PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) (1) and (2) Financial Statements:
See Table of Contents of the Financial Section of this report.
(a) (3) Exhibits:
See Index to Exhibits of this report.
26
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Index to Financial Statements
FINANCIAL SECTION
TABLE OF CONTENTS
Business Profile 28
Financial Summary 29
Frequently Used Terms 30
Quarterly Information 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Functional Earnings 33
Forward-Looking Statements 34
Overview 34
Business Environment and Risk Assessment 34
Review of 2007 and 2006 Results 35
Liquidity and Capital Resources 37
Capital and Exploration Expenditures 41
Taxes 41
Environmental Matters 42
Market Risks, Inflation and Other Uncertainties 42
Recently Issued Statements of Financial Accounting Standards 43
Critical Accounting Policies 44
Management's Report on Internal Control Over Financial Reporting 48
Report of Independent Registered Public Accounting Firm 48
Consolidated Financial Statements
Statement of Income 50
Balance Sheet 51
Statement of Shareholders' Equity 52
Statement of Cash Flows 53
Notes to Consolidated Financial Statements
1. Summary of Accounting Policies 54
2. Accounting Change for Uncertainty in Income Taxes 56
3. Miscellaneous Financial Information 56
4. Cash Flow Information 57
5. Additional Working Capital Information 57
6. Equity Company Information 58
7. Investments, Advances and Long-Term Receivables 59
8. Property, Plant and Equipment and Asset Retirement Obligations 59
9. Accounting for Suspended Exploratory Well Costs 60
10. Leased Facilities 62
11. Earnings Per Share 62
12. Financial Instruments and Derivatives 63
13. Long-Term Debt 63
14. Incentive Program 68
15. Litigation and Other Contingencies 70
16. Pension and Other Postretirement Benefits 72
17. Disclosures about Segments and Related Information 76
18. Income, Sales-Based and Other Taxes 78
Supplemental Information on Oil and Gas Exploration and Production
Activities 80
Operating Summary 90
27
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Index to Financial Statements
BUSINESS PROFILE
Return on Capital and
Earnings After Average Capital Average Capital Exploration
Income Taxes Employed Employed Expenditures
Financial 2007 2006 2007 2006 2007 2006 2007 2006
(millions of dollars) (percent) (millions of dollars)
Upstream
United States $ 4,870 $ 5,168 $ 14,026 $ 13,940 34.7 37.1 $ 2,212 $ 2,486
Non-U.S. 21,627 21,062 49,539 43,931 43.7 47.9 13,512 13,745
Total $ 26,497 $ 26,230 $ 63,565 $ 57,871 41.7 45.3 $ 15,724 $ 16,231
Downstream
United States $ 4,120 $ 4,250 $ 6,331 $ 6,456 65.1 65.8 $ 1,128 $ 824
Non-U.S. 5,453 4,204 18,983 17,172 28.7 24.5 2,175 1,905
Total $ 9,573 $ 8,454 $ 25,314 $ 23,628 37.8 35.8 $ 3,303 $ 2,729
Chemical
United States $ 1,181 $ 1,360 $ 4,748 $ 4,911 24.9 27.7 $ 360 $ 280
Non-U.S. 3,382 3,022 8,682 8,272 39.0 36.5 1,422 476
Total $ 4,563 $ 4,382 $ 13,430 $ 13,183 34.0 33.2 $ 1,782 $ 756
Corporate and financing (23 ) 434 26,451 27,891 - - 44 139
Total $ 40,610 $ 39,500 $ 128,760 $ 122,573 31.8 32.2 $ 20,853 $ 19,855
See Frequently Used Terms for a definition and calculation of capital employed
and return on average capital employed.
Operating 2007 2006
(thousands of barrels daily)
Net liquids production
United States 392 414
Non-U.S. 2,224 2,267
Total 2,616 2,681
(millions of cubic feet daily)
Natural gas production available for sale
United States 1,468 1,625
Non-U.S. 7,916 7,709
Total 9,384 9,334
(thousands of oil-equivalent barrels daily)
Oil-equivalent production (1) 4,180 4,237
(thousands of barrels daily)
Refinery throughput
United States 1,746 1,760
Non-U.S. 3,825 3,843
Total 5,571 5,603
(thousands of barrels daily)
Petroleum product sales
United States 2,717 2,729
Non-U.S. 4,382 4,518
Total 7,099 7,247
(thousands of metric tons)
Chemical prime product sales
United States 10,855 10,703
Non-U.S. 16,625 16,647
Total 27,480 27,350
(1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels.
28
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Index to Financial Statements
FINANCIAL SUMMARY
2007 2006 2005 2004 2003
(millions of dollars, except per share amounts)
Sales and other operating revenue (1) (2) $ 390,328 $ 365,467 $ 358,955 $ 291,252 $ 237,054
Earnings
Upstream $ 26,497 $ 26,230 $ 24,349 $ 16,675 $ 14,502
Downstream 9,573 8,454 7,992 5,706 3,516
Chemical 4,563 4,382 3,943 3,428 1,432
Corporate and financing (23 ) 434 (154 ) (479 ) 1,510
Income from continuing operations $ 40,610 $ 39,500 $ 36,130 $ 25,330 $ 20,960
Cumulative effect of accounting change,
net of income tax - - - - 550
Net income $ 40,610 $ 39,500 $ 36,130 $ 25,330 $ 21,510
Net income per common share
Income from continuing operations $ 7.36 $ 6.68 $ 5.76 $ 3.91 $ 3.16
Net income per common share - assuming
dilution
Income from continuing operations $ 7.28 $ 6.62 $ 5.71 $ 3.89 $ 3.15
Cumulative effect of accounting change,
net of income tax - - - - 0.08
Net income $ 7.28 $ 6.62 $ 5.71 $ 3.89 $ 3.23
Cash dividends per common share $ 1.37 $ 1.28 $ 1.14 $ 1.06 $ 0.98
Net income to average shareholders'
equity (percent) 34.5 35.1 33.9 26.4 26.2
Working capital $ 27,651 $ 26,960 $ 27,035 $ 17,396 $ 7,574
Ratio of current assets to current
liabilities 1.47 1.55 1.58 1.40 1.20
Additions to property, plant and
equipment $ 15,387 $ 15,462 $ 13,839 $ 11,986 $ 12,859
Property, plant and equipment, less
allowances $ 120,869 $ 113,687 $ 107,010 $ 108,639 $ 104,965
Total assets $ 242,082 $ 219,015 $ 208,335 $ 195,256 $ 174,278
Exploration expenses, including dry holes $ 1,469 $ 1,181 $ 964 $ 1,098 $ 1,010
Research and development costs $ 814 $ 733 $ 712 $ 649 $ 618
Long-term debt $ 7,183 $ 6,645 $ 6,220 $ 5,013 $ 4,756
Total debt $ 9,566 $ 8,347 $ 7,991 $ 8,293 $ 9,545
Fixed-charge coverage ratio (times) 49.9 46.3 50.2 36.1 30.8
Debt to capital (percent) 7.1 6.6 6.5 7.3 9.3
Net debt to capital (percent) (3) (24.0 ) (20.4 ) (22.0 ) (10.7 ) (1.2 )
Shareholders' equity at year end $ 121,762 $ 113,844 $ 111,186 $ 101,756 $ 89,915
Shareholders' equity per common share $ 22.62 $ 19.87 $ 18.13 $ 15.90 $ 13.69
Weighted average number of common shares
outstanding (millions) 5,517 5,913 6,266 6,482 6,634
Number of regular employees at year end
(thousands) (4) 80.8 82.1 83.7 85.9 88.3
CORS employees not included above
(thousands) (5) 26.3 24.3 22.4 19.3 17.4
(1) Sales and other operating revenue includes sales-based taxes of $31,728
million for 2007, $30,381 million for 2006, $30,742 million for 2005, $27,263
million for 2004 and $23,855 million for 2003.
(2) Sales and other operating revenue includes $30,810 million for 2005, $25,289
million for 2004 and $20,936 million for 2003 for purchases/sales contracts
with the same counterparty. Associated costs were included in Crude oil and
product purchases. Effective January 1, 2006, these purchases/sales were
recorded on a net basis with no resulting impact on net income. See note 1,
Summary of Accounting Policies.
(3) Debt net of cash, excluding restricted cash.
(4) Regular employees are defined as active executive, management, professional,
technical and wage employees who work full time or part time for the
Corporation and are covered by the Corporation's benefit plans and programs.
(5) CORS employees are employees of company-operated retail sites.
29
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Index to Financial Statements
FREQUENTLY USED TERMS
Listed below are definitions of several of ExxonMobil's key business and
financial performance measures. These definitions are provided to facilitate
understanding of the terms and their calculation.
CASH FLOW FROM OPERATIONS AND ASSET SALES
Cash flow from operations and asset sales is the sum of the net cash provided by
operating activities and proceeds from sales of subsidiaries, investments and
property, plant and equipment from the Consolidated Statement of Cash Flows.
This cash flow reflects the total sources of cash from both operating the
Corporation's assets and from the divesting of assets. The Corporation employs a
long-standing and regular disciplined review process to ensure that all assets
are contributing to the Corporation's strategic and financial objectives. Assets
are divested when they are no longer meeting these objectives or are worth
considerably more to others. Because of the regular nature of this activity, we
believe it is useful for investors to consider sales proceeds together with cash
provided by operating activities when evaluating cash available for investment
in the business and financing activities, including shareholder distributions.
Cash flow from operations and asset sales 2007 2006 2005
(millions of dollars)
Net cash provided by operating activities $ 52,002 $ 49,286 $ 48,138
Sales of subsidiaries, investments and property, plant and
equipment 4,204 3,080 6,036
Cash flow from operations and asset sales $ 56,206 $ 52,366 $ 54,174
CAPITAL EMPLOYED
Capital employed is a measure of net investment. When viewed from the
perspective of how the capital is used by the businesses, it includes
ExxonMobil's net share of property, plant and equipment and other assets less
liabilities, excluding both short-term and long-term debt. When viewed from the
perspective of the sources of capital employed in total for the Corporation, it
includes ExxonMobil's share of total debt and shareholders' equity. Both of
these views include ExxonMobil's share of amounts applicable to equity
companies, which the Corporation believes should be included to provide a more
comprehensive measure of capital employed.
Capital employed 2007 2006 2005
(millions of dollars)
Business uses: asset and liability perspective
Total assets $ 242,082 $ 219,015 $ 208,335
Less liabilities and minority share of assets and
liabilities
Total current liabilities excluding notes and loans
payable (55,929 ) (47,115 ) (44,536 )
Total long-term liabilities excluding long-term debt
and equity of minority and preferred shareholders in
affiliated companies (50,543 ) (45,905 ) (41,095 )
Minority share of assets and liabilities (5,332 ) (4,948 ) (4,863 )
Add ExxonMobil share of debt-financed equity company
net assets 3,386 2,808 3,450
Total capital employed $ 133,664 $ 123,855 $ 121,291
Total corporate sources: debt and equity perspective
Notes and loans payable $ 2,383 $ 1,702 $ 1,771
Long-term debt 7,183 6,645 6,220
Shareholders' equity 121,762 113,844 111,186
Less minority share of total debt (1,050 ) (1,144 ) (1,336 )
Add ExxonMobil share of equity company debt 3,386 2,808 3,450
Total capital employed $ 133,664 $ 123,855 $ 121,291
30
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Index to Financial Statements
RETURN ON AVERAGE CAPITAL EMPLOYED
Return on average capital employed (ROCE) is a performance measure ratio. From
the perspective of the business segments, ROCE is annual business segment
earnings divided by average business segment capital employed (average of
beginning and end-of-year amounts). These segment earnings include ExxonMobil's
share of segment earnings of equity companies, consistent with our capital
employed definition, and exclude the cost of financing. The Corporation's total
ROCE is net income excluding the after-tax cost of financing, divided by total
corporate average capital employed. The Corporation has consistently applied its
ROCE definition for many years and views it as the best measure of historical
capital productivity in our capital-intensive, long-term industry, both to
evaluate management's performance and to demonstrate to shareholders that
capital has been used wisely over the long term. Additional measures, which are
more cash flow-based, are used to make investment decisions.
Return on average capital employed 2007 2006 2005
(millions of dollars)
Net income $ 40,610 $ 39,500 $ 36,130
Financing costs (after tax)
Gross third-party debt (339 ) (264 ) (261 )
ExxonMobil share of equity companies (204 ) (156 ) (144 )
All other financing costs - net 268 499 (35 )
Total financing costs (275 ) 79 (440 )
Earnings excluding financing costs $ 40,885 $ 39,421 $ 36,570
Average capital employed $ 128,760 $ 122,573 $ 116,961
Return on average capital employed - corporate total 31.8 % 32.2 % 31.3 %
31
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QUARTERLY INFORMATION
2007 2006
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year
Volumes
(thousands of barrels daily)
Production of crude oil and
natural gas liquids 2,746 2,668 2,537 2,517 2,616 2,698 2,702 2,647 2,678 2,681
Refinery throughput 5,705 5,279 5,582 5,717 5,571 5,548 5,407 5,756 5,698 5,603
Petroleum product sales 7,198 6,973 7,100 7,125 7,099 7,177 7,060 7,302 7,447 7,247
(millions of cubic feet daily)
Natural gas production
available for sale 10,114 8,733 8,283 10,414 9,384 11,175 8,754 8,139 9,301 9,334
(thousands of oil-equivalent barrels daily)
Oil-equivalent production
(1) 4,432 4,123 3,918 4,253 4,180 4,560 4,161 4,004 4,228 4,237
(thousands of metric tons)
Chemical prime product sales 6,805 6,897 6,729 7,049 27,480 6,916 6,855 6,752 6,827 27,350
Summarized financial data
(millions of dollars)
Sales and other operating
revenue (2) $ 84,174 95,059 99,130 111,965 390,328 $ 86,317 96,024 96,268 86,858 365,467
Gross profit (3) $ 33,907 36,760 36,114 39,914 146,695 $ 33,428 37,668 37,117 33,764 141,977
Net income $ 9,280 10,260 9,410 11,660 40,610 $ 8,400 10,360 10,490 10,250 39,500
Per share data
(dollars per share)
Net income per common share $ 1.64 1.85 1.72 2.15 7.36 $ 1.38 1.74 1.79 1.77 6.68
Net income per common share
- assuming dilution $ 1.62 1.83 1.70 2.13 7.28 $ 1.37 1.72 1.77 1.76 6.62
Dividends per common share $ 0.32 0.35 0.35 0.35 1.37 $ 0.32 0.32 0.32 0.32 1.28
Common stock prices
High $ 76.35 86.58 93.66 95.27 95.27 $ 63.96 65.00 71.22 79.00 79.00
Low $ 69.02 75.28 78.76 83.37 69.02 $ 56.42 56.64 61.63 64.84 56.42
(1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels.
(2) Includes amounts for sales-based taxes.
(3) Gross profit equals sales and other operating revenue less estimated costs
associated with products sold.
The price range of ExxonMobil common stock is as reported on the composite tape
of the several U.S. exchanges where ExxonMobil common stock is traded. The
principal market where ExxonMobil common stock (XOM) is traded is the New York
Stock Exchange, although the stock is traded on other exchanges in and outside
the United States.
There were 566,565 registered shareholders of ExxonMobil common stock at
December 31, 2007. At January 31, 2008, the registered shareholders of
ExxonMobil common stock numbered 561,103.
On January 30, 2008, the Corporation declared a $0.35 dividend per common share,
payable March 10, 2008.
32
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FUNCTIONAL EARNINGS 2007 2006 2005
(millions of dollars, except per share amounts)
Net income (U.S. GAAP)
Upstream
United States $ 4,870 $ 5,168 $ 6,200
Non-U.S. 21,627 21,062 18,149
Downstream
United States 4,120 4,250 3,911
Non-U.S. 5,453 4,204 4,081
Chemical
United States 1,181 1,360 1,186
Non-U.S. 3,382 3,022 2,757
Corporate and financing (23 ) 434 (154 )
Net income $ 40,610 $ 39,500 $ 36,130
Net income per common share $ 7.36 $ 6.68 $ 5.76
Net income per common share - assuming dilution $ 7.28 $ 6.62 $ 5.71
Special items included in net income
Non-U.S. Upstream
Gain on Dutch gas restructuring $ - $ - $ 1,620
U.S. Downstream
Allapattah lawsuit provision $ - $ - $ (200 )
Non-U.S. Downstream
Sale of Sinopec shares $ - $ - $ 310
Non-U.S. Chemical
Sale of Sinopec shares $ - $ - $ 150
Joint venture litigation $ - $ - $ 390
Corporate and financing
Tax-related benefit $ - $ 410 $ -
33
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Index to Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future events or
conditions are forward-looking statements. Actual future results, including
demand growth and energy source mix; capacity increases; production growth and
mix; financing sources; the resolution of contingencies; the effect of changes
in prices; interest rates and other market conditions; and environmental and
capital expenditures could differ materially depending on a number of factors,
such as the outcome of commercial negotiations; changes in the supply of and
demand for crude oil, natural gas, and petroleum and petrochemical products; and
other factors discussed herein and in Item 1A of ExxonMobil's 2007 Form 10-K.
OVERVIEW
The following discussion and analysis of ExxonMobil's financial results, as well
as the accompanying financial statements and related notes to consolidated
financial statements to which they refer, are the responsibility of the
management of Exxon Mobil Corporation. The Corporation's accounting and
financial reporting fairly reflect its straightforward business model involving
the extracting, manufacturing and marketing of hydrocarbons and
hydrocarbon-based products. The Corporation's business model involves the
production (or purchase), manufacture and sale of physical products, and all
commercial activities are directly in support of the underlying physical
movement of goods. Our consistent, conservative approach to financing the
capital-intensive needs of the Corporation has helped ExxonMobil to sustain the
"triple-A" status of its long-term debt securities for 89 years.
ExxonMobil, with its resource base, financial strength, disciplined investment
approach and technology portfolio, is well-positioned to participate in
substantial investments to develop new energy supplies. While commodity prices
are volatile on a short-term basis and depend on supply and demand, ExxonMobil's
investment decisions are based on our long-term business outlook, using a
disciplined approach in selecting and pursuing the most attractive investment
opportunities. The corporate plan is a fundamental annual management process
that is the basis for setting near-term operating and capital objectives in
addition to providing the longer-term economic assumptions used for investment
evaluation purposes. Volumes are based on individual field production profiles,
which are also updated annually. Prices for crude oil, natural gas and refined
products are based on corporate plan assumptions developed annually by major
region and are utilized for investment evaluation purposes. Potential investment
opportunities are tested over a wide range of economic scenarios to establish
the resiliency of each opportunity. Once investments are made, a reappraisal
process is completed to ensure relevant lessons are learned and improvements are
incorporated into future projects.
BUSINESS ENVIRONMENT AND RISK ASSESSMENT
Long-Term Business Outlook
By 2030, the world's population is projected to grow to approximately 8 billion,
more than 20 percent higher than today's level. Coincident with this population
increase, the Corporation expects worldwide economic growth to average close to
3 percent per year. This combination of population and economic growth is
expected to lead to a primary energy demand increase of approximately 40 percent
by 2030 versus 2005. The vast majority (~80 percent) of the increase is expected
to occur in developing countries.
As demand rises, energy efficiency will become increasingly important, with the
rate of improvement projected to increase. Efficiency gains will result from
anticipated improvements in the transportation and power generation sectors,
driven by the introduction of new technologies, as well as many other
improvements that span the residential, commercial and industrial sectors. A
wide variety of energy sources will be required to meet increasing global
demand. Oil, gas and coal are expected to remain the predominant energy sources
with approximately 80 percent share of total energy. Oil and gas are projected
to maintain close to a 60 percent share. These well-established fuel sources are
the only ones with the versatility and scale to meet the majority of the world's
growing energy needs over the outlook period. Nuclear power will likely be a
growing option to meet electricity needs. Among renewable energy sources, wind,
solar and biofuels are anticipated to grow rapidly at about 9 percent per year,
reflecting government subsidies and mandates. These energy sources are projected
to reach approximately 2 percent of world energy by 2030, up from 0.5 percent
currently.
Demand for liquid fuels is expected to grow at 1.3 percent per year from 2005 to
2030, primarily due to increasing transportation requirements, especially
related to light- and heavy-duty vehicles. The global fleet of light-duty
vehicles will increase significantly, with related demand partly offset by
improvements in fuel economy. Natural gas and coal are projected to grow at 1.7
and 0.9 percent per year, respectively, driven by rising needs for electric
power generation. The Corporation expects the liquefied natural gas (LNG) market
to increase over 250 percent by 2030, with LNG imports helping to meet growing
demand in Europe, North America and Asia. With equity positions in many of the
largest remote gas accumulations in the world, the Corporation is positioned to
benefit from its technological advances in gas liquefaction, transportation and
regasification that enable distant gas supplies to reach markets economically.
The Corporation anticipates that the world's oil and gas resource base will grow
not only from new discoveries, but also from increases to known reserves.
Technology will underpin these increases. The cost to develop these resources
will be significant. According to the International Energy Agency, the
investment required to meet total oil and gas energy needs worldwide through
2030 will be about $380 billion per year, or about $9.5 trillion (measured in
2006 dollars) in total for 2006-2030.
Upstream
ExxonMobil continues to maintain a large portfolio of development and
exploration opportunities, which enables the Corporation to be selective,
optimizing total profitability and mitigating overall political and technical
risks. As future development projects bring new production online, the
Corporation expects a shift in the geographic mix of its production volumes
between now and 2012. Oil and natural gas output from West Africa, the Caspian,
the Middle East and Russia is expected to increase over the next five years
based on current capital project execution plans. Currently, these growth areas
account for 38 percent of the Corporation's production. By 2012, they are
expected to generate about 50 percent of total volumes. The remainder of the
Corporation's production is expected to be sourced from established areas,
including Europe, North America and Asia Pacific.
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In addition to a changing geographic mix, there will also be a change in the
type of opportunities from which volumes are produced. Nonconventional
production utilizing specialized technology such as arctic technology, deepwater
drilling and production systems, heavy oil recovery processes and LNG is
expected to grow from about 30 percent to over 40 percent of the Corporation's
output between now and 2012. The Corporation's overall volume capacity outlook,
based on projects coming onstream as anticipated, is for production capacity to
grow over the period 2008-2012. However, actual volumes will vary from year to
year due to the timing of individual project start-ups, operational outages,
reservoir performance, regulatory changes, asset sales, weather events, price
effects under production sharing contracts and other factors described in
Item 1A of ExxonMobil's 2007 Form 10-K.
Downstream
ExxonMobil's Downstream is a large, diversified business with marketing and
refining complexes around the world. The Corporation has a strong presence in
mature markets as well as in growing areas, such as the Asia Pacific region. The
objective of ExxonMobil's Downstream strategies is to position the Corporation
to be the industry leader under a variety of market conditions. These strategies
include maintaining best-in-class operations in all aspects of the business,
maximizing value from leading-edge technology, capitalizing on integration with
other ExxonMobil businesses, and providing quality, valued products and services
to the Corporation's customers.
The downstream industry environment remains very competitive. Refining margins
have been relatively strong over the past few years. However, inflation-adjusted
refining margins over the prior 20 years have declined at a rate of about 1
percent per year. The intense competition in the retail fuels market has
similarly driven down inflation-adjusted margins by about 3 percent per year.
Refining margins are a function of the difference between what a refinery pays
for its raw materials (primarily crude oil) and the market prices for the range
of products produced (primarily gasoline, heating oil, diesel oil, jet fuel and
fuel oil). Crude oil and many products are widely traded with published prices,
including those quoted on multiple exchanges around the world (e.g., New York
Mercantile Exchange and IntercontinentalExchange). Prices for these commodities
(crude and various products) are determined by the global marketplace and are
influenced by many factors, including global and regional supply/demand
balances, inventory levels, refinery operations, import/export balances,
seasonal demand, weather and political climate.
ExxonMobil has an ownership interest in 38 refineries, located in 21 countries,
with distillation capacity of 6.3 million barrels per day and lubricant
basestock manufacturing capacity of about 140 thousand barrels per day.
ExxonMobil's fuels and lubes marketing business portfolios include operations
around the world, serving a globally diverse customer base.
ExxonMobil's Downstream capital expenditures are focused on selective and
resilient investments. These investments capitalize on the Corporation's
world-class scale and integration, industry-leading efficiency, leading-edge
technology and respected brands, enabling ExxonMobil to take advantage of
attractive emerging-growth opportunities around the globe. For example, in
mid-2007, ExxonMobil along with our partners Saudi Aramco, Sinopec and the
Fujian Province formed the only fully integrated refining, petrochemicals and
fuels marketing venture with foreign participation in China. In addition,
ExxonMobil successfully started up several projects that produce lower-sulfur
motor fuels, including gasoline projects in Japan and diesel projects in North
America and Europe, with additional start-ups planned for 2008.
Chemical
The strength of the global economy supported continued solid demand growth for
petrochemicals in 2007. Strong economic and industrial production growth
increased demand in Asia Pacific, particularly China. North American and
European growth were moderate, similar to that of GDP. Overall the global
supply/demand balance remained tight, supporting continued strong margins
despite higher feedstock costs.
ExxonMobil benefited from continued operational excellence, as well as a
portfolio of products that includes many of the largest-volume and
highest-growth petrochemicals in the global economy. In addition to being a
worldwide supplier of primary petrochemical products, ExxonMobil Chemical also
has a diverse portfolio of less-cyclical business lines. Chemical's competitive
advantages are achieved through its business mix, broad geographic coverage,
investment discipline, integration of chemical capacity with large refining
complexes or Upstream gas processing, advantaged feedstock capabilities, leading
proprietary technology and product application expertise.
REVIEW OF 2007 AND 2006 RESULTS
2007 2006 2005
(millions of dollars)
Net income (U.S. GAAP) $ 40,610 $ 39,500 $ 36,130
2007
Net income in 2007 of $40,610 million was the highest ever for the Corporation,
up $1,110 million from 2006. Net income for 2006 included a $410 million gain
from the recognition of tax benefits related to historical investments in
non-U.S. assets. Earnings in 2007 were also at record levels for each business
segment.
2006
Net income in 2006 of $39,500 million was up $3,370 million from 2005. Net
income for 2006 included a $410 million gain from the recognition of tax
benefits related to historical investments in non-U.S. assets.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Upstream
2007 2006 2005
(millions of dollars)
Upstream
United States $ 4,870 $ 5,168 $ 6,200
Non-U.S. 21,627 21,062 18,149
Total $ 26,497 $ 26,230 $ 24,349
2007
Upstream earnings for 2007 totaled $26,497 million, an increase of $267 million
from 2006. Higher liquids realizations were mostly offset by higher operating
expenses and net unfavorable tax effects. Oil-equivalent production decreased 1
percent versus 2006, including the Venezuela expropriation, divestments, OPEC
quota effects and price and spend impacts on volumes. Excluding these impacts,
total oil-equivalent production increased by 1 percent. Liquids production of
2,616 kbd (thousands of barrels per day) decreased by 65 kbd from 2006.
Production increases from new projects in West Africa and higher Russia volumes
were offset by mature field decline and production sharing contract net interest
reductions. Natural gas production of 9,384 mcfd (millions of cubic feet per
day) increased 50 mcfd from 2006. Higher volumes from projects in Qatar and the
North Sea were mostly offset by mature field decline. Earnings from U.S.
Upstream operations for 2007 were $4,870 million, a decrease of $298 million.
Earnings outside the U.S. for 2007 were $21,627 million, an increase of $565
million.
2006
Upstream earnings for 2006 totaled $26,230 million, an increase of $1,881
million from 2005, including a $1,620 million gain related to the Dutch gas
restructuring in 2005. Higher liquids and natural gas realizations were partly
offset by higher operating expenses. Oil-equivalent production increased 4
percent versus 2005. Liquids production of 2,681 kbd increased by 158 kbd from
2005. Production increases from new projects in West Africa and increased Abu
Dhabi volumes were partly offset by mature field decline, entitlement effects
and divestment impacts. Natural gas production of 9,334 mcfd increased 83 mcfd
from 2005. Higher volumes from projects in Qatar were partly offset by mature
field decline. Earnings from U.S. Upstream operations for 2006 were $5,168
million, a decrease of $1,032 million. Earnings outside the U.S. for 2006 were
$21,062 million, an increase of $2,913 million, including a $1,620 million gain
related to the Dutch gas restructuring in 2005.
Downstream
2007 2006 2005
(millions of dollars)
Downstream
United States $ 4,120 $ 4,250 $ 3,911
Non-U.S. 5,453 4,204 4,081
Total $ 9,573 $ 8,454 $ 7,992
2007
Downstream earnings totaled $9,573 million, an increase of $1,119 million from
2006. Improved worldwide refining operations and higher gains on asset sales,
primarily outside the U.S., were partly offset by lower refining margins.
Petroleum product sales of 7,099 kbd decreased from 7,247 kbd in 2006, primarily
due to divestment impacts. Refinery throughput was 5,571 kbd compared with 5,603
kbd in 2006, with the decrease again due to divestments. U.S. Downstream
earnings of $4,120 million decreased by $130 million. Non-U.S. Downstream
earnings of $5,453 million were $1,249 million higher than 2006.
2006
Downstream earnings totaled $8,454 million, an increase of $462 million from
2005, including a $310 million gain for the 2005 Sinopec share sale and a
special charge of $200 million related to the 2005 Allapattah lawsuit provision.
Stronger worldwide refining and marketing margins were partly offset by lower
refining throughput. Petroleum product sales of 7,247 kbd decreased from 7,519
kbd in 2005, primarily due to lower refining throughput and divestment impacts.
Refinery throughput was 5,603 kbd compared with 5,723 kbd in 2005. U.S.
Downstream earnings of $4,250 million increased by $339 million, including a
2005 special charge related to the Allapattah lawsuit provision. Non-U.S.
Downstream earnings of $4,204 million were $123 million higher than 2005
earnings, which included a gain for the Sinopec share sale.
Chemical
2007 2006 2005
(millions of dollars)
Chemical
United States $ 1,181 $ 1,360 $ 1,186
Non-U.S. 3,382 3,022 2,757
Total $ 4,563 $ 4,382 $ 3,943
2007
Chemical earnings totaled $4,563 million, an increase of $181 million from 2006.
Increased 2007 earnings were driven by higher sales volumes and favorable
foreign exchange effects partly offset by lower margins. Prime product sales
were 27,480 kt (thousands of metric tons), an increase of 130 kt. Prime product
sales are total chemical product sales, including ExxonMobil's share of
equity-company volumes and finished-product transfers to the Downstream
business. Carbon black oil and sulfur volumes are excluded. U.S. Chemical
earnings of $1,181 million decreased by $179 million. Non-U.S. Chemical earnings
of $3,382 million were $360 million higher than 2006.
36
Table of Contents
Index to Financial Statements
2006
Chemical earnings totaled $4,382 million, an increase of $439 million from 2005,
including a $390 million gain from the favorable resolution of joint venture
litigation in 2005 and a $150 million gain for the 2005 Sinopec share sale.
Increased 2006 earnings were driven by higher margins and increased sales
volumes. Prime product sales were 27,350 kt, an increase of 573 kt. U.S.
Chemical earnings of $1,360 million increased by $174 million. Non-U.S. Chemical
earnings of $3,022 million were $265 million higher than 2005 earnings, which
included gains from the favorable resolution of joint venture litigation and the
Sinopec share sale.
Corporate and Financing
2007 2006 2005
(millions of dollars)
Corporate and financing $ (23 ) $ 434 $ (154 )
2007
Corporate and financing expenses were $23 million in 2007, compared to an
earnings contribution of $434 million in 2006, which included a $410 million
gain from tax benefits related to historical investments in non-U.S. assets.
2006
The corporate and financing segment contributed $434 million to earnings in
2006, up $588 million from 2005, primarily due to a $410 million gain from tax
benefits related to historical investments in non-U.S. assets and higher
interest income.
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