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| XOM > SEC Filings for XOM > Form 10-Q on 5-Nov-2009 | All Recent SEC Filings |
5-Nov-2009
Quarterly Report
FUNCTIONAL EARNINGS SUMMARY
Third Quarter First Nine Months
Earnings (U.S. GAAP) 2009 2008 2009 2008
(millions of dollars)
Upstream
United States $ 709 $ 1,879 $ 1,882 $ 5,544
Non-U.S. 3,303 9,092 9,445 24,224
Downstream
United States (203 ) 978 134 1,669
Non-U.S. 528 2,035 1,836 4,068
Chemical
United States 315 257 477 643
Non-U.S. 561 830 1,116 2,159
Corporate and financing (483 ) (241 ) (1,660 ) (907 )
Net Income attributable to ExxonMobil (U.S.
GAAP) $ 4,730 $ 14,830 $ 13,230 $ 37,400
Earnings per common share (dollars) $ 0.98 $ 2.86 $ 2.72 $ 7.13
Earnings per common share - assuming dilution
(dollars) $ 0.98 $ 2.85 $ 2.71 $ 7.09
Special items included in earnings
Non-U.S. Upstream
Sale of German gas transportation business $ 0 $ 1,620 $ 0 $ 1,620
Corporate and financing
Valdez litigation $ 0 $ (170 ) $ (140 ) $ (460 )
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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 THIRD QUARTER 2009 RESULTS
Exxon Mobil Corporation reported third quarter 2009 earnings of $4,730 million, down 68 percent or $10,100 million from the third quarter of 2008. Earnings per share of $0.98 were down 66 percent reflecting lower earnings and the benefit of the share purchase program. The third quarter of 2008 included a special gain of $1,620 million from the sale of a natural gas transportation business in Germany and a special charge of $170 million related to the Valdez punitive damages award. Earnings for the third quarter of 2009 did not include any special items.
Despite ongoing global economic weakness and reduced demand for products, we continued our robust investment program and delivered strong results. We are well-positioned for continued production growth with projects such as QatarGas, RasGas and Gorgon LNG which will contribute additional long plateau production for decades and provide ExxonMobil with a strong foundation.
ExxonMobil's industry leading financial strength has allowed us to continue to invest across the economic cycle focusing on world class opportunities. Our commitment to a disciplined and long term focused investment strategy sets ExxonMobil apart from its competitors. In addition to funding our capital and operating programs, we distributed $2.0 billion in dividends and purchased $4.0 billion of ExxonMobil common stock during the third quarter, which reduced shares outstanding by 1.2 percent.
Earnings in the first nine months of 2009 of $13,230 million decreased $24,170 million from 2008. Earnings per share decreased 62 percent to $2.71, reflecting lower earnings and the continued reduction in the number of shares outstanding. Earnings for 2009 included a special charge of $140 million for interest related to the Valdez punitive damages award. Earnings for 2008 included a special gain of $1,620 million from the sale of a natural gas transportation business in Germany and special charges of $460 million related to the Valdez punitive damages award.
While continuing to be impacted by lower commodity prices and weak product margins, we maintained our focus on operational excellence and invested $19 billion through the first three quarters of the year to develop new energy supplies. The Corporation distributed a total of $22.0 billion to shareholders in the first nine months of 2009 through dividends and share purchases to reduce shares outstanding. Dividends per share of $1.24 increased 8 percent.
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Upstream earnings
United States $ 709 $ 1,879 $ 1,882 $ 5,544
Non-U.S. 3,303 9,092 9,445 24,224
Total $ 4,012 $ 10,971 $ 11,327 $ 29,768
Special items included in earnings
Non-U.S. Upstream
Sale of German gas transportation business $ 0 $ 1,620 $ 0 $ 1,620
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Upstream earnings of $4,012 million in the third quarter of 2009 were down $6,959 million from 2008. Lower crude oil and natural gas realizations accounted for the majority of the decline, reducing earnings approximately $4.9 billion while higher operating costs reduced earnings approximately $300 million. The third quarter of 2008 included a special gain of $1,620 million from the sale of a natural gas transportation business in Germany.
Oil-equivalent production increased by 3 percent over the third quarter of 2008 with contributions from major start-ups of world-class assets including Qatargas 2, Train 5 and Ras Laffan 3, Train 6 in Qatar. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up about 5 percent.
Liquids production totaled 2,335 kbd (thousands of barrels per day), up 45 kbd from the third quarter of 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up over 5 percent, as increased production from projects in the United States and Kazakhstan was partly offset by field decline.
Third quarter natural gas production was 8,129 mcfd (millions of cubic feet per day), up 309 mcfd from 2008. New production volumes from project additions in Qatar and the United States were partly offset by maintenance in Europe.
Earnings from U.S. Upstream operations were $709 million, $1,170 million lower than the third quarter of 2008. Non-U.S. Upstream earnings were $3,303 million, down $5,789 million from last year.
Upstream earnings were $11,327 million in the first nine months of 2009, down $18,441 million from 2008. Lower crude oil and natural gas realizations decreased earnings approximately $15.8 billion while higher operating costs reduced earnings about $1.0 billion. A special gain of $1,620 million from the sale of a natural gas transportation business in Germany was included in 2008.
On an oil-equivalent basis, production was essentially flat compared to the same period in 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up 1 percent.
Liquids production of 2,385 kbd remained flat with 2008. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up over 2 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 8,778 mcfd decreased 64 mcfd from 2008. Higher volumes from Qatar were more than offset by field decline.
Earnings from U.S. Upstream operations for 2009 were $1,882 million, a decrease of $3,662 million. Earnings outside the U.S. were $9,445 million, down $14,779 million.
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Downstream earnings
United States $ (203 ) $ 978 $ 134 $ 1,669
Non-U.S. 528 2,035 1,836 4,068
Total $ 325 $ 3,013 $ 1,970 $ 5,737
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Downstream earnings of $325 million in the third quarter of 2009 were down $2,688 million from the third quarter of 2008. Lower refining margins drove the decline, reducing earnings $2.6 billion. Petroleum product sales of 6,301 kbd were 387 kbd lower than last year's third quarter, mainly reflecting asset sales and lower demand.
The U.S. Downstream recorded a loss of $203 million, down $1,181 million from the third quarter of 2008. Non-U.S. Downstream earnings of $528 million were $1,507 million lower than last year.
Downstream earnings of $1,970 million in the first nine months of 2009 were $3,767 million lower than 2008. Weaker margins decreased earnings approximately $2.8 billion. Lower volumes and refinery optimization due to weaker demand reduced earnings about $500 million while higher operating costs resulted in a $300 million decline in earnings. Petroleum product sales of 6,407 kbd decreased from 6,761 kbd in 2008, mainly reflecting asset sales and lower demand.
U.S. Downstream earnings were $134 million, down $1,535 million. Non-U.S. Downstream earnings were $1,836 million, $2,232 million lower than last year.
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Chemical earnings
United States $ 315 $ 257 $ 477 $ 643
Non-U.S. 561 830 1,116 2,159
Total $ 876 $ 1,087 $ 1,593 $ 2,802
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Chemical earnings of $876 million in the third quarter of 2009 were $211 million lower than the third quarter of 2008. Weaker margins drove the decline, reducing earnings $170 million. Third quarter prime product sales of 6,356 kt (thousands of metric tons) were 296 kt higher than the prior year primarily due to the absence of last year's hurricane impacts.
Chemical earnings of $1,593 million in the first nine months of 2009 decreased $1,209 million from 2008. Weaker margins reduced earnings by approximately $500 million while lower volumes reduced earnings about $400 million. Unfavorable foreign exchange effects decreased earnings by $200 million. Prime product sales of 18,150 kt were down 1,206 kt from 2008.
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Corporate and financing earnings $ (483 ) $ (241 ) $ (1,660 ) $ (907 )
Special items included in earnings
Corporate and financing
Valdez litigation $ 0 $ (170 ) $ (140 ) $ (460 )
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Corporate and financing expenses of $483 million in the third quarter of 2009 were up $242 million due mainly to lower interest income partially offset by the absence of the Valdez interest charge in 2008.
Corporate and financing expenses in the first nine months of 2009 of $1,660 million were up $753 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
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Net cash provided by/(used in)
Operating activities $ 19,934 $ 49,241
Investing activities (15,997 ) (12,872 )
Financing activities (23,388 ) (32,624 )
Effect of exchange rate changes 486 (1,052 )
Increase/(decrease) in cash and cash equivalents $ (18,965 ) $ 2,693
Cash and cash equivalents (at end of period) $ 12,472 $ 36,674
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S.
GAAP) $ 8,827 $ 14,403 $ 19,934 $ 49,241
Sales of subsidiaries, investments and property,
plant and equipment 172 2,630 1,083 4,202
Cash flow from operations and asset sales $ 8,999 $ 17,033 $ 21,017 $ 53,443
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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 $12.5 billion at the end of the third quarter of 2009 compared to $36.7 billion at the end of the third quarter of 2008.
Cash provided by operating activities totaled $19,934 million for the first nine months of 2009, $29,307 million lower than 2008. The major source of funds was net income including noncontrolling interests of $13,519 million, adjusted for the noncash provision of $8,724 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 $4.1 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 nine months of 2009 used net cash of $15,997 million compared to $12,872 million in the prior year. Spending for additions to property, plant and equipment increased $1,735 million to $15,728 million. Proceeds from asset divestments of $1,083 million in 2009 were lower, mainly attributable to the absence of the sale of the German natural gas transportation business in 2008. 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 third quarter of 2009 of $9.0 billion, including asset sales of $0.2 billion, decreased $8.0 billion from the comparable 2008 period. Cash flow from operations and asset sales in the first nine months of 2009 of $21.0 billion, including asset sales of $1.1 billion, decreased $32.4 billion from 2008.
Net cash used in financing activities of $23,388 million in the first nine months of 2009 was $9,236 million lower reflecting a lower level of purchases of shares of ExxonMobil stock.
During the third quarter of 2009, Exxon Mobil Corporation purchased 61 million shares of its common stock for the treasury at a gross cost of $4.2 billion. These purchases included $4.0 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 4,806 million at the end of the second quarter to 4,747 million at the end of the third quarter.
Gross share purchases through the first nine months of 2009 were $17.3 billion, reducing shares outstanding by 4.6 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 $6.0 billion in the third quarter of 2009 and $22.0 billion in the first nine months of 2009 through dividends and share purchases to reduce shares outstanding.
Total debt of $9.6 billion at September 30, 2009, compared to $9.4 billion at year-end 2008. The Corporation's debt to total capital ratio was 7.9 percent at the end of the third 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
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Income taxes $ 4,333 $ 11,327 $ 11,052 $ 31,155
Effective income tax rate 50 % 44 % 48 % 47 %
Sales-based taxes 6,805 9,327 18,927 27,297
All other taxes and duties 9,729 11,856 27,442 35,760
Total $ 20,867 $ 32,510 $ 57,421 $ 94,212
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Income, sales-based and all other taxes and duties for the third quarter of 2009 of $20,867 million were lower than 2008. In the third quarter of 2009 income tax expense declined to $4,333 million reflecting the lower level of earnings and the effective income tax rate was 50 percent, compared to $11,327 million and 44 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 nine months of 2009 of $57,421 million were lower than 2008. In the first nine months of 2009 income tax expense declined to $11,052 million reflecting the lower level of earnings and the effective income tax rate was 48 percent, compared to $31,155 million and 47 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
Third Quarter First Nine Months
2009 2008 2009 2008
(millions of dollars)
Upstream (including exploration expenses) $ 4,907 $ 5,277 $ 14,178 $ 14,629
Downstream 831 844 2,294 2,575
Chemical 747 721 2,335 2,084
Other 8 11 22 26
Total $ 6,493 $ 6,853 $ 18,829 $ 19,314
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Capital and exploration expenditures were $6.5 billion in the third quarter of 2009, down 5 percent from 2008, reflecting the impacts of a stronger U.S. dollar.
Capital and exploration expenditures were $18.8 billion in the first nine months of 2009, down 3 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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