10-Q 1 xom10q1q2017.htm FORM 10-Q  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2017

or

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

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   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   No    

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

  

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No   

 

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, 2017

Common stock, without par value

 

 4,237,265,503 

  

 


 

EXXON MOBIL CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

 

TABLE OF CONTENTS

 

 

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.       Financial Statements

 

 

     Condensed Consolidated Statement of Income

Three months ended March 31, 2017 and 2016

 

3

     Condensed Consolidated Statement of Comprehensive Income

Three months ended March 31, 2017 and 2016

 

4

     Condensed Consolidated Balance Sheet

As of March 31, 2017 and December 31, 2016

5

 

 

     Condensed Consolidated Statement of Cash Flows

          Three months ended March 31, 2017 and 2016

 

6

     Condensed Consolidated Statement of Changes in Equity

          Three months ended March 31, 2017 and 2016

 

7

     Notes to Condensed Consolidated Financial Statements

 

8

Item 2.       Management's Discussion and Analysis of Financial

                     Condition and Results of Operations

 

15

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

 

20

Item 4.       Controls and Procedures

 

20

 

 

PART II.  OTHER INFORMATION

 

Item 1.       Legal Proceedings

 

21

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

 

22

Item 6.       Exhibits

 

22

Signature

 

23

Index to Exhibits

 

24

  


2


 

PART I.  FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

EXXON MOBIL CORPORATION

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

2017

 

 

2016

 

Revenues and other income

 

 

 

 

 

 

 

 

Sales and other operating revenue (1) 

 

 

61,090

 

 

47,105

 

 

Income from equity affiliates

 

 

1,710

 

 

1,251

 

 

Other income

 

 

487

 

 

351

 

 

 

Total revenues and other income

 

 

63,287

 

 

48,707

 

Costs and other deductions

 

 

 

 

 

 

 

 

Crude oil and product purchases

 

 

30,359

 

 

20,707

 

 

Production and manufacturing expenses

 

 

7,845

 

 

7,561

 

 

Selling, general and administrative expenses

 

 

2,599

 

 

2,593

 

 

Depreciation and depletion

 

 

4,519

 

 

4,765

 

 

Exploration expenses, including dry holes

 

 

289

 

 

355

 

 

Interest expense

 

 

146

 

 

77

 

 

Sales-based taxes (1) 

 

 

5,342

 

 

4,815

 

 

Other taxes and duties

 

 

6,270

 

 

6,104

 

 

 

Total costs and other deductions

 

 

57,369

 

 

46,977

 

Income before income taxes

 

 

5,918

 

 

1,730

 

 

Income taxes

 

 

1,828

 

 

(51)

 

Net income including noncontrolling interests

 

 

4,090

 

 

1,781

 

 

Net income attributable to noncontrolling interests

 

 

80

 

 

(29)

 

Net income attributable to ExxonMobil

 

 

4,010

 

 

1,810

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Earnings per common share (dollars) 

 

 

0.95

 

 

0.43

 

  

 

 

 

 

 

 

 

 

Earnings per common share - assuming dilution (dollars) 

 

 

0.95

 

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share (dollars) 

 

 

0.75

 

 

0.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Sales-based taxes included in sales and other operating revenue

 

5,342

 

 

4,815

 

 

 

 

 

 

 

 

 

 

 



The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.


3


 

EXXON MOBIL CORPORATION

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

 

 

4,090

 

 

1,781

 

 

Other comprehensive income (net of income taxes)

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

 

1,408

 

 

3,340

 

 

 

Postretirement benefits reserves adjustment (excluding amortization)

 

 

(25)

 

 

(119)

 

 

 

Amortization and settlement of postretirement benefits reserves adjustment

 

 

 

 

 

 

 

 

 

 

 

included in net periodic benefit costs

 

 

 

256

 

 

289

 

 

 

 

Total other comprehensive income

 

 

 

1,639

 

 

3,510

 

 

Comprehensive income including noncontrolling interests

 

 

5,729

 

 

5,291

 

 

 

Comprehensive income attributable to noncontrolling interests

 

 

159

 

 

354

 

 

Comprehensive income attributable to ExxonMobil

 

 

 

5,570

 

 

4,937

 



The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.


4


 

EXXON MOBIL CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mar. 31,

 

 

Dec. 31,

 

 

 

 

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,897

 

 

3,657

 

 

 

Notes and accounts receivable – net

 

 

21,842

 

 

21,394

 

 

 

Inventories

 

 

 

 

 

 

 

 

 

 

Crude oil, products and merchandise

 

 

10,686

 

 

10,877

 

 

 

 

Materials and supplies

 

 

4,187

 

 

4,203

 

 

 

Other current assets

 

 

1,519

 

 

1,285

 

 

 

 

Total current assets

 

 

43,131

 

 

41,416

 

 

Investments, advances and long-term receivables

 

 

38,268

 

 

35,102

 

 

Property, plant and equipment – net

 

 

253,147

 

 

244,224

 

 

Other assets, including intangibles – net

 

 

9,663

 

 

9,572

 

 

 

 

Total assets

 

 

344,209

 

 

330,314

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Notes and loans payable

 

 

18,483

 

 

13,830

 

 

 

Accounts payable and accrued liabilities

 

 

32,069

 

 

31,193

 

 

 

Income taxes payable

 

 

2,822

 

 

2,615

 

 

 

 

Total current liabilities

 

 

53,374

 

 

47,638

 

 

Long-term debt

 

 

25,124

 

 

28,932

 

 

Postretirement benefits reserves

 

 

20,584

 

 

20,680

 

 

Deferred income tax liabilities

 

 

34,772

 

 

34,041

 

 

Long-term obligations to equity companies

 

 

5,175

 

 

5,124

 

 

Other long-term obligations

 

 

21,409

 

 

20,069

 

 

 

 

Total liabilities

 

 

160,438

 

 

156,484

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock without par value

 

 

 

 

 

 

 

 

 

(9,000 million shares authorized,  8,019 million shares issued)

 

 

14,415

 

 

12,157

 

 

Earnings reinvested

 

 

408,707

 

 

407,831

 

 

Accumulated other comprehensive income

 

 

(20,679)

 

 

(22,239)

 

 

Common stock held in treasury

 

 

 

 

 

 

 

 

 

(3,782 million shares at March 31, 2017 and

 

 

 

 

 

 

 

 

   3,871 million shares at December 31, 2016)

 

 

(225,292)

 

 

(230,424)

 

 

 

 

ExxonMobil share of equity

 

 

177,151

 

 

167,325

 

 

Noncontrolling interests

 

 

6,620

 

 

6,505

 

 

 

 

Total equity

 

 

183,771

 

 

173,830

 

 

 

 

Total liabilities and equity

 

 

344,209

 

 

330,314

 



The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.


5


 

EXXON MOBIL CORPORATION

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

 

4,090

 

 

1,781

 

 

Depreciation and depletion

 

 

4,519

 

 

4,765

 

 

Changes in operational working capital, excluding cash and debt

 

 

793

 

 

(399)

 

 

All other items – net

 

 

(1,229)

 

 

(1,335)

 

 

 

 

Net cash provided by operating activities

 

 

8,173

 

 

4,812

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(2,890)

 

 

(4,601)

 

 

Proceeds associated with sales of subsidiaries, property, plant and

 

 

 

 

 

 

 

 

 

equipment, and sales and returns of investments

 

 

687

 

 

177

 

 

Additional investments and advances

 

 

(1,738)

 

 

(234)

 

 

Other investing activities – net

 

 

180

 

 

309

 

 

 

 

Net cash used in investing activities

 

 

(3,761)

 

 

(4,349)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Additions to long-term debt

 

 

60

 

 

11,963

 

 

Additions to short-term debt

 

 

1,734

 

 

-

 

 

Reductions in short-term debt

 

 

(2,669)

 

 

(28)

 

 

Additions/(reductions) in commercial paper, and debt with three

 

 

 

 

 

 

 

 

 

 

months or less maturity (1) 

 

 

1,308

 

 

(7,594)

 

 

Cash dividends to ExxonMobil shareholders

 

 

(3,134)

 

 

(3,054)

 

 

Cash dividends to noncontrolling interests

 

 

(44)

 

 

(42)

 

 

Common stock acquired

 

 

(501)

 

 

(726)

 

 

Common stock sold

 

 

-

 

 

5

 

 

 

 

Net cash used in financing activities

 

 

(3,246)

 

 

524

 

Effects of exchange rate changes on cash

 

 

74

 

 

154

 

Increase/(decrease) in cash and cash equivalents

 

 

1,240

 

 

1,141

 

Cash and cash equivalents at beginning of period

 

 

3,657

 

 

3,705

 

Cash and cash equivalents at end of period

 

 

4,897

 

 

4,846

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

 

Income taxes paid

 

 

1,970

 

 

749

 

 

Cash interest paid

 

 

368

 

 

223

 

 

2017 Non-Cash Transactions

During the first quarter, the Corporation completed the acquisitions of InterOil Corporation and of companies that own certain oil and gas properties in the Permian Basin and other assets. These transactions included a significant non-cash component. Additional information is provided in Note 9.

 

 (1) Includes a net addition of commercial paper with a maturity of over three months of $0.1 billion in 2017 and $0.7 billion in 2016. The gross amount of commercial paper with a maturity of over three months issued was $1.1 billion in 2017 and $1.0 billion in 2016, while the gross amount repaid was $1.0 billion in 2017 and $0.3 billion in 2016.

 

The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.


6


 

 

EXXON MOBIL CORPORATION

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ExxonMobil Share of Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compre-

 

Stock

 

ExxonMobil

 

Non-

 

 

 

 

 

 

 

 

Common

 

Earnings

 

hensive

 

Held in

 

Share of

 

controlling

 

Total

 

 

 

 

 

Stock

 

Reinvested

 

Income

 

Treasury

 

Equity

 

Interests

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2015

 

 

11,612

 

 

412,444

 

 

(23,511)

 

 

(229,734)

 

 

170,811

 

 

5,999

 

 

176,810

 

Amortization of stock-based awards

 

 

211

 

 

-

 

 

-

 

 

-

 

 

211

 

 

-

 

 

211

 

Tax benefits related to stock-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

awards

 

 

4

 

 

-

 

 

-

 

 

-

 

 

4

 

 

-

 

 

4

 

Other

 

 

(2)

 

 

-

 

 

-

 

 

-

 

 

(2)

 

 

-

 

 

(2)

 

Net income for the period

 

 

-

 

 

1,810

 

 

-

 

 

-

 

 

1,810

 

 

(29)

 

 

1,781

 

Dividends – common shares

 

 

-

 

 

(3,054)

 

 

-

 

 

-

 

 

(3,054)

 

 

(42)

 

 

(3,096)

 

Other comprehensive income

 

 

-

 

 

-

 

 

3,127

 

 

-

 

 

3,127

 

 

383

 

 

3,510

 

Acquisitions, at cost

 

 

-

 

 

-

 

 

-

 

 

(726)

 

 

(726)

 

 

-

 

 

(726)

 

Dispositions

 

 

-

 

 

-

 

 

-

 

 

6

 

 

6

 

 

-

 

 

6

Balance as of March 31, 2016

 

 

11,825

 

 

411,200

 

 

(20,384)

 

 

(230,454)

 

 

172,187

 

 

6,311

 

 

178,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2016

 

 

12,157

 

 

407,831

 

 

(22,239)

 

 

(230,424)

 

 

167,325

 

 

6,505

 

 

173,830

 

Amortization of stock-based awards

 

 

264

 

 

-

 

 

-

 

 

-

 

 

264

 

 

-

 

 

264

 

Other

 

 

(84)

 

 

-

 

 

-

 

 

-

 

 

(84)

 

 

-

 

 

(84)

 

Net income for the period

 

 

-

 

 

4,010

 

 

-

 

 

-

 

 

4,010

 

 

80

 

 

4,090

 

Dividends – common shares

 

 

-

 

 

(3,134)

 

 

-

 

 

-

 

 

(3,134)

 

 

(44)

 

 

(3,178)

 

Other comprehensive income

 

 

-

 

 

-

 

 

1,560

 

 

-

 

 

1,560

 

 

79

 

 

1,639

 

Acquisitions, at cost

 

 

-

 

 

-

 

 

-

 

 

(582)

 

 

(582)

 

 

-

 

 

(582)

 

Issued for acquisitions

 

 

2,078

 

 

-

 

 

-

 

 

5,711

 

 

7,789

 

 

-

 

 

7,789

 

Dispositions

 

 

-

 

 

-

 

 

-

 

 

3

 

 

3

 

 

-

 

 

3

Balance as of March 31, 2017

 

 

14,415

 

 

408,707

 

 

(20,679)

 

 

(225,292)

 

 

177,151

 

 

6,620

 

 

183,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

 

 

 

Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

Held in

 

 

 

 

 

 

 

 

 

 

Held in

 

 

 

 

Common Stock Share Activity

 

Issued

 

Treasury

 

Outstanding

 

 

 

 

Issued

 

Treasury

 

Outstanding

 

 

 

 

(millions of shares)

 

 

 

 

(millions of shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31

 

 

8,019

 

 

(3,871)

 

 

4,148

 

 

 

 

 

8,019

 

 

(3,863)

 

 

4,156

 

 

 

Acquisitions

 

 

-

 

 

(7)

 

 

(7)

 

 

 

 

 

-

 

 

(9)

 

 

(9)

 

 

 

Issued for acquisitions

 

 

-

 

 

96

 

 

96

 

 

 

 

 

-

 

 

-

 

 

-

 

 

 

Dispositions

 

 

-

 

 

-

 

 

-

 

 

 

 

 

-

 

 

-

 

 

-

 

Balance as of March 31

 

 

8,019

 

 

(3,782)

 

 

4,237

 

 

 

 

 

8,019

 

 

(3,872)

 

 

4,147



The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.


7


 

EXXON MOBIL CORPORATION

 

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 2016 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.     Recently Issued Accounting Standards

 

In May 2014, the Financial Accounting Standards Board issued a new standard, Revenue from Contracts with Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements, and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2018. “Sales and Other Operating Revenue” on the Consolidated Statement of Income includes sales, excise and value-added taxes on sales transactions. When the Corporation adopts the standard, revenue will exclude sales-based taxes collected on behalf of third parties. This change in reporting will not impact earnings. The Corporation expects to adopt the standard using the Modified Retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard is provided for 2018 results. The Corporation continues to evaluate other areas of the standard, which are not expected to have a material effect on the Corporation’s financial statements. 

In February 2016, the Financial Accounting Standards Board issued a new standard, Leases. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as an asset and a lease liability. ExxonMobil is evaluating the standard and its effect on the Corporation’s financial statements and plans to adopt it in 2019.

In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires that the service cost component of net benefit costs be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. The update is required to be adopted beginning January 1, 2018. ExxonMobil is evaluating the standard and its effect on the Corporation’s financial statements.



3.      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.


8


 

Other Contingencies

 

The Corporation and certain of its consolidated subsidiaries were contingently liable at March 31, 2017, 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, 2017

 

 

 

 

 

 

 

 

Equity

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Third Party

 

 

 

 

 

 

 

 

 

 

 

Obligations (1) 

 

 

Obligations

 

 

Total

 

 

 

 

 

 

 

 

(millions of dollars)

 

 

 

Guarantees

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt-related

 

 

117

 

 

30

 

 

147

 

 

 

 

Other

 

 

2,667

 

 

4,000

 

 

6,667

 

 

 

 

 

Total

 

 

2,784

 

 

4,030

 

 

6,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 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.

 

On September 6, 2007, affiliates of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID). 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. On October 9, 2014, the ICSID Tribunal issued its final award finding in favor of the ExxonMobil affiliates and awarding $1.6 billion as of the date of expropriation, June 27, 2007, and interest from that date at 3.25% compounded annually until the date of payment in full. The Tribunal also noted that one of the Cerro Negro Project agreements provides a mechanism to prevent double recovery between the ICSID award and all or part of an earlier award of $908 million to an ExxonMobil affiliate, Mobil Cerro Negro, Ltd., against PdVSA and a PdVSA affiliate, PdVSA CN, in an arbitration under the rules of the International Chamber of Commerce.

 

On February 2, 2015, Venezuela filed a Request for Annulment of the ICSID award. On March 9, 2017, the ICSID Committee hearing the Request for Annulment issued a decision partially annulling the award of the Tribunal issued on October 9, 2014. The Committee affirmed the compensation due for the La Ceiba project and for export curtailments at the Cerro Negro project, but annulled the portion of the award relating to the Cerro Negro Project’s expropriation ($1.4 billion) based on its determination that the prior Tribunal failed to adequately explain why the cap on damages in the indemnity owed by PdVSA did not affect or limit the amount owed for the expropriation of the Cerro Negro project. As a result, ExxonMobil retains an award for $260 million (including accrued interest). Under the ICSID rules, ExxonMobil may seek to re-arbitrate the issue that was the basis for the annulment in a new ICSID arbitration proceeding.

 


9


 

The United States District Court for the Southern District of New York entered judgment on the ICSID award on October 10, 2014. Motions filed by Venezuela to vacate that judgment on procedural grounds and to modify the judgment by reducing the rate of interest to be paid on the ICSID award from the entry of the court’s judgment, until the date of payment, were denied on February 13, 2015, and March 4, 2015, respectively. On March 9, 2015, Venezuela filed a notice of appeal of the court’s actions on the two motions. Oral arguments on this appeal were held before the United States Court of Appeals for the Second Circuit on January 7, 2016.

 

A stay of the District Court’s judgment has continued pending the completion of the Second Circuit appeal. 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 appealed that judgment to the Court of Appeal, Abuja Judicial Division. On July 22, 2016, the Court of Appeal upheld the decision of the lower court setting aside the award. On October 21, 2016, the Contractors appealed the decision to the Supreme Court of Nigeria. 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. Following dismissal by this court, the Contractors appealed to the Nigerian Court of Appeal in June 2016. In October 2014, the Contractors filed suit in the United States District Court for the Southern District of New York to enforce, if necessary, the arbitration award against NNPC assets residing within that jurisdiction. NNPC has moved to dismiss the lawsuit. The stay in the proceedings in the Southern District of New York has been lifted. 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.   


10


 

4.     Other Comprehensive Income Information

 

 

 

 

 

 

 

Cumulative

 

 

Post-

 

 

 

 

 

 

 

 

 

Foreign

 

 

retirement

 

 

 

 

 

 

 

 

 

Exchange

 

 

Benefits

 

 

 

 

ExxonMobil Share of Accumulated Other

 

 

Translation

 

 

Reserves

 

 

 

 

Comprehensive Income

 

 

Adjustment

 

 

Adjustment

 

 

Total

 

 

 

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2015

 

 

(14,170)

 

 

(9,341)

 

 

(23,511)

 

Current period change excluding amounts reclassified

 

 

 

 

 

 

 

 

 

 

 

from accumulated other comprehensive income

 

 

2,962

 

 

(116)

 

 

2,846

 

Amounts reclassified from accumulated other

 

 

 

 

 

 

 

 

 

 

 

comprehensive income

 

 

-

 

 

281

 

 

281

 

Total change in accumulated other comprehensive income

 

 

2,962

 

 

165

 

 

3,127

 

Balance as of March 31, 2016

 

 

(11,208)

 

 

(9,176)

 

 

(20,384)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2016

 

 

(14,501)

 

 

(7,738)

 

 

(22,239)

 

Current period change excluding amounts reclassified

 

 

 

 

 

 

 

 

 

 

 

from accumulated other comprehensive income

 

 

1,342

 

 

(29)

 

 

1,313

 

Amounts reclassified from accumulated other

 

 

 

 

 

 

 

 

 

 

 

comprehensive income

 

 

-

 

 

247

 

 

247

 

Total change in accumulated other comprehensive income

 

 

1,342

 

 

218

 

 

1,560

 

Balance as of March 31, 2017

 

 

(13,159)

 

 

(7,520)

 

 

(20,679)



 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Amounts Reclassified Out of Accumulated Other

 

 

 

 

 

 

March 31,

 

Comprehensive Income - Before-tax Income/(Expense)

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization and settlement of postretirement benefits reserves

 

 

 

 

 

 

 

 

 

adjustment included in net periodic benefit costs (1) 

(359)

 

 

(414)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost. (See Note 6 – Pension and Other Postretirement Benefits for additional details.)



 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Income Tax (Expense)/Credit For

 

 

 

 

 

 

 

 

March 31,

 

Components of Other Comprehensive Income

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

 

 

 

 

 

 

(18)

 

 

(11)

 

Postretirement benefits reserves adjustment (excluding amortization)

 

 

5

 

 

80

 

Amortization and settlement of postretirement benefits reserves

 

 

 

 

 

 

 

 

adjustment included in net periodic benefit costs

 

 

(103)

 

 

(125)

 

Total

 

 

 

 

 

 

 

 

(116)

 

 

(56)


11


 

5.     Earnings Per Share

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to ExxonMobil (millions of dollars)

 

 

4,010

 

 

1,810

 

  

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding (millions of shares)

 

 

4,223

 

 

4,178

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share (dollars) (1)

 

 

 

0.95

 

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  The calculation of earnings per common share and earnings per common share – assuming dilution are the same in

 

       each period shown.



6.     Pension and Other Postretirement Benefits

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

(millions of dollars)

 

Components of net benefit cost

 

 

 

 

 

 

 

 

 

Pension Benefits - U.S.

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

 

197

 

 

202

 

 

 

Interest cost

 

 

 

199

 

 

198

 

 

 

Expected return on plan assets

 

 

 

(194)

 

 

(182)

 

 

 

Amortization of actuarial loss/(gain) and prior service cost

 

 

110

 

 

124

 

 

 

Net pension enhancement and curtailment/settlement cost

 

 

105

 

 

111

 

 

 

Net benefit cost

 

 

 

417

 

 

453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits - Non-U.S.

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

 

145

 

 

149

 

 

 

Interest cost

 

 

 

187

 

 

213

 

 

 

Expected return on plan assets

 

 

 

(239)

 

 

(235)

 

 

 

Amortization of actuarial loss/(gain) and prior service cost

 

 

127

 

 

148

 

 

 

Net pension enhancement and curtailment/settlement cost

 

 

(5)

 

 

-

 

 

 

Net benefit cost

 

 

 

215

 

 

275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Postretirement Benefits

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

 

26

 

 

35

 

 

 

Interest cost

 

 

 

72

 

 

89

 

 

 

Expected return on plan assets

 

 

 

(6)

 

 

(6)

 

 

 

Amortization of actuarial loss/(gain) and prior service cost

 

 

17

 

 

31

 

 

 

Net benefit cost

 

 

 

109

 

 

149

 

 

 

 

 

 

 

 

 

 

 

 


12


 

7.     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 $24,219 million at March 31, 2017, and $27,968 million at December 31, 2016, as compared to recorded book values of $23,907 million at March 31, 2017, and $27,707 million at December 31, 2016.

 

The fair value of long-term debt by hierarchy level at March 31, 2017, is: Level 1 $24,028 million; Level 2 $185 million; and Level 3 $6 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.



8.     Disclosures about Segments and Related Information

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

2017

 

 

2016

 

Earnings After Income Tax

 

 

 

(millions of dollars)

 

 

Upstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

(18)

 

 

(832)

 

 

 

Non-U.S.

 

 

 

2,270

 

 

756

 

 

Downstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

292

 

 

187

 

 

 

Non-U.S.

 

 

 

824

 

 

719

 

 

Chemical

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

529

 

 

581

 

 

 

Non-U.S.

 

 

 

642

 

 

774

 

 

All other

 

 

 

(529)

 

 

(375)

 

 

Corporate total

 

 

 

4,010

 

 

1,810

 

 

 

 

 

 

 

 

 

 

 

 

Sales and Other Operating Revenue (1) 

 

 

 

 

 

 

 

 

 

Upstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

2,324

 

 

1,450

 

 

 

Non-U.S.

 

 

 

3,593

 

 

3,019

 

 

Downstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

15,365

 

 

11,513

 

 

 

Non-U.S.

 

 

 

32,617

 

 

24,937

 

 

Chemical

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

2,783

 

 

2,385

 

 

 

Non-U.S.

 

 

 

4,394

 

 

3,799

 

 

All other

 

 

 

14

 

 

2

 

 

Corporate total

 

 

 

61,090

 

 

47,105

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes sales-based taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment Revenue

 

 

 

 

 

 

 

 

 

Upstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

1,290

 

 

806

 

 

 

Non-U.S.

 

 

 

5,899

 

 

3,453

 

 

Downstream

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

3,646

 

 

2,390

 

 

 

Non-U.S.

 

 

 

5,214

 

 

4,070

 

 

Chemical

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

1,770

 

 

1,404

 

 

 

Non-U.S.

 

 

 

1,190

 

 

952

 

 

All other

 

 

 

56

 

 

58


13


 

9.     InterOil Corporation and Permian Basin Properties Acquisitions

 

InterOil Corporation

On February 22, 2017, the Corporation completed the acquisition of InterOil Corporation (IOC) for $2.7 billion. The IOC acquisition was unproved properties in Papua New Guinea. Consideration included 28 million shares of Exxon Mobil Corporation common stock having a value on the acquisition date of $2.2 billion, a Contingent Resource Payment (CRP) with a fair value of $0.3 billion and cash of $0.2 billion. The CRP provides IOC shareholders $7.07 per share in cash for each incremental independently certified Trillion Cubic Feet Equivalent (TCFE) of resources above 6.2 TCFE, up to 11.0 TCFE. IOC’s assets include a contingent receivable related to the same resource base for volumes in excess of 3.5 TCFE at amounts ranging from $0.24 - $0.40 per thousand cubic feet equivalent. The fair value of the contingent receivable was $1.1 billion at the acquisition date. Fair values of contingent amounts were based on assumptions about the outcome of the resource certification, future business plans and appropriate discount rates. Amounts due to the Corporation related to the contingent receivable are expected to exceed those payable under the terms of the CRP.

 

Permian Basin Properties

On February 28, 2017, the Corporation completed the acquisition for $6.2 billion of a number of companies from the Bass family in Fort Worth, Texas, that indirectly own mostly unproved oil and gas properties in the Permian Basin and other assets. Consideration included 68 million shares of Exxon Mobil Corporation common stock having a value on the acquisition date of $5.5 billion, together with additional contingent cash payments tied to future drilling and completion activities (up to a maximum of $1.02 billion). The fair value of the contingent payment was $0.7 billion as of the acquisition date and is expected to be paid beginning in 2020 and ending no later than 2032 commensurate with the development of the resource. Fair value of the contingent payment was based on assumptions including drilling and completion activities, appropriate discount rates and tax rates.

 

Below is a summary of the net assets acquired for each acquisition.

 

 

 

 

 

IOC

 

Permian

 

 

 

 

(billions of dollars)

 

 

 

 

 

 

 

 

Current assets

 

 

0.6

 

-

 

Property, plant and equipment

 

 

2.9

 

6.3

 

Other

 

 

0.6

 

-

 

Total assets

 

 

4.1

 

6.3

 

 

 

 

 

 

 

 

Current liabilities

 

 

0.5

 

-

 

Long-term liabilities

 

 

0.9

 

0.1

 

Total liabilities

 

 

1.4

 

0.1

 

 

 

 

 

 

 

 

Net assets acquired

 

 

2.7

 

6.2


14


 

EXXON MOBIL CORPORATION

 

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations

 

FUNCTIONAL EARNINGS SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

First Three Months

Earnings (U.S. GAAP)

 

 

2017

 

 

2016

 

 

 

 

(millions of dollars)

Upstream

 

 

 

 

 

 

 

United States

 

 

(18)

 

 

(832)

 

Non-U.S.

 

 

2,270

 

 

756

Downstream

 

 

 

 

 

 

 

United States

 

 

292

 

 

187

 

Non-U.S.

 

 

824

 

 

719

Chemical