/loss included in net income
82
-
Postretirement benefits reserves adjustment (excluding amortization)
(84)
65
Amortization and settlement of postretirement benefits reserves adjustment
included in net periodic benefit costs
316
444
Unrealized change in fair value of stock investments
(54)
Total other comprehensive income
(526)
(700)
Comprehensive income including noncontrolling interests
8,844
9,061
Comprehensive income attributable to noncontrolling interests
59
144
Comprehensive income attributable to ExxonMobil
8,785
8,917
CONDENSED CONSOLIDATED BALANCE SHEET
Mar. 31,
Dec. 31,
Assets
Current assets
Cash and cash equivalents
5,601
4,644
Cash and cash equivalents – restricted
204
269
Notes and accounts receivable – net
32,480
33,152
Inventories
Crude oil, products and merchandise
14,439
12,117
Materials and supplies
4,129
4,018
Other current assets
5,011
5,108
Total current assets
61,864
59,308
Investments, advances and long-term receivables
37,169
36,328
Property, plant and equipment – net
245,897
243,650
Other assets, including intangibles – net
8,103
7,522
Total assets
353,033
346,808
Liabilities
Current liabilities
Notes and loans payable
9,223
15,808
Accounts payable and accrued liabilities
52,109
48,085
Income taxes payable
8,776
7,831
Total current liabilities
70,108
71,724
Long-term debt
12,144
6,891
Postretirement benefits reserves
20,215
20,646
Deferred income tax liabilities
40,783
40,530
Long-term obligations to equity companies
4,877
4,742
Other long-term obligations
22,015
21,780
Total liabilities
170,142
166,313
Commitments and contingencies (Note 2)
Equity
Common stock without par value
(9,000 million shares authorized, 8,019 million shares issued)
10,276
10,077
Earnings reinvested
393,800
387,432
Accumulated other comprehensive income
(11,040)
(10,725)
Common stock held in treasury
(3,725 million shares at Mar. 31, 2014 and
3,684 million shares at Dec. 31, 2013)
(216,638)
(212,781)
ExxonMobil share of equity
176,398
174,003
Noncontrolling interests
6,493
6,492
Total equity
182,891
180,495
Total liabilities and equity
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Changes in operational working capital, excluding cash and debt
2,452
2,321
All other items – net
(911)
(2,600)
Net cash provided by operating activities
15,103
13,592
Cash flows from investing activities
Additions to property, plant and equipment
(7,328)
(7,494)
Proceeds associated with sales of subsidiaries, property, plant and
equipment, and sales and returns of investments
1,111
360
Additional investments and advances
(457)
(3,032)
Other investing activities – net
368
112
Net cash used in investing activities
(6,306)
(10,054)
Cash flows from financing activities
Additions to long-term debt
5,500
Additions/(reductions) in short-term debt – net
(6,668)
1,587
Cash dividends to ExxonMobil shareholders
(2,732)
(2,561)
Cash dividends to noncontrolling interests
(58)
(105)
Changes in noncontrolling interests
(1)
Common stock acquired
(3,860)
(5,621)
Common stock sold
Net cash used in financing activities
(7,816)
(6,694)
Effects of exchange rate changes on cash
(24)
(212)
Increase/(decrease) in cash and cash equivalents
957
(3,368)
Cash and cash equivalents at beginning of period
9,582
Cash and cash equivalents at end of period
6,214
Supplemental Disclosures
Income taxes paid
4,145
7,220
Cash interest paid
87
105
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, 2012
9,653
365,727
(12,184)
(197,333)
165,863
5,797
171,660
Amortization of stock-based awards
212
Tax benefits related to stock-based
awards
188
(388)
241
(147)
Net income for the period
Dividends – common shares
(2,666)
Other comprehensive income
(583)
(117)
Acquisitions, at cost
(5,622)
Dispositions
391
Balance as of March 31, 2013
9,665
372,666
(12,767)
(202,563)
167,001
6,076
173,077
Balance as of December 31, 2013
201
(5)
(2,790)
(315)
(211)
Balance as of March 31, 2014
Three Months Ended March 31, 2014
Three Months Ended March 31, 2013
Common Stock Share Activity
Issued
Outstanding
(millions of shares)
Balance as of December 31
8,019
(3,684)
4,335
(3,517)
4,502
Acquisitions
(41)
(63)
Balance as of March 31
(3,725)
4,294
(3,573)
4,446
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 2013 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 March 31, 2014, 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 March 31, 2014
Company
Third Party
Obligations(1)
Obligations
Guarantees
Debt-related
3,187
46
3,233
4,309
4,437
8,746
7,496
4,483
11,979
(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 March 31, 2014, 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
Unrealized
Exchange
Benefits
Change in
ExxonMobil Share of Accumulated Other
Translation
Reserves
Comprehensive Income
Adjustment
Investments
2,410
(14,594)
Current period change excluding amounts reclassified
from accumulated other comprehensive income
(1,088)
78
(1,010)
Amounts reclassified from accumulated other
comprehensive income
427
Total change in accumulated other comprehensive income
505
1,322
(14,089)
(846)
(9,879)
(555)
(93)
(702)
305
387
(473)
(1,319)
(9,667)
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)
(82)
Amortization and settlement of postretirement benefits reserves
adjustment included in net periodic benefit costs (1)
(451)
(644)
(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
(32)
37
50
(19)
adjustment included in net periodic benefit costs
(135)
(200)
29
(88)
(182)
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)
4,328
4,485
Earnings per common share (dollars) (1)
(1) The calculation of earnings per common share and earnings per common share – assuming dilution are the same in each period shown.
5. Pension and Other Postretirement Benefits
Components of net benefit cost
Pension Benefits - U.S.
Service cost
177
187
Interest cost
202
Expected return on plan assets
(209)
Amortization of actuarial loss/(gain) and prior service cost
104
164
Net pension enhancement and curtailment/settlement cost
167
Net benefit cost
395
496
Pension Benefits - Non-U.S.
150
178
285
277
(298)
(292)
192
250
329
413
Other Postretirement Benefits
36
92
91
(9)
(10)
43
63
163
180
11
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 $12,086 million at March 31, 2014, and $6,787 million at December 31, 2013, as compared to recorded book values of $11,786 million at March 31, 2014, and $6,516 million at December 31, 2013. The increase in the estimated fair value and book value of long-term debt reflects the Corporation’s issuance of $5,500 million of long-term debt in the first quarter of 2014. The $5,500 million of long-term debt is comprised of $750 million of floating-rate notes due in 2017, $500 million of floating-rate notes due in 2019, $1,500 million of 0.921% notes due in 2017, $1,750 million of 1.819% notes due in 2019, and $1,000 million of 3.176% notes due in 2024.
The fair value of long-term debt by hierarchy level at March 31, 2014, is: Level 1 $11,142 million; Level 2 $880 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.
7. Disclosures about Segments and Related Information
Earnings After Income Tax
Upstream
United States
1,244
859
Non-U.S.
6,539
6,178
Downstream
623
1,039
190
506
Chemical
679
752
385
All other
(543)
(219)
Corporate total
Sales and Other Operating Revenue (1)
4,322
2,872
5,827
6,160
30,412
30,998
51,288
53,407
3,876
3,883
6,032
6,050
(1) Includes sales-based taxes
Intersegment Revenue
2,063
2,275
10,781
11,387
4,909
5,170
12,842
13,517
2,634
3,227
2,267
2,062
67
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
First Three Months
Earnings (U.S. GAAP)
Corporate and financing
Net Income attributable to ExxonMobil
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 FIRST QUARTER 2014 RESULTS
ExxonMobil’s first quarter earnings and cash flow reflect the company’s continuing focus on delivering profitable growth and creating long-term shareholder value. Strong performance in the Upstream benefitted from improved production mix and increased unit profitability.
First quarter 2014 earnings were $9.1 billion, down 4 percent from the first quarter of 2013. Upstream earnings were $7.8 billion, up 11 percent from the previous year.
Capital and exploration expenditures for the first quarter were $8.4 billion, down 28 percent from the first quarter of 2013.
The Corporation distributed $5.7 billion to shareholders in the first quarter through dividends and share purchases to reduce shares outstanding.
Upstream earnings
7,783
7,037
Upstream earnings were $7,783 million in the first three months of 2014, up $746 million from the first quarter of 2013. Higher natural gas realizations, partially offset by lower liquids realizations, increased earnings by $410 million. Production volume and mix effects increased earnings by $20 million. All other items, including asset management impacts, increased earnings by $320 million.
On an oil-equivalent basis, production decreased 5.6 percent from the first quarter of 2013. Excluding the impact of the expiry of the Abu Dhabi onshore concession, production decreased 2.9 percent.
Liquids production totaled 2,148 kbd (thousands of barrels per day), down 45 kbd from the first quarter of 2013. The Abu Dhabi onshore concession expiry reduced volumes by 118 kbd. Excluding this impact, liquids production was up 3.3 percent, driven by project ramp-up, mainly at Kearl, and lower downtime.
First quarter natural gas production was 12,016 mcfd (millions of cubic feet per day), down 1,197 mcfd from 2013, primarily due to lower demand.
Earnings from U.S. Upstream operations were $1,244 million, $385 million higher than the first quarter of 2013. Non-U.S. Upstream earnings were $6,539 million, up $361 million from the prior year.
First Quarter
Upstream additional information
(thousands of barrels daily)
Volumes reconciliation (Oil-equivalent production)(1)
4,395
Entitlements - Net Interest
(3)
Entitlements - Price / Spend
(49)
Quotas
Divestments
(20)
United Arab Emirates Onshore Concession Expiry
(118)
Net Growth
4,151
(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
813
1,545
For the first three months, Downstream earnings were $813 million, down $732 million from the first quarter of 2013. Weaker margins, mainly in refining, decreased earnings by $740 million. Volume and mix effects increased earnings by $80 million. All other items decreased earnings by a net $70 million. Petroleum product sales of 5,817 kbd were 62 kbd higher than last year's first quarter.
Earnings from the U.S. Downstream were $623 million, down $416 million from the first quarter of 2013. Non-U.S. Downstream earnings of $190 million were $316 million lower than last year.
14
Chemical earnings
1,047
1,137
Chemical earnings of $1,047 million for the first three months were $90 million lower than the first quarter of 2013. Weaker margins decreased earnings by $90 million, while volume and mix effects increased earnings by $40 million. All other items decreased earnings by $40 million. First quarter prime product sales of 6,128 kt (thousands of metric tons) were 218 kt higher than last year's first quarter, driven by increased Singapore production.
Corporate and financing earnings
Corporate and financing expenses were $543 million for the first three months of 2014, up $324 million from the first quarter of 2013, due primarily to the absence of favorable tax impacts.
15
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)
376
Total cash and cash equivalents (at end of period)
5,805
6,590
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
Proceeds associated with sales of subsidiaries, property, plant & equipment,
and sales and returns of investments
16,214
13,952
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 $15.1 billion for the first three months of 2014, $1.5 billion higher than 2013. The major source of funds was net income including noncontrolling interests of $9.4 billion, a decrease of $0.4 billion from the prior year period. The adjustment for the noncash provision of $4.2 billion for depreciation and depletion increased by $0.1 billion. Changes in operational working capital added to cash flows in both periods. All other items net decreased cash by $0.9 billion in 2014 and by $2.6 billion in 2013. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 6.
Investing activities for the first three months of 2014 used net cash of $6.3 billion, a decrease of $3.7 billion compared to the prior year. Spending for additions to property, plant and equipment of $7.3 billion was $0.2 billion lower than 2013. Proceeds from asset sales of $1.1 billion increased $0.8 billion. Additional investment and advances decreased $2.6 billion to $0.5 billion reflecting the absence of the 2013 acquisition of Celtic Exploration Ltd.
Cash flow from operations and asset sales in the first quarter of 2014 of $16.2 billion, including asset sales of $1.1 billion, increased $2.3 billion from the comparable 2013 period.
During the first quarter of 2014, the Corporation issued $5.5 billion of long-term debt and used the proceeds to reduce short-term debt. Net cash used in financing activities of $7.8 billion in the first quarter of 2014 was $1.1 billion higher than 2013 reflecting total debt reduction in 2014 and short-term debt issuance in 2013, partially offset by a lower level of purchases of shares of ExxonMobil stock in 2014.
During the first quarter of 2014, Exxon Mobil Corporation purchased 40.5 million shares of its common stock for the treasury at a gross cost of $3.9 billion. These purchases included $3 billion to reduce the number of shares outstanding with the balance used to acquire shares in conjunction with the company’s benefit plans and programs. Shares outstanding decreased from 4,335 million at year-end 2013 to 4,294 million at the end of the first quarter 2014. 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.
16
The Corporation distributed to shareholders a total of $5.7 billion in the first quarter of 2014 through dividends and share purchases to reduce shares outstanding.
Total cash and cash equivalents of $5.8 billion at the end of the first quarter of 2014 compared to $6.6 billion at the end of the first quarter of 2013.
Total debt of $21.4 billion compared to $22.7 billion at year-end 2013. The Corporation's debt to total capital ratio was 10.5 percent at the end of the first quarter of 2014 compared to 11.2 percent at year-end 2013.
While 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.
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
45
%
Sales-based taxes
All other taxes and duties
8,857
8,781
22,130
22,550
Income, sales-based and all other taxes and duties totaled $22.1 billion for the first quarter of 2014, a decrease of $0.4 billion from 2013. Income tax expense decreased by $0.4 billion to $5.9 billion reflecting lower pre-tax income and a lower effective tax rate. The effective income tax rate was 45 percent compared to 46 percent in the prior year period. Sales-based taxes and all other taxes and duties were flat at $16.3 billion.
CAPITAL AND EXPLORATION EXPENDITURES
Upstream (including exploration expenses)
7,264
10,847
540
609
630
8,436
11,775
Capital and exploration expenditures in the first quarter of 2014 were $8.4 billion, down 28 percent from first quarter of 2013, reflecting the absence of the $3.1 billion Celtic Exploration Ltd. acquisition. The Corporation anticipates an average investment profile of about $37 billion per year for the next several years. Actual spending could vary depending on the progress of individual projects and property acquisitions.
17
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 2013 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 three months ended March 31, 2014, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2013.
As indicated in the certifications in Exhibit 31 of this report, the Corporation’s Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer have evaluated the Corporation’s disclosure controls and procedures as of March 31, 2014. 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.
Regarding the administrative orders issued by the United States Environmental Protection Agency (USEPA) to XTO Energy Inc. (XTO) for alleged violations of the Clean Water Act at three XTO locations in West Virginia reported in the Corporation’s Form 10-Q for the first quarter of 2012, the restoration plan for one site has been approved and the physical portion of the restoration has been commenced. The plans for two other sites are still under review by USEPA. XTO has voluntarily disclosed five additional West Virginia sites to the USEPA. XTO has submitted delineation reports for the additional sites which USEPA is reviewing. Negotiations continue on a Consent Decree to resolve outstanding penalty and compliance issues. It is expected that the USEPA will seek penalties from XTO in excess of $100,000 to resolve the matters at all of the sites.
On April 11, 2014, ExxonMobil Oil Corporation (EMOC) signed an agreement with South Coast Air Quality Management District (AQMD) to resolve the issues relating to three parallel flare lines at EMOC’s Torrance Refinery in California as reported in the Corporation’s Form 10-Q for the third quarter of 2013. Under the settlement, AQMD will give EMOC a full release of all pending AQMD Notices of Violation and all violations related to and arising from the lines from 1998 through December 31, 2013, in exchange for ExxonMobil’s payment of a civil penalty of $8.1 million and the Refinery’s commitment to permanently close off the three lines before December 31, 2015. In addition, ExxonMobil will owe $14.5 million in back flare mitigation fees (initially paying 50% and retaining 50%) with the opportunity to apply 100% of the back mitigation fees towards one or more AQMD approved Mitigation Projects at or near the Torrance Refinery. ExxonMobil will also pay back emissions fees through 2012 in the amount of $320,000.
With respect to 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, against ExxonMobil Pipeline Company 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, second and third quarters of 2013, the court has issued an order setting a trial date of February 24, 2015.
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 March 31, 2014
Total Number of
Maximum Number
Shares Purchased
of Shares that May
Total Number
Average
as Part of Publicly
Yet Be Purchased
of Shares
Price Paid
Announced Plans
Under the Plans or
Period
Purchased
per Share
or Programs
Programs
January 2014
13,628,922
$97.93
February 2014
12,887,419
$92.98
March 2014
13,981,145
$94.89
40,497,486
$95.31
(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 May 1, 2014, the Corporation stated that second quarter 2014 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.
The registrant has not filed with this report copies of the instruments defining the rights of holders of long-term debt of the registrant and its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. The registrant agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 7, 2014
By:
/s/ PATRICK T. MULVA
Patrick T. Mulva
Vice President, Controller and
Principal Accounting Officer
INDEX TO EXHIBITS