10-Q 1 xom10q2q2017.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 June 30, 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 June 30, 2017

Common stock, without par value

 

 4,237,105,828 

  

 


 

EXXON MOBIL CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017

 

TABLE OF CONTENTS

 

 

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.       Financial Statements

 

 

     Condensed Consolidated Statement of Income

Three and six months ended June 30, 2017 and 2016

 

3

     Condensed Consolidated Statement of Comprehensive Income

Three and six months ended June 30, 2017 and 2016

 

4

     Condensed Consolidated Balance Sheet

As of June 30, 2017 and December 31, 2016

5

 

 

     Condensed Consolidated Statement of Cash Flows

          Six months ended June 30, 2017 and 2016

 

6

     Condensed Consolidated Statement of Changes in Equity

          Six months ended June 30, 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

 

23

Item 4.       Controls and Procedures

 

23

 

 

PART II.  OTHER INFORMATION

 

Item 1.       Legal Proceedings

 

24

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

 

25

Item 6.       Exhibits

 

25

Signature

 

26

Index to Exhibits

 

27

  


2


 

PART I.  FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.  Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

Revenues and other income

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenue (1) 

 

 

60,825

 

 

56,360

 

 

121,915

 

 

103,465

 

Income from equity affiliates

 

 

1,525

 

 

1,124

 

 

3,235

 

 

2,375

 

Other income

 

 

526

 

 

210

 

 

1,013

 

 

561

 

 

Total revenues and other income

 

 

62,876

 

 

57,694

 

 

126,163

 

 

106,401

Costs and other deductions

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil and product purchases

 

 

30,194

 

 

27,130

 

 

60,553

 

 

47,837

 

Production and manufacturing expenses

 

 

8,407

 

 

8,076

 

 

16,252

 

 

15,637

 

Selling, general and administrative expenses

 

 

2,628

 

 

2,646

 

 

5,227

 

 

5,239

 

Depreciation and depletion

 

 

4,652

 

 

4,821

 

 

9,171

 

 

9,586

 

Exploration expenses, including dry holes

 

 

514

 

 

445

 

 

803

 

 

800

 

Interest expense

 

 

158

 

 

75

 

 

304

 

 

152

 

Sales-based taxes (1) 

 

 

5,589

 

 

5,435

 

 

10,931

 

 

10,250

 

Other taxes and duties

 

 

6,578

 

 

6,670

 

 

12,848

 

 

12,774

 

 

Total costs and other deductions

 

 

58,720

 

 

55,298

 

 

116,089

 

 

102,275

Income before income taxes

 

 

4,156

 

 

2,396

 

 

10,074

 

 

4,126

 

Income taxes

 

 

892

 

 

715

 

 

2,720

 

 

664

Net income including noncontrolling interests

 

 

3,264

 

 

1,681

 

 

7,354

 

 

3,462

 

Net income attributable to noncontrolling interests

 

 

(86)

 

 

(19)

 

 

(6)

 

 

(48)

Net income attributable to ExxonMobil

 

 

3,350

 

 

1,700

 

 

7,360

 

 

3,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share (dollars) 

 

 

0.78

 

 

0.41

 

 

1.73

 

 

0.84

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - assuming dilution (dollars) 

 

 

0.78

 

 

0.41

 

 

1.73

 

 

0.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share (dollars) 

 

 

0.77

 

 

0.75

 

 

1.52

 

 

1.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

operating revenue

 

 

5,589

 

 

5,435

 

 

10,931

 

 

10,250



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

 

 

Six Months Ended

 

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

 

3,264

 

 

1,681

 

 

7,354

 

 

3,462

Other comprehensive income (net of income taxes)

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

1,674

 

 

(727)

 

 

3,082

 

 

2,613

 

Adjustment for foreign exchange translation (gain)/loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 included in net income

 

 

234

 

 

-

 

 

234

 

 

-

 

Postretirement benefits reserves adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(excluding amortization)

 

 

(159)

 

 

110

 

 

(184)

 

 

(9)

 

Amortization and settlement of postretirement benefits reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

adjustment included in net periodic benefit costs

 

 

283

 

 

292

 

 

539

 

 

581

 

 

Total other comprehensive income

 

 

2,032

 

 

(325)

 

 

3,671

 

 

3,185

Comprehensive income including noncontrolling interests

 

 

5,296

 

 

1,356

 

 

11,025

 

 

6,647

 

Comprehensive income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests

 

 

169

 

 

16

 

 

328

 

 

370

Comprehensive income attributable to ExxonMobil

 

 

5,127

 

 

1,340

 

 

10,697

 

 

6,277



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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

Dec. 31,

 

 

 

 

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,042

 

 

3,657

 

 

 

Notes and accounts receivable – net

 

 

21,289

 

 

21,394

 

 

 

Inventories

 

 

 

 

 

 

 

 

 

 

Crude oil, products and merchandise

 

 

11,135

 

 

10,877

 

 

 

 

Materials and supplies

 

 

4,170

 

 

4,203

 

 

 

Other current assets

 

 

1,544

 

 

1,285

 

 

 

 

Total current assets

 

 

42,180

 

 

41,416

 

 

Investments, advances and long-term receivables

 

 

37,719

 

 

35,102

 

 

Property, plant and equipment – net

 

 

252,987

 

 

244,224

 

 

Other assets, including intangibles – net

 

 

10,126

 

 

9,572

 

 

 

 

Total assets

 

 

343,012

 

 

330,314

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Notes and loans payable

 

 

17,185

 

 

13,830

 

 

 

Accounts payable and accrued liabilities

 

 

31,100

 

 

31,193

 

 

 

Income taxes payable

 

 

2,664

 

 

2,615

 

 

 

 

Total current liabilities

 

 

50,949

 

 

47,638

 

 

Long-term debt

 

 

24,750

 

 

28,932

 

 

Postretirement benefits reserves

 

 

20,778

 

 

20,680

 

 

Deferred income tax liabilities

 

 

34,585

 

 

34,041

 

 

Long-term obligations to equity companies

 

 

4,954

 

 

5,124

 

 

Other long-term obligations

 

 

21,158

 

 

20,069

 

 

 

 

Total liabilities

 

 

157,174

 

 

156,484

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock without par value

 

 

 

 

 

 

 

 

 

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

 

 

14,617

 

 

12,157

 

 

Earnings reinvested

 

 

408,768

 

 

407,831

 

 

Accumulated other comprehensive income

 

 

(18,902)

 

 

(22,239)

 

 

Common stock held in treasury

 

 

 

 

 

 

 

 

 

(3,782 million shares at June 30, 2017 and

 

 

 

 

 

 

 

 

   3,871 million shares at December 31, 2016)

 

 

(225,305)

 

 

(230,424)

 

 

 

 

ExxonMobil share of equity

 

 

179,178

 

 

167,325

 

 

Noncontrolling interests

 

 

6,660

 

 

6,505

 

 

 

 

Total equity

 

 

185,838

 

 

173,830

 

 

 

 

Total liabilities and equity

 

 

343,012

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

 

7,354

 

 

3,462

 

 

Depreciation and depletion

 

 

9,171

 

 

9,586

 

 

Changes in operational working capital, excluding cash and debt

 

 

(228)

 

 

(1,725)

 

 

All other items – net

 

 

(1,177)

 

 

(1,992)

 

 

 

 

Net cash provided by operating activities

 

 

15,120

 

 

9,331

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(5,988)

 

 

(8,872)

 

 

Proceeds associated with sales of subsidiaries, property, plant and

 

 

 

 

 

 

 

 

 

equipment, and sales and returns of investments

 

 

841

 

 

1,206

 

 

Additional investments and advances

 

 

(1,793)

 

 

(311)

 

 

Other investing activities – net

 

 

301

 

 

481

 

 

 

 

Net cash used in investing activities

 

 

(6,639)

 

 

(7,496)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Additions to long-term debt

 

 

60

 

 

11,964

 

 

Additions to short-term debt

 

 

1,735

 

 

-

 

 

Reductions in short-term debt

 

 

(2,722)

 

 

(257)

 

 

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

 

 

 

 

 

 

 

 

 

 

months or less maturity (1) 

 

 

(321)

 

 

(5,966)

 

 

Cash dividends to ExxonMobil shareholders

 

 

(6,423)

 

 

(6,187)

 

 

Cash dividends to noncontrolling interests

 

 

(91)

 

 

(85)

 

 

Changes in noncontrolling interests

 

 

(29)

 

 

-

 

 

Common stock acquired

 

 

(514)

 

 

(727)

 

 

Common stock sold

 

 

-

 

 

7

 

 

 

 

Net cash used in financing activities

 

 

(8,305)

 

 

(1,251)

 

Effects of exchange rate changes on cash

 

 

209

 

 

69

 

Increase/(decrease) in cash and cash equivalents

 

 

385

 

 

653

 

Cash and cash equivalents at beginning of period

 

 

3,657

 

 

3,705

 

Cash and cash equivalents at end of period

 

 

4,042

 

 

4,358

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

 

Income taxes paid

 

 

3,247

 

 

2,144

 

 

Cash interest paid

 

 

587

 

 

334

 

 

2017 Non-Cash Transactions

In the first six months of 2017, 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 $0.2 billion in 2017 and $0.1 billion in 2016. The gross amount of commercial paper with a maturity of over three months issued was $2.2 billion in 2017 and $1.5 billion in 2016, while the gross amount repaid was $2.0 billion in 2017 and $1.4 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

 

 

403

 

 

-

 

 

-

 

 

-

 

 

403

 

 

-

 

 

403

 

Tax benefits related to stock-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

awards

 

 

8

 

 

-

 

 

-

 

 

-

 

 

8

 

 

-

 

 

8

 

Other

 

 

(4)

 

 

-

 

 

-

 

 

-

 

 

(4)

 

 

-

 

 

(4)

 

Net income for the period

 

 

-

 

 

3,510

 

 

-

 

 

-

 

 

3,510

 

 

(48)

 

 

3,462

 

Dividends – common shares

 

 

-

 

 

(6,187)

 

 

-

 

 

-

 

 

(6,187)

 

 

(85)

 

 

(6,272)

 

Other comprehensive income

 

 

-

 

 

-

 

 

2,767

 

 

-

 

 

2,767

 

 

418

 

 

3,185

 

Acquisitions, at cost

 

 

-

 

 

-

 

 

-

 

 

(727)

 

 

(727)

 

 

-

 

 

(727)

 

Dispositions

 

 

-

 

 

-

 

 

-

 

 

10

 

 

10

 

 

-

 

 

10

Balance as of June 30, 2016

 

 

12,019

 

 

409,767

 

 

(20,744)

 

 

(230,451)

 

 

170,591

 

 

6,284

 

 

176,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

467

 

 

-

 

 

-

 

 

-

 

 

467

 

 

-

 

 

467

 

Other

 

 

(85)

 

 

-

 

 

-

 

 

-

 

 

(85)

 

 

(53)

 

 

(138)

 

Net income for the period

 

 

-

 

 

7,360

 

 

-

 

 

-

 

 

7,360

 

 

(6)

 

 

7,354

 

Dividends – common shares

 

 

-

 

 

(6,423)

 

 

-

 

 

-

 

 

(6,423)

 

 

(91)

 

 

(6,514)

 

Other comprehensive income

 

 

-

 

 

-

 

 

3,337

 

 

-

 

 

3,337

 

 

334

 

 

3,671

 

Acquisitions, at cost

 

 

-

 

 

-

 

 

-

 

 

(595)

 

 

(595)

 

 

(29)

 

 

(624)

 

Issued for acquisitions

 

 

2,078

 

 

-

 

 

-

 

 

5,711

 

 

7,789

 

 

-

 

 

7,789

 

Dispositions

 

 

-

 

 

-

 

 

-

 

 

3

 

 

3

 

 

-

 

 

3

Balance as of June 30, 2017

 

 

14,617

 

 

408,768

 

 

(18,902)

 

 

(225,305)

 

 

179,178

 

 

6,660

 

 

185,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2017

 

 

 

 

Six Months Ended June 30, 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 June 30

 

 

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 June 30, 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 June 30, 2017

 

 

 

 

 

 

 

 

Equity

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Third Party

 

 

 

 

 

 

 

 

 

 

 

Obligations (1) 

 

 

Obligations

 

 

Total

 

 

 

 

 

 

 

 

(millions of dollars)

 

 

 

Guarantees

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt-related

 

 

108

 

 

30

 

 

138

 

 

 

 

Other

 

 

2,976

 

 

4,131

 

 

7,107

 

 

 

 

 

Total

 

 

3,084

 

 

4,161

 

 

7,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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). ExxonMobil reached an agreement with Venezuela for full payment of the $260 million. The agreement does not impact ExxonMobil’s ability 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. On July 11, 2017, the United States Court of Appeals for the Second Circuit rendered its opinion overturning the District Court’s decision and vacating the judgment on the grounds that a different procedure should have been used to reduce the award to judgment. The Corporation is evaluating next steps.

 

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

 

 

2,209

 

 

(6)

 

 

2,203

 

Amounts reclassified from accumulated other

 

 

 

 

 

 

 

 

 

 

 

comprehensive income

 

 

-

 

 

564

 

 

564

 

Total change in accumulated other comprehensive income

 

 

2,209

 

 

558

 

 

2,767

 

Balance as of June 30, 2016

 

 

(11,961)

 

 

(8,783)

 

 

(20,744)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2016

 

 

(14,501)

 

 

(7,738)

 

 

(22,239)

 

Current period change excluding amounts reclassified

 

 

 

 

 

 

 

 

 

 

 

from accumulated other comprehensive income

 

 

2,849

 

 

(172)

 

 

2,677

 

Amounts reclassified from accumulated other

 

 

 

 

 

 

 

 

 

 

 

comprehensive income

 

 

140

 

 

520

 

 

660

 

Total change in accumulated other comprehensive income

 

 

2,989

 

 

348

 

 

3,337

 

Balance as of June 30, 2017

 

 

(11,512)

 

 

(7,390)

 

 

(18,902)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Amounts Reclassified Out of Accumulated Other

 

 

June 30,

 

 

June 30,

 

Comprehensive Income - Before-tax Income/(Expense)

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation gain/(loss) included in net income

 

 

 

 

 

 

 

 

 

 

 

 

(Statement of Income line: Other income)

(234)

 

 

-

 

 

(234)

 

 

-

 

Amortization and settlement of postretirement benefits reserves

 

 

 

 

 

 

 

 

 

 

 

 

adjustment included in net periodic benefit costs (1) 

(406)

 

 

(419)

 

 

(765)

 

 

(833)

 

(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

 

 

Six Months Ended

 

Income Tax (Expense)/Credit For

 

 

June 30,

 

 

June 30,

 

Components of Other Comprehensive Income

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

(millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

(8)

 

 

14

 

 

(26)

 

 

3

 

Postretirement benefits reserves adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(excluding amortization)

 

 

75

 

 

(49)

 

 

80

 

 

31

 

Amortization and settlement of postretirement benefits reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

adjustment included in net periodic benefit costs

 

 

(123)

 

 

(127)

 

 

(226)

 

 

(252)

 

Total

 

 

(56)

 

 

(162)

 

 

(172)

 

 

(218)


11


 

5.     Earnings Per Share

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to ExxonMobil (millions of dollars)

 

3,350

 

 

1,700

 

 

7,360

 

 

3,510

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

outstanding (millions of shares)

 

4,271

 

 

4,178

 

 

4,244

 

 

4,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share (dollars) (1) 

 

0.78

 

 

0.41

 

 

1.73

 

 

0.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(millions of dollars)

 

Components of net benefit cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits - U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

186

 

 

204

 

 

383

 

 

406

 

 

 

Interest cost

 

 

200

 

 

198

 

 

399

 

 

396

 

 

 

Expected return on plan assets

 

 

(194)

 

 

(181)

 

 

(388)

 

 

(363)

 

 

 

Amortization of actuarial loss/(gain) and prior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

service cost

 

 

112

 

 

125

 

 

222

 

 

249

 

 

 

Net pension enhancement and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

curtailment/settlement cost

 

 

158

 

 

111

 

 

263

 

 

222

 

 

 

Net benefit cost

 

 

462

 

 

457

 

 

879

 

 

910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits - Non-U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

145

 

 

150

 

 

290

 

 

299

 

 

 

Interest cost

 

 

189

 

 

217

 

 

376

 

 

430

 

 

 

Expected return on plan assets

 

 

(244)

 

 

(239)

 

 

(483)

 

 

(474)

 

 

 

Amortization of actuarial loss/(gain) and prior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

service cost

 

 

126

 

 

153

 

 

253

 

 

301

 

 

 

Net pension enhancement and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

curtailment/settlement cost

 

 

-

 

 

-

 

 

(5)

 

 

-

 

 

 

Net benefit cost

 

 

216

 

 

281

 

 

431

 

 

556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Postretirement Benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

30

 

 

42

 

 

56

 

 

77

 

 

 

Interest cost

 

 

67

 

 

84

 

 

139

 

 

173

 

 

 

Expected return on plan assets

 

 

(5)

 

 

(6)

 

 

(11)

 

 

(12)

 

 

 

Amortization of actuarial loss/(gain) and prior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

service cost

 

 

10

 

 

30

 

 

27

 

 

61

 

 

 

Net benefit cost

 

 

102

 

 

150

 

 

211

 

 

299


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 $24,010 million at June 30, 2017, and $27,968 million at December 31, 2016, as compared to recorded book values of $23,531 million at June 30, 2017, and $27,707 million at December 31, 2016.

 

The fair value of long-term debt by hierarchy level at June 30, 2017, is: Level 1 $23,825 million; Level 2 $179 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

 

 

Six Months Ended

 

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

 

2017

 

 

2016

 

 

2017