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XOM > SEC Filings for XOM > Form 10-Q on 6-Nov-2012All Recent SEC Filings

Show all filings for EXXON MOBIL CORP

Form 10-Q for EXXON MOBIL CORP


6-Nov-2012

Quarterly Report


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)                              2012          2011          2012          2011
                                                             (millions of dollars)
Upstream
        United States                         $    633     $   1,184     $   2,321     $   3,912
        Non-U.S.                                 5,340         7,210        19,812        21,698
Downstream
        United States                            1,441           810         2,878         2,238
        Non-U.S.                                 1,749           769         8,544         1,796
Chemical
        United States                              565           538         1,492         1,832
        Non-U.S.                                   225           465         1,448         2,008
Corporate and financing                           (383)         (646)       (1,565)       (1,824)
Net Income attributable to ExxonMobil         $  9,570     $  10,330     $  34,930     $  31,660
(U.S. GAAP)

Earnings per common share (dollars)           $   2.09     $    2.13     $    7.50     $    6.46
Earnings per common share - assuming
        dilution (dollars)                    $   2.09     $    2.13     $    7.50     $    6.45

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 2012 RESULTS

ExxonMobil results for the third quarter of 2012 reflect our ongoing commitment to help deliver the energy needed to underpin economic recovery and growth while maintaining our strong focus on safety and environmental performance.

Third quarter 2012 earnings were $9.6 billion, down 7 percent from the third quarter of 2011.

Capital and exploration expenditures were $9.2 billion in the third quarter of 2012.

The Corporation distributed $7.6 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding.


Earnings of $34,930 million in the first nine months of 2012 increased $3,270 million from 2011.

Earnings per share - assuming dilution increased 16 percent to $7.50.

-16-


                           Third Quarter        First Nine Months
                           2012       2011        2012        2011
                                   (millions of dollars)
Upstream earnings
    United States       $   633    $ 1,184    $  2,321    $  3,912
    Non-U.S.              5,340      7,210      19,812      21,698
        Total           $ 5,973    $ 8,394    $ 22,133    $ 25,610

Upstream earnings were $5,973 million in the third quarter of 2012, down $2,421 million from the third quarter of 2011. Production volume and mix effects reduced earnings by $700 million. Lower liquids and natural gas realizations decreased earnings by $130 million. All other items, including the absence of prior year asset sales ($1.0 billion), unfavorable tax items and foreign exchange impacts, decreased earnings by a total of $1.6 billion.

On an oil-equivalent basis, production decreased 7.5 percent from the third quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production decreased 2.9 percent.

Liquids production totaled 2,116 kbd (thousands of barrels per day), down 133 kbd from the third quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was down 3.1 percent, as field decline was partially offset by project ramp-up in Angola and Nigeria.

Third quarter natural gas production was 11,061 mcfd (millions of cubic feet per day), down 1,136 mcfd from 2011. Excluding the impacts of entitlement volumes and divestments, natural gas production was down 2.7 percent, due primarily to field decline.

Earnings from U.S. Upstream operations were $633 million, $551 million lower than the third quarter of 2011. Non-U.S. Upstream earnings were $5,340 million, down $1,870 million from the prior year.


Upstream earnings for the first nine months of 2012 were $22,133 million, down $3,477 million from 2011. Production volume and mix effects decreased earnings by $1.9 billion. Liquids and natural gas realizations decreased earnings by $80 million. All other items, including higher operating expenses and unfavorable tax effects, reduced earnings by $1.5 billion.

On an oil-equivalent basis, production was down 6.2 percent compared to the same period in 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was down 1.6 percent.

Liquids production of 2,179 kbd decreased 153 kbd compared with 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was down 1.8 percent, as field decline was partly offset by project ramp-up in Angola and Nigeria.

Natural gas production of 12,249 mcfd decreased 739 mcfd from 2011. Excluding the impacts of entitlement volumes and divestments, natural gas production was down 1.3 percent, as field decline was partially offset by higher demand and lower downtime.

Earnings from U.S. Upstream operations for 2012 were $2,321 million, down $1,591 million from 2011. Earnings outside the U.S. were $19,812 million, down $1,886 million.

                            Third Quarter        First Nine Months
                            2012       2011         2012       2011
                                    (millions of dollars)
Downstream earnings
    United States        $ 1,441    $   810    $   2,878    $ 2,238
    Non-U.S.               1,749        769        8,544      1,796
        Total            $ 3,190    $ 1,579    $  11,422    $ 4,034

-17-


Downstream earnings were $3,190 million in the third quarter of 2012, up $1,611 million from the third quarter of 2011. Downstream margins, mainly refining, increased earnings by $850 million, while volume and mix effects were essentially flat. All other items, including higher gains on asset sales of $360 million, favorable foreign exchange effects, and lower operating expenses, increased earnings by $780 million. Petroleum product sales of 6,105 kbd were 453 kbd lower than last year's third quarter due mainly to divestments and the Japan restructuring.

Earnings from the U.S. Downstream were $1,441 million, up $631 million from the third quarter of 2011. Non-U.S. Downstream earnings of $1,749 million were $980 million higher than last year.


Downstream earnings of $11,422 million in the first nine months of 2012 increased $7,388 million from 2011. Higher refining margins increased earnings by $1.4 billion, while volume and mix effects increased earnings by $140 million. All other items increased earnings by $5.8 billion due primarily to a $5.3 billion gain associated with the Japan restructuring and other divestment gains. Petroleum product sales of 6,197 kbd decreased 189 kbd from 2011 due mainly to divestments and the Japan restructuring.

U.S. Downstream earnings were $2,878 million, up $640 million from 2011. Non-U.S. Downstream earnings were $8,544 million, an increase of $6,748 million from last year.

                          Third Quarter       First Nine Months
                         2012       2011         2012       2011
                                  (millions of dollars)
Chemical earnings
    United States       $ 565    $   538    $   1,492    $ 1,832
    Non-U.S.              225        465        1,448      2,008
        Total           $ 790    $ 1,003    $   2,940    $ 3,840

Chemical earnings of $790 million in the third quarter of 2012 were $213 million lower than the third quarter of 2011. Lower margins decreased earnings by $150 million. All other items, mainly unfavorable foreign exchange effects, decreased earnings by $60 million. Third quarter prime product sales of 5,947 kt (thousands of metric tons) were 285 kt lower than last year's third quarter due mainly to the Japan restructuring.


Chemical earnings of $2,940 million for the first nine months of 2012 were $900 million lower than 2011. Margins decreased earnings by $920 million. Volume and mix effects lowered earnings by $60 million. All other items increased earnings by $80 million, as a $630 million gain associated with the Japan restructuring was mostly offset by unfavorable foreign exchange effects and higher operating expenses. Prime product sales of 18,256 kt were down 479 kt from 2011.

Third Quarter First Nine Months 2012 2011 2012 2011

(millions of dollars)

Corporate and financing earnings $ (383) $ (646) $ (1,565) $ (1,824)

Corporate and financing expenses were $383 million for the third quarter of 2012, down $263 million from the third quarter of 2011, due mainly to favorable tax items.


Corporate and financing expenses were $1,565 million for the first nine months of 2012, down $259 million from 2011 due primarily to the Japan restructuring.

-18-


LIQUIDITY AND CAPITAL RESOURCES

                                                Third Quarter              First Nine Months
                                                2012          2011           2012           2011
                                                           (millions of dollars)
Net cash provided by/(used in)
   Operating activities                                                $   42,946     $   44,594
   Investing activities                                                   (16,599)       (20,153)
   Financing activities                                                   (26,143)       (21,211)
Effect of exchange rate changes                                               187            (33)
Increase/(decrease) in cash and cash                                   $      391     $    3,197
equivalents

Cash and cash equivalents (at end of                                   $   13,055     $   11,022
period)
Cash and cash equivalents - restricted                                        206            233
(at end of period)
Total cash and cash equivalents (at end                                $   13,261     $   11,255
of period)

Cash flow from operations and asset
sales
   Net cash provided by operating          $  13,442     $  14,849     $   42,946     $   44,594
   activities (U.S. GAAP)
   Proceeds associated with sales of
   subsidiaries, property,
      plant & equipment, and sales and           607         1,408          6,850          4,246
      returns of investments
   Cash flow from operations and asset     $  14,049     $  16,257     $   49,796     $   48,840
   sales

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 $13.3 billion at the end of the third quarter of 2012 compared to $11.3 billion at the end of the third quarter of 2011.

Cash provided by operating activities totaled $42.9 billion for the first nine months of 2012, $1.6 billion lower than 2011. The major source of funds was net income including noncontrolling interests of $37.4 billion, an increase of $4.9 billion from the prior year period. The adjustment for the noncash provision of $11.8 billion for depreciation and depletion was essentially flat with 2011. Changes in operational working capital added to cash flows in both periods. These items were partially offset by the net gain on asset sales of $11.7 billion in 2012 and $1.3 billion in 2011. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 6.

Investing activities for the first nine months of 2012 used net cash of $16.6 billion, a decrease of $3.6 billion compared to the prior year. Spending for additions to property, plant and equipment increased $1.9 billion to $24.2 billion. Proceeds from asset sales of $6.9 billion, increased $2.6 billion reflecting the impact of the Japan restructuring. Additional investment and advances decreased by $2.4 billion to $0.8 billion.

Cash flow from operations and asset sales in the third quarter of 2012 of $14.0 billion, including asset sales of $0.6 billion, decreased $2.2 billion from the comparable 2011 period. Cash flow from operations and asset sales in the first nine months of 2012 of $49.8 billion, including asset sales of $6.9 billion, increased $1.0 billion from the comparable 2011 period.

Net cash used in financing activities of $26.1 billion in the first nine months of 2012 was $4.9 billion higher than 2011, reflecting the maturing of the deferred interest debentures in 2012 and the absence of 2011 net short-term debt issuance.

During the third quarter of 2012, Exxon Mobil Corporation purchased 58 million shares of its common stock for the treasury at a gross cost of $5.1 billion. These purchases included $5 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 4,616 million at the end of the second quarter to 4,559 million at the end of the third quarter 2012. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.

-19-


The Corporation distributed to shareholders a total of $7.6 billion in the third quarter of 2012 through dividends and share purchases to reduce shares outstanding.

Total debt of $12.4 billion compared to $17.0 billion at year-end 2011. The decrease is due to the maturing of the deferred interest debentures and the impact of divestments. The Corporation's debt to total capital ratio was 6.7 percent at the end of the third quarter of 2012 compared to 9.6 percent at year-end 2011.

Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds are expected to cover the majority of its net near-term financial requirements.

The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses. Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time. Key criteria for evaluating acquisitions include potential for future growth and attractive current valuations. Acquisitions may be made with cash, shares of the Corporation's common stock, or both.

Litigation and other contingencies are discussed in Note 2 to the unaudited condensed consolidated financial statements.

TAXES

                                     Third Quarter         First Nine Months
                                     2012        2011        2012        2011
                                             (millions of dollars)

Income taxes                     $  7,394    $  8,009    $ 23,647    $ 23,734
   Effective income tax rate           47  %       47  %       43  %       46  %
Sales-based taxes                   8,137       8,484      24,657      25,013
All other taxes and duties          8,652      11,084      29,891      32,575
         Total                   $ 24,183    $ 27,577    $ 78,195    $ 81,322

Income, sales-based and all other taxes and duties totaled $24.2 billion for the third quarter of 2012, a decrease of $3.4 billion from 2011. Income tax expense decreased by $0.6 billion to $7.4 billion reflecting the lower level of earnings. The effective income tax rate was 47 percent in both periods. Sales-based taxes and all other taxes and duties decreased by $2.8 billion to $16.8 billion reflecting the Japan restructuring.


Income, sales-based and all other taxes and duties totaled $78.2 billion for the first nine months of 2012, a decrease of $3.1 billion from 2011. Income tax expense decreased by $0.1 billion to $23.6 billion with the impact of higher earnings offset by the lower effective tax rate. The effective income tax rate was 43 percent compared to 46 percent in the prior year due to a lower effective tax rate on divestments. Sales-based and all other taxes decreased by $3.0 billion reflecting the Japan restructuring.

CAPITAL AND EXPLORATION EXPENDITURES

                                                 Third Quarter        First Nine Months
                                                 2012       2011        2012        2011
                                                         (millions of dollars)

Upstream (including exploration expenses)     $ 8,248    $ 7,752    $ 24,720    $ 24,088
Downstream                                        583        541       1,591       1,475
Chemical                                          350        321       1,031       1,122
Other                                               2          6          14          62
        Total                                 $ 9,183    $ 8,620    $ 27,356    $ 26,747

Capital and exploration expenditures in the third quarter of 2012 were $9.2 billion, up 7 percent from the third quarter of 2011.


Capital and exploration expenditures were a record $27.4 billion for the first nine months of 2012, up 2 percent, as ExxonMobil continues pursuing opportunities to find and produce new supplies of oil and natural gas to meet global demand for energy. The Corporation anticipates an investment profile of about $37 billion per year over the next five 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 2011 Form 10-K. We assume no duty to update these statements as of any future date.

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