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| XOM > SEC Filings for XOM > Form 10-Q on 5-Aug-2009 | All Recent SEC Filings |
5-Aug-2009
Quarterly Report
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
Earnings (U.S. GAAP) 2009 2008 2009 2008
(millions of dollars)
Upstream
United States $ 813 $ 2,034 $ 1,173 $ 3,665
Non-U.S. 2,999 7,978 6,142 15,132
Downstream
United States (15 ) 293 337 691
Non-U.S. 527 1,265 1,308 2,033
Chemical
United States 79 102 162 386
Non-U.S. 288 585 555 1,329
Corporate and financing (741 ) (577 ) (1,177 ) (666 )
Net Income attributable to ExxonMobil (U.S.
GAAP) $ 3,950 $ 11,680 $ 8,500 $ 22,570
Earnings per common share (dollars) $ 0.82 $ 2.24 $ 1.74 $ 4.27
Earnings per common share - assuming dilution
(dollars) $ 0.81 $ 2.22 $ 1.73 $ 4.24
Special items included in earnings
Corporate and financing
Valdez litigation $ (140 ) $ (290 ) $ (140 ) $ (290 )
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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 2009 RESULTS
Exxon Mobil Corporation reported second quarter 2009 earnings of $3,950 million, down 66 percent from the second quarter of 2008. Earnings per share of $0.81 were down 64 percent reflecting lower earnings and the benefit of the share purchase program. Earnings included a special charge of $140 million for interest related to the Valdez punitive damages award. Second quarter 2008 earnings included a charge of $290 million related to the Valdez punitive damages award.
Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products. In spite of these challenges, ExxonMobil achieved solid results. We continued our capital investment program at near record levels while returning over $16 billion to our shareholders during the first half of the year.
The Corporation distributed a total of $7.0 billion to shareholders in the second quarter of 2009, through dividends and share purchases to reduce shares outstanding.
Earnings in the first half of 2009 of $8,500 million decreased $14,070 million, or 62 percent, from 2008 reflecting lower crude oil and natural gas realizations. Earnings per share decreased 59 percent to $1.73, reflecting lower earnings and the continued reduction in the number of shares outstanding.
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Upstream earnings
United States $ 813 $ 2,034 $ 1,173 $ 3,665
Non-U.S. 2,999 7,978 6,142 15,132
Total $ 3,812 $ 10,012 $ 7,315 $ 18,797
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Upstream earnings were $3,812 million in the second quarter of 2009, down $6,200 million from 2008. Lower crude oil and natural gas realizations accounted for the decline, reducing earnings approximately $6.1 billion.
On an oil-equivalent basis, production decreased about 3 percent from the second quarter of 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was down about 2.5 percent.
Liquids production totaled 2,347 kbd (thousands of barrels per day), down 44 kbd from the second quarter of 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was flat, as field decline was offset by increased production from projects in the United States and west Africa, and lower maintenance activity.
Second quarter natural gas production was 8,013 mcfd (millions of cubic feet per day), down 476 mcfd from 2008. New production volumes from project additions in Qatar, the United States, and the North Sea were more than offset by field decline and lower European demand.
Earnings from U.S. Upstream operations were $813 million, $1,221 million lower than the second quarter of 2008. Non-U.S. Upstream earnings were $2,999 million, down $4,979 million from last year.
Upstream earnings in the first six months of 2009 were $7,315 million, down $11,482 million from 2008. Lower crude oil and natural gas realizations decreased earnings approximately $11.0 billion while higher operating costs reduced earnings about $600 million.
On an oil-equivalent basis, production decreased less than 2 percent from last year. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was flat.
Liquids production of 2,411 kbd decreased 19 kbd from 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up over 1 percent, as new volumes from project additions in west Africa and the United States, and lower maintenance activity, were partly offset by field decline.
Natural gas production of 9,094 mcfd decreased 265 mcfd from 2008. Higher volumes from Qatar and North Sea projects were more than offset by field decline and lower European demand.
Earnings from U.S. Upstream operations for 2009 were $1,173 million, a decrease of $2,492 million. Earnings outside the U.S. were $6,142 million, $8,990 million lower than last year.
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Downstream earnings
United States $ (15 ) $ 293 $ 337 $ 691
Non-U.S. 527 1,265 1,308 2,033
Total $ 512 $ 1,558 $ 1,645 $ 2,724
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Downstream earnings of $512 million in the second quarter of 2009 were down $1,046 million from 2008. Lower margins drove the decline, reducing earnings approximately $1.0 billion, as weaker refining margins more than offset stronger marketing margins. Petroleum product sales of 6,487 kbd were 288 kbd lower than last year's second quarter, mainly reflecting asset sales and lower demand.
The U.S. Downstream recorded a loss of $15 million, down $308 million from the second quarter of 2008. Non-U.S. Downstream earnings of $527 million were $738 million lower than last year.
Downstream earnings in the first six months of 2009 of $1,645 million were $1,079 million lower than 2008. Weaker margins reduced earnings approximately $300 million. Lower volumes and refinery optimization associated with weaker demand reduced earnings about $500 million. Higher operating costs mainly associated with planned work activity also reduced earnings. Petroleum product sales of 6,461 kbd decreased from 6,798 kbd in 2008, mainly reflecting asset sales and lower demand.
U.S. Downstream earnings were $337 million, down $354 million. Non-U.S. Downstream earnings were $1,308 million, $725 million lower than last year.
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Chemical earnings
United States $ 79 $ 102 $ 162 $ 386
Non-U.S. 288 585 555 1,329
Total $ 367 $ 687 $ 717 $ 1,715
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Chemical earnings of $367 million in the second quarter of 2009 were $320 million lower than 2008. Lower volumes reduced earnings approximately $150 million, while weaker margins decreased earnings by about $100 million. Hurricane repair costs and unfavorable foreign exchange effects also reduced earnings. Second quarter prime product sales of 6,267 kt (thousands of metric tons) were 451 kt lower than the prior year primarily due to weaker demand.
Chemical earnings in the first six months of 2009 of $717 million decreased $998 million from 2008. Lower volumes reduced earnings by approximately $450 million while lower margins reduced earnings about $350 million. Unfavorable foreign exchange effects and hurricane costs also decreased earnings. Prime product sales of 11,794 kt were down 1,502 kt from 2008.
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Corporate and financing earnings $ (741 ) $ (577 ) $ (1,177 ) $ (666 )
Special items included in earnings
Corporate and financing
Valdez litigation $ (140 ) $ (290 ) $ (140 ) $ (290 )
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Corporate and financing expenses of $741 million in the second quarter of 2009 were up $164 million from 2008, due mainly to lower interest income partially offset by a lower Valdez litigation charge in the current period.
Corporate and financing expenses in the first six months of 2009 of $1,177 million were up $511 million from 2008, mainly due to lower interest income partially offset by a lower Valdez litigation charge in the current year.
LIQUIDITY AND CAPITAL RESOURCES
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Net cash provided by/(used in)
Operating activities $ 11,107 $ 34,838
Investing activities (9,713 ) (8,768 )
Financing activities (17,360 ) (22,204 )
Effect of exchange rate changes 105 1,121
Increase/(decrease) in cash and cash equivalents $ (15,861 ) $ 4,987
Cash and cash equivalents (at end of period) $ 15,576 $ 38,968
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S.
GAAP) $ 2,197 $ 13,418 $ 11,107 $ 34,838
Sales of subsidiaries, investments and property,
plant and equipment 770 1,159 911 1,572
Cash flow from operations and asset sales $ 2,967 $ 14,577 $ 12,018 $ 36,410
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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 $15.6 billion at the end of the second quarter of 2009 compared to $39.0 billion at the end of the second quarter of 2008.
Cash provided by operating activities totaled $11,107 million for the first six months of 2009, $23,731 million lower than 2008. The major source of funds was net income including noncontrolling interests of $8,648 million, adjusted for the noncash provision of $5,797 million for depreciation and depletion, both of which decreased. In the 2008 period, the effects of higher prices on payments of accounts and other payables and collection of accounts receivable and the timing of income tax payments added to cash provided by operating activities. All other items net in 2009 included $3.9 billion of pension fund contributions, consistent with previous disclosures. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.
Investing activities for the first six months of 2009 used net cash of $9,713 million compared to $8,768 million in the prior year. Spending for additions to property, plant and equipment increased $1,387 million to $10,238 million. Proceeds from asset divestments of $911 million in 2009 were lower. Sales of investments in marketable securities in the current period, compared to purchases in 2008, are reflected in the change in other investing activities.
Cash flow from operations and asset sales in the second quarter of 2009 of $3.0 billion, including asset sales of $0.8 billion, decreased $11.6 billion from the comparable 2008 period. Cash flow from operations and asset sales in the first six months of 2009 of $12.0 billion, including asset sales of $0.9 billion, decreased $24.4 billion from 2008.
Net cash used in financing activities of $17,360 million in the first six months of 2009 was $4,844 million lower reflecting a lower level of purchases of shares of ExxonMobil stock.
During the second quarter of 2009, Exxon Mobil Corporation purchased 75 million shares of its common stock for the treasury at a gross cost of $5.2 billion. These purchases included $5.0 billion to reduce the number of shares outstanding, with the balance used to offset shares issued in conjunction with the company's benefit plans and programs. Shares outstanding were reduced from 4,880 million at the end of the first quarter to 4,806 million at the end of the second quarter. Share purchases to reduce shares outstanding are currently anticipated to equal $4.0 billion in the third quarter of 2009.
Gross share purchases through the first half of 2009 were $13.1 billion, reducing shares outstanding by 3.4 percent. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.
The Corporation distributed to shareholders a total of $7.0 billion in the second quarter of 2009 and $16.0 billion in the first half of 2009 through dividends and share purchases to reduce shares outstanding.
Total debt of $9.3 billion at June 30, 2009, compared to $9.4 billion at year-end 2008. The Corporation's debt to total capital ratio was 7.7 percent at the end of the second quarter of 2009 compared to 7.4 percent at year-end 2008.
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 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.
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.
On September 6, 2007, affiliates of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes. An affiliate of ExxonMobil has also filed an arbitration under the rules of the International Chamber of Commerce against PdVSA and a PdVSA affiliate for breach of their contractual obligations under certain Cerro Negro Project agreements. At this time, the net impact of this matter on the Corporation's consolidated financial results cannot be reasonably estimated. However, the Corporation does not expect the resolution to have a material effect upon the Corporation's operations or financial condition. ExxonMobil's remaining net book investment in Cerro Negro producing assets is about $750 million.
TAXES
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Income taxes $ 3,571 $ 10,526 $ 6,719 $ 19,828
Effective income tax rate 50 % 49 % 47 % 48 %
Sales-based taxes 6,216 9,538 12,122 17,970
All other taxes and duties 9,124 12,297 17,713 23,904
Total $ 18,911 $ 32,361 $ 36,554 $ 61,702
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Income, sales-based and all other taxes and duties for the second quarter of 2009 of $18,911 million were lower than 2008. In the second quarter of 2009 income tax expense declined to $3,571 million reflecting the lower level of earnings and the effective income tax rate was 50 percent, compared to $10,526 million and 49 percent, respectively, in the prior year period. Sales-based taxes and all other taxes and duties decreased in 2009 reflecting lower prices and foreign exchange effects.
Income, sales-based and all other taxes and duties for the first six months of 2009 of $36,554 million were lower than 2008. In the first six months of 2009 income tax expense declined to $6,719 million reflecting the lower level of earnings and the effective income tax rate was 47 percent, compared to $19,828 million and 48 percent, respectively, in the prior year period. Sales-based taxes and all other taxes and duties decreased in 2009 reflecting lower prices and foreign exchange effects.
CAPITAL AND EXPLORATION EXPENDITURES
Second Quarter First Six Months
2009 2008 2009 2008
(millions of dollars)
Upstream (including exploration expenses) $ 4,905 $ 5,257 $ 9,271 $ 9,352
Downstream 817 904 1,463 1,731
Chemical 830 797 1,588 1,363
Other 10 12 14 15
Total $ 6,562 $ 6,970 $ 12,336 $ 12,461
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ExxonMobil continued its robust capital investment program in the second quarter. Capital and exploration project spending was $6.6 billion in the second quarter of 2009, down 6 percent from last year, mainly due to the strengthening of the U.S. dollar.
In line with our longer term plan, capital and exploration expenditures for the first half of 2009 were $12.3 billion, down 1 percent versus 2008 due to the stronger U.S. dollar. Capital and exploration expenditures for full year 2008 were $26.1 billion and are expected to range from $25 billion to $30 billion for the next several years. Actual spending could vary depending on the progress of individual projects.
FORWARD-LOOKING STATEMENTS
Statements in this report 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; and share purchase levels, could differ materially due to factors including: changes in long-term oil or gas prices or other market or economic conditions affecting the oil and gas industry; completion of repair projects as planned; unforeseen technical difficulties; political events or disturbances; reservoir performance; the outcome of commercial negotiations; wars and acts of terrorism or sabotage; changes in technical or operating conditions; and other factors discussed under the heading "Factors Affecting Future Results" on our website and in Item 1A of ExxonMobil's 2008 Form 10-K. We assume no duty to update these statements as of any future date.
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