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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 17, 2005

Exxon Mobil Corporation

(Exact name of registrant as specified in its charter)
         
New Jersey
(State or other jurisdiction
of incorporation)
  1-2256
(Commission
File Number)
  13-5409005
(IRS Employer
Identification No.)
     
5959 LAS COLINAS BOULEVARD, IRVING, TEXAS
(Address of principal executive offices)
  75039-2298
(Zip Code)

(Registrant’s telephone number, including area code): (972) 444-1000


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

Item 7.01  Regulation FD Disclosure

Item 2.02  Results of Operations and Financial Condition

The following information is furnished pursuant to both Item 7.01 and Item 2.02.

The Registrant hereby furnishes the information set forth in its 2004 Financial and Operating Review, a copy of which is included as Exhibit 99.

This Form 8-K/A corrects working interest and targeted peak production information in the “Europe Projects” table on page 40 of Exhibit 99 that was inadvertently reported in the wrong columns in the Form 8-K filed on March 17, 2005.

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SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
  EXXON MOBIL CORPORATION
 
 
Date: March 18, 2005  By:   /s/ Patrick T. Mulva    
    Name:   Patrick T. Mulva   
    Title:   Vice President, Controller and Principal Accounting Officer   
 

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INDEX TO EXHIBITS

     
Exhibit No.   Description
 
   
99
  Exxon Mobil Corporation’s 2004 Financial and Operating Review.

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exv99
 

(EXXONMOBIL PICTURE)

2 0 0 4 F I N A N C I A L & O P E R A T I N G R E V I E W
ExxonMobil Taking on the world's toughest energy challengesTM.

 


 

(BAYTOWN CONGENERATION UNIT PICTURE)

A new Baytown Cogeneration Unit started up in 2004. It is one component of a Refining and Supply capital investment program that focuses on selective and resilient investments to meet future product quality requirements, reduce environmental impact, further upgrade safety systems, lower operating costs, and produce higher-value products with lower-cost raw materials. The term Upstream refers to exploration, development, production, and gas and power marketing. Downstream refers to the refining and marketing of petroleum products such as motor fuels and lubricants. Projections, targets, expectations, estimates, and business plans in this report are forward-looking statements. Actual future results, including demand growth and energy mix; capacity growth; the impact of new technologies; capital expenditures; project plans, dates, and capacities; production rates and resource recoveries; and efficiency gains and cost savings could differ materially due to, for example, changes in long-term oil and gas prices or other market conditions affecting the oil and gas industry; reservoir performance; timely completion of development projects; war and other political or security disturbances; changes in law or government regulation; the actions of competitors; unexpected technological developments; the occurrence and duration of economic recessions; the outcome of commercial negotiations; TA B L E O F C O N T E N T S unforeseen technical difficulties; and other factors discussed in this report and under the heading "Factors Affecting Future Results" in Item 1 of Corporate 1-23 ExxonMobil's most recent Form 10-K. Technology 10 -13 Definitions of certain financial and operating measures and other terms used in Safety, Health & Environment 14 -15 this report are contained in the section titled "Frequently Used Terms" on pages Corporate Financials 16-23 88 through 91. In the case of financial measures, the definitions also include information required by SEC Regulation G to the extent we believe applicable. Upstream 24 -63 Downstream 64-79 "Factors Affecting Future Results" and "Frequently Used Terms" are also Chemical 80 -87 posted on our website and are updated from time to time during the year. Frequently Used Terms 88 -91 Certain reclassifications to prior years have been made to conform to Index 92 the 2004 presentation.

 


 

To grow and prosper, the world will need 50 percent more energy by 2030 — an enormous challenge. Taking on this challenge demands more than deploying the right assets in the right places at the right time. It requires a relentless focus on execution by a highly effective work force. Not just quarter to quarter but decade to decade. To this challenge we bring continued dedication to the values we live by — discipline, integrity, reliability, consistency, and a commitment to technology. These principles are fundamental to our success today, and will remain so as we take on the world’s toughest energy challenges.

(EXXONMOBIL LOGO)

 


 

  2

FINANCIAL HIGHLIGHTS

                                         
(millions of dollars, unless noted)   2004     2003     2002     2001     2000  
 
Sales and other operating revenue
    291,252       237,054       200,949       208,715       227,596  
Net income
    25,330       21,510       11,460       15,320       17,720  
Cash flow from operations and asset sales(1)
    43,305       30,788       24,061       23,967       28,707  
Capital and exploration expenditures (1)
    14,885       15,525       13,955       12,311       11,168  
Cash dividends to ExxonMobil shareholders
    6,896       6,515       6,217       6,254       6,123  
Common stock purchases (gross)
    9,951       5,881       4,798       5,721       2,352  
Research and development costs
    649       618       631       603       564  
Cash and cash equivalents at year end(2)
    18,531       10,626       7,229       6,547       7,080  
Total assets at year end
    195,256       174,278       152,644       143,174       149,000  
Total debt at year end
    8,293       9,545       10,748       10,802       13,441  
Shareholders’ equity at year end
    101,756       89,915       74,597       73,161       70,757  
Average capital employed(1)
    107,339       95,373       88,342       88,000       87,463  
Market valuation at year end
    328,128       269,294       234,101       267,577       301,239  
Regular employees at year end (thousands)
    85.9       88.3       92.5       97.9       99.6  
 

KEY FINANCIAL RATIOS

                                         
    2004     2003     2002     2001     2000  
 
Net income per common share (dollars)
    3.91       3.24       1.69       2.23       2.55  
Net income per common share — assuming dilution (dollars)
    3.89       3.23       1.68       2.21       2.52  
Return on average capital employed(1) (percent)
    23.8       20.9       13.5       17.8       20.6  
Net income to average shareholders’ equity (percent)
    26.4       26.2       15.5       21.3       26.4  
Debt to capital(3)(percent)
    7.3       9.3       12.2       12.4       15.4  
Net debt to capital(4)(percent)
    (10.7 )     (1.2 )     4.4       5.3       7.9  
Current assets to current liabilities(4)
    1.40       1.20       1.15       1.18       1.06  
Fixed charge coverage (times)
    36.1       30.8       13.8       17.7       15.6  
 


(1)   See Frequently Used Terms on pages 88 through 91.
 
(2)   Excluding restricted cash of $4,604 million.
 
(3)   Debt includes short and long-term debt. Capital includes short and long-term debt, shareholders’ equity, and minority interests.
 
(4)   Debt net of cash, excluding restricted cash. The ratio of net debt to capital including restricted cash is (16.3) percent for 2004.

(BAR CHART)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

  3

ExxonMobil holds a legacy of leadership in our industry. We’ve created sustainable competitive advantage through our proven business model, enabling us to excel while taking on the world’s toughest energy challenges.

(BUSINESS MODEL FLOW GRAPH)

Our fundamental business model is disciplined, straightforward, and focused on generating value while managing risk. Through it we continue to demonstrate superior financial and operating results that have enhanced long-term returns for our shareholders. The core values that form the backbone of our model are firmly established in our globally aligned functional organization. The disciplined execution of our business strategies sets us apart.

OUR APPROACH

§   Uphold high ethical standards and business integrity
 
§     Ensure safe, environmentally sound operations
 
§     Capture quality investment opportunities while maintaining a selective and disciplined approach
 
§     Pursue operational excellence
 
§     Leverage efficiency gains through our global functional organization
 
§     Develop and employ leading-edge proprietary technology
 
§     Optimize performance through geographic and functional diversity and integration
 
§     Attract and retain exceptionally qualified and highly motivated people
 
§     Maintain a strong and flexible financial position in all commodity environments

INDUSTRY-LEADING RESULTS

§     Record low safety incidents
 
§     Record earnings – highest in the history of the Corporation and in each business line
 
§     Return on average capital employed (ROCE) increased to 24 percent; five-year average ROCE leads the industry at 19 percent
 
§     Proved reserves additions replaced 125 percent of production, excluding asset sales and year-end price/cost revisions
 
§     Oil-equivalent production increased 0.3 percent; excluding sales and entitlement effects, production increased 3 percent
 
§     Key resource additions from Qatar, the United States, Canada, Nigeria, Angola, and Kazakhstan
 
§     Downstream operating cost efficiencies and revenue enhancements in excess of $1.7 billion
 
§     Record chemical prime product sales
 
§     Annual dividend payments grew 8 percent and increased for the 22nd consecutive year
 
§     $15 billion returned to shareholders

Our disciplined approach yielded strong performance in each of our business lines and enabled us to fully capture the benefits of a robust environment. Our results demonstrate our ability to generate more income from a highly efficient capital base – something we have consistently done for years across all phases of the business cycle.

(BAR CHART)



2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION  

 


 

  4

Unparalleled Execution of Business Strategies Builds Competitive Advantage

Our industry faces an enormous challenge to meet the energy needs of a growing world. Increasingly, significant new oil and gas resources are in more remote areas and difficult environments. Projects are more capital intensive and require substantial financial strength and flexibility. The complexity of the operating environment places greater emphasis on execution excellence. These challenges present ExxonMobil with opportunities to further differentiate each of our businesses.

UPHOLD HIGH STANDARDS
ExxonMobil has long recognized the importance of sound corporate governance, strong business controls, and the value of high ethical standards and integrity. We believe that the methods we employ to attain results are as important as the results themselves. We are committed to transparency and honesty in all our reporting. These principles form the basis of our Standards of Business Conduct, and are regularly reinforced with all employees. Our straightforward business model, ethical standards, and culture of integrity, legal compliance, and accountability are key to achieving industry-leading results.

MAINTAIN SAFETY AS OUR TOP PRIORITY
In 2004, ExxonMobil set another record in safety performance, once again leading the industry. We believe that when a company is disciplined about its commitment to safety, health, and the environment, a sound foundation is created for superior results in all aspects of its business. We comply with all applicable environmental laws and regulations, and apply responsible standards where laws and regulations do not exist.

INVEST WITH DISCIPLINE
In our industry, investment decisions can impact results for decades. They must be based on an in-depth understanding of supply and demand for each business. Our highly disciplined approach to

pursuing and selecting the most attractive investment opportunities has served us well in all phases of the economic cycle. Potential investment opportunities are tested over a wide range of economic scenarios to assure the resiliency of each opportunity. Our disciplined approach continues from design through start-up and ongoing operations. Post-investment, we complete a rigorous appraisal process on all major projects and incorporate improvements into future project planning and design. This critical process ensures that we obtain the maximum value from our investments; we believe it distinguishes us from competition.

PURSUE OPERATIONAL EXCELLENCE
ExxonMobil applies the same rigor to our operations that we apply to investments. We operate with the highest industry standards in all respects. We meet our commitments and we set industry benchmarks in the process. We call this “operational excellence.”

To accomplish this, ExxonMobil has developed a wide range of proven management systems. These systems cover all aspects of our operations, from business ethics, finance, project execution and appraisal, to business controls, security, safety, health, and environmental performance. They also encompass profit improvement initiatives, including efforts to increase reliability, lower costs, and enhance revenue. The application of rigorous management and operating systems, deployed in our functional organization, has delivered consistently superior results.

OPTIMIZE RESULTS THROUGH GEOGRAPHIC AND FUNCTIONAL DIVERSITY AND INTEGRATION
ExxonMobil’s size, geographic diversity, and functional mix provide a natural hedge that reduces the Company’s sensitivity to changes in commodity prices, business cycles, and regional market conditions. Our global presence provides us with an efficient platform for investing in any opportunity that meets our rigorous criteria.



(LINE GRAPH AND BAR CHART)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

Corporate 5

In addition, by capitalizing on synergies among our various businesses, including physical integration of facilities, ExxonMobil is able to optimize the Corporation’s performance. For example, the integration of our refining and chemical facilities enhances margins through improved feedstock/product interchange and lowers site operating costs.

LEVERAGE EFFICIENCY GAINS THROUGH OUR GLOBAL FUNCTIONAL ORGANIZATION
ExxonMobil operates our functional businesses and service organizations on a global basis. Our functional organization continually raises the bar on execution performance. It facilitates rapid deployment of our most valued resource, our people, to the best opportunities. It also enables prompt identification, prioritization, and sharing of ideas, technology, and best practices around the globe. However, success with this organizational approach requires a foundation of global management and support systems.

Advantages do not last forever. Our ability to quickly implement the best solutions to problems across our global scale through our functional organization enables us to capture more value from our assets. ExxonMobil’s functional approach continues to deliver savings from cost efficiencies and revenue enhancements. In 2004, ExxonMobil delivered more than $1 billion in before-tax cost efficiencies.

DIFFERENTIATE THROUGH PROPRIETARY TECHNOLOGY
Technological innovation continues to differentiate ExxonMobil from the competition. ExxonMobil invests over $600 million per year on proprietary research. We balance our investments between extensions of existing technology and breakthrough research. The development of extensions is prioritized by business need and is focused on the development of new technologies and their application in day-to-day operations. A significant portion of our research effort is also aimed at discovering next-generation and breakthrough technologies that have the potential to provide a step-change to the Corporation’s competitive position and financial performance.

ATTRACT AND RETAIN EXCEPTIONAL PEOPLE
ExxonMobil’s success is the result of a highly capable, diverse work force focused on the right business priorities. The key to an effective work force is to have a system that aligns people who have the right capabilities in the right direction at the right time. Developing such a work force requires leadership, succession planning, accountability, stewardship, and constancy of purpose.

Our process begins by recruiting outstanding candidates and accelerating the development of those with top management potential. It includes both formal training and skill development through exposure to a variety of experiences over a career. Our performance-based development system is integrated throughout the Corporation. ExxonMobil is a meritocracy where people are given valuable and rewarding experiences that help them learn, grow, and contribute at the same time.

MAINTAIN FINANCIAL STRENGTH AND FLEXIBILITY
ExxonMobil has a long track record of generating strong cash flow from our proven approach. This performance has accelerated since the merger between Exxon and Mobil in 1999. In 2004, we generated a record $43.3 billion in cash flow from operations and asset sales. This affords us the financial strength and flexibility to pursue all profitable investment opportunities that meet our rigorous criteria. Last year, we invested $14.9 billion to profitably grow the business.

Strong business results and a disciplined approach to financial management ensure that we maintain financial strength and flexibility regardless of the prevailing commodity price. This strength has enabled us to raise the dividend in each of the last 22 years – an unmatched record among international oil companies. We also distribute value to shareholders through the largest share purchase program in the industry. In 2004, we paid $6.9 billion in dividends and increased the amount distributed to shareholders through share purchases to $8 billion (excluding spending to offset share issuance under benefit plans).



(BAR CHART)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION  

 


 

  6

ExxonMobil’s Core Objective – Delivering Long-Term Growth in Shareholder Value

Our business strategies underpin ExxonMobil’s commitment to deliver superior shareholder value through dividend growth and long-term share price appreciation. Since Exxon and Mobil merged, we have distributed over $57 billion to shareholders in dividend payments and share purchases. Over that time, we have reduced the shares outstanding by over 8 percent while the stock price has appreciated 27 percent. Our compound annual dividend growth rate over the last 20 years of 4.8 percent has exceeded the U.S. Consumer Price Index by 1.7 percent. In 2004, the annual dividend grew by over 8 percent, to $1.06 per share.

Total shareholder returns on ExxonMobil stock have consistently outpaced the S&P 500 index. ExxonMobil shareholders have earned annualized returns of 16.0 percent and 16.1 percent during the last 10 and 20 years, compared with S&P 500 index returns of 12.1 percent and 13.2 percent, respectively. Risk and reward are a factor in any investment decision. Volatility – the fluctuation of monthly returns around its mean – is one measure of risk. By this measure, ExxonMobil stock risk was approximately equal to S&P 500 index risk during the past 20 years. However, ExxonMobil shareholders earned a 2.9 percent higher annual total return. The volatility of ExxonMobil returns has been well below that of our industry competitors during the same period.



(GRAPH)

DIVIDEND AND SHAREHOLDER RETURN INFORMATION

                                         
    2004     2003     2002     2001     2000  
 
Net income per common share (dollars)
    3.91       3.24       1.69       2.23       2.55  
Net income per common share – assuming dilution (dollars)
    3.89       3.23       1.68       2.21       2.52  
 
Dividends per common share (dollars)
                                       
First quarter
    0.25       0.23       0.23       0.22       0.22  
Second quarter
    0.27       0.25       0.23       0.23       0.22  
Third quarter
    0.27       0.25       0.23       0.23       0.22  
Fourth quarter
    0.27       0.25       0.23       0.23       0.22  
 
Total
    1.06       0.98       0.92       0.91       0.88  
 
Dividends per share growth (annual percent)
    8.2       6.5       1.1       3.4       4.3  
 
Number of common shares outstanding (millions)
                                       
Average
    6,482       6,634       6,753       6,868       6,953  
Average – assuming dilution
    6,519       6,662       6,803       6,941       7,033  
Year end
    6,401       6,568       6,700       6,809       6,930  
 
Cash dividends paid on common stock (millions of dollars)
    6,896       6,515       6,217       6,254       6,123  
Cash dividends paid to net income (percent)
    27       30       54       41       35  
Cash dividends paid to cash flow(1)(percent)
    17       23       29       27       27  
 
Total return to shareholders(2)(annual percent)
    27.9       20.5       (8.9 )     (7.6 )     10.2  
 
Market quotations for common stock (dollars)
                                       
High
    52.05       41.13       44.58       45.84       47.72  
Low
    39.91       31.58       29.75       35.01       34.94  
Average daily close
    45.29       36.14       37.70       41.29       41.42  
Year-end close
    51.26       41.00       34.94       39.30       43.47  
 


(1)   Cash flow from operating activities.
 
(2)   See Frequently Used Terms on pages 88 through 91.

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

Corporate 7

Energy Outlook – 2030

For ExxonMobil and for the entire energy sector, supplying energy is a challenge that must be met reliably, affordably, safely, and in an environmentally responsible manner. To do so requires an understanding of the opportunities ahead.

We continuously assess the trends and issues that are likely to affect energy in the future. This year we extended our outlook to 2030. The result is a comprehensive view of the fundamentals that underpin our business, which serves as a strategic framework to evaluate and select the business opportunities that hold the most promise. The key conclusions include:

§   Growing economies and rising personal incomes are expected to drive world energy demand higher by 50 percent

§   Energy efficiency will become increasingly important to help economically balance supply and demand

§   Plentiful, reliable, and affordable energy supplies are essential – we expect oil and gas to remain predominant

§   Transportation remains the primary driver of oil demand – emerging new vehicle technology will dampen demand growth

§   Power generation needs drive growing natural gas demand – diverse pipeline and liquefied natural gas (LNG) supplies are key

§   Growing the available oil and gas resource base is critical – persistent and significant technology investment is needed

IMPROVING LIVING STANDARDS REQUIRES MORE ENERGY, DESPITE ACCELERATING EFFICIENCY GAINS

Energy will continue to play an essential role in supporting economic prosperity and better living standards. As economies advance, the need for energy supplies will also grow. Meeting this need remains a crucial challenge.

Worldwide economic growth will likely average just under 3 percent per year through 2030, a pace similar to the last 20 years. We expect this growth and increasing personal income, notably in developing nations, to drive global energy demand increases averaging 1.7 percent per year. By 2030, energy consumption will likely reach 335 million barrels per day of oil-equivalent, or 50 percent more than today.

Close to 80 percent of this demand increase is expected to occur in developing nations. Meeting the growing need for modern energy supplies in these areas is essential to help raise living standards through better health, education, and productivity. With faster economic growth, average annual per capita income should approach $4,000 in developing nations by 2030, contributing to substantial increases in personal vehicle use.

As energy demand continues to grow, we anticipate increasingly more efficient use of resources. Critical to this result will be the development and use of more advanced technologies to meet growing transportation and power generation needs, as well as tightening environmental standards.



(GRAPH)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

  8

OIL & GAS WILL REMAIN PREDOMINANT IN GLOBAL ENERGY MIX; GAS WILL SURPASS COAL
We anticipate energy demand will continue to be met through a broad portfolio of energy options. Oil and natural gas are essential to improving prosperity throughout the world. We expect them to remain the predominant fuels through the middle of the century, with gas surpassing coal as the next highest fuel share behind oil.

(BAR CHART)

§     We expect the share of oil and gas in the world’s energy supply — close to 60 percent today — will stay relatively stable through 2030.
 
§     Coal will maintain its share of the energy mix, driven by strong demand in China and India, and continued growth in the United States.
 
§     Hydropower and nuclear power will also grow, though public opposition and the lack of suitable hydro sites will likely limit global capacity increases.
 
§     Although wind and solar energy are likely to average double-digit growth due to public subsidies/mandates, we expect their share will be only about 1 percent of the world’s energy supply in 2030.

In the very long term, the energy mix will likely become more diversified. We expect higher growth for nuclear and the development of biofuel energies. However, over the outlook period, fossil fuels are the only energy forms with the scale and versatility to meet the challenge of growing world energy demand.

TRANSPORTATION DRIVES OIL DEMAND
Transportation uses are expected to account for about 60 percent of the worldwide increase in oil demand through 2030. With rising vehicle use, the developing nations’ share of global transport fuel is anticipated to rise from 35 percent to 55 percent.

Nevertheless, we expect several factors will significantly dampen long-term oil demand growth during the outlook period, especially in the industrialized nations. These factors include:

§     A gradual shift in the new car mix favoring more cars and fewer light trucks and sport utility vehicles;
 
§     A rising share of diesels, hybrids, and advanced internal combustion engines to between 40 to 60 percent of new vehicle sales in the United States, Europe, and Japan; and,
 
§     Continued incremental improvements to conventional internal combustion engines.
 

FUEL EFFICIENCY A KEY CHALLENGE
By 2030, we expect the vast majority of automobiles will continue to use an internal combustion engine, including hybrids. ExxonMobil is engaged in research that targets significant improvements in fuel efficiency and emission levels. We expect that the next-generation vehicle will be a composite of the best emerging internal combustion engine technologies combined with an electric motor in an optimized hybrid configuration.

Promising internal combustion engine technologies include:

§     Hybrid-engine technology using a gasoline engine for steady speeds and an electric motor for extra power during the more energy demanding phases of start-up and acceleration; and,
 
§     New combustion technologies, such as homogenous charge compression ignition (HCCI), that have the potential to deliver the higher efficiency of a diesel engine with the low emissions of a gasoline engine.

Research is also under way on automotive fuel cell systems powered by hydrogen, an alternative longer-term approach. Hydrogen is abundant but does not exist freely in nature, and so requires significant energy to produce. The technical and economic issues related to the cost, safe distribution, and widespread use of hydrogen are significant, and it may well take decades to overcome them.

(GRAPH)



EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

Corporate 9

POWER GENERATION DRIVES NATURAL GAS DEMAND
Over the period to 2030, we expect natural gas will be the fastest growing primary energy source, capturing about 30 percent of the growth in total energy demand, and reaching one quarter of global energy supply. About half of the growth in gas demand will likely be needed to meet power generation requirements to supply worldwide electricity demand, which is expected to double by 2030.

(BAR CHART)

TECHNOLOGY INVESTMENT NEEDED TO EXTEND CRITICAL OIL AND GAS RESOURCES
By 2030, global oil and gas demand is likely to be close to 200 million barrels per day of oil-equivalent compared to about 130 million barrels per day in 2004. Meeting this demand will be an enormous challenge. The ongoing task is to economically find, produce, and deliver this energy. By 2030, the industry will likely need to add roughly 170 million oil-equivalent barrels per day of new oil and gas production – an amount close to one-third more than current production levels. Development of these supplies will not only require access to resources, but increasingly the cooperation and commitment of governments to advance international development and trade relationships that promote security of supply.

Technology advances remain critical to increasing future oil and gas supplies, enabling more effective resource recovery while minimizing costs and environmental effects. New technologies, such as 4D seismic and direct hydrocarbon detection, promise to further advance our capability to extend recoverable resources worldwide. New technology will also enable economic development of “frontier” resources – extra heavy oil, oil sands, and oil shale – to help ensure adequate supplies of fossil fuels at affordable prices.

The cost to develop these resources is very large. According to the International Energy Agency, the investment required to meet total energy needs worldwide through 2030 will be $16 trillion, with about $200 billion per year required for oil and gas. Financing will be a critical global challenge, with funding dependent on whether investment conditions provide potential investors sufficient incentives versus other options.

ExxonMobil, with our leading resource base, financial strength, disciplined investment approach, and technology portfolio, is well-positioned to participate in the global investment needed to develop new energy supplies. These strengths enable us to remain at the forefront of competition in meeting the energy challenges and capitalizing on the opportunities ahead.

(BAR CHART)



2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

10

Technology

Our unwavering commitment to research underscores a fundamental belief that technology is absolutely vital to our effort to provide reliable and affordable energy supplies. Increasingly, proprietary technology solutions are a key differentiating factor for ExxonMobil.

ExxonMobil’s unparalleled commitment to the development and application of industry-leading technologies provides the business with opportunities to discover, produce, manufacture, and market oil and gas resources and petrochemicals that may not be available to competitors. Our research efforts are matched to our business needs through a rigorous prioritization process based on both sound economic and technical evaluation.

New energy supplies have a number of prerequisites for commercialization. Access to resources and the finances to develop them are basic requirements. However, continuing advances in technology are vital to economically unlocking the potential in many of the world’s hydrocarbon basins. Technology is equally important in the development of the many high-quality petroleum and petrochemical products used every day.

ExxonMobil maintains one of the industry’s largest research and development efforts, spending more that $600 million annually. We emphasize proprietary solutions that solve critical business challenges. We balance our investment between technology extensions, which can be rapidly deployed to our existing operations, and breakthrough research that can have a significant and lasting impact on the Corporation and industry.

Upstream Technology

ExxonMobil’s broad research effort addresses a spectrum of Upstream business needs from the generation of new opportunities to maximizing hydrocarbon production from discovered resources. The highly skilled staff of the Upstream Research Company, including geologists, engineers, mathematicians, and other scientists, is dedicated to maintaining and growing a portfolio of technology that translates into a competitive advantage for ExxonMobil. Research initiatives range in scale from the physics of the wellbore to the movement of the earth’s crust, but they are all guided by strong links to the business and a relentless focus on developing a fundamental understanding of the underlying science.

GENERATING NEW OPPORTUNITIES

A new research effort is aimed at developing novel geologic concepts and technologies to help find new hydrocarbon resources. This effort includes work ranging from predicting how the microscopic pore spaces that hold hydrocarbons change through time, to understanding the movement of large pieces of the earth’s crust. In the example shown, a proprietary model calculates how South America and Africa have moved apart on a geologic time scale. This type of movement has a significant influence on where oil and gas reservoirs have formed. This proprietary technology has already helped our geoscientists generate ideas about where new exploration opportunities might exist.

(MAP)

EXXON     MO B I L     C O R P O R A T I O N     •     2 0 0 4   F I N A N C I A L     &     O P E R A T I N G     R E V I E W

 


 

Corporate 11

(MAP)

IMPROVED SEISMIC IMAGING

ExxonMobil dedicates a significant research effort to improving our ability to image the subsurface using seismic technologies. Our current focus is on developing proprietary methods that produce higher-quality images than standard industry processing, allowing better predictions of the properties of discovered reservoirs. Advances in this area are key to cost-effectively finding and developing hydrocarbon resources in increasingly challenging environments.

(MAP)

(EM POWER LOGO)

MAXIMIZING HYDROCARBON RECOVERY

Maximizing recovery from discovered resources is critical to the success of our investment program. ExxonMobil has developed a number of patented technologies that produce exceptionally detailed reservoir images. In the examples shown, the computer-processed image of a deeply buried carbonate reservoir (left) looks remarkably like modern analogs, such as the Great Barrier Reef of Australia (right). The blue areas indicate low-quality rock, which with these better images can be avoided during drilling.

Also critical to maximizing recovery is ExxonMobil’s application of the industry’s only next-generation reservoir simulator, EMpower. Today over 275 ExxonMobil engineers regularly use EMpower to build detailed reservoir simulation models. These computer models take advantage of a long list of proprietary capabilities, such as the ability to rigorously analyze multiple reservoirs linked together through a common facility. Even as ExxonMobil extracts unprecedented value from EMpower, we continue to invest in further enhancements, such as advanced capabilities for modeling the recovery of heavy oil.

(PICTURE)

THE ENGINEERED WELLBORE

ExxonMobil routinely applies its Engineered Wellbore approach to drill, complete, and produce wells at the physics-based technical limit, resulting in lower costs and higher production rates. This technology includes practices and procedures that maximize production rates while sustaining wellbore longevity. These practices and procedures are derived from physics-based models, and are validated in our unique experimental laboratories, such as the Wellbore Simulator (shown above). The Engineered Wellbore approach has led to 27 consecutive successful well installations offshore Africa, where other operators have encountered significant difficulties.

2004   F I N A N C I A L   &   O P E R A T I N G   R E V I E W   •   E X X O N   M O B I L   C O R P O R A T I O N

 


 

12

Manufacturing and Product Technology

Manufacturing and product technologies encompass and are driven by both the Downstream and Chemical businesses, aiming to meet the needs of the marketplace and create competitive advantage. Whether it’s a new plastic, a new lubricant, or a cutting-edge technology to improve the efficiency of manufacturing operations, the scientists and engineers at ExxonMobil Research & Engineering Company and ExxonMobil Chemical work in collaborative teams with their business partners. The ideas they generate lead to experiments in the laboratory at the molecular level. Using state-of-the-art research techniques, new and innovative processes and product technologies are scaled to commercial size. Once proven, they are deployed across our global businesses to capture maximum value.

COMMERCIALIZING GAS-TO-LIQUIDS TECHNOLOGY

An important element of downstream technology is to develop state-of-the-art options for resource commercialization. Our 154-thousand-barrel-per-day gas-to-liquids (GTL) project in Qatar, the world’s largest announced to date, will benefit from significant upstream and manufacturing economies of scale. ExxonMobil’s AGC-21 GTL technology combines several proprietary technologies that create competitive advantage. Our slurry reactor system, based on a proprietary cobalt catalyst and expertise in managing fluidized catalytic systems, enables lower-cost synthesis and better control of reaction conditions. This process produces high-quality diesel blendstock and a high yield of very high-quality lube basestocks.

(PICTURE)

PREMIUM LUBRICANTS

ExxonMobil’s proprietary MSDW-2 catalyst is the industry-leading technology to make high-quality lube basestocks. Our technology has much lower capital costs than conventional solvent dewaxing. High catalyst activity, long life, and tolerance to feed impurities contribute to performance and cost advantages over competing technologies. MSDW-2 technology has been very successfully applied in our own refineries, has captured the major share of recent industry lube upgrading licenses, and is also a critical element of the upgrading step in our GTL technology.

(PICTURE)

A UNIQUE CATALYSIS CAPABILITY LEVERAGES ASSETS

ExxonMobil has a long history of developing refining and chemical manufacturing technologies that improve efficiency and provide new solutions to meet market needs. The critical priorities are to enhance the performance of existing manufacturing facilities and the quality and performance of the products produced. Catalysis – the science of engineering substances that facilitate chemical reactions – is one of the most effective tools to address these priorities.

Our SCANfining catalyst is used in over 1 million barrels per day of low-sulfur motor gasoline production in North America.

ExxonMobil’s unique proprietary capability in this area is the driver behind improvements in our ability to increase yields from existing processing hardware. Likewise, technology that employs new catalysts, such as our SCANfining technology for low-sulfur gasoline, shown below, and Nebula-20 for ultralow-sulfur diesel, enable us to meet new, more stringent product specifications while minimizing investment. Our competitive position in catalysis is supported by more than 150 catalyst family patents and over 40 commercialized catalysts. The value of our catalyst assets is enhanced and regularly validated through our licensing business.

(PICTURE)

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HIGHER-VALUE CHEMICAL PRODUCTS

ExxonMobil is a leader in metallocene catalyst development, which we were the first to commercialize in 1992. Metallocenes are a class of chemical compounds that function as polymerization catalysts. They significantly enhance the mechanical and optical properties of polyethylene and polypropylene.

Our proprietary polymer science allows us to select the right metallocene catalyst and process conditions to tailor the exact end-use properties to meet market needs. Since their introduction, sales of high-margin polymers using our metallocene catalysts have grown by an average of 30 percent per year – four to five times industry growth over the same period.

This growth is supported by the continuous introduction of new and enhanced products such as our Vistamaxx specialty elastomers. These new polymers can enhance the elasticity, softness, adhesion, strength, and durability of our customers’ products.

Film made with metallocene polyethylene provides a unique combination of stiffness and clarity as demonstrated on this commercial production line.

(PICTURE)

INCREASING MARGIN CAPTURE

We have used our advanced process technology to identify and deliver initiatives that improve our manufacturing processes and equipment utilization. As a result, we lead the industry in refinery operating reliability. In 2004, technology helped reduce unplanned capacity loss below 2 percent.

In refining, one area of promise is our breakthrough research in low-energy separation technology. Advances in materials science have created opportunities for alternative separation techniques to conventional energy-intensive distillation. Membranes, adsorbents, and reactive separations, if successful, could have a wide range of potential applications, from substantially reducing the energy intensity of crude oil fractionation to improvements in upgrading difficult-to-process raw materials, such as heavy crudes.

Technology also helps us reduce raw material costs. Optimizing the selection and use of raw materials through our refineries and chemical plants is one of the best opportunities to improve margins in the downstream and chemical business. ExxonMobil has developed unique capabilities to analyze, model, and optimize the chemistry at the molecular level in our units – what we call “molecule management.” The application of our proprietary molecular management technologies has expanded from individual units to regional manufacturing centers, and should ultimately encompass our entire supply system. When fully implemented, the impact of these technologies is likely to be about $500 million per year.

NEW R&D CAPABILITIES SPEED UP RESEARCH

High throughput experimentation (HTE) is a combination of technologies in experimental design, materials synthesis, and testing, combined with advanced data analysis and visualization tools that have delivered exciting results. Using this technique, we use computer-driven robotics to quickly generate many forms of catalysts. We then evaluate those candidate catalysts in high-speed screening tests for commercial application.

Using HTE, we can conduct nearly 100 experiments simultaneously, providing results in days that before took weeks to months. So far we have conducted over 30,000 tests. Beyond catalyst synthesis and testing, we have plans to apply HTE to product formulation and advanced separation techniques. We expect to significantly shorten the time it takes to discover new technologies. ExxonMobil has capabilities in this field that are unique in the oil industry.

Technicians like Kathryn Hammack can conduct multiple experiments simultaneously using HTE at the Baytown Technology and Engineering Complex.

(PICTURE)

2004   FIN A N C I A L   &   O P E R A T I N G   R E V I E W   •   E X X O N   M O B I L   C O R P O R A T I O N

 


 

14

Safety, Health & Environment

We maintain our commitment to high standards of safety, security, health, and environmental care.

2004 HIGHLIGHTS

§   Safest year ever
 
§   Record energy efficiency performance in our Refining and Chemical businesses

GUIDING PRINCIPLE

ExxonMobil is committed to maintaining high standards of safety, security, health, and environmental care. We comply with all applicable environmental laws and regulations, and apply responsible standards where laws and regulations do not exist.

The products we produce are essential to society. ExxonMobil has shown that we can produce them while protecting the health and safety of people, and safeguarding the environment. Our goal is to drive injuries, illnesses, and operational incidents with environmental impact to zero.

RISK MANAGEMENT AND SECURITY

Risks are inherent in the energy and petrochemical businesses, including risks associated with safety, health, and the environment. ExxonMobil recognizes these risks and takes a systematic managed approach to mitigate their impact. The same rigor and discipline that underpin our investment program are also used in our approach to the management of our performance in safety, security, health, and the environment. ExxonMobil’s commitment is supported by our investment in related science and technology, which will help improve performance in these areas.

Our Operations Integrity Management System (OIMS) is a risk management tool for assessing and improving our safety, security, health, and environmental performance. OIMS enables us to measure progress, plan future improvements, and ensure management accountability for results in these areas. OIMS conforms with the international standard for environmental management systems (ISO 14001).

ExxonMobil has a long-standing commitment to the protection of its people, facilities, information, and other assets. Security measures take into account perceived risk, cost and practicality, compliance with applicable laws, and recognition of social norms.

EXXONMOBIL LNG SAFETY & ENVIRONMENTAL INSTITUTE

ExxonMobil is establishing a Liquefied Natural Gas Safety and Environmental Institute as an anchor tenant in the recently announced Science and Technology Park in Education City, Doha, Qatar. Anticipated opening is 2006. The Institute will focus on developing leading-edge technologies to help ensure the highest standards of safety and environmental performance in the world’s largest gas processing and liquefaction facilities. This is one of the many efforts supporting ExxonMobil’s commitment to safe, reliable, and environmentally responsible activities.

(PICTURE)

(PICTURE)

“We further believe ExxonMobil to be among the industry leaders in the extent to which environmental management considerations have been integrated into its business processes for ongoing operations and for the planning and development of new projects.” – Lloyd’s Register Quality Assurance, September 2, 2004. Above, Dale Williams surveys the new cogeneration project at the Baytown Olefins Plant.

SAFETY AND HEALTH

ExxonMobil has long been an industry leader in safety performance. We believe that providing a safe work environment for our employees, contractors, and communities contributes to and is indicative of superior performance in other aspects of our operations. In 2004, we achieved our safest year ever, with the fewest safety incidents in ExxonMobil history. Over the last decade, we have reduced lost-time incidents by a factor of ten.

While our systematic approach to managing risk minimizes the likelihood of a major incident, such risks cannot be entirely eliminated. We therefore place great emphasis on preparations to respond effectively to potential incidents, including product spills,

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

Corporate 15

fires, explosions, natural disasters, and security incidents. As part of this preparation in 2004, we conducted nine major drills in locations around the world.

The world’s health pandemics are taking a staggering toll in many of the communities where we operate, particularly West Africa. ExxonMobil is helping to address this plight head-on. Our “Africa Health Initiative” grants include programs to tackle malaria at the community level, to promote research and development of new drugs, and to advocate for international support. In 2004, we also developed a comprehensive African program known as Stop AIDS to help address HIV/AIDS where we live and work.

ENVIRONMENT

ExxonMobil is committed to leadership in environmental performance. We will operate responsibly wherever we do business by implementing scientifically sound, practical solutions. Our business units around the world develop detailed environmental business plans to identify and manage environmental risks and address issues at the local level.

We are taking a number of significant actions to improve our efficiency and reduce greenhouse gas emissions (GHG) from our operations:

§   We are capturing significant energy efficiency improvements with our Global Energy Management System (GEMS). We achieved record energy efficiency in our refining and chemical businesses in 2004.
 
§   ExxonMobil is an industry leader in the use of cogeneration, a much more efficient way to make power and steam than by traditional methods. We currently have interests in over 85 cogeneration facilities with the capacity to produce approximately 3,300 megawatts of electricity. In 2004, 400 megawatts of new cogeneration capacity were added at our facilities in the United States and Canada, and we expect to add another 400 megawatts in 2005 at a total expected investment for both years of nearly $1 billion.

(BAR CHART)

§   ExxonMobil is taking steps to significantly reduce flaring in the near future, although flaring increased in 2004 due to higher oil production. In Nigeria, where ExxonMobil flares a lower percentage of gas than the industry average, projects are being implemented to simultaneously increase production and end nonessential flaring ahead of the government mandated deadline. These projects, the first of which is scheduled for start-up in 2006, will reduce GHG emissions by approximately 7 million metric tons per year.

We are prepared to meet the new European GHG regulatory requirements that come into effect in 2005, using a system-wide approach that addresses all affected facilities in a cost-effective manner.

In the longer term, we are progressing technologies that will significantly reduce emissions. The majority of GHG emissions associated with the production and the use of oil arise from consumer use of fuels (87 percent), with the remainder from industry operations (13 percent). We are working with automobile manufacturers, universities, and government agencies to develop advanced fuels and new energy technologies that are economic and have broad application. We are committed to further development of breakthrough technology to reduce GHG emissions through research projects, including initiating the largest privately-funded academic energy technology initiative in history – the Global Climate and Energy Project (GCEP) led by Stanford University. For more information, refer to the website gcep.stanford.edu.

MORE INFORMATION

For more information regarding our commitment to safety, health, and the environment, refer to the following documents available on our website at www.exxonmobil.com.

§   Corporate Citizenship Report (CCR)
 
§   Report on Energy Trends, Greenhouse Gas Emissions, and Alternative Energy

2004   F I N A N C I A L   &   O P E R A T I N G   R E V I E W   •   E X X O N   M O B I L   C O R P O R A T I O N

 


 

16

Financial Summary

FUNCTIONAL EARNINGS

                                                                         
            2004 Quarters                                      
(millions of dollars)   First     Second     Third     Fourth     2004     2003     2002     2001     2000  
 
Net Income (U.S. GAAP)
                                                                       
Upstream
                                                                       
United States
    1,154       1,237       1,173       1,384       4,948       3,905       2,524       3,933       4,542  
Non-U.S.
    2,859       2,609       2,756       3,503       11,727       10,597       7,074       6,803       8,143  
Total
    4,013       3,846       3,929       4,887       16,675       14,502       9,598       10,736       12,685  
 
Downstream
                                                                       
United States
    392       907       11       876       2,186       1,348       693       1,924       1,561  
Non-U.S.
    612       600       840       1,468       3,520       2,168       607       2,303       1,857  
Total
    1,004       1,507       851       2,344       5,706       3,516       1,300       4,227       3,418  
 
Chemical
                                                                       
United States
    118       148       329       425       1,020       381       384       298       644  
Non-U.S.
    446       459       680       823       2,408       1,051       446       409       517  
Total
    564       607       1,009       1,248       3,428       1,432       830       707       1,161  
 
Corporate and financing
    (141 )     (170 )     (109 )     (59 )     (479 )     1,510       (442 )     (142 )     (538 )
Merger expenses
                                        (275 )     (525 )     (920 )
Discontinued operations
                                        449       102       184  
Extraordinary gain
                                              215       1,730  
Accounting change
                                  550                    
 
Net income (U.S. GAAP)
    5,440       5,790       5,680       8,420       25,330       21,510       11,460       15,320       17,720  
 
Net income per common share (dollars)
    0.83       0.89       0.88       1.31       3.91       3.24       1.69       2.23       2.55  
Net income per common share – assuming dilution (dollars)
    0.83       0.88       0.88       1.30       3.89       3.23       1.68       2.21       2.52  
 
 
                                                                       
Merger Effects, Discontinued Operations, Accounting Change, and Other Special Items  
Upstream
                                                                       
United States
                                                     
Non-U.S.
                                  1,700       (215 )            
Total
                                  1,700       (215 )            
 
Downstream
                                                                       
United States
                (550 )           (550 )                        
Non-U.S.
                                                     
Total
                (550 )           (550 )                        
 
Chemical
                                                                       
United States
                                                     
Non-U.S.
                                                     
Total
                                                     
 
Corporate and financing
                                  2,230                    
Merger expenses
                                        (275 )     (525 )     (920 )
Discontinued operations
                                        449       102       184  
Extraordinary gain
                                              215       1,730  
Accounting change
                                  550                    
 
Corporate total
                (550 )           (550 )     4,480       (41 )     (208 )     994  
 
 
                                                                       
Earnings Excluding Merger Effects, Discontinued Operations, Accounting Change, and Other Special Items  
Upstream
                                                                       
United States
    1,154       1,237       1,173       1,384       4,948       3,905       2,524       3,933       4,542  
Non-U.S.
    2,859       2,609       2,756       3,503       11,727       8,897       7,289       6,803       8,143  
Total
    4,013       3,846       3,929       4,887       16,675       12,802       9,813       10,736       12,685  
 
Downstream
                                                                       
United States
    392       907       561       876       2,736       1,348       693       1,924       1,561  
Non-U.S.
    612       600       840       1,468       3,520       2,168       607       2,303       1,857  
Total
    1,004       1,507       1,401       2,344       6,256       3,516       1,300       4,227       3,418  
 
Chemical
                                                                       
United States
    118       148       329       425       1,020       381       384       298       644  
Non-U.S.
    446       459       680       823       2,408       1,051       446       409       517  
Total
    564       607       1,009       1,248       3,428       1,432       830       707       1,161  
 
Corporate and financing
    (141 )     (170 )     (109 )     (59 )     (479 )     (720 )     (442 )     (142 )     (538 )
 
Corporate total
    5,440       5,790       6,230       8,420       25,880       17,030       11,501       15,528       16,726  
 
Earnings per common share (dollars)
    0.83       0.89       0.96       1.31       3.99       2.57       1.70       2.27       2.40  
Earnings per common share – assuming dilution (dollars)
    0.83       0.88       0.96       1.30       3.97       2.56       1.69       2.25       2.37  
 

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

C o r p o r a t e 17

(PERFORMANCE GRAPH)

RETURN ON AVERAGE CAPITAL EMPLOYED ( 1 ) BY BUSINESS

                                         
(percent)   2004     2003     2002     2001     2000  
 
Upstream
                                       
United States
    37.0       28.9       19.0       30.4       35.3  
Non-U.S.
    31.5       31.0       23.7       25.1       28.7  
Total
    32.9       30.4       22.3       26.8       30.8  
 
Downstream
                                       
United States
    28.6       16.7       8.6       25.0       19.6  
Non-U.S.
    18.0       11.5       3.4       12.4       9.4  
Total
    21.0       13.0       5.0       16.1       12.3  
 
Chemical
                                       
United States
    19.4       7.3       7.3       7.2       11.4  
Non-U.S.
    25.7       11.8       5.3       5.8       6.3  
Total
    23.5       10.2       6.1       6.4       8.4  
 
Corporate and financing
                             
Discontinued operations
                63.2       7.2       12.3  
 
Corporate total
    23.8       20.9       13.5       17.8       20.6  
 


(1) Capital employed consists of shareholders’ equity and debt, including ExxonMobil’ s share of amounts applicable to equity companies. See Frequently Used Terms on pages 88 through 91.

(BAR CHART)

AVERAGE CAPITAL EMPLOYED ( 1 ) BY BUSINESS

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Upstream
                                       
United States
    13,355       13,508       13,264       12,952       12,864  
Non-U.S.
    37,287       34,164       29,800       27,077       28,354  
Total
    50,642       47,672       43,064       40,029       41,218  
 
Downstream
                                       
United States
    7,632       8,090       8,060       7,711       7,976  
Non-U.S.
    19,541       18,875       17,985       18,610       19,756  
Total
    27,173       26,965       26,045       26,321       27,732  
 
Chemical
                                       
United States
    5,246       5,194       5,235       5,506       5,644  
Non-U.S.
    9,362       8,905       8,410       8,333       8,170  
Total
    14,608       14,099       13,645       13,839       13,814  
 
Corporate and financing
    14,916       6,637       4,878       6,399       3,198  
Discontinued operations
                710       1,412       1,501  
 
Corporate total
    107,339       95,373       88,342       88,000       87,463  
 
Average capital employed applicable to equity companies included above
    18,049       15,587       14,001       13,902       15,330  
 


(1) Average capital employed is the average of beginning and end-of-year business segment capital employed. See Frequently Used Terms on pages 88 through 91.

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

18

CAPITAL AND EXPLORATION EXPENDITURES ( 1 )

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Upstream
                                       
Exploration
                                       
United States
    248       275       295       471       285  
Non-U.S.
    1,035       940       1,015       1,188       1,222  
Total
    1,283       1,215       1,310       1,659       1,507  
 
Production(2)
                                       
United States
    1,669       1,842       2,057       1,947       1,574  
Non-U.S.
    8,629       8,758       6,949       5,157       3,818  
Total
    10,298       10,600       9,006       7,104       5,392  
 
Power and Coal
                                     
United States
    5       8       5       5       6  
Non-U.S.
    129       165       73       48       28  
Total
    134       173       78       53       34  
 
Total Upstream (Exploration,
                                       
Production, Power, and Coal)
    11,715       11,988       10,394       8,816       6,933  
 
 
                                       
Downstream
                                       
Refining
                                       
United States
    550       998       670       524       632  
Non-U.S.
    774       768       685       514       703  
Total
    1,324       1,766       1,355       1,038       1,335  
 
Marketing
                                       
United States
    201       216       255       370       372  
Non-U.S.
    811       739       761       836       808  
Total
    1,012       955       1,016       1,206       1,180  
 
Pipeline/Marine
                                       
United States
    24       30       55       67       73  
Non-U.S.
    45       30       24       11       30  
Total
    69       60       79       78       103  
 
Total Downstream (Refining,
                                       
Marketing, and Pipeline/Marine)
    2,405       2,781       2,450       2,322       2,618  
 
 
                                       
Chemical
                                       
United States
    262       333       575       432       351  
Non-U.S.
    428       359       379       440       1,117  
Total Chemical
    690       692       954       872       1,468  
 
 
                                       
Other Operations and Administrative
                                       
United States
    66       64       45       126       45  
Non-U.S.
    9             32       32       7  
Total other operations and administrative
    75       64       77       158       52  
 
 
                                       
Discontinued Operations
                                       
Non-U.S.
                80       143       97  
 
Total capital and exploration expenditures
    14,885       15,525       13,955       12,311       11,168  
 


(1)   See Frequently Used Terms on pages 88 through 91.
 
(2)   Including related transportation.

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

C o r p o r a t e 19

TOTAL CAPITAL AND EXPLORATION EXPENDITURES BY GEOGRAPHY

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
United States
    3,025       3,766       3,957       3,942       3,338  
Canada
    1,546       1,601       1,513       1,262       1,004  
Latin America
    289       217       441       717       677  
Europe
    2,845       3,046       2,919       2,564       2,255  
Asia Pacific
    1,137       1,410       1,470       1,496       2,250  
Middle East
    1,044       636       393       185       112  
Africa
    3,316       3,657       2,405       1,585       981  
Other Eastern Hemisphere
    1,683       1,192       857       560       551  
 
Total worldwide
    14,885       15,525       13,955       12,311       11,168  
 

DISTRIBUTION OF CAPITAL AND EXPLORATION EXPENDITURES

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Consolidated Companies’ Expenditures
                                       
Capital expenditures
    11,901       12,857       11,499       9,943       9,017  
Exploration costs charged to expense
                                       
United States
    192       256       220       213       133  
Non-U.S.
    891       735       679       941       780  
Depreciation on support equipment(1)
    15       19       21       21       23  
Total exploration expenses
    1,098       1,010       920       1,175       936  
 
Total consolidated companies’ capital and exploration expenditures
                                       
(excluding depreciation on support equipment)
    12,984       13,848       12,398       11,097       9,930  
 
ExxonMobil’s Share of Non-Consolidated Companies’ Expenditures
                                       
Capital expenditures
    1,865       1,651       1,518       1,203       1,216  
Exploration costs charged to expense
    36       26       39       11       22  
Total non-consolidated companies’ capital and exploration expenditures
    1,901       1,677       1,557       1,214       1,238  
 
Total capital and exploration expenditures
    14,885       15,525       13,955       12,311       11,168  
 


(1)   Not included as part of total Capital and Exploration Expenditures, but included as part of Exploration Expenses in the Summary Statement of Income, page 22.

(PERFORMANCE GRAPH)

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON    MOBIL   CORPORATION

 


 

20

NET INVESTMENT IN PROPERTY, PLANT, AND EQUIPMENT AT YEAR END

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Upstream
                                       
United States
    16,410       16,992       16,924       16,697       16,216  
Non-U.S.
    45,603       41,735       34,772       29,980       29,600  
Total
    62,013       58,727       51,696       46,677       45,816  
 
Downstream
                                       
United States
    9,408       9,714       9,238       9,012       9,048  
Non-U.S.
    20,402       19,852       17,682       16,548       17,682  
Total
    29,810       29,566       26,920       25,560       26,730  
 
Chemical
                                       
United States
    4,887       5,068       5,155       5,079       5,045  
Non-U.S.
    5,162       5,047       4,754       4,611       4,890  
Total
    10,049       10,115       9,909       9,690       9,935  
 
Other/discontinued operations
    6,767       6,557       6,415       7,675       7,348  
 
Total net investment
    108,639       104,965       94,940       89,602       89,829  
 

DEPRECIATION AND DEPLETION EXPENSES

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Upstream
                                       
United States
    1,453       1,571       1,597       1,447       1,426  
Non-U.S.
    4,758       4,072       3,551       3,221       3,469  
Total
    6,211       5,643       5,148       4,668       4,895  
 
Downstream
                                       
United States
    618       601       583       598       594  
Non-U.S.
    1,646       1,548       1,399       1,476       1,489  
Total
    2,264       2,149       1,982       2,074       2,083  
 
Chemical
                                       
United States
    408       410       414       408       397  
Non-U.S.
    400       368       348       289       281  
Total
    808       778       762       697       678  
 
Other
    484       477       418       409       345  
 
Total depreciation and depletion expenses
    9,767       9,047       8,310       7,848       8,001  
 

OPERATING COSTS EXCLUDING MERGER EXPENSES AND DISCONTINUED OPERATIONS ( 1 )

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Production and manufacturing expenses
    23,225       21,260       17,831       17,743       17,600  
Selling, general, and administrative
    13,849       13,396       12,356       12,898       12,044  
Depreciation and depletion
    9,767       9,047       8,310       7,848       8,001  
Exploration
    1,098       1,010       920       1,175       936  
Subtotal
    47,939       44,713       39,417       39,664       38,581  
ExxonMobil’s share of equity-company expenses
    4,209       3,937       3,800       3,832       4,355  
Total operating costs
    52,148       48,650       43,217       43,496       42,936  
 


(1)   See Frequently Used Terms on pages 88 through 91.

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

C o r p o r a t e  21

SUMMARY BALANCE SHEET AT YEAR END

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
Assets
                                       
Current assets
                                       
Cash and cash equivalents
    18,531       10,626       7,229       6,547       7,080  
Cash and cash equivalents – restricted
    4,604                          
Notes and accounts receivable, less estimated doubtful amounts
    25,359       24,309       21,163       19,549       22,996  
Inventories
                                       
Crude oil, products, and merchandise
    8,136       7,665       6,827       6,743       7,244  
Materials and supplies
    1,351       1,292       1,241       1,161       1,060  
Prepaid taxes and expenses
    2,396       2,068       1,831       1,681       2,019  
 
Total current assets
    60,377       45,960       38,291       35,681       40,399  
 
Investments and advances
    18,404       15,535       12,111       10,768       12,618  
Property, plant, and equipment, at cost, less accumulated depreciation and depletion
    108,639       104,965       94,940       89,602       89,829  
Other assets, including intangibles – net
    7,836       7,818       7,302       7,123       6,154  
 
Total assets
    195,256       174,278       152,644       143,174       149,000  
 
Liabilities
                                       
Current liabilities
                                       
Notes and loans payable
    3,280       4,789       4,093       3,703       6,161  
Accounts payable and accrued liabilities
    31,763       28,445       25,186       22,862       26,755  
Income taxes payable
    7,938       5,152       3,896       3,549       5,275  
 
Total current liabilities
    42,981       38,386       33,175       30,114       38,191  
 
Long-term debt
    5,013       4,756       6,655       7,099       7,280  
Annuity reserves
    10,850       9,609       11,202       7,331       6,835  
Accrued liabilities
    6,279       5,283       5,252       5,144       5,099  
Deferred income tax liabilities
    21,092       20,118       16,484       16,359       16,442  
Deferred credits and other long-term obligations
    3,333       2,829       2,511       1,141       1,166  
Equity of minority and preferred shareholders in affiliated companies
    3,952       3,382       2,768       2,825       3,230  
 
Total liabilities
    93,500       84,363       78,047       70,013       78,243  
 
Commitments and Contingencies
                                       
Shareholders’ Equity
                                         
Benefit-plan-related balances
    (1,014 )     (634 )     (450 )     (159 )     (235 )
Common stock without par value (9,000 million shares authorized)
    5,067       4,468       4,217       3,789       3,661  
Earnings reinvested
    134,390       115,956       100,961       95,718       86,652  
Accumulated other non-owner changes in equity
                                       
Cumulative foreign exchange translation adjustment
    3,598       1,421       (3,015 )     (5,947 )     (4,862 )
Minimum pension liability adjustment
    (2,499 )     (2,446 )     (2,960 )     (535 )     (310 )
Unrealized gains/(losses) on stock investments
    428       511       (79 )     (108 )     (17 )
Common stock held in treasury (1,618 million shares in 2004 and 1,451 million shares in 2003)
    (38,214 )     (29,361 )     (24,077 )     (19,597 )     (14,132 )
 
Total shareholders’ equity
    101,756       89,915       74,597       73,161       70,757  
 
Total liabilities and shareholders’ equity
    195,256       174,278       152,644       143,174       149,000  
 

The information in the Summary Statement of Income (for 2002 to 2004), the Summary Balance Sheet (for 2003 and 2004), and the Summary Statement of Cash Flows (for 2002 to 2004), shown on pages 21 through 23 is a replication of the information in the Consolidated Statement of Income, Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in ExxonMobil’s 2005 Proxy Statement. For complete consolidated financial statements, including notes, please refer to pages A26 through A53 of ExxonMobil’s 2005 Proxy Statement. See also management’s discussion and analysis of financial condition and results of operations and other information on pages A6 through A23 of the 2005 Proxy Statement.

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

22

SUMMARY STATEMENT OF INCOME

                                         
(millions of dollars)
  2004     2003     2002     2001     2000  
 
Revenues and Other Income
                                       
Sales and other operating revenue(1)
    291,252       237,054       200,949       208,715       227,596  
Income from equity affiliates
    4,961       4,373       2,066       2,174       2,434  
Other income
    1,822       5,311       1,491       1,896       1,816  
 
Total revenues and other income
    298,035       246,738       204,506       212,785       231,846  
 
 
                                       
Costs and Other Deductions
                                       
Crude oil and product purchases
    139,224       107,658       90,950       92,257       108,913  
Production and manufacturing expenses
    23,225       21,260       17,831       17,743       17,600  
Selling, general, and administrative expenses
    13,849       13,396       12,356       12,898       12,044  
Depreciation and depletion
    9,767       9,047       8,310       7,848       8,001  
Exploration expenses, including dry holes
    1,098       1,010       920       1,175       936  
Merger-related expenses
                410       748       1,406  
Interest expense
    638       207       398       293       589  
Excise taxes(1)
    27,263       23,855       22,040       21,907       22,356  
Other taxes and duties
    40,954       37,645       33,572       33,377       32,708  
Income applicable to minority and preferred interests
    776       694       209       569       412  
 
Total costs and other deductions
    256,794       214,772       186,996       188,815       204,965  
 
Income before income taxes
    41,241       31,966       17,510       23,970       26,881  
Income taxes
    15,911       11,006       6,499       8,967       11,075  
 
Income from continuing operations
    25,330       20,960       11,011       15,003       15,806  
 
Discontinued operations, net of income tax
                449       102       184  
Cumulative effect of accounting change, net of income tax
          550                    
Extraordinary gain, net of income tax
                      215       1,730  
 
Net Income
    25,330       21,510       11,460       15,320       17,720  
 
 
                                       
Net Income per Common Share (dollars)
                                       
Income from continuing operations
    3.91       3.16       1.62       2.19       2.27  
Discontinued operations, net of income tax
                0.07       0.01       0.03  
Cumulative effect of accounting change, net of income tax
          0.08                    
Extraordinary gain, net of income tax
                      0.03       0.25  
 
Net income
    3.91       3.24       1.69       2.23       2.55  
 
 
                                       
Net Income per Common Share – Assuming Dilution (dollars)
                                       
Income from continuing operations
    3.89       3.15       1.61       2.17       2.24  
Discontinued operations, net of income tax
                0.07       0.01       0.03  
Cumulative effect of accounting change, net of income tax
          0.08                    
Extraordinary gain, net of income tax
                      0.03       0.25  
 
Net income
    3.89       3.23       1.68       2.21       2.52  
 
(1) Excise taxes included in sales and other operating revenue
    27,263       23,855       22,040       21,907       22,356  

The information in the Summary Statement of Income (for 2002 to 2004), the Summary Balance Sheet (for 2003 and 2004), and the Summary Statement of Cash Flows (for 2002 to 2004), shown on pages 21 through 23 is a replication of the information in the Consolidated Statement of Income, Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in ExxonMobil’s 2005 Proxy Statement. For complete consolidated financial statements, including notes, please refer to pages A26 through A53 of ExxonMobil’s 2005 Proxy Statement. See also management’s discussion and analysis of financial condition and results of operations and other information on pages A6 through A23 of the 2005 Proxy Statement.

EXXON   MOBIL  CORPORATION  •  2004  FINANCIAL  &  OPERATING  REVIEW

 


 

C o r p o r a t e  23

SUMMARY STATEMENT OF CASH FLOWS

                                         
(millions of dollars)
  2004     2003     2002     2001     2000  
 
Cash Flows from Operating Activities
                                       
Net income
                                       
Accruing to ExxonMobil shareholders
    25,330       21,510       11,460       15,320       17,720  
Accruing to minority and preferred interests
    776       694       209       569       412  
Cumulative effect of accounting change, net of income tax
          (550 )                  
Adjustments for noncash transactions
                                       
Depreciation and depletion
    9,767       9,047       8,310       7,848       8,001  
Deferred income tax charges/(credits)
    (1,134 )     1,827       297       650       10  
Annuity provisions
    886       (1,489 )     (500 )     349       (425 )
Accrued liability provisions
    806       264       (90 )     149       (237 )
Dividends received greater than/(less than) equity in current earnings of equity companies
    (1,643 )     (402 )     (170 )     78       (387 )
Extraordinary gain, before income tax
                      (194 )     (2,038 )
Changes in operational working capital, excluding cash and debt
                                       
Reduction/(increase) – Notes and accounts receivable
    (472 )     (1,286 )     (305 )     3,062       (4,832 )
– Inventories
    (223 )     (100 )     353       154       (297 )
– Prepaid taxes and expenses
    11       42       32       118       (204 )
Increase/(reduction) – Accounts and other payables
    6,333       1,130       365       (5,103 )     5,411  
Ruhrgas transaction
          (2,240 )     1,466              
All other items – net
    114       51       (159 )     (111 )     (197 )
 
Net cash provided by operating activities
    40,551       28,498       21,268       22,889       22,937  
 
 
                                       
Cash Flows from Investing Activities
                                       
Additions to property, plant, and equipment
    (11,986 )     (12,859 )     (11,437 )     (9,989 )     (8,446 )
Sales of subsidiaries, investments, and property, plant, and equipment
    2,754       2,290       2,793       1,078       5,770  
Increase in restricted cash and cash equivalents
    (4,604 )                        
Additional investments and advances
    (2,287 )     (809 )     (2,012 )     (1,035 )     (1,648 )
Collection of advances
    1,213       536       898       1,735       985  
Additions to other marketable securities
                            (41 )
Sales of other marketable securities
                            82  
 
Net cash used in investing activities
    (14,910 )     (10,842 )     (9,758 )     (8,211 )     (3,298 )
 
 
                                       
Cash Flows from Financing Activities
                                       
Additions to long-term debt
    470       127       396       547       238  
Reductions in long-term debt
    (562 )     (914 )     (246 )     (506 )     (901 )
Additions to short-term debt
    450       715       751       705       500  
Reductions in short-term debt
    (2,243 )     (1,730 )     (927 )     (1,212 )     (2,413 )
Additions/(reductions) in debt with less than 90-day maturity
    (66 )     (322 )     (281 )     (2,306 )     (3,129 )
Cash dividends to ExxonMobil shareholders
    (6,896 )     (6,515 )     (6,217 )     (6,254 )     (6,123 )
Cash dividends to minority interests
    (215 )     (430 )     (169 )     (194 )     (251 )
Changes in minority interests and sales/(purchases) of affiliate stock
    (215 )     (247 )     (161 )     (401 )     (227 )
Common stock acquired
    (9,951 )     (5,881 )     (4,798 )     (5,721 )     (2,352 )
Common stock sold
    960       434       299       301       493  
 
Net cash used in financing activities
    (18,268 )     (14,763 )     (11,353 )     (15,041 )     (14,165 )
 
Effects of exchange rate changes on cash
    532       504       525       (170 )     (82 )
 
Increase/(decrease) in cash and cash equivalents
    7,905       3,397       682       (533 )     5,392  
Cash and cash equivalents at beginning of year
    10,626       7,229       6,547       7,080       1,688  
 
Cash and cash equivalents at end of year
    18,531       10,626       7,229       6,547       7,080  
 

The information in the Summary Statement of Income (for 2002 to 2004), the Summary Balance Sheet (for 2003 and 2004), and the Summary Statement of Cash Flows (for 2002 to 2004), shown on pages 21 through 23 is a replication of the information in the Consolidated Statement of Income, Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in ExxonMobil’s 2005 Proxy Statement. For complete consolidated financial statements, including notes, please refer to pages A26 through A53 of ExxonMobil’s 2005 Proxy Statement. See also management’s discussion and analysis of financial condition and results of operations and other information on pages A6 through A23 of the 2005 Proxy Statement.

2004  FINANCIAL   &  OPERATING  REVIEW   •  EXXON  MOBIL  CORPORATION

 


 

(PICTURE)

MA E RT S P U The start-up of Kizomba A signaled a key milestone in the continuing development of ExxonMobil's premier acreage position in Angola. The $3.6 billion Kizomba A project, the largest deepwater development offshore West Africa and the world's largest floating production, storage, and offloading (FPSO) system, will recover approximately 1 billion barrels of oil (gross) with an expected peak production rate of 250 thousand barrels a day.

 


 

Consistency is key to leading results, ExxonMobil’s

Upstream sets benchmarks as an industry leader in project

execution and operating performance.

Exploration, Development, Production, and Gas & Power Marketing

UPSTREAM STRATEGIES

Although business conditions and opportunities change from year to year, ExxonMobil employs a set of long-term fundamental strategies in its worldwide exploration, development, production, and gas and power marketing businesses. These strategies are supported by an unparalleled commitment to technology. Superior execution of these strategies through our global functional organization, across what we believe is the best Upstream asset portfolio in the industry, distinguishes ExxonMobil from competition. These key strategies are:

§ Maximize profitability of existing oil and gas production;

§ Identify and pursue all attractive exploration opportunities;

§ Invest in projects that deliver superior returns; and,

§ Capitalize on growing natural gas and power markets.

(LINE GRAPH)

(1)   Royal Dutch Shell, BP, and Chevron Texaco values calculated on a consistent basis with ExxonMobil, based on public information. Competitor data estimated for 2004.

2004 RESULTS AND HIGHLIGHTS

Earnings were $16.7 billion, up 15 percent and a record, primarily due to strong oil and natural gas prices.

Upstream return on average capital employed was 33 percent in 2004 and averaged 29 percent over the past five years.

Net income per oil-equivalent barrel was $10.81.

Total liquids and gas production available for sale was 4.2 million oil-equivalent barrels per day, exceeding all competitors. Strong liquids production growth of 2.2 percent was offset by lower gas production, which declined 2.5 percent.

Proved oil and gas reserve additions totaled 1.8 billion oil-equivalent barrels, excluding asset sales and year-end price/cost revisions. The Corporation replaced 112 percent of production including asset sales, and 125 percent excluding asset sales. This is the 11th year in a row that ExxonMobil has more than replaced reserves produced.

At 22 billion oil-equivalent barrels, ExxonMobil’s proved reserves remain the highest among nongovernmental producers. New field resource additions totaled 2.9 billion oil-equivalent barrels in 2004. ExxonMobil’s resource base now stands at 73 billion oil-equivalent barrels.

Finding costs were $0.44 per oil-equivalent barrel. Five-year average reserve replacement cost was $4.91 per oil-equivalent barrel.

Upstream capital and exploration spending remained robust at $11.7 billion, driven by a strong portfolio of development projects.

                                         
STATISTICAL RECAP   2004     2003     2002     2001     2000  
Earnings (millions of dollars)
    16,675       14,502       9,598       10,736       12,685  
Liquids production (thousands of barrels per day)
    2,571       2,516       2,496       2,542       2,553  
Natural gas production available for sale (millions of cubic feet per day)
    9,864       10,119       10,452       10,279       10,343  
Oil-equivalent production (thousands of barrels per day)
    4,215       4,203       4,238       4,255       4,277  
Proved reserves replacement(1) (percent)
    125       107       118       111       112  
New field resource additions (millions of oil-equivalent barrels)
    2,940       2,110       2,150       2,490       2,120  
Average capital employed (millions of dollars)
    50,642       47,672       43,064       40,029       41,218  
Return on average capital employed (percent)
    32.9       30.4       22.3       26.8       30.8  
Capital and exploration expenditures (millions of dollars)
    11,715       11,988       10,394       8,816       6,933  


(1)   Excluding asset sales and year-end price/cost revisions.

2004  FINANCIAL   &  OPERATING  REVIEW   •  EXXON  MOBIL  CORPORATION

 


 

26

Upstream Competitive Advantages

ExxonMobil’s industry-leading, geographically diverse Upstream business includes the largest reserve base among nongovernmental oil companies, a development portfolio of over 100 projects involving over $80 billion in net investment, the leading production base, and global gas and power marketing activities.

2004 Global Upstream Summary

         
Countries with operations
    37  
Resource base (oil-equivalent barrels)
    73 billion  
Reserves (oil-equivalent barrels)
    22 billion  
Exploration acreage (gross acres)
    109 million  
Production (oil-equivalent barrels per day)
    4.2 million  
Producing wells (gross)
    59 thousand  

Our Upstream competitive advantages include:

§ Strong, diverse production base

§ Wide range of profitable growth opportunities

§ Leading proprietary technology tool kit

§ Unique global functional organization

§ Financial strength and disciplined approach

STRONG, DIVERSE PRODUCTION BASE

Large, highly profitable, and established oil and gas operations in North America, Europe, Asia Pacific, West Africa, and the Caspian form the strong foundation of our portfolio. These areas include long-life producing fields that have significant near-term potential for discovering and developing new near-field opportunities using existing infrastructure. In 2004, total liquids production was 2,571 thousand barrels per day. Gas production was 9,864 million cubic feet per day.

Our existing asset base includes about 59,000 productive wells from more than 8,300 reservoirs and nearly 600 offshore platforms. We invest in active work programs to maintain this profitable base. ExxonMobil’s production portfolio includes a wide variety of assets. This diversity is extremely valuable when establishing new production.

ExxonMobil is the world’s largest nongovernmental producer of natural gas. Natural gas sales are made in 25 countries and across five continents in every major gas market in the world. ExxonMobil has leading-edge LNG, gas-to-liquids, gas pipeline, and power generation technologies. Our expertise in integrating these advanced technologies with global market requirements provides a substantial competitive advantage. The ability to participate in nearly all sectors of the global gas business is essential to optimizing a substantial base business and commercializing our large remote resources in an ever-changing market.

WIDE RANGE OF PROFITABLE GROWTH OPPORTUNITIES

ExxonMobil maintains the largest portfolio of exploration and development opportunities in the industry, which enables the selectivity required to optimize total profitability and mitigate overall political and technical risks.

As future development projects bring new resources on line, we expect a shift in the geographic mix of production volumes from North America and Europe to resource-rich regions including West Africa, the Caspian, the Middle East, and Russia. ExxonMobil is in a strong position in those areas, and continues to invest in new opportunities in all of these regions.

Exploration gross acreage totals 109 million acres in 34 countries. In addition, initiatives are under way worldwide to participate in emerging, high-potential but previously inaccessible regions offering the potential for future growth opportunities.

     (PERFORMANCE GRAPH)

2004  FINANCIAL   &  OPERATING  REVIEW   •  EXXON  MOBIL  CORPORATION

 


 

U p s t r e a m  27

OPPORTUNITIES SHIFTING TO EXXONMOBIL STRENGTHS

The ExxonMobil opportunity portfolio is shifting by resource type as we look forward to the end of this decade. We expect our conventional opportunities to continue to deliver strong results, accounting for about 60 percent of production in 2010. Our Upstream competitive advantages – commitment to technology, a global functional organization, and financial strength – also position us to capture value from a new set of opportunities. These opportunities trend toward more nonconventional and frontier resources, including LNG, arctic, deepwater, heavy oil, tight gas, and acid/sour gas. By 2010, they are likely to account for about 40 percent of our production volumes. This shift is not unique to ExxonMobil, but it does play to our strengths. ExxonMobil is unique in its ability to effectively execute the variety of projects needed to efficiently commercialize this diverse resource base.

P R O D U C T I O N   V O L U M E   C O N T R I B U T I O N   B Y   R E S O U R C E   T Y P E

     (PIE CHART)

LEADING PROPRIETARY TECHNOLOGY

ExxonMobil’s long-standing commitment to the development and application of leading-edge Upstream technology is unmatched in the industry and provides a sustainable competitive advantage. Technology is the lifeblood of our business. It allows us to maximize value by increasing recoverable resources, reducing costs, and creating new markets for our products. We manage technology development and application with the same disciplined approach we use in making all of our business decisions. Our approach to technology and our track record of developing new industry-leading technology serve us well in countries where we have an established business presence, and in emerging areas where we are positioned to be the partner of choice. Technology is, and will continue to be, fundamental to our business success.

TECHNICAL TRAINING CENTER

The 100,000-square-foot Upstream Technical Training Center opened in Houston, Texas, in June, underscoring ExxonMobil’s commitment to the technical excellence of the Corporation’s earth scientists and engineers.

This new center provides a learning environment that is unique in the petroleum industry.

Among its many state-of-the-art features is a room dedicated to training employees in the use of emerging visualization technologies. The ability to view and analyze 3D images of oil and gas reservoirs aids in evaluation of new discoveries and development of known reservoirs.

ExxonMobil’s Upstream training curriculum, accessed by nearly 5,000 employees each year, helps ensure that the best technology is applied to the Corporation’s assets worldwide.

     (PICTURE)

2004  FINANCIAL   &  OPERATING  REVIEW   •  EXXON  MOBIL  CORPORATION

 


 

28

GLOBAL FUNCTIONAL ORGANIZATION

ExxonMobil has an experienced, dedicated, and diverse work force of exceptional quality. Our unique global functional organization is structured along the life cycle of an asset and provides a significant competitive advantage. This allows us to establish priorities on a global basis, effectively leverage the transfer of technology and best practices across our vast worldwide portfolio, focus on operational excellence in all aspects of our business, and efficiently deploy experienced people with the right skills. This approach yields significant advantages in both cost efficiencies and our ability to recognize and respond to the changing business environment.

(PICTURE)

FUNCTIONAL ORGANIZATION DELIVERS RESULTS

ExxonMobil, by virtue of its participation in a variety of joint ventures and operated-by-other projects, has access to data that can be utilized to benchmark our performance versus that of industry. This data allows insight into the tangible efficiencies in both cost and schedule achieved through our global functional organization. Specifically, ExxonMobil-operated projects and drilling performance demonstrate industry-leading results in several key metrics.

(BAR CHART)

In Africa and the Gulf of Mexico, ExxonMobil’s global technology transfer, as well as cost and schedule discipline, has resulted in best-in-class execution results. Development costs are up to 30% lower than competition on projects of similar size in a given region.

In Angola exploration, ExxonMobil’s use of advanced drilling technology has resulted in top-tier performance. Drilling performance as measured in feet per day was on average 13% better than competition.

Superior planning and execution enable ExxonMobil to minimize the cycle time from initial funding to start-up. In Africa and the Gulf of Mexico, ExxonMobil-operated projects have consistently started up on or ahead of schedule. This cycle time has been up to 15 months shorter than competition.

EXXON   MOBIL  CORPORATION  •  2004  FINANCIAL  &  OPERATING  REVIEW

 


 

U p s t r e a m  29

FINANCIAL STRENGTH AND DISCIPLINED APPROACH

ExxonMobil’s financial strength and access to capital are competitive advantages that allow us to pursue all attractive projects that meet our rigorous criteria. We continually invest in our existing asset base to increase resource recovery, maximize profitability and extend economic life. Projects are tested over a wide range of economic scenarios to substantiate the resiliency of expected returns. They are evaluated for strategic fit and long-term advantage versus competition, and they undergo a rigorous appraisal process to capture lessons learned and ensure improvements are incorporated into future decisions. This disciplined approach to making investments and managing assets clearly distinguishes us from competition.

ExxonMobil believes that return on average capital employed (ROCE) is the most relevant metric for measuring financial performance in a capital-intensive industry such as the Upstream.

(LINE GRAPH)

ROCE is a direct measure of the cumulative contribution from all of our Upstream competitive advantages, and it has distinguished the performance of our Upstream business relative to competition not only in 2004, but on average, for the last five years.

Disciplined Approach to Proved Reserves

The annual reporting of proved reserves is the product of ExxonMobil’s long-standing processes, which ensure consistency and management accountability with respect to all reserve bookings. All reserve additions and revisions follow a rigorous and structured management review process that is stewarded by a team of experienced reserve experts with global responsibilities. ExxonMobil has always taken this approach to booking proved reserves in full alignment with the standard set by the SEC of reasonable certainty for recovery.

Historically, ExxonMobil has consistently added significant reserves through revisions based on technical analysis and performance. Increasingly, the nature of large projects with long development times is likely to increase the swings in reserves additions due to timing.

Although we participate in joint ventures with other companies, ExxonMobil maintains an independent view of reserves. Each company must make its own determination for booking reserves and for moving them into the proved category. As a result, reserve figures can (and usually do) vary from one company to the next.

For the first time, ExxonMobil has stated our 2004 results to reflect impacts to the proved reserve base using year-end prices. However, the use of prices from a single date is not relevant to the investment decisions made by the Corporation, and annual variations in reserves based on such year-end prices are not of consequence in how the business is actually managed.

DEFINITIONS - RESOURCES AND PROVED RESERVES
See Frequently Used Terms on pages 88 through 91 for further information.

Resource base, resources, recoverable oil, recoverable hydrocarbons, recoverable resources: quantities of oil and gas that may not yet be classified as proved reserves, but which ExxonMobil believes will likely be moved to proved reserves and produced in the future.

Proved oil and gas reserves: estimated quantities of crude oil, natural gas, and natural gas liquids that ExxonMobil has determined to be reasonably certain of recovery under existing economic and operating conditions on the basis of our long standing, rigorous management review process. ExxonMobil only records proved reserves when we have made significant funding commitments for the related projects. In this report, reserves:

§     Include 100 percent of majority-owned affiliates’ proved reserves;
 
§     Include ExxonMobil’s percentage ownership of equity-company proved reserves;
 
§     Include proved reserves from Syncrude tar sands operations in Canada. Syncrude reserves are reported separately as a mining operation in SEC filings; and,
 
§     Exclude royalties and quantities due others.

Reserve bookings for certain deepwater fields may be made prior to conducting flow tests due to safety and cost implications of such tests. In those situations, other industry-accepted analyses are used.

Proved developed reserves: volumes recoverable through existing wells with existing equipment and operating methods.

Proved undeveloped reserves: volumes expected to be recovered as a result of future investments.

Year-end price/cost revisions: The Corporation is also stating, for the first time, our 2004 reserves to reflect the impacts to the proved reserves base utilizing December 31, 2004 prices and costs. Changes to proved reserves from these revisions are reported as year-end price/cost revisions. Refer to page 59 as well as page A58 of the 2005 Proxy Statement for more detail.

    2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

30

Resources and Proved Reserves

The size, quality, and breadth of ExxonMobil’s total inventory of discovered oil and gas resources are major strengths of the Company. ExxonMobil’s discovered resource base now stands at 73 billion oil-equivalent barrels (31 percent proved). It has grown by over 28 percent, or 16 billion oil-equivalent barrels, during the last 10 years.

At year-end 2004, the resource base included 22.2 billion oil-equivalent barrels of proved oil and gas reserves, excluding year-end price/cost revisions (21.7 billion including year-end price/cost revisions). ExxonMobil added 1.8 billion oil-equivalent barrels to proved reserves in 2004 (excluding year-end price/cost revisions), while producing 1.6 billion oil-equivalent barrels, and replacing 112 percent of reserves produced, including asset sales (125 percent, excluding asset sales). This is the 11th consecutive year that the Company’s reserves replacement has exceeded 100 percent (excluding year-end price/cost revisions). We have also stated, for the first time, our 2004 reserves to reflect the impact to the proved reserve base from using prices on December 31, 2004. Including sales and year-end price/cost revisions, we replaced 83 percent of reserves produced.

(BAR CHART)

RESOURCE BASE

The resource base is updated annually to add new discoveries and resource acquisitions, and to reflect any changes in estimates of existing resources. ExxonMobil refers to new discoveries and acquisitions of discovered, but undeveloped, resources as new field resource additions. The Company includes only those resources it believes are likely to be produced in the future. Adjustments to existing field resources reflect changes in recovery expectations resulting from new technologies, drilling, ongoing evaluations, and any other revisions. During the update process, volumes produced or sold during the year are removed from the resource base.

Resources are classified as either proved or nonproved. The process to move nonproved resources to proved reserves begins once technical and commercial confidence support a development decision.

(BAR CHART)

(BAR CHART)

Resource Base Changes

                 
            5-Year  
(billions of oil-equivalent barrels)   2004     Average  
 
New field resource additions/acquisitions
    2.9       2.3  
Existing fields
    (0.4 )     0.2  
Production
    (1.6 )     (1.6 )
Sales
    (0.4 )     (0.2 )
 
Net change
    0.5       0.7  

(PIE CHART)

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

U p s t r e a m  31

(BAR CHART)

Proved Reserves Additions

                 
            5-Year  
(millions of oil-equivalent barrels)   2004     Average  
 
Revisions (excluding year-end price/cost revisions)
    140       551  
Discoveries/extensions
    1,809       1,180  
Improved recovery
    28       103  
Purchases
    11       3  
 
Total excluding sales
    1,988       1,837  
Asset sales
    (211 )     (59 )
 
Total including sales
    1,777       1,778  
Production
    (1,591 )     (1,604 )
Reserve replacement excluding sales(1) (percent)
    125       115  
Reserve replacement including sales(1) (percent)
    112       111  


(1) Excluding year-end revisions associated with using December 31, 2004, prices and costs.

Year-End Reserves

         
(billions of oil-equivalent barrels)        
 
Year-end 2003 reserves
    22.0  
2004 additions
    2.0  
2004 production
    (1.6 )
Year-end 2004 reserves before year-end price/cost revisions and sales
    22.4  
2004 sales
    (0.2 )
 
Year-end 2004 reserves before year-end price/cost revisions
    22.2  
Year-end 2004 price/cost revisions*
    (0.5 )
 
Year-end 2004 reserves including year-end price/cost revisions
    21.7  


*Year-end price/cost revisions in 2004 were due to unusually low bitumen prices on December 31, 2004, at our Cold Lake heavy oil development. However, prices increased substantially after December 31, and resulted in the rebooking of approximately 0.5 billion oil-equivalent barrels to the proved category at Cold Lake in 2005.

PROVED RESERVES

Total proved reserves remain at 22 billion oil-equivalent barrels with near-term emphasis on large LNG projects in the Middle East, heavy oil projects in Canada and Venezuela, and conventional projects in Africa and offshore eastern Canada.

Excluding sales and year-end price/cost revisions, the Company has added 19 billion oil-equivalent barrels to proved reserves over the last 10 years, more than replacing production. Over the last five years, reserves have been added at an average replacement cost of $4.91 per oil-equivalent barrel.

Performance-related revisions have averaged 551 million oil-equivalent barrels per year over the last five years, and have resulted from effective reservoir management and the application of new technology. In 2004, upward revisions were made at fields such as Zafiro in Equatorial Guinea and Marlin in Australia.

The development of new fields discovered through exploration and extensions of existing fields has added 1.2 billion oil-equivalent barrels per year to proved reserves over the past five years. These include proved additions in 2004 in Qatar, Nigeria, and Angola.

ExxonMobil’s proved reserve base of 22.2 billion oil-equivalent barrels (excluding year-end price/cost revisions) equates to a reserve life at current production rates of 14 years.

(PICTURE)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

32

Major Development Projects

(MAJOR DEVELOPMENT PROJECTS TABLE)

Major Development Projects Expected Project Start-Ups Target Peak Target Peak ExxonMobil ExxonMobil _ ______________________________________________ Production (Gross) _ ______________________________________________ Production (Gross) Working Working Interest Liquids Gas Interest Liquids Gas (%) (kBD) (MCFD) (%) (kBD) (MCFD) 2 0 0 4 2 0 0 8 + ( P r o j e c t e d ) Angola - Kizomba A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 250 - n Angola - LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 50 965 l Canada - Sable Energy Tier 2 - Angola - Kizomba D . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 125 - n South Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 10 140 n Angola - Lirio-Cravo . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 115 - l Chad - Bolobo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 60 - n Angola - Perpetua-Zinia-Acacia . . . . . . . . . . . . . . . 20 125 - l Norway - Sleipner West Alpha North . . . . . . . . . . 32 15 195 l Angola - Plutao-Saturno . . . . . . . . . . . . . . . . . . . . . . . 25 110 - l Norway - Sleipner West Compression . . . . . . . . 32 20 250 l Australia - Greater Gorgon/Jansz Project . . . . . . . * 10 1,500 l Qatar - RasGas Train 3 . . . . . . . . . . . . . . . . . . . . . . . . . 29 30 725 s Australia - Kipper/Tuna . . . . . . . . . . . . . . . . . . . . . . . . 41 25 270 n U.K. - Goldeneye . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 30 260 l Azerbaijan - ACG Phase 3 . . . . . . . . . . . . . . . . . . . . 8 260 - l U.K. - Scoter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 5 125 l Canada - Hebron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 165 - l Canada - Kearl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 100 - n 2 0 0 5 ( P r o j e c t e d ) Canada - Mackenzie Gas Project . . . . . . . . . . . . . 57 10 850 n Angola - Kizomba B . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 250 - n Indonesia - Banyu Urip . . . . . . . . . . . . . . . . . . . . . . . . * 165 20 n Azerbaijan - Azeri-Chirag-Gunashli (ACG) Italy - Tempa Rossa . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 50 20 l Phase 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 325 - l Kazakhstan - Kashagan . . . . . . . . . . . . . . . . . . . . . . . 17 1,200 - l Nigeria - Bonga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 200 150 l Kazakhstan - Tengiz Expansion . . . . . . . . . . . . . . . 25 220 - l Qatar - Al Khaleej Gas Phase 1 . . . . . . . . . . . . . . . .100 50 600 n Nigeria - Bonga Ullage . . . . . . . . . . . . . . . . . . . . . . . . 20 140 100 l Qatar - RasGas Train 4 . . . . . . . . . . . . . . . . . . . . . . . . . 34 45 740 s Nigeria - Bonga SW . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 85 65 l Russia - Sakhalin-1 (Chayvo) Phase 1 . . . . . . . . 30 250 1,000 n Nigeria - Bosi Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 110 - n U.K. - Arthur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 5 120 n Nigeria - East Area Natural Gas Liquids . . . . . . 51 40 - n U.S. - Thunder Horse . . . . . . . . . . . . . . . . . . . . . . . . . . 25 250 200 l Nigeria - Satellite Projects . . . . . . . . . . . . . . . . . . . . . 40 125 - n Nigeria - Usan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 150 - l 2 0 0 6 ( P r o j e c t e d ) Norway - Skarv/Idun . . . . . . . . . . . . . . . . . . . . . . . . . . 12 85 500 l Angola - Dalia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 225 - l Norway - Tyrihans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 70 380 l Azerbaijan - ACG Phase 2 . . . . . . . . . . . . . . . . . . . . . 8 465 - l Papua New Guinea - PNG Gas Project . . . . . . 26 20 415 n Canada - Syncrude Upgrader Expansion . . . . . 25 110 - l Qatar - Al Khaleej Gas (Future Phases) . . . . . . .100 95 1,050 n Kazakhstan - Tengiz Phase 1 . . . . . . . . . . . . . . . . . . 25 300 100 l Qatar - Qatar GTL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 165 1,440 n Malaysia - Guntong Hub . . . . . . . . . . . . . . . . . . . . . . . 50 35 715 n Qatar - Qatargas II Train 4 . . . . . . . . . . . . . . . . . . . . . 30 80 1,250 s Nigeria - Amenam / Kpono Gas Project . . . . . . . 10 25 235 l Qatar - Qatargas II Train 5 . . . . . . . . . . . . . . . . . . . . . 18 80 1,250 s Nigeria - East Area Additional Oil Recovery . . . . . . 40 115 20 n Qatar - RasGas Trains 6 & 7 . . . . . . . . . . . . . . . . . . 30 140 2,500 s Nigeria - Erha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 150 - n U.S. - Alaska Gas Project/Point Thomson . . . 36 70 4,500 * Norway - Fram East . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 40 50 l U.S. - Piceance Tight Gas (Initial Phase) . . . . .100 2 400 n Norway - Kristin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 140 500 l U.S. - Western Region Development U.S. - Princess Phase II . . . . . . . . . . . . . . . . . . . . . . . . 16 25 65 l (Orion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 55 - l U.S. - Ursa Pressure Maintenance . . . . . . . . . . . . 16 35 15 l 2 0 0 7 ( P r o j e c t e d ) Angola - Kizomba C . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 250 - n Major Global LNG Terminal Activity Angola - Rosa Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 140 - l ExxonMobil Working Primary Norway - Njord Gas Export . . . . . . . . . . . . . . . . . . . . 20 15 185 l Interest Market Supply Source Norway - Ormen Lange . . . . . . . . . . . . . . . . . . . . . . . . 7 30 2,000 l (%) Norway - Statfjord Late Life . . . . . . . . . . . . . . . . . . . . 21 65 350 l 2 0 0 7 - 2 0 0 9 ( P r o j e c t e d ) Qatar - RasGas Train 5 . . . . . . . . . . . . . . . . . . . . . . . . . 30 45 740 s Italy - Adriatic Terminal . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Italy RasGas U.K. - Caravel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5 170 l U.K. - South Hook Terminal . . . . . . . . . . . . . . . . . . . . 30 U.K. Qatargas II U.S. - Gulf Coast Terminal . . . . . . . . . . . . . . . . . . . . . . 30 U.S. RasGas Operatorship: Supporting ExxonMobil's LNG efforts, regasification terminals are being n = ExxonMobil Operated s = Joint Operation l = Operated by Others progressed consistent with project demands. In addition to new-build terminals in the United Kingdom, Italy, and the United States, ExxonMobil continues to *Under negotiation - Not applicable evaluate third-party terminals. E X X O N M O B I L C O R P O R A T I O N o 2 0 0 4 F I N A N C I A L & O P E R A T I N G R E V I E W

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U p s t r e a m  33

Development Project Execution

START-UPS DELIVERING VOLUMES

ExxonMobil-operated major project start-ups since the merger (1999 to 2004) are delivering on volume, cost, and schedule commitments. Over 70 major projects have been brought on line since 1999 and will produce 3.7 billion oil-equivalent barrels by 2010. Peak rates for these start-ups total 1.3 million oil-equivalent barrels per day. With the largest portfolio of development and exploration opportunities in the industry, ExxonMobil is well-positioned to continue this trend.

INNOVATIVE EARLY PRODUCTION SYSTEMS CAPTURING VALUE

The early production system (EPS) is an example of ExxonMobil’s innovative execution strategies. The EPS, a generic floating, production, storage, and offloading (FPSO) vessel, is deployed to capture early production volumes until the full-field development can be completed. Coupled with the “design one, build multiple” concept, the EPS offers significant project management and schedule efficiencies that improve overall project economics. Initial deployments in West Africa have delivered about 160 million oil-equivalent barrels (gross) with best-in-class reliability.

DEVELOPMENT COST HOLDING AT $3 PER OIL-EQUIVALENT BARREL

With ExxonMobil’s industry-leading resource base and proved reserves, our organization is focused on developing the most attractive opportunities through a disciplined process of selectivity and efficient deployment of capital. Since the merger, Upstream capital expenditures have grown over 50 percent. Spending on projects to develop major new resources accounts for the largest proportion of the growth and has tripled since the merger. Even with the shift to deepwater, arctic, and other technically challenging environments, average overall development cost remains relatively constant at around $3 per barrel for the Upstream development portfolio. In this context, development cost refers to expected gross Upstream investment divided by expected gross resource additions for the full ExxonMobil opportunity portfolio.

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(PICTURE)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

34

The Americas

ExxonMobil’s operations in the Americas contributed about 35 percent of ExxonMobil’s 2004 worldwide production on an oil-equivalent basis and about 42 percent of Upstream earnings. Base production continues to yield strong returns. We expect future production will be augmented by multiple nonconventional opportunities, including deepwater Gulf of Mexico, tight gas, heavy oil, and arctic developments. Additionally, ExxonMobil has secured positions in new exploration areas including Canada’s Orphan Basin and offshore Colombia.

Americas Highlights

                         
    2004     2003     2002  
Earnings (billions of dollars)
    7.1       5.5       3.7  
Proved Reserves(1) (BOEB)
    7.4       8.1       8.6  
Acreage (gross acres, million)
    64.6       51.9       69.8  
Net Liquids Production (MBD)
    1.0       1.1       1.1  
Net Gas Production (BCFD)
    3.0       3.2       3.5  
                             
Americas Projects             Target Peak  
        Working     Production (Gross)  
Projected Start-Ups     Interest     Liquids     Gas  
        (%)     (kBD)     (MCFD)  
2004
  Sable Tier 2 - South Venture     60       10       140  
2005
  Thunder Horse     25       250       200  
2006
  Princess Phase II     16       25       65  
 
  Syncrude Upgrader Expansion     25       110        
 
  Ursa Pressure Maintenance     16       35       15  
2008+
  Hebron     38       165        
 
  Kearl     100       100        
 
  Mackenzie Gas Project     57       10       850  
 
  Alaska Gas Proj./Pt. Thomson     36       70       4,500  
 
  Piceance Gas (Initial Phase)     100       2       400  
 
  Western Region Development     36       55        

(BAR CHART)

UNITED STATES

ExxonMobil is one of the largest oil and gas producers and reserve holders in the United States. The Corporation’s well-established portfolio is geographically diverse with significant positions in all major producing regions including Alaska, onshore Gulf Coast, shelf and deepwater areas of the Gulf of Mexico, onshore and offshore California, and the midcontinent region. United States properties contributed 21 percent of the Company’s net oil and gas production in 2004 and accounted for 21 percent of proved reserves at year end.

In the United States, the Upstream continues to provide a significant contribution to ExxonMobil’s profitability through a sizable but selective drilling program, investments in the existing base as well as in attractive new projects, and continued operational efficiency improvements. Technology and quality reservoir management enhance the long-term performance of each field. Base production decline is mitigated through active workover and development drilling programs. Mature, higher-cost properties are considered for divestment to prioritize our resources on the highest-value opportunities.

(PICTURE)

LaBarge Acid Gas Injection

High-pressure acid gas injection will replace existing sulfur recovery units at the Shute Creek Treating Facility in La Barge, Wyoming. The $400 million (gross) project includes two injection wells and a 110-megawatt power cogeneration unit, and will increase the existing plant capacity from 650 to 720 million cubic feet per day (gross). In addition, the project will generate plant electrical needs, with excess power to sell, and efficiently utilize exhaust gas to generate steam for process heat needs. Start-up of the cogeneration turbine occurred in 2004, and acid gas injection will commence early in 2005.

Thunder Horse

Located in the central Gulf of Mexico, this deepwater development will include a semi-submersible floating production, drilling, and quarters unit with capacity of 250 thousand barrels per day (gross), and will accommodate 11 direct-access subsea wells and 13 remote subsea wells. Export will occur via a joint-venture oil pipeline to southern Louisiana and a third-party gas pipeline to southern Mississippi. Drilling and construction activities are under way with start-up projected for the second half of 2005.

(PICTURE)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U p s t r e a m  35

OPTIMIZING THE BASE

ExxonMobil’s diverse North American portfolio is optimized through selective investment in high-value opportunities, while enhancing existing capacity, leveraging technology, and participating in selective acreage monetization opportunities. 3D seismic technology, advanced subsurface modeling, and extended-reach drilling are adding new potential to mature areas.

In 2004, ExxonMobil announced an arrangement that will optimize hydrocarbon exploration and development in the United States and Canada. The agreement will capitalize on our strengths and enhance shareholder value through transfers and joint-venture activity with our partner across a broad range of prospective and mature properties in West Texas, western Canada, onshore Louisiana, and the Gulf of Mexico. ExxonMobil will operate deep-gas prospects that rely on state-of-the-art technology, and will retain an option to also participate in shallower prospects.

As part of the agreement, ExxonMobil has farmed out its interest in more than 300,000 acres of undeveloped property interests in mature areas of the western Canadian province of Alberta. Thirty-five wells were drilled in 2004 and more than 250 wells are expected to be drilled over an initial two-year period with opportunities for further drilling.

Gulf of Mexico

ExxonMobil holds one of the leading acreage positions in the Gulf of Mexico with 547 deepwater blocks (about 3.2 million gross acres) and 118 shelf blocks (about 800,000 gross acres). This acreage position includes interests in two highly active industry plays, the ultradeepwater foldbelt in the Walker Ridge area, and deep gas underlying the Louisiana shelf.

In the ultradeepwater foldbelt, a successful appraisal of the 2003 St. Malo discovery (ExxonMobil interest, 4 percent) was drilled to 28,905 feet in 8,830 feet of water. The well encountered more than 400 net feet of oil and provided valuable geotechnical data that has been applied in reservoir modeling studies of the field. These results will help optimize investigation of ExxonMobil’s strong acreage position including analysis of several additional prospects in this highly active play.

On the shelf, plans include drilling three or more wells to test deep gas potential, including drilling one of the deepest wildcats in North America. The high-risk, over 30,000-foot Blackbeard well (ExxonMobil interest, 25 percent) spudded in February 2005, and will test an unproven, but potentially very large, ultrahigh-temperature, high-pressure play. We will also jointly explore for deep gas on 800,000 gross acres of high-potential onshore Louisiana and offshore Gulf of Mexico shelf acreage through an agreement completed in 2004.

(MAP)

(MAP)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

36

THE AMERICAS GAS MARKET

North America continues to be an important market for ExxonMobil. With gas demand likely to grow 1.3 percent per year on average to 2020, and domestic supply from existing wells declining, continued investment in existing fields and new discoveries is required, representing a great opportunity for those with the technology to locate and produce gas. ExxonMobil has developed technology to produce gas resources such as tight and deep gas. ExxonMobil has a leading position in arctic gas resources in the Mackenzie Delta region of northern Canada and on the North Slope of Alaska. LNG imports are forecast to play an increasingly important role. We expect ExxonMobil LNG projects in Qatar will supply approximately 2 billion cubic feet per day of gas (ExxonMobil interest, 30 percent) to the United States beginning in 2009. In 2004, ExxonMobil made progress in permitting and land acquisition for LNG offloading and regasification terminals along the Gulf Coast.

Supply And Demand In United States
And Canada

(billions of cubic feet per day)

(PERFORMANCE GRAPH)

New Gas Supplies For United States
And Canada
(billions of cubic feet per day)

(PERFORMANCE GRAPHS)

TIGHT GAS OPPORTUNITIES – PICEANCE BASIN

ExxonMobil is initiating development of approximately 300,000 gross acres of tight gas resources in the Piceance Basin, located in northwestern Colorado. Our strong acreage position in this basin offers the potential of over 35 trillion cubic feet of gas resources. Breakthrough technology, involving state-of-the-art ExxonMobil proprietary multistaged fracturing techniques, is being used to stimulate stacked tight sands. Full development is expected to involve deviated wells drilled from multiwell pads, significantly reducing the environmental impact in this remote region.

(MAP)

ARCTIC GAS OPPORTUNITIES

Federal legislation was passed and progress made with the State of Alaska on a fiscal contract for the Alaska Gas Project. Progress was also made in 2004 on key regulatory milestones for the Mackenzie Gas Project.

The Alaska Gas Project is designed to treat and transport gas from Prudhoe Bay and Point Thomson, Alaska. The project scope includes a gas-treating plant on the North Slope and construction of a large-diameter, high-pressure pipeline to North American gas markets. Start-up for the project is anticipated in the middle of the next decade.

(MAP)

The Mackenzie Gas Project ($5.6 billion, gross) is expected to develop approximately 6 trillion cubic feet of gas from three onshore arctic fields including Taglu field (Imperial Oil-operated, 100 percent interest) and Parsons Lake field (ExxonMobil interest, 25 percent).

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U p s t r e a m   37

CANADA

ExxonMobil is the largest crude oil producer in Canada, is a leading natural gas producer, and holds the largest resource position through its wholly owned affiliate, ExxonMobil Canada, and its majority-owned affiliate, Imperial Oil (ExxonMobil interest, 69.6 percent). The Company has a significant presence in major development projects in offshore eastern Canada and a well-established production base with expansion opportunities in western Canada. Our position has been further strengthened with our recent acquisition of exploration rights in the Orphan Basin.

Offshore Canada Operations

The ExxonMobil-operated Sable Offshore Energy Project (ExxonMobil interest, 60 percent) consists of five producing fields containing estimated recoverable hydrocarbons of 2.1 trillion cubic feet of natural gas and 90 million barrels of natural gas liquids (gross). Production in 2004 was approximately 400 million cubic feet per day of natural gas (gross) and 13 thousand barrels per day of liquids (gross).

The Company also operates the Hibernia oil field (ExxonMobil interest, 33 percent). Hibernia, located 195 miles from St. John’s, Newfoundland, holds an estimated 950 million barrels (gross) of recoverable oil. Production in 2004 was over 200 thousand barrels of oil per day (gross). The Hibernia field consists of a large concrete Gravity Base Structure (GBS) with two drilling rigs.

The non-operated Terra Nova development (ExxonMobil interest, 22 percent), located 200 miles southeast of St.John’s, Newfoundland, produces up to 150 thousand barrels of oil per day (gross). Located in 300 feet of water, Terra Nova consists of a unique, harsh-environment-equipped FPSO and 24 subsea wells that are expected to recover 380 million oil-equivalent barrels (gross).

(PICTURE)

(MAP)

Orphan Basin, Canada

ExxonMobil Canada and Imperial Oil successfully participated in a tender for eight high-potential, frontier deepwater exploration blocks in the Orphan Basin, located offshore Newfoundland (ExxonMobil interest, 25 percent; Imperial Oil interest, 25 percent). Acquisition of a 2,000-square-kilometer, 3D seismic survey was completed in 2004. Two additional 3D seismic surveys are planned for 2005.

(MAP)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

38

HEAVY OIL

Current estimates of extra heavy oil and tar sands exceed 4 trillion barrels in-place worldwide. While heavy oil has been commercially produced since the 1960s, worldwide cumulative production to date is small relative to the overall size of the resource base. ExxonMobil is well-positioned to capitalize on new heavy oil opportunities based on our operational expertise gained through participation in Cerro Negro in Venezuela, Cold Lake, and Syncrude projects in Canada

(MAP)

Heavy Oil Production In Canada
And South America
(thousands of barrels per day, net ExxonMobil)

(PERFORMANCE GRAPH)

Recovery Techniques

ExxonMobil engineers select the process that best suits the resource characteristics and ensures maximum recovery. ExxonMobil’s experience across a broad range of these technologies is a competitive advantage.

(PICTURE)

ONSHORE CANADA OPERATIONS

The Cold Lake field (Imperial Oil interest, 100 percent) and the Syncrude tar sands operation (Imperial Oil interest, 25 percent) in Alberta account for the majority of Imperial Oil’s production in western Canada. Cold Lake averaged 126 thousand barrels of oil per day in 2004 and at Syncrude, 2004 production of synthetic crude averaged 240 thousand barrels per day (gross). Staged expansion is under way at Syncrude to further develop reserves in the area and expand the upgrading facilities. This expansion is planned to increase production to over 350 thousand barrels of upgraded crude oil per day (gross).

ExxonMobil holds interests in three large Kearl Lake tar sands mining leases. A 200-well delineation program continued in 2004 to further define the resource and support the conceptual design for the project.

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

UPSTREAM 39

Syncrude Upgrader Expansion

The Syncrude Upgrader Expansion project consists of adding a second train at the Aurora tar sands mine and increasing capacity of the upgrader by about 110 thousand barrels of oil per day (gross). Mining for the second train started in 2003. The upgrader expansion, which includes the addition of a third coker, a new aromatic saturation unit, and a new hydrogen plant, is scheduled for completion in 2006. The project is expected to develop in excess of 1 billion barrels of resource (gross) with an investment of more than $5 billion (gross).

(PICTURE)

SOUTH AMERICA

Cerro Negro and
Venezuela
Operations

ExxonMobil operates the Cerro Negro field (ExxonMobil interest, 42 percent) in Venezuela. The 120 thousand barrels of extra-heavy crude produced daily (gross) are processed through an upgrader into synthetic crude oil.

ExxonMobil also has a 25-percent interest in the Quiamare La Ceiba block in eastern Venezuela and a 50-percent interest in the 122,000-acre La Ceiba block on the southeastern shore of Lake Maracaibo. Work has begun on the La Ceiba commercialization evaluation plan, including extended production testing that started in October 2004.

(PICTURE)

Offshore Colombia

ExxonMobil signed an exploration and production contract with Colombia’s National Hydrocarbon Agency to begin exploration activities offshore Colombia (ExxonMobil interest, 40 percent). The agreement covers the 11-million-acre Tayrona block, off Colombia’s northern coast in the Caribbean Sea. During the initial 18-month phase of the exploratory program, ExxonMobil is utilizing its industry-leading Remote Reservoir Resistivity Mapping (R3M) technology, a proprietary electromagnetic survey technique that ExxonMobil has successfully applied in other offshore areas of the world.

(MAP)

Other South America

ExxonMobil holds a 51-percent interest in the Chihuidos block, which contains the Sierra Chata gas field, located in the Neuquen Basin in central Argentina. The Company also holds a 23-percent interest in the Aguarague concession in northwest Argentina. Net daily gas production of 89 million cubic feet is sold into markets in Argentina and central and northern Chile.

ExxonMobil holds interests in two blocks offshore Brazil located in the prolific Campos Basin deepwater play. Also offshore Brazil, ExxonMobil acquired an interest and operatorship of Block BM-S-22 (ExxonMobil interest, 40 percent), a 340 thousand acre block in the Santos Basin. Activity planned for 2005 includes acquisition of a 3D survey.

In addition, the Company holds exploration rights onshore Bolivia, and offshore Guyana and Trinidad.

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

40

Europe

ExxonMobil is the largest net producer of hydrocarbons in Europe with daily net production of about 600 thousand barrels of liquids and 4.6 billion cubic feet of gas. The Company has exploration and/or production operations in the United Kingdom, Norway, the Netherlands, Germany, France, and Italy. Extensive North Sea oil and natural gas production operations and significant onshore natural gas production are among the Company’s key assets. ExxonMobil’s operations in Europe accounted for almost 32 percent of the Company’s 2004 net oil and gas production and about 26 percent of Upstream earnings.

Europe Highlights

                         
    2004     2003     2002  
Earnings (billions of dollars)
    4.4       5.3       3.0  
Proved Reserves(1)(BOEB)
    4.7       5.2       5.4  
Acreage (gross acres, million)
    19.8       19.9       21.1  
Net Liquids Production (MBD)
    0.6       0.6       0.6  
Net Gas Production (BCFD)
    4.6       4.5       4.5  

Europe Projects

                                 
                    Target Peak  
            Working     Production (Gross)  
Projected Start-Ups         Interest     Liquids     Gas  
       
 
    ( %)   (kBD)   (MCFD)
  2004    
Sleipner West Alpha North
    32       15       195  
       
Sleipner West Compression
    32       20       250  
       
Goldeneye
    39       30       260  
       
Scoter
    44       5       125  
  2005    
Arthur
    70       5       120  
  2006    
Kristin
    11       140       500  
       
Fram East
    25       40       50  
  2007    
Njord Gas Export
    20       15       185  
       
Ormen Lange
    7       30       2,000  
       
Statfjord Late Life
    21       65       350  
       
Caravel
    29       5       170  
  2008+    
Skarv/Idun
    12       85       500  
       
Tyrihans
    8       70       380  
       
Tempa Rossa
    25       50       20  

(BAR CHART)

(1) Excludes 2004 year-end price/cost revisions.

CONTINENTAL EUROPE

ExxonMobil has significant gas holdings onshore in the Netherlands and Germany, and is the largest gas producer in both countries. Capacity is being optimized to meet market demand and peak-day needs. A multiyear upgrade of the Groningen facilities, along with additional compression for future deliverability, is progressing in the Netherlands. In late 2004, the Dutch Parliament endorsed Cabinet recommendations to allow both exploration and gas production from the Waddenzee under carefully controlled conditions to ensure environmental integrity. This action is expected to enable Nederlandse Aardolie Maatschappij B.V. (NAM) (ExxonMobil interest, 50 percent) to develop and further explore significant gas resources in the area.

Offshore the Netherlands, the K/7-FB project (ExxonMobil interest, 23 percent) began production in late December 2003; the project is anticipated to recover 11 million oil-equivalent barrels (gross). K/15-FB-South began production in July 2004, and is expected to recover 6 million oil-equivalent barrels (gross). Also offshore, NAM is embarking on its first major tight gas development at K/17, utilizing an innovative monotower platform and underbalanced horizontal wells.

In Germany, ExxonMobil increased gas capacity with the start-up of the Visbek sour gas compression project. To unlock the tight gas potential that exists in Germany, a regional study that includes a high-resolution aeromagnetic survey, is being conducted as a first step of a comprehensive development strategy.

Groningen

The Groningen field started production in 1963. It is the largest gas field in northwest Europe, with estimated ultimate recoverable reserves of 100 trillion cubic feet of gas (gross). Groningen is a swing producer, allowing the primary Dutch gas marketing company, Gasunie, to meet sales commitments. A multiyear major project is under way to renovate production clusters to ensure the long-term integrity of existing facilities, and install new compression to maintain capacity and extend field life. NAM’s underground gas storage facility is shown below.

Visbek Compression

Compression projects for ExxonMobil’s onshore gas assets are key enablers to enhance and maintain production capacity when reservoir pressures are declining. The two gas turbine engines (7.5 megawatts each) driving the new sour gas compression in north German Visbek field are among the largest of their kind in Europe. Visbek Compression started up in fourth quarter 2004. A sweet gas compression project will start up at Soehlingen in 2005, followed by the start-up of Scholen compression in 2006.

(PICTURE)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

UPSTREAM 41

EUROPEAN GAS MARKET

One objective of the second European Gas Directive, which went into effect in June 2004, is to further liberalize gas markets and facilitate market liquidity, which we believe creates new opportunities for ExxonMobil. European gas demand is likely to grow at about 2.5 percent per year on average to 2020, while local production is declining in the United Kingdom, and is expected to decline on the Continent later in the decade. Significant new LNG imports, plus North African, Russian, and Caspian pipeline supplies are expected to satisfy future demand.

SUPPLY AND DEMAND IN EUROPE
(billions of cubic feet per day)

(PERFORMANCE GRAPH)

NEW GAS SUPPLIES FOR EUROPE
(billions of cubic feet per day)

(PERFORMANCE GRAPH)

EUROPEAN LNG TERMINALS

In the United Kingdom, ExxonMobil and Qatar Petroleum are developing the South Hook LNG (ExxonMobil interest, 30 percent) receiving terminal at ExxonMobil’s former refinery site in Milford Haven, Wales. This terminal will be used to import up to 15.6 million tons per annum from the Qatargas II LNG project. Also under development is the offshore Adriatic LNG receiving terminal (ExxonMobil interest, 45 percent) in Italy. In 2004, ExxonMobil and Qatar Petroleum signed a long-term subscription agreement with Fluxys for 3.4 million tons per annum of capacity at Fluxys’ Zeebrugge Terminal. In southern Europe, ExxonMobil is assessing potential terminal development opportunities at its refinery sites in Fos (France) and Augusta (Italy).

EUROPEAN GAS MARKET RESTRUCTURING

Europe is one of the largest gas markets in the ExxonMobil portfolio and equity production from the Continent continues to deliver much-needed volumes to the region. Restructuring activities have been progressed by ExxonMobil to continue to compete effectively as the European gas market evolves. These changes anticipate the impact of the European Gas Directives and enable ExxonMobil to directly market more of its equity production. ExxonMobil Gas Marketing Europe was formed to enable marketing on a pan-European basis. Restructuring efforts include:

•   Independent marketing of Norwegian equity production following dissolution of the government-mandated Gas Sales Committee and unitization of the offshore and onshore Norwegian gas infrastructure;

•   Transfer of the company’s shareholding in Ruhrgas AG to E.ON AG;
 
•   Sale of the industrial and commercial business in the United Kingdom;
 
•   Transfer and sale of minority shareholdings in marketing and transport companies and transportation assets in Germany; and,
 
•   Transfer of gas marketing activities from the 50/50 BEB German joint venture into separate ExxonMobil and Shell companies, which enables independent marketing to customers.

In November 2004, ExxonMobil announced that its subsidiary, Esso Nederland B.V., signed a Heads of Agreement (HOA) with the State of the Netherlands and Shell Nederland B.V. to restructure its interest in the Dutch gas business. Under the terms of the agreement, Esso Nederland B.V. and Shell Nederland B.V. will transfer their ownership share of 25 percent each in Gasunie’s gas transportation business to the State of the Netherlands. The final transaction remains subject to regulatory reviews. The parties intend to finalize the restructuring by mid-2005.

CONTINENTAL EUROPE CONTINUES
AS SIGNIFICANT GAS PRODUCER
(billions of cubic feet per day)

(BAR CHART)

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

42

NORTH SEA

The North Sea continues to be a strong producer for ExxonMobil. Activities continue in all sectors of the North Sea (northern, central, and southern) and include execution of greenfield projects, leveraging of existing infrastructure, and maximizing recovery in mature assets.

In order to improve effectiveness and capture synergies in the mature ExxonMobil-operated areas in the North Sea, the operating organizations in the United Kingdom and Norway merged into one business unit, effective January 1, 2005.

Northern North Sea – New Developments

Two Norwegian deepwater development projects are under way at Kristin (ExxonMobil interest, 11 percent) and Ormen Lange (ExxonMobil interest, 7 percent). These new developments are projected to start up in 2006 and 2007, respectively.

(BAR CHART)

Kristin

The Kristin project ($3 billion, gross), in the Norwegian sector of the North Sea, will develop high-pressure, high-temperature hydrocarbon resources. Four subsea templates will be tied back to a semisubmersible production vessel in 1,200 feet of water with daily production capacity of 140 thousand barrels of liquids and 500 million cubic feet of gas. The semisubmersible production platform for the Kristin field is under construction in Norway. First production is expected in early 2006.

Ormen Lange

The Ormen Lange project ($10 billion, gross) is designed to develop over 13 trillion cubic feet of gas (gross) from the Ormen Lange field. The gas will be transported by the world’s longest subsea export pipeline, approximately 750 miles, from Nyhamna on the west coast of Norway, via Sleipner in the North Sea, to Easington in the United Kingdom. Still in its early stages, the project scope includes a new onshore gas processing plant at Nyhamna, and subsea wells in 2,840 feet of water. At plateau, Ormen Lange is expected to produce 2 billion cubic feet of gas per day.

(PICTURE)

Central North Sea – Maximizing Recovery

In March 2004, in the Norwegian sector of the North Sea, the Ringhorne Jurassic project was completed, which tied part of the Ringhorne production to the ExxonMobil-operated Jotun FPSO. In 2005, Ringhorne (ExxonMobil interest, 100 percent) will export oil and gas through the Balder and Jotun FPSOs at a peak rate of about 90 thousand barrels per day of oil and 30 million cubic feet per day of natural gas.

During 2004, a successful evaluation well supported development plans for the 2003 Ringhorne East discovery. Development drilling activities are planned from the Ringhorne platform in 2005/2006.

EXXON MOBIL CORPORATION . 2004 FINANCIAL & OPERATING REVIEW

 


 

UPSTREAM 43

In the U.K. North Sea, the Goldeneye project (ExxonMobil interest, 39 percent) started production in October 2004. The project is expected to recover 135 million oil-equivalent barrels (gross). This five-well development uses an unmanned wellhead platform with the full well-stream sent to the existing St. Fergus gas plant for separation.

ExxonMobil participated in an extensive maintenance and upgrading program at the Norwegian Sleipner West field (ExxonMobil interest, 32 percent) that will boost the estimated recoverable resources by approximately 350 million oil-equivalent barrels (gross). The program will hold Sleipner West’s gas production at its plateau level of around 775 million standard cubic feet per day for another three years. A key part of this upgrade is the Sleipner Alpha North satellite development, which includes the installation of a subsea template and the drilling of four wells. The project was delivered on time and at a cost of about $350 million, some 25 percent below the original estimate. The upgrade program also consists of the Sleipner West compression project. Through this project, the existing Sleipner T platform was modified rather than rebuilt, for cost savings of $380 million.

ExxonMobil continues to acquire exploration interests in the North Sea. Through the 18th licensing round in Norway, ExxonMobil acquired a 30-percent working interest in 11 blocks on the Norwegian Continental Shelf. In 2005, ExxonMobil (operator) and its co-venturers plan to drill the first exploration well on these interests.

(MAP)

Statfjord Late Life

The Statfjord Late Life project (ExxonMobil interest, 21 percent) is a capacity enhancement project to transition Statfjord operations from reservoir pressure maintenance to reservoir depressurization for enhanced oil and gas recovery. The project involves debottlenecking three platforms to recover 365 million oil-equivalent barrels (gross) of incremental resources with an investment of $3 billion (gross). This will involve facility modifications to accommodate changing reservoir conditions, and to allow for continued drilling and extension of facilities’ life beyond 2020. In addition, a new pipeline will be built to allow export of gas into the UK FLAGS system (ExxonMobil interest, 50 percent).

Southern North Sea – Leveraging Infrastructure

The Arthur field (ExxonMobil interest, 70 percent), discovered in October 2003, started up in January 2005. The field is located in approximately 140 feet of water and will be developed with three subsea wells tied back to the existing ExxonMobil-operated Thames platform via a new 20-mile, 12-inch pipeline and umbilical. The project is expected to recover approximately 130 billion cubic feet (gross) of gas resources.

(MAP)

2004 FINANCIAL & OPERATING REVIEW . EXXON MOBIL CORPORATION

 


 

44

Africa

ExxonMobil has a substantial and profitable production base, as well as significant growth potential in Africa, with production from Angola, Chad, Cameroon, Equatorial Guinea, and Nigeria. Exploration and development activities continue in Angola, Chad, Cameroon, Equatorial Guinea, Niger, Nigeria, Madagascar, Senegal, Guinea Bissau, and the Republic of Congo. ExxonMobil’s acreage portfolio ranges from onshore to a world-class position in the high-potential deepwater. ExxonMobil is also pursuing LNG opportunities in Nigeria and Angola.

In deepwater areas offshore Africa, ExxonMobil holds interests in 19 blocks totaling nearly 21 million gross acres. Fourteen deepwater exploration wells were completed offshore West Africa during 2004, adding about 340 million barrels (net) to ExxonMobil’s resource base.

Africa Highlights

                         
    2004   2003   2002
Earnings (billions of dollars)
    2.1       1.3       0.8  
Proved Reserves(1) (BOEB)
    2.8       2.8       2.7  
Acreage (gross acres, million)
    42.6       29.5       31.7  
Net Liquids Production (MBD)
    0.6       0.4       0.3  
Net Gas Production (BCFD)
                 

Africa Projects

                             
                Target Peak  
        Working     Production (Gross)  
Projected Start-Ups     Interest     Liquids     Gas  
        (%)     (kBD)     (MCFD)  
2004
  Kizomba A     40       250        
 
  Bolobo     40       60        
2005
  Bonga     20       200       150  
 
  Kizomba B     40       250        
2006
  Dalia     20       225        
 
  Amenam/Kpono Gas Project     10       25       235  
 
  East Area Add'l Oil Recovery     40       115       20  
 
  Erha     56       150        
2007
  Rosa Area     20       140        
 
  Kizomba C     40       250        
2008+
  Bonga Ullage     20       140       100  
 
  Bonga SW     20       85       65  
 
  Bosi Oil     56       110        
 
  Nigeria East Area NGLs     51       40        
 
  Nigeria Satellite Projects     40       125        
 
  Usan     30       150        
 
  Angola LNG     14       50       965  
 
  Kizomba D     40       125        
 
  Lirio-Cravo     20       115        
 
  Perpetua-Zinia-Acacia     20       125        
 
  Plutao-Saturno     25       110        

(GRAPH)


(1) Excludes 2004 year-end price/cost revisions.

- Not applicable

(PICTURE)

ANGOLA

ExxonMobil has interests in five deepwater blocks that cover 4.5 million gross acres. The Company and its co-venturers have announced 38 discoveries in Angola, which represent world-class development opportunities with recoverable resource potential of almost 12 billion oil-equivalent barrels (gross).

Kizomba A

Initial production from the Kizomba A project occurred in August 2004, setting an industry record for project execution time from contract award to first oil for a project of this size. This offshore Angola Block 15 project is developing the Hungo and Chocalho fields in water depths of 3,300 to 4,200 feet. Peak production is estimated at 250 thousand barrels of oil per day (gross) with estimated recovery from the project of 1 billion barrels of oil (gross).

(MAP)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U P S T R E A M   45

Kizomba B

Construction is under way on the offshore Angola Block 15 Kizomba B project ($3.5 billion, gross), which utilizes a design similar to Kizomba A to achieve reduced costs and cycle time. Kizomba B is designed to develop 1 billion barrels of oil (gross) from the Kissanje and Dikanza fields. Installation of the tension leg platform (TLP) and sailaway of the FPSO vessel are scheduled for early 2005. First oil is anticipated in the third quarter 2005.

(PICTURE)

Kizomba C

The Kizomba C project ($3.5 billion, gross) is planned to include the fourth and fifth offshore production hubs in Angola Block 15. Two FPSOs will be required to develop Mondo, Saxi, and Batuque fields, which have combined resources of over 650 million barrels of oil (gross). The project is currently in the design phase, and initial production is expected in 2007.

(MAP) (MAP)

Dalia

(PICTURE)

The Dalia project ($3.8 billion, gross) includes a 2-million barrel FPSO vessel to recover nearly 1 billion barrels of oil (gross) from the offshore Angola Block 17 structure. Subsea templates at a water depth of 4,400 feet will handle production and injection for 73 subsea wells. Construction is under way with start-up anticipated in 2006.

(MAP)

2004 FINANCIAL & OPERATING REVIEW  •  EXXON MOBIL CORPORATION

 


 

46

NIGERIA

ExxonMobil participates in a joint venture (ExxonMobil interest, 40 percent for crude and condensate; 51 percent for natural gas liquids) with the Nigerian National Petroleum Corporation, for which it operates five leases covering over 800,000 acres in shallow water offshore southeastern Nigeria. ExxonMobil is the operator for over 90 platforms, the terminal at Qua Iboe, the Falcon FPSO at Yoho, the Oso Condensate Recovery/NGL extraction plant, and the Bonny Fractionation Plant. In 2004, ExxonMobil operations in offshore Nigeria produced an average of 276 thousand barrels of liquids per day (net). In addition to activities in the Joint Venture Area, ExxonMobil is expanding into deepwater Nigeria via the Bonga and Erha fields.

(MAP)

Nigeria Joint Venture – Shelf Development

Activities are progressing to increase production capacity in the Joint Venture Area. Production growth will result from development drilling, satellite field developments, enhanced recovery projects, and a series of platform upgrades, which will enhance facility integrity and production capacity, and optimally develop additional resources on the joint-venture acreage. The Amenam/Kpono project (ExxonMobil interest, 10 percent), which achieved first oil production in 2003, is expected to deliver first gas in 2006. Three major projects, the Yoho Full-Field Project, the East Area Additional Oil Recovery Project, and the East Area Natural Gas Liquids Project, are under way.

(PICTURE)

Fabrication for the Erha development is under way in Port Harcourt, Nigeria.

Yoho

Yoho full-field drilling and installations continue in offshore Nigeria. With investment of $1.3 billion (gross), the project is developing the Yoho and Awawa fields with estimated recoverable reserves of 400 million barrels of oil. Full-field development is expected to be completed in 2005 and consists of production and quarters platforms, a floating storage and offloading vessel, multiple wellhead platforms and an oil export system. Successful implementation of an early production system in 2002 enabled first oil from Yoho about three years ahead of full-field production.

(MAP)

East Area Additional Oil Recovery

The East Area Additional Oil Recovery project ($2.3 billion, gross) will increase recovery and minimize gas flaring from six joint-venture East Area producing fields. Project scope includes expansion of the gas gathering and injection systems, and installation of gas compression and quarters platforms. The project is expected to recover 550 million oil-equivalent barrels (gross). Construction is under way for first gas injection in 2006.

East Area Natural Gas Liquids

The East Area NGL project ($1 billion, gross) will include offshore extraction facilities, a 120-mile pipeline system, and expansion of the Bonny River Terminal to recover 275 million oil-equivalent barrels (gross) of natural gas liquids from East Area joint-venture fields. Contracting is under way with project start-up in 2008.

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U P S T R E A M   47

Nigeria Deepwater Development

Complementing the activity in the Joint Venture Area, development projects are now under way to capture the potential of Nigeria’s deepwater. The first of these, Bonga, will start up in 2005 followed closely by Erha in 2006. Development plans continue for Usan on Block 222.

Bonga

Offshore installation is in progress on the Bonga project ($3.9 billion, gross), ExxonMobil’s first participation in a deepwater (3,300 feet) development offshore Nigeria. Starting up in 2005, the project is designed to produce 200 thousand barrels of oil per day (gross) from 22 subsea wells tied back to a newly constructed FPSO vessel.

Erha

Fabrication of the Erha FPSO topsides is in progress in Singapore and Malaysia. The FPSO will be moored 60 miles offshore Nigeria in 3,400 feet of water, with capacity to handle production of 150 thousand barrels of oil per day from 15 subsea producers. Project investment totals $2.5 billion (gross) and first oil is anticipated in the first half of 2006.

BUILDING CAPABILITY — FIRST SUBSEA INTEGRATION TEST IN WEST AFRICA

In 2004, the first subsea integration test (SIT) ever conducted in West Africa took place in Nigeria for the Erha Project. The SIT lays out all subsea equipment on land, including wellheads, manifolds, and flowlines, and tests the necessary connections, functions, and interfaces prior to mobilization for offshore installation. The SIT, a critical execution milestone for subsea production equipment, was completed successfully, and represented a dramatic move forward in capability for West Africa, and specifically, Nigeria.

(PICTURE)

EQUATORIAL GUINEA

ExxonMobil is the largest producer in Equatorial Guinea and operates two blocks which cover about 1 million acres (gross). The Zafiro field is located on Block B (ExxonMobil interest, 71 percent) approximately 40 miles northwest of Malabo in water depths between 400 and 2,800 feet.

In 2004, total field production increased to an average of over 280 thousand barrels of oil per day (gross). This is approximately 40 percent above 2003 volumes with substantial volume contributions from the Southern Expansion Area Project. Production from this project is through the FPSO Serpentina, an EPS, with production from the remainder of the field supported by the Jade Platform and the Zafiro Producer, a floating production unit (FPU). In 2004, 14 wells were completed in the Zafiro field.

CHAD

With start-up of Kome field production in January 2004 and the Bolobo field in August 2004, five months ahead of schedule, combined Chad production exceeded 200 thousand barrels of oil per day (gross) through a 650-mile pipeline that extends from the Doba Basin to Kribi, Cameroon. The Nya and Moundouli fields are expected to begin production in 2005 and 2006, respectively. An estimated 1 billion barrels of oil (gross) will be recovered from the Chad fields. Additionally, ExxonMobil finalized an agreement allowing continued exploration in the over-8-million-acre (gross) Permit H through 2008. Exploration drilling is under way.

OTHER AFRICA

During 2004, ExxonMobil continued to acquire deepwater exploration interests in Africa. Through the first license round in the Nigeria-Sao Tome and Principe Joint Development Zone, ExxonMobil acquired a 40-percent participating interest in the 174,000-acre Block1 (pending completion of final agreements). ExxonMobil also farmed into the 4.4-million-acre Majunga concession on the northwest coast of Madagascar to earn a 40-percent participating interest, and acquired 100-percent interest in the offsetting Cap Saint Andre Offshore block. In 2005, ExxonMobil and its co-venturers will conduct technical studies on these interests with plans for near-term exploration drilling.

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION

 


 

48

Middle East

ExxonMobil has a substantial production base and significant growth potential in the resource-rich Middle East region. In addition to Qatar, ExxonMobil is pursuing additional opportunities, focusing where ExxonMobil’s industry-leading technology and capabilities can contribute to increased recovery of oil and gas, while enhancing training and development of national work forces. In Kuwait, ExxonMobil leads a consortium competing for the Operating Services Agreement covering four fields in the northern part of the country. ExxonMobil is also pursuing investment opportunities in the United Arab Emirates where we currently produce 116 thousand barrels of liquids per day.

Middle East Highlights

                         
    2004     2003     2002  
Earnings (billions of dollars)
    0.6       0.4       0.3  
Proved Reserves(1) (BOEB)
    3.6       2.0       1.8  
Acreage (gross acres, million)
    7.6       7.5       7.5  
Net Liquids Production (MBD)
    0.1       0.1       0.1  
Net Gas Production (BCFD)
    0.7       0.5       0.4  

Middle East Projects

                             
                Target Peak  
        Working     Production (Gross)  
Projected Start-Ups     Interest     Liquids     Gas  
        (%)     (kBD)     (MCFD)  
2004
  RasGas Train 3     29       30       725  
2005
  Al Khaleej Gas Phase 1     100       50       600  
 
  RasGas Train 4     34       45       740  
2007
  RasGas Train 5     30       45       740  
2008+
  RasGas Trains 6 & 7     30       140       2,500  
 
  Qatargas II Train 4     30       80       1,250  
 
  Qatargas II Train 5     18       80       1,250  
 
  Al Khaleej Gas (Future Phases)     100       95       1,050  
 
  Qatar GTL     100       165       1,440  

(GRAPH)


(1)   Excludes 2004 year-end price/cost revisions.
                 
Qatar Existing and Planned LNG Trains
                                   
Joint           Capacity     Working         Scheduled
Venture   Train     MTA     Interest     Market   Completion
                    (%)          
Qatargas
    1,2,3       9.4       10     Japan/Europe   Complete
Qatargas II
    4       7.8       30     United Kingdom   2008
Qatargas II
    5       7.8       18     United Kingdom   2009
RasGas
    1,2       6.6       25     Korea   Complete
RasGas
    3       4.7       29     India   Complete
RasGas
    4       4.7       34     Europe   2005
RasGas
    5       4.7       30     Europe   2007
RasGas
    6       7.8       30     United States   2008
RasGas
    7       7.8       30     United States   2010
Total
            61.3                  

QATAR

ExxonMobil and Qatar Petroleum, with other joint-venture partners, are further developing the giant North Field, the largest nonassociated gas field in the world. Resources to be developed through existing and planned LNG trains, the gas-to-liquids (GTL) project, and pipeline sales projects exceed 25 billion oil-equivalent barrels (gross). Natural gas from the North Field is competitive for supplying Liquefied Natural Gas (LNG) to the Asia Pacific region, Europe, and the United States.

In 2004, three existing LNG trains at the Qatargas joint venture produced 9.2 million tons (gross), which were sold mainly to customers in Japan and Spain. Work is progressing on the Qatargas II project (ExxonMobil interest, Train 4, 30 percent and Train 5, 18 percent), which includes two LNG trains each with a capacity of 7.8 million tons per year with sales commencing in 2008. In 2004, construction started on the South Hook LNG receiving terminal in Milford Haven, Wales.

The RasGas joint venture (ExxonMobil interest, 25 to 34 percent) produced 9.5 million tons in 2004 (gross), sold mainly to Korea and India, with the bulk of the remainder going into markets in the United States and Spain. RasGas Train 3 started up in February 2004, and supplied the first LNG sales ever into India. RasGas Trains 4 and 5 will commence production in 2005 and 2007, respectively, with sales predominantly to Europe.

RasGas is progressing plans to produce and deliver 15.6 million tons per year of LNG to the United States. This project will be the largest LNG import project for supply of gas to the United States. Two LNG trains of 7.8 million tons per year each and 24 ships are included in the RasGas Trains 6 and 7 development.

The Qatar natural gas projects will also produce natural gas liquids for both domestic use and export.

(MAP)

EXXON MOBIL CORPORATION • 2004 FINANCIAL & OPERATING REVIEW

 


 

U p s t r e a m 49

RasGas Trains 3, 4, and 5

RasGas LNG Trains 3, 4, and 5 are designed to expand Qatar’s North Field production with combined capacity of over 14 million tons of LNG per year. First production from Train 3 occurred ahead of schedule in February 2004, with sales to India. Trains 4 and 5 are targeted for sales primarily in Europe, with start-up scheduled in 2005 and 2007, respectively.

(PICTURE)

LARGE TRAINS – LOWER SUPPLY COST

Advances in design and engineering of key process equipment, including spiral-wound heat exchangers, compressors, and turbines have allowed ExxonMobil to leverage economy of scale to lower cost of supply.

(PICTURE)

RasGas Trains 6 and 7

RasGas Trains 6 and 7 are expected to be the largest LNG export project to supply the United States market ($12 billion, gross). Designed to produce and deliver 15.6 million tons per year of LNG from Qatar’s North Field, the project will be an important element in meeting future gas demand in the United States. Start-up of Train 6 is targeted for 2008, followed by Train 7 in 2010.


Qatargas II – Trains 4 and 5

A joint project between Qatar Petroleum and ExxonMobil, the Qatargas II project ($12 billion, gross) is expected to further develop Qatar’s North Field through the addition of the world’s largest (7.8 million tons per year) onshore LNG liquefaction trains. Each project will encompass production, liquefaction, shipping, and regasification facilities. Construction is in progress on the South Hook LNG receiving terminal in Milford Haven, Wales. With first gas sales in 2008, Qatargas II LNG will supply markets in the United Kingdom and continental Europe.

Al Khaleej Gas

The multiphase Al Khaleej Gas Project is another opportunity to develop natural gas from Qatar’s giant North Field. Construction is in progress on Phase 1 ($1 billion, gross), which is expected to supply over 600 million cubic feet of gas per day plus associated condensate, natural gas liquids and ethane. First gas sales are anticipated in 2005. Future phases of the project will supply additional domestic requirements as well as regional export sales.


Qatar Gas-to-Liquids (GTL)

In July 2004, ExxonMobil signed a Heads of Agreement with Qatar Petroleum to build the world’s largest fully integrated GTL plant ($7 billion, gross). The upstream project will be designed to produce over 1.4 billion cubic feet per day (gross) of feed gas, along with 165 thousand barrels per day (gross) of associated condensate and natural gas liquids. The GTL plant will process the feed gas to yield an industry-leading 154 thousand barrels per day (gross) of products, such as low-sulfur diesel, lube basestocks, and naphtha. ExxonMobil holds over 3,500 patents or patents pending associated with GTL technology. Start-up is targeted for 2011.

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

50

COMPETITIVE ADVANTAGE IN LNG

LNG TECHNOLOGY LEADERSHIP

ExxonMobil is well-positioned to continue its leadership in the growing LNG trade. ExxonMobil’s access and knowledge of world markets combined with advanced technology have allowed us to commercialize new resources.

Technology has played a very important part in enabling economic supply of gas from remote sources. For example, LNG liquefaction trains will increase in size from around 3 million tons per annum of capacity in 2000 to almost 8 million tons by 2008. New technology and economies of scale are expected to lower unit liquefaction costs by 15 to 20 percent.

Likewise, in the same time frame, LNG ship sizes are increasing from a capacity of about 140,000 cubic meters to as large as 250,000 cubic meters. A unique ExxonMobil-designed testing program has enabled the qualification of membrane tanks in what will be the world’s largest LNG ships, almost 50 percent larger than conventional ships today. Unit transportation costs as a result are expected to be reduced by 10 to 15 percent.

LNG OPPORTUNITIES

Between 2005 and 2010, ExxonMobil has plans to participate in start-up of nine LNG trains in Qatar, Angola, and Australia. These new trains have a gross capacity of over 7 billion cubic feet per day or 55 million tons per year. These projects represent about half of the industry’s new LNG capacity expected to be added by 2010.

The Greater Gorgon/Jansz Project will develop resources in the Gorgon, Jansz, and nearby fields in northwest Australia. The Angola LNG project provides a disposition for the associated gas from offshore oil developments.

Beyond 2010, ExxonMobil is evaluating new LNG opportunities, including additional trains in Qatar, Nigeria, and Australia.

(BAR CHART)

(BAR CHART)

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LNG MARKET – EXXONMOBIL MARKET SHARE

Global LNG demand is growing at approximately 7 percent per year, faster than overall gas demand. Between 2001 and 2020, world LNG demand is expected to grow nearly four times (from about 120 to over 450 million tons per annum). By 2020, the United States is expected to become the largest market for LNG.

As of 2004, the Company’s participation in LNG joint ventures had a combined gross capacity of 27 million tons per year, or 20 percent of the global industry capacity, making ExxonMobil one of the largest LNG suppliers in the world.

(BAR CHART)

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

U p s t r e a m   51

Russia and Caspian

ExxonMobil operates and holds a 30-percent interest in the Sakhalin-1 blocks offshore mainland Russia. Gas marketing efforts have resulted in Letters of Intent for sales with customers in eastern Russia. Progress was made for potential sales into China, and discussions continue with potential customers in Japan.

Exploration activities on the Sakhalin III blocks are pending award of Exploration and Production licenses by the Russian government.

In the Caspian, ExxonMobil holds the unique position of participating in the development of three of the largest fields in the world: Kashagan and Tengiz in Kazakhstan, and Azeri-Chirag-Gunashli in Azerbaijan.

Caspian Highlights

                         
    2004     2003     2002  
Earnings (billions of dollars)
    0.4       0.3       0.2  
Proved Reserves(1) (BOEB)
    2.1       2.0       1.4  
Acreage (gross acres, million)
    2.8       3.1       3.1  
Net Liquids Production (MBD)
    0.1       0.1       0.1  
Net Gas Production (BCFD)
    0.1       0.1       0.1  

Russia and Caspian Projects

                             
                Target Peak  
        Working   Production(Gross)  
Projected Start-Ups     Interest   Liquids   Gas  
        (%)   (kBD)   (MCFD)  
2005
  Azeri-Chirag-Gunashli                        
 
      (ACG) Phase 1     8       325        
 
  Sakhalin-1 (Chayvo) Phase 1     30       250       1,000  
2006
  ACG Phase 2     8       465        
 
  Tengiz Phase 1     25       300       100  
2008+
  ACG Phase 3     8       260        
 
  Kashagan     17       1,200        
 
  Tengiz Expansion     25       220        

(BAR CHART)


(1)   Excludes 2004 year-end price/cost revisions.
 
  Not applicable

Sakhalin - 1

The multiphase Sakhalin-1 project ($12+ billion, gross) in the arctic region offshore the Russian Far East will develop more than 5 billion oil-equivalent barrels (gross). The initial phase of the project is designed to produce 250 thousand barrels of oil and 1 billion cubic feet of gas per day (gross) from the Chayvo field utilizing onshore and offshore extended-reach drilling technologies for some of the longest extended-reach drillwells in the world. Oil production will be processed in an onshore facility and exported via pipeline to the new DeKastri terminal facility on the Russian mainland. Phase 1 construction and drilling activities are under way. An early production system will accelerate initial production to mid-2005, followed by full-field production in 2006. Beginning in 2005, gas will be sold to domestic utilities in the Khabarovsk Krai in the Russian Far East. Sales will increase to 270 million cubic feet per day (gross) in 2009. Future phases will develop the remaining Chayvo, Odoptu, and Arkutun-Dagi resources.

(PICTURE)

(MAP)

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

52

EXTENDED REACH DRILLING TECHNOLOGY

The Sakhalin-1 Phase 1 development has benefited significantly from application of leading-edge technology. The use of extended-reach drillwells (ERDs) to access reserves about six miles from shore has allowed the elimination of a costly offshore platform and minimized activity in the sensitive offshore area. To drill these wells to very long measured depths, state-of-the-art rotary steerable technology (RST) is applied, which delivers a smooth wellpath and enables successful installation of casing at these record depths.

In 2003 to 2004, four wells were drilled into the reservoir. Two more wells will be drilled prior to starting production operations, and another nine wells are planned over the next three years. One well has been perforated and tested, and two more wells are equipped with production tubing awaiting completion. The completion and perforation of these wells utilizes coil tubing, which is run to distances never before attempted. The first ERD well set the world record for a coiled-tubing run at 30,600 feet.

Sakhalin-1 ERD well design utilized a systematic planning approach that incorporated a study of local Russian and worldwide geometric offset wells and application of ExxonMobil proprietary technologies (integrated hole quality/quantitative risk assessment). A comprehensive directional plan was developed to successfully intersect the reservoir target objective at a precise depth and location. ERD technology utilized at Sakhalin is making this challenging project technically feasible and economically attractive.

(PICTURE)

AZERBAIJAN

Production from the Azeri-Chirag-Gunashli (ACG) development (ExxonMobil interest, 8 percent) in the south Caspian Sea totaled 130 thousand barrels of oil per day (gross) in 2004. In total, the development is expected to recover resources of over 6 billion barrels of oil and 6 trillion cubic feet of natural gas (gross). The first phase of a multiphase expansion started up in February 2005.

ExxonMobil participates in three other Production Sharing Agreements that cover 570 thousand gross acres in the Azeri sector of the Caspian Sea: Nakhchivan (ExxonMobil-operated, 50 percent interest); Zafar Mashal (ExxonMobil-operated, 30 percent interest); and Araz-Alov-Sharg (ExxonMobil interest, 15 percent). The first exploration well on the Zafar Mashal prospect completed drilling in 2004 but no commercial hydrocarbons were found.

Azeri-Chirag-Gunashli (ACG)

The $12 billion (gross) multiphase Azeri-Chirag-Gunashli project is under way in the western Caspian Sea offshore Azerbaijan. Adding to existing production at Chirag, ACG Phase 1, which started up in February 2005, will develop the Central Azeri field with gross capacity of 325 thousand barrels of oil per day. Phase 1 includes the construction and installation of drilling, production, compression, and injection platforms in 420 feet of water, along with 100 miles of subsea oil and gas pipelines. Phase 2 will further develop the Azeri field, and Phase 3 will develop the Gunashli field. Gross developed resource from the three-phase expansion is expected to total 5.4 billion oil-equivalent barrels (gross).

(PICTURE)

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

U p s t r e a m 53

KAZAKHSTAN

Development planning activities are under way to initiate production from the giant Kashagan field, located in the offshore Caspian Sea and part of the North Caspian Production Sharing Agreement (NCPSA). In addition to the Kashagan field, the NCPSA includes exploration acreage where ExxonMobil participated in the successful testing and discovery of hydrocarbons at the Kairan prospect during 2004, following suspension of drilling operations in 2003 for the winter season.

During 2003, ExxonMobil exercised its preferential right to purchase its share of BG Group equity in the NCPSA. Upon close of the equity purchase, now anticipated in 2005, ExxonMobil will increase its interest in the NCPSA. Final equity percentages are still to be determined.

ExxonMobil participates in the Tengizchevroil (TCO) joint venture (ExxonMobil interest, 25 percent), which includes a production license area of 380 thousand gross acres encompassing the Tengiz field, an associated processing plant complex, and the adjacent Korolev field. TCO also holds a prospective exploration license that covers over 600 thousand gross acres surrounding the production license.

(MAP)

Kashagan

The super-giant Kashagan field is located in the northern Caspian Sea offshore Kazakhstan. The $40+ billion (gross) development of the field will occur in phases, with the first phase targeting 5.2 billion barrels of oil reserves (gross) at a producing rate of 450 thousand barrels per day. Phase 1 development is under way and will include an offshore production/separation hub on an artificial island, three drilling islands, three onshore oil stabilization trains, and two onshore gas treating plants. Future phases will increase recovery to 13 billion barrels of oil (gross) at a producing rate of more than 1 million barrels of oil per day.


Tengiz

Production capacity for Tengiz, in Kazakhstan, is currently 300 thousand barrels of oil per day with over 3 billion barrels of oil reserves developed. Planned expansions and optimizations ($15 billion, gross) will add 520 thousand barrels per day of oil production (gross) and incremental reserves of nearly 3 billion barrels. The first expansion will integrate a second-generation gas-handling project with a sour gas injection project resulting in incremental peak production of 300 thousand barrels of oil per day (gross). Construction is under way with initial oil production in 2006.

(PICTURE)

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

54

Asia Pacific

ExxonMobil has an established large-scale and profitable production base throughout the Asia Pacific region. Net daily production of about 200 thousand barrels of liquids and 1.5 billion cubic feet of gas represented 11 percent of ExxonMobil’s worldwide production in 2004.

Asia Pacific Highlights

                         
    2004     2003     2002  
Earnings (billions of dollars)
    2.1       1.7       1.6  
Proved Reserves(1) (BOEB)
    1.6       1.9       2.0  
Acreage (gross acres, million)
    10.6       22.9       29.5  
Net Liquids Production (MBD)
    0.2       0.2       0.3  
Net Gas Production (BCFD)
    1.5       1.8       2.0  

Asia Pacific Projects

                             
                Target Peak  
        Working     Production (Gross)  
Projected Start-Ups     Interest     Liquids     Gas  
        (%)     (kBD)     (MCFD)  
2006
  Guntong Hub     50       35       715  
2008+
  Banyu Urip     *       165       20  
 
  Greater Gorgon/Jansz Project     *       10       1,500  
 
  Kipper/Tuna     41       25       270  
 
  PNG Gas Project     26       20       415  

(BAR CHART)


(1)   Excludes 2004 year-end price/cost revisions.
 
*   Under negotiation

INDONESIA

ExxonMobil operates Indonesia’s Arun natural gas field (ExxonMobil interest, 100 percent), which supplies gas to the P.T. Arun LNG plant. In 2004, net production from the Arun and satellite fields in Pase/South Lhok Sukon and the North Sumatra Offshore field totaled almost 580 million cubic feet of gas per day.

ExxonMobil is continuing negotiations with PT Pertamina (Persero) and the government of Indonesia to extend the term of the Cepu contract. Once agreement is reached, plans are to begin development of the Banyu Urip oil field. In addition, analysis of the large, 3D seismic survey over the block will guide future exploratory and development programs.

ExxonMobil, along with co-participant PT Pertamina (Persero), is proceeding with the next phase of development of the Natuna gas field (ExxonMobil interest, 76 percent). During this phase, the participating parties will work to complete marketing arrangements for the gas and update cost and design studies. The Natuna D-Alpha gas field, located north of the Kalimantan Province, Indonesia, and approximately 850 miles from Java, was discovered in 1973 and has estimated recoverable hydrocarbon resources of 46 trillion cubic feet of natural gas (gross).

Banyu Urip

Pending resolution of commercial agreements, development of the Banyu Urip field in eastern Java will include construction of an initial oil production facility followed by a central processing facility. A 50-mile pipeline will transport the processed oil to a 2-million-barrel floating storage and offloading vessel moored off the nearby Tuban coast in the Java Sea. Estimated recovery from the field is over 250 million barrels of oil (gross).

MALAYSIA

ExxonMobil is the largest oil producer in Malaysia and the largest supplier of natural gas to Peninsular Malaysia. Net production in 2004 was over 90 thousand barrels of liquids per day and 510 million cubic feet of gas per day. The Company participates in six Production Sharing Contracts offshore Peninsular Malaysia, operates 39 platforms in 17 fields and has plans to install three new platforms over the next few years. In total, ExxonMobil holds an interest in 500 thousand net acres offshore.

Guntong Hub

The Guntong Hub project (ExxonMobil interest, 50 percent) will develop approximately 800 million oil-equivalent barrels (gross) and features the installation of a compression platform, Guntong E. Scheduled for start-up in 2006, the Hub project will process approximately 715 million cubic feet of gas per day and 35 thousand barrels of liquids per day (gross). The project facilitates a series of future gas developments with investments totaling $1.6 billion over 15 years. Future gas developments include adjacent fields at Tabu, Palas, Irong Barat, Telok, and Bindu.

(PICTURE)

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

U p s t r e a m 55

AUSTRALIA / PAPUA NEW GUINEA

In 2004, daily net production from ExxonMobil’s Australian and Papua New Guinea operations was about 400 million cubic feet of gas and 100 thousand barrels of liquids. In the Bass Strait, the Company continues to operate offshore producing facilities, a crude stabilization plant, three gas processing plants, and one fractionation plant, while supplying natural gas throughout southeast Australia. After 35 years of production, this mature area still contains significant gas resources, with new exploration and infill drilling targets resulting from the recent 3,900-square-kilometer Northern Fields and 1,100-square-kilometer Tuskfish 3D seismic surveys. Drilling of these targets commenced in 2004 and will continue through 2005.

(PICTURE)

Greater Gorgon / Jansz Project

Development of Gorgon, Jansz, and Io fields will result in 10 million tons per year (gross) of LNG targeted principally for markets in Asia Pacific and the west coast of North America. Currently in the planning phase, the project scope includes installation of two 5-million-ton-per-year LNG trains on Barrow Island. Start-up of the first LNG train will occur in 2009, and the second train will start up in 2010. ExxonMobil has participated in the discovery of over 50 trillion cubic feet (gross) of gas resources in the deepwater off Australia’s Northwest Shelf.

PNG Gas Project

The PNG Gas Project will develop gas from the Hides field in the Southern Highlands of Papua New Guinea for export to Queensland, Australia, via a 3,000-kilometer pipeline with a capacity of approximately 415 million cubic feet per day (gross). The project is currently in the front-end engineering and design stage. ExxonMobil and co-venturers are actively negotiating gas sales contracts with customers to support project development.

(PICTURE)

Power

ExxonMobil has significant holdings in electric power generation, with interests in 13,700 megawatts of generation capacity, including 3,300 megawatts of cogeneration. In 2004, 400 megawatts of cogeneration capacity started up at the Beaumont, Baytown, and Sarnia refineries.

Power – Statistical Highlights(1)

                         
    2004     2003     2002  
Earnings (millions of dollars)
    315       311       299  
Electricity sales(2) (gigawatt hours)
    31,719       31,043       29,888  
Average capital employed
                       
(millions of dollars)
    1,982       1,956       1,978  
Capital expenditures
                       
(millions of dollars)
    129       165       73  


(1)   ExxonMobil share of power affiliate results, except electricity sales, which are stated at 100 percent.
 
(2)   China Light & Power sales to consumers in China.

In 2004, ExxonMobil celebrated the 40th anniversary of partnership with China Light & Power in the Hong Kong power business. ExxonMobil has a 60-percent interest in three power stations in Hong Kong totaling almost 6,300 megawatts of electricity generation capacity, and a 51-percent interest in an additional 600 megawatts of capacity in southern China. These stations supply electricity to China Light & Power, which serves Hong Kong, and surplus power is sold to neighboring Guangdong. Since 2000, power sales have been growing at 3.7 percent per year.

To supply growing electrical demand, construction is in progress on two additional combined cycle gas turbine (CCGT) units at the Black Point Power Station. Completion of these units will add 625 megawatts of gas-fired generation capacity in 2005.

Coal

ExxonMobil operates the Monterey coal mine in the United States (Illinois) with production of 2.8 million metric tons in 2004. The coal is supplied to local power generation and cement processing industries.

2004   FINANCIAL   &   OPERATING   REVIEW   •   EXXON   MOBIL   CORPORATION

 


 

56

Upstream Operating Statistics

NET LIQUIDS PRODUCTION ( 1 )–Including Tar Sands and Non-Consolidated Operations

                                         
(thousands of barrels per day)   2004     2003     2002     2001     2000  
 
United States
                                       
Alaska
    174       188       197       210       232  
Lower 48
    383       422       484       502       501  
Total United States
    557       610       681       712       733  
Canada
    355       363       349       331       304  
Total North America
    912       973       1,030       1,043       1,037  
 
Europe
                                       
United Kingdom
    235       278       305       320       355  
Norway
    328       280       263       307       320  
Other
    20       21       24       26       29  
Total Europe
    583       579       592       653       704  
 
Asia Pacific
                                       
Australia
    91       111       122       131       140  
Malaysia
    94       105       115       98       90  
Other
    17       21       23       18       23  
Total Asia Pacific
    202       237       260       247       253  
 
Africa
                                       
Nigeria
    276       260       213       249       253  
Equatorial Guinea
    136       124       98       89       67  
Other
    160       58       38       4       3  
Total Africa
    572       442       349       342       323  
 
Middle East
    158       149       127       135       137  
 
Other Areas
    144       136       138       122       99  
 
Total worldwide
    2,571       2,516       2,496       2,542       2,553  
 
 
                                       
Gas Plant Liquids Included Above
                                       
United States
    86       90       111       120       120  
Non-U.S.
    168       166       178       185       180  
Total worldwide
    254       256       289       305       300  
 
 
                                       
Tar Sands and Non-Consolidated Volumes Included Above
                                       
United States
    101       106       106       109       115  
Canada
    59       52       57       52       42  
Europe
    9       9       9       10       13  
Middle East
    140       127       102       108       107  
Other
    74       71       74       70       57  
Total worldwide
    383       365       348       349       334  
 


(1)  Net liquids production quantities are the volumes of crude oil and natural gas liquids withdrawn from ExxonMobil’ s oil and gas reserves, excluding royalties and quantities due to others when produced, and are based on the volumes delivered from the lease or at the point measured for royalty and/or severance tax purposes. Volumes include 100 percent of the production of majority-owned affiliates, including liquids production from tar sands operations in Canada, and ExxonMobil’ s ownership of the production by companies owned 50 percent or less.

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

Upstream  57

NET NATURAL GAS PRODUCTION AVAILABLE FOR SALE ( 1 ) - Including Non-Consolidated Operations

                                         
(millions of cubic feet per day)   2004     2003     2002     2001     2000  
 
United States
    1,947       2,246       2,375       2,598       2,856  
Canada
    972       943       1,024       1,006       844  
Total North America
    2,919       3,189       3,399       3,604       3,700  
 
Europe
                                       
Netherlands
    1,725       1,591       1,601       1,637       1,519  
United Kingdom
    1,196       1,234       1,417       1,547       1,506  
Norway
    645       667       503       445       451  
Germany
    1,048       1,006       942       966       987  
Total Europe
    4,614       4,498       4,463       4,595       4,463  
 
Asia Pacific
                                       
Australia
    397       450       453       449       346  
Malaysia
    511       563       690       645       649  
Indonesia
    578       745       825       401       701  
Other
    33       45       51       52       59  
Total Asia Pacific
    1,519       1,803       2,019       1,547       1,755  
 
Middle East
    642       455       408       354       278  
 
Other Areas
    170       174       163       179       147  
 
Total worldwide
    9,864       10,119       10,452       10,279       10,343  
 
 
                                       
Non-Consolidated Natural Gas Volumes Included Above
                                       
United States
    2       2       2       13       15  
Europe
    1,667       1,531       1,539       1,556       1,433  
Middle East
    642       455       408       354       278  
Other
    74       73       77       65       38  
Total worldwide
    2,385       2,061       2,026       1,988       1,764  
 


(1)   Net natural gas available for sale quantities are the volumes withdrawn from ExxonMobil’ s natural gas reserves, excluding royalties and volumes due to others when produced, and excluding gas purchased from others, gas consumed in producing operations, field processing plant losses, volumes used for gas lift, gas injection and cycling operations, quantities flared, and volume shrinkage due to the removal of condensate or natural gas liquids fractions.

NATURAL GAS SALES ( 1 )

                                         
(millions of cubic feet per day)   2004     2003     2002     2001     2000  
 
United States
    2,277       4,793       6,939       5,925       5,829  
Canada
    1,253       1,919       2,051       2,305       2,324  
Europe
    6,262       6,610       7,544       7,570       7,213  
Asia Pacific
    1,448       1,708       1,907       1,472       1,683  
Middle East
    525       384       334       308       235  
Other
    177       181       188       205       160  
Total worldwide
    11,942       15,595       18,963       17,785       17,444  
 


(1)   Natural gas sales include 100 percent of the sales of ExxonMobil and majority-owned affiliates and ExxonMobil’ s ownership of sales by companies owned 50 percent or less. Numbers include sales of gas purchased from third parties.

2004 FINANCIAL & OPERATING REVIEW • EXXON MOBIL CORPORATION  

 


 

58

NUMBER OF NET WELLS DRILLED ANNUALLY ( 1 )

                                                                                                                         
    Productive     Dry             Total  
(net wells drilled)   2004     2003     2002     2001     2000     2004     2003     2002     2001     2000     2004     2003     2002     2001     2000  
 
Exploratory(2)
    21       38       46       51       62       15       28       23       41       26       36       66       69       92       88  
Development
    1,164       1,060       1,287       1,313       934       18       34       29       24       13       1,182       1,094       1,316       1,337       947  
Total
    1,185       1,098       1,333       1,364       996       33       62       52       65       39       1,218       1,160       1,385       1,429       1,035  
 

NET ACREAGE AT YEAR END ( 3 )

                                                                                 
    Undeveloped             Developed                       
(thousands of net acres)   2004     2003     2002     2001     2000     2004     2003     2002     2001     2000  
 
United States
    7,055       7,353       7,309       7,669       7,399       5,480       5,655       5,695       5,714       5,993  
Canada(4)
    6,144       5,204       8,851       9,708       9,775       2,527       2,457       2,382       2,426       2,402  
Europe
    2,245       2,611       2,687       4,624       6,244       4,715       4,746       4,874       4,819       4,816  
Asia Pacific
    4,219       8,769       12,163       14,161       19,641       1,080       1,723       1,692       1,640       1,528  
Africa
    21,797       11,447       12,205       15,736       20,111       475       462       685       630       387  
Latin America
    19,688       15,141       17,459       19,205       25,122       388       388       387       388       363  
Middle East
    46       10       10       10             1,356       1,356       1,354       1,354       1,354  
Other
    476       516       543       1,241       1,241       103       103       104       104       104  
Total worldwide
    61,670       51,051       61,227       72,354       89,533       16,124       16,890       17,173       17,075       16,947  
 

NET CAPITALIZED COSTS AT YEAR END ( 3 )

                                         
(millions of dollars)   2004     2003     2002     2001     2000  
 
United States
    16,217       16,711       15,739       15,408       14,887  
Canada(4)
    8,907       8,114       6,114       5,772       5,827  
Europe
    16,169       15,830       12,872       10,704       11,361  
Asia Pacific
    6,496       6,888       5,702       5,207       5,274  
Africa
    10,706       8,606       5,755       4,355       3,711  
Middle East
    1,063       738       641       415       452  
Other
    5,689       4,659       3,936       3,601       3,410  
Total worldwide
    65,247       61,546       50,759       45,462       44,922  
 

COSTS INCURRED IN PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES ( 3 )

                                                                 
(millions of dollars)   United States     Canada(4)     Europe     Asia Pacific     Africa     Middle East     Other     Worldwide  
 
During 2004
                                                               
Property acquisition costs
    14       1             2       92             25       134  
Exploration costs
    233       80       143       113       382       64       240       1,255  
Development costs
    1,581       1,196       1,381       660       2,788       362       1,154       9,122  
Total
    1,828       1,277       1,524       775       3,262       426       1,419       10,511  
 
During 2003(5)
                                                               
Property acquisition costs
    17       7       4             17                   45  
Exploration costs
    253       102       171       138       264       40       213       1,181  
Development costs
    1,780       1,079       1,968       929       3,117       208       775       9,856  
Total
    2,050       1,188       2,143       1,067       3,398       248       988       11,082  
 
During 2002
                                                               
Property acquisition costs
    32       20                   10             125       187  
Exploration costs
    281       109       160       95       301       18       199       1,163  
Development costs
    1,843       949       1,975       936       1,708       144       546       8,101  
Total
    2,156       1,078       2,135       1,031       2,019       162       870       9,451  
 
During 2001
                                                               
Property acquisition costs
    95       17       1       (1 )     2       1       9       124  
Exploration costs
    356       141       165       148       281       26       443       1,560  
Development costs
    1,816       798       1,619       666       995       32       327       6,253  
Total
    2,267       956       1,785       813       1,278       59       779       7,937  
 


(1) A regional breakout of this data is included on page 11 of ExxonMobil’s 2004 Form 10-K.
 
(2) These include near-field and appraisal wells classified as exploratory for SEC reporting.
 
(3) Includes non-consolidated interests and Canadian tar sands operations and is not directly comparable to data on pages A56 and A57 of ExxonMobil’s 2005 Proxy Statement, and page 5 of ExxonMobil’s 2004 Form 10-K, which due to financial reporting requirements, treat Canadian tar sands as a mining operation.
 
(4) Canadian tar sands data included above: net acreage of 28,000 developed acres and 147,000 undeveloped acres at year-end 2004, net capitalized cost of about $2.3 billion at yearend 2004, exploration costs of $12 million, and development costs of $502 million incurred during 2004.
 
(5) Per FAS 143, development costs beginning in 2003 also include new asset retirement obligations established in the current year, as well as increases or decreases to the asset retirement obligation resulting from changes in cost estimates or abandonment date.

EXXON   MOBIL   CORPORATION   •   2004   FINANCIAL   &   OPERATING   REVIEW

 


 

UPSTREAM  59

PROVED OIL AND GAS RESERVES ( 1 )

The Corporation is also stating, for the first time, its 2004 reserves on the basis of December 31, 2004, prices and costs.

The use of year-end prices for reserves estimation introduces short-term price volatility into the process since annual adjustments will be required based on prices occurring on a single day. The Corporation believes that this approach is inconsistent with the long-term nature of the upstream business where production from individual projects often spans multiple decades. The use of prices from a single date is not relevant to the investment decisions made by the Corporation and annual variations in reserves based on such year-end prices are not of consequence to how the business is actually managed.

Performance-related revisions can include upward or downward changes in previously estimated volumes of proved reserves for existing fields due to the evaluation or re-evaluation of: (1) already available geologic, reservoir or production data; or (2) new geologic, reservoir, or production data. This category can also include changes associated with the performance of improved recovery projects and significant changes in either development strategy or production equipment/facility capacity. During the past five years, performance-related revisions averaged 551 million oil-equivalent barrels per year.

                                         
    2004     2003     2002     2001     2000  
 
Liquids, Including Tar Sands and Non-Consolidated Reserves
                                       
(millions of barrels at year end)
                                       
Net proved developed and undeveloped reserves
                                       
United States
    2,894       3,218       3,352       3,494       3,480  
Canada(1)
    1,848       1,975       2,085       2,098       1,940  
Europe
    1,029       1,204       1,359       1,503       1,591  
Asia Pacific
    613       684       691       622       690  
Africa
    2,654       2,742       2,626       2,461       2,384  
Middle East
    1,216       833       803       788       756  
Other
    2,259       2,200       1,707       1,346       1,330  
Total worldwide excluding year-end price/cost revisions
    12,513       12,856       12,623       12,312       12,171  
 
Year-end price/cost revisions
    (862 )                        
Total worldwide
    11,651       12,856       12,623       12,312       12,171  
 
Proportional interest in tar sands and non-consolidated reserves included above, excluding year-end price/cost revisions
                                       
United States
    402       426       444       466       494  
Canada (tar sands)(2)
    757       781       800       821       610  
Europe
    17       20       26       27       33  
Middle East
    1,161       767       779       758       726  
Other
    981       973       949       688       658  
 
                                       
Net proved developed reserves included above
                                       
United States
    2,551       2,711       2,835       2,957       3,042  
Canada(1)
    1,089       1,301       1,255       1,184       1,240  
Europe
    778       821       817       900       999  
Asia Pacific
    394       473       487       477       504  
Africa
    1,117       1,107       1,057       1,022       989  
Middle East
    651       632       675       716       755  
Other
    763       678       645       547       419  
Total worldwide
    7,343       7,723       7,771       7,803       7,948  
 
Natural Gas, Including Non-Consolidated Reserves
                                       
(billions of cubic feet at year end)
                                       
Net proved developed and undeveloped reserves
                                       
United States
    10,578       11,424       12,239       12,924       13,296  
Canada
    1,979       2,341       2,882       3,183       3,516  
Europe
    21,916       23,849       24,336       25,252       26,017  
Asia Pacific
    6,029       7,285       7,958       8,301       8,546  
Africa
    771       583       436       379       375  
Middle East
    14,122       6,921       5,722       4,275       2,595  
Other
    2,545       2,366       2,145       1,632       1,521  
Total worldwide excluding year-end price/cost revisions
    57,940       54,769       55,718       55,946       55,866  
 
Year-end price/cost revisions
    2,422                          
Total worldwide
    60,362       54,769       55,718       55,946       55,866  
 
Proportional interest non-consolidated reserves included above, excluding year-end price/cost revisions
                                       
United States
    140       152       177       192       251  
Europe
    12,873       13,703       13,828       14,321       14,847  
Middle East
    13,339       6,055       5,692       4,237       2,548  
Other
    1,473       1,464       1,440       942       901  
 
                                       
Net proved developed reserves included above
                                       
United States
    9,254       9,637       10,128       10,511       11,118  
Canada
    1,647       1,962       2,294       2,517       2,850  
Europe
    16,881       14,966       12,928       13,641       14,325  
Asia Pacific
    4,428       5,764       5,887       6,005       6,300  
Africa
    279       155       112       122       125  
Middle East
    4,590       2,710       2,388       2,389       2,595  
Other
    1,120       1,040       1,006       837       704  
Total worldwide
    38,199       36,234       34,743       36,022       38,017  
 


(1) See Frequently Used Terms on pages 88 through 91.
 
(2) Includes proven reserves from Canadian tar sands operations in Canada and, therefore, is not directly comparable to data shown on pages A59 to A61 of ExxonMobil’s 2005 Proxy Statement, which due to financial reporting requirements, treat Canadian tar sands as a mining operation.

2004   FINANCIAL  &   OPERATING   REVIEW   •   EXXON  MOBIL  CORPORATION

 


 

60

PROVED OIL AND GAS RESERVES REPLACEMENT ( 1 )

                                                 
                                            Average  
    2004     2003     2002     2001     2000     2000-2004  
 
Liquids(millions of barrels)
                                               
Performance-related revisions
    97       375       355       264       628       344  
Improved recovery
    22       111       94       121       123       94  
Extensions/discoveries
    595       674       777       683       517       649  
Purchases
    10       1                         2  
Sales
    (132 )     (16 )     (13 )     (9 )     (6 )     (35 )
 
Total additions before year-end price/cost revisions
    592       1,145       1,213       1,059       1,262       1,054  
Year-end price/cost revisions
    (862 )   NA     NA     NA     NA     NA  
Total additions
    (270 )   NA     NA     NA     NA     NA  
Production
    935       912       902       918       928       919  
 
Reserves replacement ratio, excluding sales(2)(percent)
    77       127       136       116       137       119  
Reserves replacement ratio, including sales(2)(percent)
    63       126       134       115       136       115  
Reserves replacement ratio, including sales and year-end price/cost revisions(percent)
        NA     NA     NA     NA     NA  
 
Natural Gas(billions of cubic feet)
                                               
Performance-related revisions
    256       1,462       1,447       836       2,207       1,242  
Improved recovery
    37       25       4       39       166       54  
Extensions/discoveries
    7,282       1,719       2,597       3,431       873       3,181  
Purchases
    9       10       2       1       10       6  
Sales
    (477 )     (120 )     (43 )     (69 )     (8 )     (143 )
 
Total additions before year-end price/cost revisions
    7,107       3,096       4,007       4,238       3,248       4,340  
Year-end price/cost revisions
    2,422     NA     NA     NA     NA     NA  
Total additions
    9,529     NA     NA     NA     NA     NA  
Production
    3,936       4,045       4,235       4,158       4,178       4,110  
 
Reserves replacement ratio, excluding sales(2)(percent)
    193       80       96       104       78       109  
Reserves replacement ratio, including sales(2)(percent)
    181       77       95       102       78       106  
Reserves replacement ratio, including sales and year-end price/cost revisions(percent)
    242     NA     NA     NA     NA     NA  
 
Oil-Equivalent (millions of barrels)
                                               
Performance-related revisions
    140       619       597       403       996       551  
Improved recovery
    28       116       95       127       151       103  
Extensions/discoveries
    1,809       961       1,210       1,255       662       1,180  
Purchases
    11       2                   2       3  
Sales
    (211 )     (36 )     (21 )     (20 )     (8 )     (59 )
 
Total additions before year-end price/cost revisions
    1,777       1,662       1,881       1,765       1,803       1,778  
Year-end price/cost revisions
    (459 )   NA     NA     NA     NA     NA  
Total additions
    1,318     NA     NA     NA     NA     NA  
Production
    1,591       1,587       1,608       1,611       1,624       1,604  
 
Reserves replacement ratio, excluding sales(2)(percent)
    125       107       118       111       112       115  
Reserves replacement ratio, including sales(2)(percent)
    112       105       117       110       111       111  
Reserves replacement ratio, including sales and year-end price/cost revisions(percent)
    83     NA     NA     NA     NA     NA  
 

2004 Reserves Changes by Region

                                                                                                                                 
    Crude Oil and Natural Gas Liquids (millions of barrels)     Natural Gas (billions of cubic feet)  
    United                     Asia             Middle                     United                     Asia             Middle              
    States     Canada     Europe     Pacific     Africa     East     Other     Total     States     Canada     Europe     Pacific     Africa     East     Other     Total  
     
Performance-related revisions
    (49 )     2       35       17       (39 )     21       110       97       26       19       (290 )     (375 )     165       455       256       256  
Improved recovery
    22                                           22       6             31                               37  
Extensions/discoveries
    15       4       3       2       150       419       2       595       121       36       48       44       39       6,991       3       7,282  
Purchases
                            10                   10                               9                   9  
Sales
    (113 )     (3 )           (16 )                       (132 )     (141 )     (18 )     (17 )     (301 )                       (477 )
     
Total additions before year- end price/cost revisions
    (125 )     3       38       3       121       440       112       592       12       37       (228 )     (632 )     213       7,446       259       7,107  
Year-end price/cost revisions
    101       (464 )     2       (12 )     (210 )     3       (282 )     (862 )     1,891       (96 )     826       (110 )           18       (107 )     2,422  
Total additions
    (24 )     (461 )     40       (9 )     (89 )     443       (170 )     (270 )     1,903       (59 )     598       (742 )     213       7,464       152       9,529  
Production
    198       130       213       74       209       58       53       935       859       399       1,705       624       25       244       80       3,936  
Net change
    (222 )     (591 )     (173 )     (83 )     (298 )     385       (223 )     (1,205 )     1,044       (458 )     (1,107 )     (1,366 )     188       7,220       72       5,593  
     
Reserves replacement ratio, excluding sales(2)(percent)
          5       18       26       58       759       211       77       18       14                   852       3,052       324       193  
Reserves replacement ratio, including sales(2)(percent)
          2       18       4       58       759       211       63       1       9                   852       3,052       324       181  
Reserves replacement ratio, including sales and year-end price/cost revisions(percent)
                19                   764                   222             35             852       3,059       190       242  
     


(1) The data shown above and on the next page include reserves, production, and costs from Canadian tar sands operations. This is a more complete summary of ExxonMobil’s exploration and production operations than the data on pages A59 to A61 of ExxonMobil’s 2005 Proxy Statement, which due to financial reporting requirements, treat Canadian tar sands as a mining operation. See Frequently Used Terms on pages 88 through 91 for definitions of reserves and reserves replacement ratio.
 
(2) Excluding year-end revisions associated with using December 31, 2004, prices and costs.

EXXON   MOBIL   CORPORATION   •  2004  FINANCIAL  &  OPERATING  REVIEW

 


 

U p s t r e a m  61

PROVED OIL AND GAS RESERVES REPLACEMENT – Units are million barrels of oil or billion cubic feet of gas unless specified otherwise

                                                 
                                            Average  
    2004     2003     2002     2001     2000     2000-2004  
 
Non-U.S.
                                               
E&P costs (millions of dollars)
    8,683       9,032       7,295       5,670       4,466       7,029  
 
Oil reserves additions
    (246 )     1,063       1,116       795       805       707  
Oil production
    737       695       663       668       666       686  
 
Gas reserves additions
    7,626       2,900       3,635       3,477       2,004       3,928  
Gas production
    3,077       3,034       3,177       3,026       3,003       3,063  
 
Oil-equivalent reserves additions, excluding sales(1)
    1,974       1,554       1,722       1,375       1,145       1,554  
Oil-equivalent reserves additions, including sales(1)
    1,900       1,547       1,722       1,374       1,139       1,537  
Oil-equivalent reserves additions, including sales and price/cost revisions
    1,025     NA     NA     NA     NA     NA  
Oil-equivalent production
    1,250       1,201       1,193       1,172       1,166       1,196  
 
Reserves replacement ratio, excluding sales(1)(percent)
    158       129       144       117       98       130  
Reserves replacement ratio, including sales(1)(percent)
    152       129       144       117       98       129  
Reserves replacement ratio, including sales and year-end price/cost revisions (percent)
    82     NA     NA     NA     NA     NA  
Reserves replacement costs(2) (dollars per barrel)
    4.40       5.81       4.24       4.12       3.90       4.52  
 
 
                                               
United States
                                               
E&P costs (millions of dollars)
    1,828       2,050       2,156       2,267       1,682       1,997  
 
Oil reserves additions
    (24 )     82       97       264       457       175  
Oil production
    198       217       239       250       262       233  
 
Gas reserves additions
    1,903       196       372       761       1,244       895  
Gas production
    859       1,011       1,058       1,132       1,175       1,047  
 
Oil-equivalent reserves additions, excluding sales(1)
    14       144       180       410       666       283  
Oil-equivalent reserves additions, including sales(1)
    (123 )     115       159       391       664       241  
Oil-equivalent reserves additions, including sales and year-end price/cost revisions
    293     NA     NA     NA     NA     NA  
Oil-equivalent production
    341       386       415       439       458       408  
 
Reserves replacement ratio, excluding sales(1)(percent)
    4       37       43       93       145       69  
Reserves replacement ratio, including sales(1)(percent)
          30       38       89       145       59  
Reserves replacement ratio, including sales and year-end price/cost revisions (percent)
    86     NA     NA     NA     NA     NA  
Reserves replacement costs(2) (dollars per barrel)
    130.57       14.24       11.98       5.53       2.53       7.06  
 
 
                                               
Worldwide
                                               
E&P costs (millions of dollars)
    10,511       11,082       9,451       7,937       6,148       9,026  
 
Oil reserves additions
    (270 )     1,145       1,213       1,059       1,262       882  
Oil production
    935       912       902       918       928       919  
 
Gas reserves additions
    9,529       3,096       4,007       4,238       3,248       4,823  
Gas production
    3,936       4,045       4,235       4,158       4,178       4,110  
 
Oil-equivalent reserves additions, excluding sales(1)
    1,988       1,698       1,902       1,785       1,811       1,837  
Oil-equivalent reserves additions, including sales(1)
    1,777       1,662       1,881       1,765       1,803       1,778  
Oil-equivalent reserves additions, including sales and price/cost revisions
    1,318     NA     NA     NA     NA     NA  
Oil-equivalent production
    1,591       1,587       1,608       1,611       1,624       1,604  
 
Reserves replacement ratio, excluding sales(1)(percent)
    125       107       118       111       112       115  
Reserves replacement ratio, including sales(1)(percent)
    112       105       117       110       111       111  
Reserves replacement ratio, including sales and year-end price/cost revisions (percent)
    83     NA     NA     NA     NA     NA  
Reserves replacement costs(2) (dollars per barrel)
    5.29       6.53       4.97       4.45       3.39       4.91  
 


(1) Excluding year-end revisions associated with using December 31, 2004, prices and costs. See Frequently Used Terms on pages 88 through 91 for definitions of reserves and reserves replacement ratio.
 
(2) Calculation based on exploration and production costs divided by oil-equivalent reserves additions. All values exclude the impact of asset sales; i.e., reserves sold and proceeds received; and price/cost related revisions associated with using December 31, 2004, prices and costs. See Frequently Used Terms for definition of reserves replacement costs.

2004  FINANCIAL   &   OPERATING   REVIEW    EXXON   MOBIL   CORPORATION

 


 

62

OIL AND GAS EXPLORATION AND PRODUCTION EARNINGS

The revenue, cost, and earnings data are shown both on a total dollar and unit basis, and are inclusive of non-consolidated and Canadian tar sands operations. They are not directly comparable to the data on pages A54 and A55 of ExxonMobil’s 2005 Proxy Statement, which due to financial reporting requirements, treat Canadian tar sands as a mining operation. The data displayed here provide a more complete summary of ExxonMobil’s exploration and production operations.

                                                                                                 
    Total Revenues and Costs, Including Non-Consolidated Interests and Tar Sands     Revenues and Costs per Unit of Sales or Production(1)  
    United                     Asia             Middle                     United     Outside North  
    States     Canada     Europe     Pacific     Africa     East     Other     Total     States     Canada     America     Worldwide  
     
2004   (millions of dollars)
  (dollars per unit of sales)
Revenue
                                                                                               
Crude oil and NGL
    7,119       4,148       7,647       2,920       7,301       2,151       1,523       32,809       34.92       31.92       35.51       34.88  
Natural gas
    3,943       1,860       7,642       1,895             734       58       16,132       5.53       5.23       4.06       4.47  
         
                                                                    (dollars per barrel of net oil-equivalent production)
Total revenue
    11,062       6,008       15,289       4,815       7,301       2,885       1,581       48,941       34.28       31.74       30.92       31.72  
Less costs:
                                                                                               
Production costs excluding taxes
    1,787       1,444       2,209       622       719       93       242       7,116       5.54       7.63       3.77       4.61  
Depreciation and depletion
    1,454       1,020       2,296       667       839       73       158       6,507       4.50       5.38       3.91       4.22  
Exploration expenses
    202       104       137       108       321       32       229       1,133       0.63       0.55       0.80       0.73  
Taxes other than income
    571       52       1,747       633       722       1,069       45       4,839       1.77       0.28       4.09       3.14  
Related income tax
    2,546       1,147       4,971       1,022       2,789       924       301       13,700       7.89       6.06       9.71       8.88  
     
Results of producing activities
    4,502       2,241       3,929       1,763       1,911       694       606       15,646       13.95       11.84       8.64       10.14  
Other earnings(2)
    458       (313 )     459       (27 )     201       (59 )     7       726       1.42       (1.65 )     0.56       0.47  
     
Total earnings, excluding power and coal
    4,960       1,928       4,388       1,736       2,112       635       613       16,372       15.37       10.19       9.20       10.61  
Power and coal
    (12 )                 315                         303                                  
                                 
Total earnings
    4,948       1,928       4,388       2,051       2,112       635       613       16,675                                  
                                 
 
                                                                                               
2003   (millions of dollars)
  (dollars per unit of sales)
Revenue
                                                                                               
Crude oil and NGL
    5,785       3,307       5,683       2,484       4,499       1,530       1,081       24,369       26.00       24.80       27.47       26.72  
Natural gas
    4,152       1,587       6,720       1,869             473       54       14,855       5.07       4.61       3.60       4.02  
         
                                                                    (dollars per barrel of net oil-equivalent production)
Total revenue
    9,937       4,894       12,403       4,353       4,499       2,003       1,135       39,224       27.67       25.75       24.77       25.57  
Less costs:
                                                                                               
Production costs excluding taxes
    1,780       1,372       1,951       558       564       94       217       6,536       4.96       7.22       3.44       4.26  
Depreciation and depletion
    1,574       821       1,997       727       459       70       154       5,802       4.37       4.32       3.46       3.78  
Exploration expenses
    257       92       166       146       217       33       122       1,033       0.72       0.48       0.69       0.67  
Taxes other than income
    554       42       1,594       447       528       707       44       3,916       1.54       0.22       3.37       2.55  
Related income tax
    2,017       808       3,420       1,046       1,496       624       171       9,582       5.62       4.25       6.86       6.25  
     
Results of producing activities
    3,755       1,759       3,275       1,429       1,235       475       427       12,355       10.46       9.26       6.95       8.06  
Other earnings(2)
    149       (246 )     1,977       2       14       (66 )     5       1,835       0.41       (1.30 )     1.96       1.19  
     
Total earnings, excluding power and coal
    3,904       1,513       5,252       1,431       1,249       409       432       14,190       10.87       7.96       8.91       9.25  
Power and coal
    1                   311                         312                                  
                                 
Total earnings
    3,905       1,513       5,252       1,742       1,249       409       432       14,502                                  
                                 


(1) The per unit data is divided into two separate sections: (a) revenue per unit of sales from ExxonMobil’s own production; and, (b) operating costs and earnings per unit of net oil-equivalent production. Units for crude oil and natural gas liquids (NGL) are barrels, while units for natural gas are thousands of cubic feet. The volumes of crude oil and natural gas liquids production and net natural gas production available for sale used in this calculation are shown on pages 56 and 57 of this document. The volumes of natural gas were converted to oil-equivalent barrels based on a conversion factor of 6 thousand cubic feet per barrel.
 
(2) Includes earnings related to transportation operations, LNG liquefaction and transportation operations, sale of third-party purchases, technical services agreements, other non-operating activities, and adjustments for minority interests.
 
(3) Other revenue includes carbon dioxide, helium, and sulfur. Revenue from these products has been included in “other earnings” beginning in 2002.

EXXON  MOBIL  CORPORATION   2004  FINANCIAL  &  OPERATING  REVIEW

 


 

U p s t r e a m  63

Oil and Gas Exploration and Production Earnings (continued)

                                                                                                 
    Total Revenues and Costs, Including Non-Consolidated Interests and Tar Sands     Revenues and Costs per Unit of Sales or Production(1)  
    United                     Asia             Middle                     United     Outside North  
    States     Canada     Europe     Pacific     Africa     East     Other     Total     States     Canada     America     Worldwide  
     
2002   (millions of dollars)
  (dollars per unit of sales)
Revenue
                                                                                               
Crude oil and NGL
    5,203       2,715       4,979       2,352       3,064       1,134       878       20,325       20.95       21.56       23.15       22.33  
Natural gas
    2,320       876       5,304       1,664             356       29       10,549       2.68       2.34       2.86       2.77  
         
                                                                    (dollars per barrel of net oil-equivalent production)
Total revenue
    7,523       3,591       10,283       4,016       3,064       1,490       907       30,874       19.14       18.94       20.49       19.96  
Less costs:
                                                                                               
Production costs excluding taxes
    1,675       1,010       1,674       592       455       91       211       5,708       4.26       5.33       3.13       3.69  
Depreciation and depletion
    1,644       716       1,869       651       354       62       173       5,469       4.19       3.77       3.22       3.54  
Exploration expenses
    222       66       133       101       177       21       237       957       0.56       0.35       0.69       0.62  
Taxes other than income
    477       33       1,007       403       345       479       39       2,783       1.21       0.17       2.36       1.80  
Related income tax
    1,153       566       2,828       939       972       466       (99 )     6,825       2.93       2.99       5.30       4.41  
     
Results of producing activities
    2,352       1,200       2,772       1,330       761       371       346       9,132       5.99       6.33       5.79       5.90  
Other earnings(2)
    165       (202 )     228       (32 )     76       (77 )     2       160       0.41       (1.07 )     0.20       0.10  
     
Total earnings, excluding power and coal
    2,517       998       3,000       1,298       837       294       348       9,292       6.40       5.26       5.99       6.00  
Power and coal
    7                   307                   (8 )     306                                  
                                 
Total earnings
    2,524       998       3,000       1,605       837       294       340       9,598                                  
                                 
2001   (millions of dollars)
  (dollars per unit of sales)
Revenue
                                                                                               
Crude oil and NGL
    5,124       2,095       5,372       2,167       2,911       1,209       603       19,481       19.70       17.43       22.74       21.19  
Natural gas
    4,126       1,364       5,790       1,019             351       70       12,720       4.35       3.71       2.97       3.39  
Other(3)
    90       7       23                         2       122                                  
         
                                                                    (dollars per barrel of net oil-equivalent production)
Total revenue
    9,340       3,466       11,185       3,186       2,911       1,560       675       32,323       22.35       19.05       20.47       20.81  
Less costs:
                                                                                               
Production costs excluding taxes
    1,650       884       1,613       549       414       130       211       5,451       3.95       4.86       3.06       3.51  
Depreciation and depletion
    1,522       602       1,781       557       318       55       180       5,015       3.64       3.31       3.03       3.22  
Exploration expenses
    216       109       128       103       217       19       399       1,191       0.52       0.60       0.91       0.77  
Taxes other than income
    567       56       1,178       410       375       419       30       3,035       1.36       0.31       2.53       1.96  
Related income tax
    1,957       603       3,079       622       1,023       564       (137 )     7,711       4.68       3.31       5.40       4.96  
     
Results of producing activities
    3,428       1,212       3,406       945       564       373       (8 )     9,920       8.20       6.66       5.54       6.39  
Other earnings(2)
    504       (151 )     224       (27 )     32       (43 )     (30 )     509       1.21       (0.83 )     0.16       0.32  
     
Total earnings, excluding power and coal
    3,932       1,061       3,630       918       596       330       (38 )     10,429       9.41       5.83       5.70       6.71  
Power and coal
    1                   314                   (8 )     307                                  
                                 
Total earnings
    3,933       1,061       3,630       1,232       596       330       (46 )     10,736                                  
                                 
2000   (millions of dollars)
  (dollars per unit of sales)
Revenue
                                                                                               
Crude oil and NGL
    6,438       2,542       6,985       2,636       3,232       1,389       685       23,907       23.99       22.75       27.06       25.66  
Natural gas
    4,026       1,105       4,687       1,661             281       55       11,815       3.85       3.58       2.75       3.12  
Other(3)
    59       8       30                               97                                  
         
                                                                    (dollars per barrel of net oil-equivalent production)
Total revenue
    10,523       3,655       11,702       4,297       3,232       1,670       740       35,819       23.78       22.46       22.54       22.88  
Less costs:
                                                                                               
Production costs excluding taxes
    1,526       818       1,829       543       400       101       204       5,421       3.45       5.03       3.20       3.46  
Depreciation and depletion
    1,545       616       2,060       556       340       67       147       5,331       3.49       3.78       3.30       3.41  
Exploration expenses
    145       81       156       164       196       13       199       954       0.33       0.50       0.76       0.61  
Taxes other than income
    655       35       841       506       446       457       43       2,983       1.48       0.21       2.39       1.90  
Related income tax
    2,419       820       3,662       1,005       1,093       639       45       9,683       5.47       5.04       6.71       6.19  
     
Results of producing activities
    4,233       1,285       3,154       1,523       757       393       102       11,447       9.56       7.90       6.18       7.31  
Other earnings(2)
    312       (155 )     630       148       30       (14 )     (29 )     922       0.71       (0.96 )     0.79       0.59  
     
Total earnings, excluding power and coal
    4,545       1,130       3,784       1,671       787       379       73       12,369       10.27       6.94       6.97       7.90  
Power and coal
    (3 )                 323                   (4 )     316                                  
                                 
Total earnings
    4,542       1,130       3,784       1,994       787       379       69       12,685                                  
                                 

2 0 0 4  F I N A N C I A L  &  O P E R A T I N G  R E V I E W   E X X O N  M O B I L  C O R P O R A T I O N

 


 

(PICTURE)

M A E R T S N W O D Our Downstream operations include world-class facilities, such as our Baytown, Texas, refinery. The Baytown refinery delayed coker converts heavy low-cost crudes into the high-value products our customers require.

 


 

65

Operating and capital discipline positions ExxonMobil’s Downstream as an industry leader, capable of outperforming the competition under a variety of market conditions.

Refining and Supply, Fuels Marketing, and Lubricants and Specialties

DOWNSTREAM STRATEGIES

ExxonMobil has refining operations in 25 countries, over 37,000 retail sites in more than 100 countries, and lubricants marketing in about 200 countries and territories. Our financial objectives in the Downstream can be summarized into three broad areas – margin enhancement, cost efficiency, and capital discipline. Delivering on these objectives enables us to create value for shareholders through industry-leading return on average capital employed. The key strategies we pursue to meet these objectives are:

§   Maintain best-in-class operations, in all respects;
 
§   Provide quality, valued products and services to our customers;
 
§   Lead industry in efficiency and effectiveness;
 
§   Capitalize on integration with other ExxonMobil businesses;
 
§   Selectively invest for resilient, advantaged returns; and,
 
§   Maximize value from leading-edge technology.

DOWNSTREAM RETURN ON AVERAGE CAPITAL EMPLOYED

(LINE GRAPH)


(1)   Royal Dutch Shell, BP, and ChevronTexaco values calculated on a consistent basis with ExxonMobil, based on public information. Competitor data estimated for 2004.

2004 RESULTS AND HIGHLIGHTS

Continued leadership in safety, reliability, scale, and technology helped contribute to our best-ever financial and operating results.

Earnings increased 62 percent to $5.7 billion versus 2003.

More than $1.7 billion of pretax operating cost efficiencies and revenue enhancements were achieved.

We have delivered an average of $1.4 billion in pretax savings per year since 2000 through improvements that leverage our industry-leading proprietary technology, scale, and global functional organization.

Downstream capital expenditures were $2.4 billion in 2004, down 14 percent versus 2003, reflecting the completion of many low-sulfur fuel projects.

Downstream return on average capital employed was 21 percent, up from 13 percent in 2003, aided by stronger industry margins and ongoing “self-help” improvements.

Refinery throughput, at 5.7 million barrels per day, was up 4 percent versus 2003, with improved unit reliability that captured stronger industry margins.

Petroleum product sales were up 3 percent in 2004, largely due to stronger industry demand and higher refinery throughput.

                                         
STATISTICAL RECAP   2004     2003     2002     2001     2000  
Earnings (millions of dollars)
    5,706       3,516       1,300       4,227       3,418  
Refinery throughput (thousands of barrels per day)
    5,713       5,510       5,443       5,542       5,642  
Petroleum product sales (thousands of barrels per day)
    8,210       7,957       7,757       7,971       7,993  
Average capital employed (millions of dollars)
    27,173       26,965       26,045       26,321       27,732  
Return on average capital employed (percent)
    21.0       13.0       5.0       16.1       12.3  
Capital expenditures (millions of dollars)
    2,405       2,781       2,450       2,322       2,618  

2004 FINANCIAL & OPERATING REVIEW  EXXON MOBIL CORPORATION

 


 

66

Downstream Competitive Advantages

“SELF-HELP” IN A CHALLENGING ENVIRONMENT

Downstream earnings were strong in 2004, while the business environment remained very competitive. Long-term real refining margins have historically declined at a rate of about 2 percent per year driven by productivity improvements, in part enabled by technology advancement. Intense competition in the retail fuels market has driven long-term real margins down by 4 percent per year. Combined with an outlook for modest industry growth in mature markets, cost pressures from inflation, and increasing requirements for regulatory investments, we must rely on “self-help” measures to generate attractive returns and create value for our shareholders.

ExxonMobil’s Downstream business is a large, diversified, and profitable portfolio, with marketing presence and refining facilities around the world. In pursuing our Downstream strategies, we have created sustainable competitive advantages in a number of areas. We build on these advantages with an array of self-help initiatives in the areas of margin enhancement, cost efficiency, and capital discipline.

§   The scale of our global operations is a key advantage for ExxonMobil. Our refineries are, on average, 70 percent larger than the industry average.

§   Our manufacturing facilities are highly integrated with other ExxonMobil operations. Integration provides us with the flexibility to optimize feedstock and product streams in a refining-chemical complex to the highest-value outlet. It also enables us to share infrastructure and support staff, lowering operating costs.

(PICTURE)

§   Our global functional organization enables better prioritization and rapid deployment of new technologies, while fully leveraging best practices and cost efficiencies across the Downstream businesses.

§   The Exxon, Mobil, and Esso brands are well recognized and respected throughout the world, and are valued by customers for superior quality, performance, and reliability.

§   The competitive strength resulting from our in-house proprietary technical capability is enhanced through close cooperation between the technology and business organizations. This alignment of research priorities results in timely and cost-effective solutions to the highest-value business opportunities.


Refining and Supply

ExxonMobil’s Refining and Supply business provides quality products and feedstocks to customers around the world. We manufacture clean fuels, lubes, and other high-value products utilizing a highly efficient asset base. Our global supply organization optimizes the supply of crude and feedstock to our refineries and places our equity crude production in its highest-value disposition. As a result, we process about one-half of our equity crude and purchase nearly 5 million barrels per day of crude oil and feedstocks to maximize value from our refining assets. Timely application of technological advances continues to improve our operations.

Largest Global Refiner

         
Refinery interests
    45  
Distillation capacity(barrels per day)
  6.4 million
Lube basestock capacity (barrels per day)
  145 thousand
Crude oil and product tanker interests (>1kDWT)
    32  
Major petroleum products terminals
    282  

Refining gross margin is the small difference between the price at which we sell the products we manufacture and what we pay for the raw materials we buy. Those prices are set by the global marketplace. Within this context, there are three ways for us to improve returns and create shareholder value:

§   Improve the yield of high-value products; for example, by converting more of the barrel to lighter products, such as motor gasoline;

§   Lower the cost of raw materials; for example, by using technology advancements to process more difficult, lower-cost crude; and,

§   Operate more efficiently; for example, by using less energy to manufacture our products.

GLOBAL SCALE AND INTEGRATION ARE STRUCTURAL ADVANTAGES

Our scale, integration, functional organization, and technological capabilities combine to provide us with significant competitive advantages versus industry. Structural factors such as these differentiate us and are strengths that are difficult for competitors to duplicate. We leverage these advantages across our global network to yield results that are better than industry.

EXXON MOBIL CORPORATION  2004 FINANCIAL & OPERATING REVIEW

 


 

D o w n s t r e a m  67

Structural Advantages

Equity Distillation and Conversion Capacity(1)

(BAR CHART)


(1)   Conversion capacity includes cat cracking, coking, and hydrocracking.
 
(2)   Royal Dutch Shell and BP values calculated on a consistent basis with ExxonMobil, based on public information.

Source: Oil & Gas Journal

World–Class Refinery Size

(BAR CHART)

Source: Oil & Gas Journal

We have more distillation and conversion capacity than any refiner in the world. Overall, our refineries are 70 percent larger than the industry average and are integrated with chemical operations at many locations. Combined, these factors enable the disposition of molecules to the highest-value outlet and provide advantages through improved feedstock flexibility and lower site operating costs.

We have multiple refineries concentrated in some major refining centers, which enable further operational and supply optimization among facilities. These centers are located on the U.S. Gulf Coast, northwest Europe, Japan, and Southeast Asia. Collectively, these represent over 60 percent of our total refining capacity.

ENHANCING MARGIN

Improving profitability includes identifying and delivering initiatives that enhance margin generation. We do this using sophisticated molecule management tools as described on page 68. In addition, one of the most straightforward and least capital-intensive ways to increase refinery profitability is to increase refinery utilization and overall yield.

INTEGRATION OPTIMIZES THE YIELD OF HIGH-VALUE PRODUCTS

About 80 percent of our fuels refining capacity is integrated with either chemical and/or lubes and specialties operations. Obvious advantages include shared site costs, energy management efficiency, and common infrastructure. Even more sizable value capture accrues from our ability to optimize many product and feedstock streams and exchanges between plants. This cannot be matched by standalone operations. For example, by integrating a large chemical operation with a refinery, streams that would normally end up as fuels products can be upgraded to higher-value chemical products. Similarly, the economic incentive to run chemical feed alternatives changes daily. An integrated complex is able to continually and promptly respond to changing market dynamics, and create additional shareholder value.

In 2004, unplanned capacity loss was reduced by over 20 percent versus 2003. We are also reducing planned downtime by extending the intervals between required turnarounds and reducing the time required to complete a turnaround.

These improvements are driven by the disciplined application of our Reliability and Maintenance Management System. This program is safely increasing plant reliability and availability while lowering total facility maintenance costs. The program has been applied to all ExxonMobil sites and provides a structured, rigorous approach to the management of more than $1 billion of annual maintenance work. Since its introduction, we have reduced the amount of time that units are down for maintenance by 40 percent, and reduced maintenance costs by 30 percent. We are an industry leader in operating reliability and we continue to improve the economic utilization of our refining capacity.

Refining Unit Utilization

(BAR CHART)

The most recent Solomon survey showed ExxonMobil refineries widened their utilization lead over competition.

2004 FINANCIAL & OPERATING REVIEW  EXXON MOBIL CORPORATION

 


 

68

MOLECULE MANAGEMENT LOWERS RAW MATERIAL COST

We continue to find new, innovative methods to increase the yields of high-value products, while reducing overall raw material costs. We have made advancements in molecular fingerprinting and modeling technologies that improve our understanding of the behavior and characteristics of materials moving through our refineries. This technology enables us to optimize the chemical composition of feedstocks and products in real-time, and:

•   More precisely select and blend crudes with properties that will maximize margins through our hardware;
 
•   Identify and better utilize advantaged crudes that may be discounted in the marketplace; and,
 
•   Optimize value for each product stream.

Molecule Management Improvements
(millions of dollars per year)

(MOLECULE MANAGEMENT IMPROVEMENTS GRAPH)

(GRAPHIC)

Lab technicians at ExxonMobil’s Rotterdam, Netherlands, refinery analyze distillation profiles for heavy refining components.

ENERGY INITIATIVES LOWER OPERATING COSTS

The improved energy efficiency of operations is a key contributor to our better-than-industry cost performance. ExxonMobil’s proprietary Global Energy Management System (GEMS) focuses on opportunities to reduce the energy consumed at our refineries and chemical complexes. The benefits from energy initiatives have increased with higher energy prices.

§   More than $1 billion of pretax energy savings has been identified to date, equal to 15 to 20 percent of the energy consumed at our refinery and chemical facilities.

§   Our rate of energy improvement from 2002 to 2004 has been five times the historical industry pace.

We also continue to make significant investments in cogeneration facilities. Cogeneration, the simultaneous production of electric power and steam, requires substantially less energy and results in lower emissions versus separate conventional steam and power generation.

§   More than 90 percent of the power generating capacity at our manufacturing sites comes from cogeneration, meeting two-thirds of our power requirements at these facilities.

§   Three new cogeneration facilities started up in 2004 at Baytown, Beaumont, and Sarnia.

Exxon Mobil Energy Efficiency
(indexed Solomon data)

(LINE GRAPH)

PERSISTENT PURSUIT OF OPERATING EFFICIENCIES

We combine our structural advantages with a continuous and disciplined effort to implement operating efficiencies and reduce costs in all of our facilities. Together, work force and energy costs comprise two-thirds of total refining cash operating costs. An ongoing focus on being the most efficient we can be, in all aspects of the business, has resulted in worldwide cash operating costs at our refineries that are substantially below the industry average.

Refining Cash Operating Costs

(BAR CHART)

(PICTURE)

EXXON MOBIL CORPORATION  2004 FINANCIAL & OPERATING REVIEW

 


 

D o w n s t r e a m  69

(PICTURE)

INVESTING TO MEET CUSTOMER NEEDS FOR IMPROVED PRODUCTS

Refining and Supply capital expenditures are focused on selective and resilient investments to meet future product quality requirements, reduce environmental impact, further upgrade safety systems, lower operating costs, and produce higher-value products and chemical feedstocks using lower-cost raw materials.

In 2004, we completed construction and successfully started up several facilities to produce lower-sulfur gasoline and diesel. (See page 75 for details of 2004 and 2005 investments.) ExxonMobil’s proprietary SCANfining technology provides a competitive edge by producing lower-sulfur motor gasoline with less octane loss and a minimum of new investment. Through application in our own refineries and licensing to third parties, this technology will be used in producing about 25 percent of the low-sulfur gasoline required by U.S. and Canadian customers.

Similarly, demand is strong for the Nebula-20 catalyst technology application for ultralow-sulfur diesel. Eleven applications are expected by the end of 2005.

Spending on projects that enhance refinery capacity and yield also continued. In 2004, we completed the $200 million enhanced-conversion project at the Port Jerome-Gravenchon, France, refinery. The investment increases yields of motor fuels and high-value chemical feedstocks and also provides the capability to meet lower-sulfur motor fuel specifications.

Overall, ExxonMobil’s Capital Project Management System continues to provide top-tier performance in project execution. Through a rigorous post-project completion appraisal process and confirmed by external benchmarking, our project execution performance is at the leading edge of industry. Leveraging our global scale, we continue to increase our capital execution efficiency.

EMERGING MARKET GROWTH

World-class scale and integration, industry-leading efficiency, leading-edge technology, and globally respected brands enable ExxonMobil to take advantage of attractive emerging-growth opportunities around the globe. For example, our assets are well-positioned and configured to supply demand growth in Asia Pacific, which we estimate will rise 3 percent annually through 2020.

FUJIAN – PUTTING IT ALL TOGETHER

§     In 2004, an agreement was signed between ExxonMobil, Sinopec, Saudi Aramco, and Fujian Petrochemical to advance the design and planning of an integrated project.
 
    This project is the only fully integrated project announced in China with foreign participation. Scale, integration, leading technology, and world-class operations will help ensure this project is highly competitive and resilient to market volatility.
 
§     Plans include an expansion of the existing refinery in Fujian from 80 thousand barrels per day to 240 thousand barrels per day.
 
§     This project includes a world-scale integrated chemical plant, including an 800 thousand ton per year flexible-feed steam cracker plus polyolefins and aromatics units.
 
§     A fuels marketing joint venture is expected to market products through more than 600 retail sites, which ensures a high-value outlet for the manufacturing complex.

(MAP)

2004 FINANCIAL  & OPERATING REVIEW  EXXON MOBIL CORPORATION

 


 

70 

Fuels Marketing

ExxonMobil Fuels Marketing helps make life easier for customers on the move in more than 100 countries across the globe, creating value with high-quality and convenient products and services under our three strong brands: Exxon, Mobil, and Esso. Our business portfolio leverages globally common, consistently applied processes, marketing programs, and best practices to enhance worldwide business performance. Improvement in return on average capital employed is driven through disciplined execution in the areas of safety, cost efficiency, nonfuels income growth, and retail chain portfolio management.

Diverse Customer Base Provides Global Outlet

     
Operations
  100 countries on six continents
Service stations
  37 thousand
Industrial and wholesale customers
  1 million
Aviation operations
  600 airports
Marine operations.
  300 ports

GLOBAL SCALE DELIVERS COST EFFICIENCIES

Our scale, global organization, and disciplined approach provide advantages in an intensely competitive industry. We capture efficiencies by implementing innovative technology, streamlining and automating work processes, and centralizing support activities, while continuing to improve customer service. Our on-site and above-site operating costs are lowered by consistently applying retail best practices that are tested and proven around the world. Results include:

•   Customer Service Centers have been consolidated in the past five years, with the network of core locations down 80 percent;
 
•   Regular employee staffing is 20 percent lower than in 2000; and,
 
•   In 2004, our cost reduction initiatives reduced ongoing operating expenses by over $200 million.

Improved category management in our convenience stores, car wash execution, and strategic alliances with leading food and grocery marketers have yielded efficiencies and increased nonfuels income by $30 million per year since 2000.

U.S.  B r e a k e v e n  F u e l s  M a r g i n
(indexed 2000 = 100; real 2004 dollars)

(LINE GRAPH)

(PICTURE)

The combined benefit of our efficiency savings and nonfuels income growth results in a reduction to the fuels margin required for a retail site to break even after netting nonfuels income against operating costs. In the United States, for example, we have reduced our breakeven margin by 15 percent since 2000.

CAPITAL DISCIPLINE ENHANCES PERFORMANCE

Our retail capital management strategy combines selective investments with ongoing asset highgrading to create a resilient asset base. We have adopted a global focused market approach to manage retail marketing capital effectiveness. Markets are selected and prioritized through a rigorous and consistent market planning process. Within each market, we assess customer preferences, develop detailed market models, and produce comprehensive network plans. These plans generally result in a smaller but higher-performing chain of retail outlets.

A common measure of asset performance in the retail business is market effectiveness, which is the ratio of the percentage of volume sold to the percentage of industry retail sites in a given market. While the size of our retail chain is approximately 15 percent lower since 2000 as a result of highgrading our assets, our market effectiveness in markets where we have seen the full benefits of a focused market approach is 50 percent better than industry. We are in the early years of a long-term program to apply these tools.

I m p a c t   o f   F o c u s   M a r k e t   I n v e s t m e n t s

(BAR CHART)

EXXON MOBIL CORPORATION  2004 FINANCIAL & OPERATING REVIEW

 


 

(PICTURE)

CUSTOMER FOCUSED INITIATIVES IMPROVE MARGINS

Around the world we employ a portfolio of innovative retail formats designed to appeal to customers by delivering quality products, convenience, and value. Nonfuels products make up a significant and growing part of our offering.

In 2004, we added nearly 300 On the Run convenience stores worldwide, bringing the total to nearly 1,300 in over 40 countries and territories. Our award-winning On the Run convenience store format reflects extensive market research and incorporates leading-edge technology.

In selected markets, we use strategic alliances to enhance our convenience store offering, building on the strength of our partners’ brands or distribution networks. Examples include our alliances with Tesco in the United Kingdom and Thailand, Doutor and 7-Eleven in Japan, Tim Hortons in Canada, and Innscor across Africa.

Our Speedpass payment offering provides more than 7 million users in the United States, Canada, Japan, and Singapore, the ability to purchase fuel, car wash, or convenience products with ease, building customer loyalty. Speedpass is accepted at over 10,000 Exxon, Mobil, and Esso sites worldwide.

H i g h g r a d i n g R e t a i l S i t e s
Retail Sites in Operation

(BAR CHART)

INDUSTRIAL AND WHOLESALE, AVIATION, AND MARINE

In addition to retail, Fuels Marketing has a significant global presence in commercial fuels businesses. Functional teams, integrated with Refining and Supply, have been organized to capture the highest value for the fuel products we make. These teams market ExxonMobil-produced fuels to 1 million industrial and wholesale customers, 600 airports, and 300 marine ports, maximizing utilization of our global logistics assets.

(PICTURE)

G l o b a l N o n f u e l s I n c o m e G r o w t h
Convenience Retailing, Car Wash, Card/Alliance, Rent
(millions of dollars per year)

(BAR CHART)

2004 FINANCIAL  & OPERATING REVIEW  EXXON MOBIL CORPORATION

 


 

72

Lubricants & Specialties

ExxonMobil is the world’s largest supplier of lube basestocks and a leading marketer of finished lubricants and specialty products. Leveraging three strong global brands, Mobil, Exxon, and Esso, along with the world’s leading full-synthetic motor oil, Mobil 1, we are trusted by customers to deliver technically superior products in a global market. A dedicated organization and a strong distributor network supply high-quality lubricants and our application expertise to customers around the world.

Global Lubes Leadership Position

     
Lube basestock refineries
   12 
Average capacity per site
  2 times industry
Blend plants
   58 
Lube basestock market share
  18 percent
Finished lubricant market share
  13 percent

LEVERAGING OUR BRAND AND TECHNOLOGY

ExxonMobil’s leading lubricant brands – Mobil, Exxon, and Esso –continue to meet customer needs for transportation and industrial applications around the world. Customers rely on Mobil, Exxon, and Esso branded products because of their quality, reliability, technological leadership, a close association with many leading original-equipment manufacturers, and their demonstrated ability to withstand performance stresses, including those of motorsports racing. They are also backed by a variety of technical services designed to provide customers with worry-free operations.

In 2005, ExxonMobil took another step in technology leadership with the U.S. introduction of a new line of passenger car lubricants that guarantee extended engine protection. Mobil 1 Extended Performance, Mobil Clean 5000 and Mobil Clean 7500 provide consumers protection for their vehicles’ engines for longer oil change intervals than conventional lubricants.

ExxonMobil also applies technology in improving customer satisfaction and service. In 2004, ExxonMobil’s revenue from e-based ordering was up 35 percent over the prior year. Many customers can now place orders directly, check order status, and manage accounts using the Internet.

G l o b a l  L e a d e r s h i p  P o s i t i o n
(BAR CHART)

Source: ExxonMobil estimate and industry data

(PICTURE)

GROWING FLAGSHIP AND PREMIUM PRODUCTS

As the world’s economies grow, so does the demand for higher-quality lubricants. ExxonMobil continues to grow market share in this most profitable part of the finished lubes business.

•   Mobil 1 is the endorsed, recommended, and/or approved engine oil for more than 50 percent of new luxury vehicles in the North American market. No other motor oil holds as many engine specification approvals.
 
•   The growing list of automotive manufacturers recommending Mobil 1 for their high-performance vehicles include the makers of Aston Martin, Bentley, BMW, Cadillac, Chrysler, Corvette, Dodge, Mercedes Benz, Porsche, and Saab.
 
•   In 2005, we introduced new higher mileage, extended-performance Mobil 1 and Mobil product lines in the United States that will further differentiate these premium brands.

S y n t h e t i c L u b e s S a l e s G r o w t h

(LINE GRAPH)

EXXON MOBIL CORPORATION   2004 FINANCIAL & OPERATING  REVIEW

 


 

D o w n s t r e a m       73

E m e r g i n g  M a r k e t s
f o r F i n i s h e d  L u b e s

(indexed 2000 = 100)

(LINE GRAPH)

ExxonMobil lubricants have grown over 50 percent in profitable emerging markets. Our globally recognized brands are a good platform to establish the ExxonMobil name with new customers.

STRATEGIC GLOBAL ALLIANCES

Globally respected brands and industry-leading technology enable ExxonMobil to build on strategic global alliances with automotive and industrial equipment manufacturers. A strong global presence enables ExxonMobil to better serve customers with worldwide operations that demand consistently reliable, high-quality products and services. For example, ExxonMobil is a global supplier of premium oils to Caterpillar factories and dealers in over 90 countries. ExxonMobil’s worldwide service capability and integrated sales focus on strategic global customers differentiate us from competitors.

Motorsports sponsorships, like those in Formula 1 with the West McLaren Mercedes and Toyota teams, lead to new business with strategic global customers and provide an ideal environment for developing high-performance lubricants. Sponsorship of Toyota’s new Formula 1 team, for example, helped strengthen ExxonMobil’s position as a primary supplier of factory and service fill lubricants for Toyota Motor Company.

Relationships with strategic accounts extend off the track as well, through our technology partnerships with Toyota, DaimlerChrysler, and General Motors, where we collaborate on developing innovative new lubricants.

GROWTH IN PROFITABLE EMERGING MARKETS

As economies develop and industrialize, there is an increasing demand for high-quality industrial and automotive lubricants. For example, in China, we have leveraged our well-recognized brands, strong equipment manufacturer relationships, and technical expertise to become the leading international lubes marketer. China is now our fourth largest market for finished lubricants.

Steps we have taken to increase our operating efficiency include simplifying our operations, such as reducing the number of blend plants and product formulations in our supply chain.

SUPPLY CHAIN EFFICIENCY IMPROVES RESULTS

Building on a 30-percent reduction in the number of blend plants and a 65-percent reduction in product formulations, ExxonMobil continues to improve supply chain efficiency. Further optimization of the supply chain network includes a 29-percent reduction in third-party blenders and packagers, and a 9-percent reduction in distribution warehouses in 2004.

Worldwide implementation of sophisticated supply chain planning tools was completed in 2004, and reduced inventories by more than 5 percent. The further development of these leading-edge analytical tools is expected to capture additional working capital efficiencies while ensuring superior execution of our marketing offerings.

O p e r at i n g  E f f i c i e n c y
(LINE GRAPH)

(PICTURE)

2004 FINANCIAL  & OPERATING REVIEW  EXXON MOBIL CORPORATION

 


 

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Downstream Operating Statistics
REFINING CAPACITY AT YEAR-END 2004 (1)

                                                                             
                                Capacity at 100%  
                        ExxonMobil                                             ExxonMobil  
                        Share     Atmospheric     Catalytic             Residuum             Interest  
(thousands of barrels per day)                       kBD(2)     Distillation     Cracking     Hydrocracking     Conversion(3)     Lubes(4)     %  
 
United States
                                                                           
Torrance
  California       l         150       150       96       21       53             100  
Joliet
  Illinois       l         238       238       93             56             100  
Baton Rouge
  Louisiana   n   l         494       494       229       24       113       16       100  
Cha