Exxon Mobil Corporation 10-Q


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549


FORM 10-Q


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

THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2005


or


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

THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from __________to________


Commission File Number 1-2256



                                 EXXON MOBIL CORPORATION                                 

(Exact name of registrant as specified in its charter)




                            NEW JERSEY                                                             13-5409005                         

               (State or other jurisdiction of                                              (I.R.S. Employer                     

               incorporation or organization)                                        Identification Number)               



     5959 Las Colinas Boulevard, Irving, Texas                             75039-2298       

(Address of principal executive offices)                               (Zip Code)




                                         (972) 444-1000                                         

(Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X  No    


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  X  No    


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


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



                      Class                                                              Outstanding as of September 30, 2005

Common stock, without par value                                                              6,222,395,687                




EXXON MOBIL CORPORATION


FORM 10-Q


FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005


TABLE OF CONTENTS


Page

Number


PART I.  FINANCIAL INFORMATION


Item 1.

Financial Statements


Condensed Consolidated Statement of Income

3

Three months and nine months ended September 30, 2005 and 2004


Condensed Consolidated Balance Sheet

4

As of September 30, 2005 and December 31, 2004


Condensed Consolidated Statement of Cash Flows

5

Nine months ended September 30, 2005 and 2004


Notes to Condensed Consolidated Financial Statements

6-20


Item 2.

Management's Discussion and Analysis of Financial

Condition and Results of Operations

21-27


Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28


Item 4.

Controls and Procedures

28


PART II.  OTHER INFORMATION


Item 1.

Legal Proceedings

28-29


Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30


Item 6.

Exhibits

31


Signature

32

 

Index to Exhibits

33


-2-



PART I.  FINANCIAL INFORMATION



Item 1.  Financial Statements


EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(millions of dollars)


 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 

  

 

2005

   

2004

   

2005

   

2004

 

REVENUES AND OTHER INCOME

                       

Sales and other operating revenue (1) (2)

$

96,731

 

$

74,854

 

$

262,828

 

$

210,134

 

Income from equity affiliates

 

3,080

   

1,219

   

5,957

   

3,487

 

Other income

 

906

   

302

   

2,551

   

1,049

 

       Total revenues and other income

 

100,717

   

76,375

   

271,336

   

214,670

 

 

                       

COSTS AND OTHER DEDUCTIONS

                       

Crude oil and product purchases (2)

 

52,345

   

37,047

   

136,334

   

100,572

 

Production and manufacturing expenses

 

6,537

   

5,721

   

19,089

   

16,932

 

Selling, general and administrative expenses

 

3,765

   

3,372

   

10,724

   

9,946

 

Depreciation and depletion

 

2,513

   

2,431

   

7,582

   

7,154

 

Exploration expenses, including dry holes

 

248

   

388

   

635

   

789

 

Interest expense

 

73

   

459

   

373

   

557

 

Excise taxes (1)

 

8,160

   

7,045

   

22,913

   

19,975

 

Other taxes and duties

 

10,850

   

10,179

   

31,504

   

30,274

 

Income applicable to minority and preferred interests

 

174

   

199

   

468

   

495

 

       Total costs and other deductions

 

84,665

   

66,841

   

229,622

   

186,694

 

 

                       

INCOME BEFORE INCOME TAXES

 

16,052

   

9,534

   

41,714

   

27,976

 

       Income taxes

 

6,132

   

3,854

   

16,294

   

11,066

 

NET INCOME

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 
                         

 

                       

NET INCOME PER COMMON SHARE (dollars)

$

1.60

 

$

0.88

 

$

4.04

 

$

2.60

 

 

                       

NET INCOME PER COMMON SHARE

                       

 - ASSUMING DILUTION (dollars)

$

1.58

 

$

0.88

 

$

4.00

 

$

2.59

 

 

                       
                         

DIVIDENDS PER COMMON SHARE (dollars)

$

0.29

 

$

0.27

 

$

0.85

 

$

0.79

 

 

                       
                         

(1) Excise taxes included in sales and other

                       

         operating revenue

$

8,160

 

$

7,045

 

$

22,913

 

$

19,975

 
                         

(2) Amounts included in sales and other operating revenue for

                       

         purchases/sales contracts with the same counterparty

                       

         (associated costs are included in crude oil and product

                       

         purchases).  See note 2 on page 6.

$

8,439

 

$

6,467

 

$

23,106

 

$

18,500

 


-3-



EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(millions of dollars)



 

Sept. 30,

 

Dec. 31,

 
 

2005

 

2004

 

ASSETS

               

Current assets

               

   Cash and cash equivalents

 

$

29,240

   

$

18,531

 

   Cash and cash equivalents - restricted (note 4)

   

4,604

     

4,604

 

   Notes and accounts receivable - net

   

26,193

     

25,359

 

   Inventories

               

     Crude oil, products and merchandise

   

9,577

     

8,136

 

     Materials and supplies

   

1,399

     

1,351

 

   Prepaid taxes and expenses

   

3,717

     

2,396

 

     Total current assets

   

74,730

     

60,377

 

Property, plant and equipment - net

   

107,094

     

108,639

 

Investments and other assets

   

27,897

     

26,240

 
                 

     TOTAL ASSETS

 

$

209,721

   

$

195,256

 
                 

LIABILITIES

               

Current liabilities

               

   Notes and loans payable

 

$

2,331

   

$

3,280

 

   Accounts payable and accrued liabilities

   

39,055

     

31,763

 

   Income taxes payable

   

9,489

     

7,938

 

     Total current liabilities

   

50,875

     

42,981

 

Long-term debt

   

6,126

     

5,013

 

Deferred income tax liability

   

20,525

     

21,092

 

Other long-term liabilities

   

24,305

     

24,414

 
                 

     TOTAL LIABILITIES

   

101,831

     

93,500

 
                 

Commitments and contingencies (note 4)

               
                 

SHAREHOLDERS' EQUITY

               

Benefit plan related balances

   

(732

)

   

(1,014

)

Common stock, without par value:

               

   Authorized:  

9,000 million shares

               

   Issued:      

8,019 million shares

   

5,176

     

5,067

 

Earnings reinvested

   

154,420

     

134,390

 

Accumulated other nonowner changes in equity

               

   Cumulative foreign exchange translation adjustment

   

1,451

     

3,598

 

   Minimum pension liability adjustment

   

(2,347

)

   

(2,499

)

   Unrealized gains on stock investments

   

0

     

428

 

Common stock held in treasury:

               

       1,797 million shares at September 30, 2005

   

(50,078

)

       

       1,618 million shares at December 31, 2004

           

(38,214

)

                 

     TOTAL SHAREHOLDERS' EQUITY

   

107,890

     

101,756

 
                 

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

209,721

   

$

195,256

 



The number of shares of common stock issued and outstanding at September 30, 2005 and

December 31, 2004 were 6,222,395,687 and 6,401,244,728, respectively.


-4-




EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(millions of dollars)



 

Nine Months Ended

 
 

September 30,

 
     

2005

     

2004

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

   Net income

 

$

25,420

   

$

16,910

 

   Depreciation and depletion

   

7,582

     

7,154

 

   Changes in operational working capital, excluding cash and debt

   

6,226

     

4,155

 

   All other items - net

   

(1,480

)

   

24

 
                 

    Net cash provided by operating activities

   

37,748

     

28,243

 
                 

CASH FLOWS FROM INVESTING ACTIVITIES

               

   Additions to property, plant and equipment

   

(9,940

)

   

(8,579

)

   Sales of subsidiaries, investments, and property, plant and equipment

   

4,580

     

1,952

 

   Increase in restricted cash and cash equivalents (note 4)

   

0

     

(4,602

)

   Other investing activities - net

   

(2,019

)

   

209

 
                 

    Net cash used in investing activities

   

(7,379

)

   

(11,020

)

                 

CASH FLOWS FROM FINANCING ACTIVITIES

               

   Additions to long-term debt

   

61

     

371

 

   Reductions in long-term debt

   

(83

)

   

(113

)

   Additions/(reductions) in short-term debt - net

   

(993

)

   

(244

)

   Cash dividends to ExxonMobil shareholders

   

(5,390

)

   

(5,158

)

   Cash dividends to minority interests

   

(229

)

   

(177

)

   Changes in minority interests and sales/(purchases)

               

      of affiliate stock

   

(351

)

   

(151

)

   Net ExxonMobil shares acquired

   

(11,985

)

   

(6,235

)

                 

    Net cash used in financing activities

   

(18,970

)

   

(11,707

)

                 

Effects of exchange rate changes on cash

   

(690

)

   

(34

)

                 

Increase/(decrease) in cash and cash equivalents

   

10,709

     

5,482

 

Cash and cash equivalents at beginning of period

   

18,531

     

10,626

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

29,240

   

$

16,108

 
                 

SUPPLEMENTAL DISCLOSURES

               

   Income taxes paid

 

$

15,104

   

$

8,492

 

   Cash interest paid

 

$

361

   

$

219

 


-5-



EXXON MOBIL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.

Basis of Financial Statement Preparation


These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation's 2004 Annual Report on Form 10-K.  In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein.  All such adjustments are of a normal recurring nature.  The Corporation's exploration and production activities are accounted for under the "successful efforts" method.


2.

Accounting for Purchases and Sales of Inventory with the Same Counterparty


At its September 2005 meeting, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 04-13, "Accounting for Purchases and Sales of Inventory with the Same Counterparty".  This issue addresses the question of when it is appropriate to measure purchases and sales of inventory at fair value and record them in cost of sales and revenues and when they should be recorded as exchanges measured at the book value of the item sold.  The EITF concluded that purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another should be combined and recorded as exchanges measured at the book value of the item sold.


ExxonMobil currently records certain crude oil, natural gas, petroleum product and chemical purchases and sales of inventory entered into contemporaneously with the same counterparty as cost of sales and revenues, measured at fair value as agreed upon by a willing buyer and a willing seller.  These transactions occur under contractual arrangements that establish the agreement terms either jointly, in a single contract, or separately, in individual contracts.  This accounting treatment is consistent with long standing industry practice  (although the Corporation understands that some companies in the oil and gas industry may be accounting for these transactions as nonmonetary exchanges).  The EITF consensus will result in the Corporation's accounts "Sales and other operating revenue" and "Crude oil and product purchases" on the Consolidated Statement of Income being reduced by associated amounts with no impact on net income.  All operating segments will be impacted by this change, but the largest effects are in the Downstream.  The EITF consensus will become effective for new arrangements entered into, and modifications or renewals of existing agreements, beginning no later than the second quarter of 2006.


The purchase/sale amounts included in revenue for 2004, 2003 and 2002 are shown below along with total "Sales and other operating revenue" to provide context.


     

2004

 

2003

 

2002

 
     

(millions of dollars)

 


 

Sales and other operating revenue

$

291,252

$

237,054

$

200,949

 
 

Amounts included in sales and other operating

             
 

   revenue for purchases/sales contracts

             
 

   with the same counterparty (1)

 

25,289

 

20,936

 

18,150

 
 

Percent of sales and other operating revenue

 

9%

 

9%

 

9%

 


(1) Associated costs are in "Crude oil and product purchases"


-6-



3.

Suspended Exploratory Well Costs


Effective July 1, 2005, the Corporation adopted Financial Accounting Standards Board Staff Position FAS 19-1 (FSP 19-1), "Accounting for Suspended Well Costs."   FSP 19-1 amended Statement of Financial Accounting Standards No. 19 (FAS 19), "Financial Accounting and Reporting by Oil and Gas Producing Companies," to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.  There were no capitalized exploratory well costs charged to expense upon the adoption of FSP 19-1.


Prior to the adoption of FSP 19-1, ExxonMobil carried as an asset the cost of drilling exploratory wells that found sufficient quantities of reserves to justify their completion as producing wells if the required capital expenditure was made and drilling of additional exploratory wells was under way or firmly planned for the near future.  Once exploration activities demonstrated that sufficient quantities of commercially producible reserves had been discovered, continued capitalization was dependent on project reviews, which took place at least annually, to ensure that satisfactory progress toward ultimate development of the reserves was being achieved.  Exploratory well costs not meeting these criteria were charged to expense.


The two tables below provide details of the changes in the balance of suspended exploratory well costs as well as an aging summary of those costs.

 


   

Nine Months

 
   

Ended

 
 

Change in capitalized suspended

Sept. 30,

 
 

   exploratory well costs

 

2005

 

2004

 

2003

 
     

  (millions of dollars)

 


 

Beginning balance at January 1

$

1,070

 

$

1,093

 

$

1,193

 
 

   Additions pending the determination of proved reserves

 

207

   

139

   

217

 
 

   Charged to expense

 

(55)

   

(98

)

 

(238

)

 

   Reclassifications to wells, facilities and equipment

                 
 

      based on the determination of proved reserves

 

(40)

   

(92

)

 

(123

)

 

   Foreign exchange / Other

 

11

   

28

   

44

 
 

Ending balance

$

1,193

 

$

1,070

 

$

1,093

 



   

 

Period end capitalized suspended

Sept. 30,

 
 

   exploratory well costs

 

2005

 

2004

 

2003

 
     

      (millions of dollars)

 


 

Capitalized for a period of one year or less

$

246

 

$

139

 

$

217

 
                     
 

  Capitalized for a period of between one and five years

 

502

   

510

   

453

 
 

  Capitalized for a period of between five and ten years

 

188

   

172

   

162

 
 

  Capitalized for a period of greater than 10 years

 

257

   

249

   

261

 
 

Capitalized for a period greater than one year

 

947

   

931

   

876

 
 

      Total

$

1,193

 

$

1,070

 

$

1,093

 


-7-



Exploration activity often involves drilling multiple wells, over a number of years, to fully evaluate a project.  The table below provides a numerical breakdown of the number of projects with suspended exploratory well costs which had their first capitalized well drilled in the preceding 12 months and those that have had exploratory well costs capitalized for a period greater than 12 months.


   

Sept. 30,

 
     

2005

 

2004

 

2003

 


 

Number of projects with first capitalized well drilled

                 
 

   in the preceding 12 months

 

20

   

8

   

13

 
 

Number of projects that have exploratory well costs

                 
 

   capitalized for a period greater than 12 months

 

59

   

61

   

76

 
 

      Total

 

79

   

69

   

89

 


Of the 59 projects that have exploratory well costs capitalized for a period greater than twelve months as of September 30, 2005, 18 projects have drilling in the preceding 12 months or exploratory activity planned in the next two years, while the remaining 41 projects are those with completed exploratory activity progressing toward development.  The table below provides additional detail for those 41 projects which total $623 million dollars.




Country / Project


Sept. 30, 2005

Years Wells Drilled



Comment

   

(millions of dollars)

 

Angola

     
 

Marimba

11

 

2001

Development in progress on first phase of Marimba deepwater project with proved reserves booked; development of second phase awaiting capacity in existing/planned infrastructure.

 

Mavacola

12

 

2001-2002

Development awaiting capacity in existing/planned infrastructure; planned subsea tieback to floating production system; submission of Declaration of Commerciality in 2005.

 

Mondo

24

 

2000-2003

Planned subsea tieback to floating production system; initial project funding in 2003; Declaration of Commerciality approved by government in 2003; project funding is anticipated in 2005 or 2006.

 

Orquidea/Violeta

6

 

1999-2001

Planned subsea tieback to floating production system; high-resolution 3-D seismic survey in 2004; further technical evaluation and reservoir studies were conducted in 2005.

 

Saxi/Batuque

24

 

2000-2003

Planned subsea tieback to floating production system; initial project funding in 2003; Declaration of Commerciality approved by government in 2005.

Australia

       
 

Gorgon/Jansz

73

 

1980-2003

Gorgon and Jansz resources to be developed as integrated LNG project; land access rights for onshore plant secured in 2003; co-venturers have agreed to combine these resources and redistribute their equity interests, with governmental approval of this plan anticipated by year-end 2005; initial project funding and engineering began in 2005.

 

Kipper/East Pilchard

10

 

1986-2001

Bass Strait project in design phase; planned tie-in to existing platform; initial Kipper funding began in 2005 following execution of Memorandum of Understanding between co-venturers; development of East Pilchard phase awaiting capacity in existing/planned infrastructure.

 

Whiptail

3

 

2004

Progressing development concept with planned subsea tieback to existing Bass Strait platform.

Canada

       
 

Hebron

31

 

1999-2000

Progressing development concept with co-venturer following resolution of the Joint Operating Agreement in 2005; recent efforts focused on further technical evaluation of wells and reservoir using seismic reprocessing and well core analysis; initial project funding and engineering began in 2005.

 

Terra Nova

4

 

2001

Drilling plans to develop far east area of field have been approved by provincial authority in 2005.

-8-





Country / Project


Sept. 30, 2005

Years Wells Drilled



Comment

   

(millions of dollars)

 

Indonesia

       
 

Cepu

41

 

1998-2001

Progressing license term extension and commercial agreements with the Government of Indonesia; a Memorandum of Understanding and a Production Sharing Contract have been signed and other agreements are progressing; initial project funding and engineering began in 2001, with development anticipated upon conclusion of negotiations.

 

Natuna

118

 

1981-1983

Intent to proceed to the next phase of development communicated to government in 2004; discussions with government on near-term development work plans are in progress; further technical evaluation and gas marketing activities progressed in 2005.

Nigeria

       
 

Etoro/Isobo

9

 

2002

Offshore satellite development which will tie back to an existing production facility.

 

Other

(5 projects)

15

 

2001-2002

Actively pursuing development of several additional offshore satellite discoveries which will tie back to existing production facilities.

Norway

       
 

Lavrans

20

 

1995-1999

Development awaiting capacity in existing/planned infrastructure; planned subsea tieback to existing floating production system; evaluation of phased ullage filling scenarios progressing.

 

Skarv/Idun

28

 

1998-2002

Planned subsea tieback to floating production system; export infrastructure and development plan agreed to with partners in 2005; submission of Plan of Development to the government anticipated in 2006; initial project funding and engineering began in 2005.

 

Other

(4 projects)

7

 

1992-2002

Progressing several smaller North Sea developments expected to result in proved reserve additions over next few years.

Papua New Guinea

     
 

Hides

35

 

1993-1998

Early engineering studies complete; negotiations with customers on sales terms are in progress; initial project funding and engineering began in 2004; reservoir pressure data acquired in 2005.

Russia

       
 

Sakhalin-1, Phase 3

26

 

1996-1998

Actively progressing third phase of the Sakhalin-1 project to utilize capacity in facilities and infrastructure in Phase 1; Phase 1 development underway with first production in 2005; production testing program planned in 2006 to gather additional reservoir data.

United Kingdom

       
 

Merganser

12

 

1995

Planned subsea tieback to existing U.K. North Sea facilities; project funding anticipated in 2005 or 2006.

 

Puffin

38

 

1981-1986

Development awaiting capacity in existing infrastructure; planned tieback to existing U.K. North Sea production facility.

 

Starling

8

 

2003

Planned subsea tieback to existing U.K. North Sea facilities; project funding anticipated in 2005 or 2006.

 

Other

(2 projects)

3

 

2002-2003

 

United States

       
 

Point Thomson

28

 

1977-1980

Progressing development option consisting of tie-in to proposed Alaska gas pipeline; negotiations of gas pipeline fiscal terms with state of Alaska ongoing; conceptual engineering planned for 2006.

Other

       
 

Various

(9 projects)

37

 

1979-2004

Projects primarily awaiting capacity in existing or planned infrastructure.

Total (41 projects)

$623

     


-9-



4.

Litigation and Other Contingencies


Litigation


A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits and tax disputes. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a materially adverse effect upon the Corporation's operations or financial condition.


A number of lawsuits, including class actions, were brought in various courts against Exxon Mobil Corporation and certain of its subsidiaries relating to the accidental release of crude oil from the tanker Exxon Valdez in 1989. The vast majority of the compensatory claims have been resolved. All of the punitive damage claims were consolidated in the civil trial that began in May 1994.


In that trial, on September 24, 1996, the United States District Court for the District of Alaska entered a judgment in the amount of $5 billion in punitive damages to a class composed of all persons and entities who asserted claims for punitive damages from the Corporation as a result of the Exxon Valdez grounding. ExxonMobil appealed the judgment. On November 7, 2001, the United States Court of Appeals for the Ninth Circuit vacated the punitive damage award as being excessive under the Constitution and remanded the case to the District Court for it to determine the amount of the punitive damage award consistent with the Ninth Circuit's holding. The Ninth Circuit upheld the compensatory damage award, which has been paid. On December 6, 2002, the District Court reduced the punitive damage award from $5 billion to $4 billion. Both the plaintiffs and ExxonMobil appealed that decision to the Ninth Circuit. The Ninth Circuit panel vacated the District Court's $4 billion punitive damage award without argument and sent the case back for the District Court to reconsider in light of the recent U.S. Supreme Court decision in Campbell v. State Farm. On January 28, 2004, the District Court reinstated the punitive damage award at $4.5 billion plus interest. ExxonMobil and the plaintiffs have appealed the decision to the Ninth Circuit. The Corporation has posted a $5.4 billion letter of credit.


On January 29, 1997, a settlement agreement was concluded resolving all remaining matters between the Corporation and various insurers arising from the Valdez accident. Under terms of this settlement, ExxonMobil received $480 million. Final income statement recognition of this settlement continues to be deferred in view of uncertainty regarding the ultimate cost to the Corporation of the Valdez accident. Management believes that the likelihood of the judgment being upheld is remote. While it is reasonably possible that a liability may have been incurred arising from the Exxon Valdez grounding, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability.


On December 19, 2000, a jury in the 15th Judicial Circuit Court of Montgomery County, Alabama, returned a verdict against the Corporation in a dispute over royalties in the amount of $88 million in compensatory damages and $3.4 billion in punitive damages in the case of Exxon Corporation v. State of Alabama, et al. The verdict was upheld by the trial court on May 4, 2001. On December 20, 2002, the Alabama Supreme Court vacated the $3.5 billion jury verdict. The case was retried and on November 14, 2003, a state district court jury in Montgomery, Alabama, returned a verdict against Exxon Mobil Corporation. The verdict included $63.5 million in compensatory damages and $11.8 billion in punitive damages. On March 29, 2004, the district


-10-



court judge reduced the amount of punitive damages to $3.5 billion. ExxonMobil believes the judgment is not justified by the evidence, that any punitive damage award is not justified by either the facts or the law, and that the amount of the award is grossly excessive and unconstitutional. ExxonMobil has appealed the decision to the Alabama Supreme Court. Management believes that the likelihood of the judgment being upheld is remote. While it is reasonably possible that a liability may have been incurred by ExxonMobil from this dispute over royalties, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability. On May 4, 2004, the Corporation posted a $4.5 billion supersedeas bond as required by Alabama law to stay execution of the judgment pending appeal. The Corporation has pledged to the issuer of the bond collateral consisting of cash and short-term, high-quality securities with an aggregate value of approximately $4.6 billion. This collateral is reported as restricted cash and cash equivalents on the Condensed Consolidated Balance Sheet. Under the terms of the pledge agreement, the Corporation is entitled to receive the income generated from the cash and securities and to make investment decisions, but is restricted from using the pledged cash and securities for any other purpose until such time the bond is canceled.


On May 22, 2001, a state court jury in New Orleans, Louisiana, returned a verdict against the Corporation and three other entities in a case brought by a landowner claiming damage to his property. The property had been leased by the landowner to a company that performed pipe cleaning and storage services for customers, including the Corporation. The jury awarded the plaintiff $56 million in compensatory damages (90 percent to be paid by the Corporation) and $1 billion in punitive damages (all to be paid by the Corporation). The damage related to the presence of naturally occurring radioactive material (NORM) on the site resulting from pipe cleaning operations. The award was upheld at the trial court. ExxonMobil appealed the judgment to the Louisiana Fourth Circuit Court of Appeals, which reduced the punitive damage award to $112 million. On June 15, 2005, the Corporation appealed this decision to the Louisiana Supreme Court as it continues to believe that the judgment should be substantially reduced on legal and constitutional grounds. While it is reasonably possible that a liability may have been incurred by ExxonMobil from this dispute over property damages, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability.


In Allapattah v. Exxon, a jury in the United States District Court for the Southern District of Florida determined in January 2001 that a class of all Exxon dealers between March 1983 and August 1994 had been overcharged between 1.03 and 1.4 cents per gallon for gasoline. Exxon sold a total of 39.8 billion gallons of gasoline to its dealers during this period. The estimated value of the potential claims associated with the 39.8 billion gallons of gasoline is $494 million. Including related interest, the total is approximately $1.3 billion. On June 11, 2003, the Eleventh Circuit Court of Appeals affirmed the judgment and on March 15, 2004, denied a petition for Rehearing En Banc. On October 12, 2004, the U.S. Supreme Court granted review of an issue raised by ExxonMobil as to whether the class in the District Court judgment should include members that individually do not satisfy the $50,000 minimum amount-in-controversy requirement in federal court. In light of the Supreme Court's decision to grant review of only part of ExxonMobil's appeal, ExxonMobil took an after-tax charge of $550 million in the third quarter of 2004 reflecting the estimated liability, including interest and after considering potential set-offs and defenses, for the claims in excess of $50,000. By a 5-to-4 decision in June 2005, the Supreme Court granted the District Court the right to hear the claims of class members that did not satisfy the $50,000 minimum amount-in-controversy requirement.  Exxon Mobil Corporation took an after-tax charge of $200 million in the second quarter of 2005.


-11-



Exxon Mobil Corporation and Saudi Basic Industries Corporation (SABIC) have been involved in litigation related to charges by SABIC for license agreements to a joint venture between the companies.  On February 22, 2005, the Delaware Supreme Court affirmed a trial court's judgment in the Corporation's favor and denied SABIC's motion for reconsideration.  SABIC paid $475 million to the Corporation per the Delaware Supreme Court ruling.  On July 22, 2005, SABIC appealed to the United States Supreme Court.  On October 11, 2005, the United States Supreme Court denied certiorari on the appeal.  In light of the U.S. Supreme Court's action the Corporation will recognize a positive after-tax earnings impact of approximately $390 million in fourth quarter 2005 results.


Tax issues for 1986 to 1993 remain pending before the U.S. Tax Court. The ultimate resolution of these issues is not expected to have a materially adverse effect upon the Corporation's operations or financial condition.


Other Contingencies

 

As of September 30, 2005

 

Equity

 

Other

 
 

Company

 

Third Party

 
 

Obligations

 

Obligations

Total

 

(millions of dollars)

Guarantees of excise taxes and custom duties   

                   

    under reciprocal arrangements

 

$

0

 

$

1,048

 

$

1,048

 

Other guarantees

   

2,305

   

338

   

2,643

 

Total

 

$

2,305

 

$

1,386

 

$

3,691

 


The Corporation and certain of its consolidated subsidiaries were contingently liable at September 30, 2005 for $3,691 million, primarily relating to guarantees for notes, loans and performance under contracts. This included $1,048 million representing guarantees of non-U.S. excise taxes and customs duties of other companies, entered into as a normal business practice, under reciprocal arrangements. Also included in this amount were guarantees by consolidated affiliates of $2,305 million, representing ExxonMobil's share of obligations of certain equity companies.


Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation's operations or financial condition. The Corporation's outstanding unconditional purchase obligations at September 30, 2005 were similar to those at the prior year-end period. Unconditional purchase obligations as defined by accounting standards are those long-term commitments that are noncancelable or cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services.


The operations and earnings of the Corporation and its affiliates throughout the world have been, and may in the future be, affected from time to time in varying degree by political developments and laws and regulations, such as forced divestiture of assets; restrictions on production, imports and exports; price controls; tax increases and retroactive tax claims; expropriation of property; cancellation of contract rights and environmental regulations. Both the likelihood of such occurrences and their overall effect upon the Corporation vary greatly from country to country and are not predictable.


-12-



5.

Nonowner Changes in Shareholders' Equity


 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2005

 

2004

 

2005

 

2004

 
 

(millions of dollars)

 


                         

Net income

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 

Changes in other nonowner changes in equity

                       

Foreign exchange translation adjustment


 

203

   

559

   

(2,147

)

 

(179

)

Minimum pension liability adjustment

 

152

   

0

   

152

   

0

 

Unrealized gains/(losses) on stock investments

 

0

   

85

   

0

   

(92

)

Reclassification adjustment for gain on sale of

                       

    stock investment included in net income

 

0

   

0

   

(428

)

 

0

 

Total nonowner changes in shareholders' equity

$

10,275

 

$

6,324

 

$

22,997

 

$

16,639

 



6.

Earnings Per Share

 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
   

2005

   

2004

   

2005

   

2004

 
                         

NET INCOME PER COMMON SHARE

                       

Net income (millions of dollars)

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 

 

                       

Weighted average number of common shares

                       

  outstanding (millions of shares)

 

6,241

   

6,464

   

6,304

   

6,505

 
                         

Net income per common share (dollars)

$

1.60

 

$

0.88

 

$

4.04

 

$

2.60

 
                         

NET INCOME PER COMMON SHARE

                       

 - ASSUMING DILUTION

                       

Net income (millions of dollars)

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 
                         

Weighted average number of common shares

                       

  outstanding (millions of shares)

 

6,241

   

6,464

   

6,304

   

6,505

 

    Effect of employee stock-based awards

 

62

   

44

   

57

   

37

 

Weighted average number of common shares

                       

  outstanding - assuming dilution

 

6,303

   

6,508

   

6,361

   

6,542

 
                         

Net income per common share

                       

   - assuming dilution (dollars)

$

1.58

 

$

0.88

 

$

4.00

 

$

2.59

 



-13-



7.

Annuity Benefits and Other Postretirement Benefits


 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2005

 

2004

 

2005

 

2004

 
 

(millions of dollars)

 


Annuity Benefits - U.S.

                       

   Components of net benefit cost

                       

      Service cost

$

81

 

$

76

 

$

254

 

$

230

 

      Interest cost

 

150

   

151

   

469

   

455

 

      Expected return on plan assets

 

(154

)

 

(155

)

 

(484

)

 

(462

)

      Amortization of actuarial loss/(gain)

                       

        and prior service cost

 

67

   

71

   

209

   

214

 

      Net pension enhancement and

                       

        curtailment/settlement expense

 

30

   

45

   

94

   

133

 

      Net benefit cost

$

174

 

$

188

 

$

542

 

$

570

 
                         
                         

Annuity Benefits - Non-U.S.

                       

   Components of net benefit cost

                       

      Service cost

$

89

 

$

82

 

$

284

 

$

253

 

      Interest cost

 

193

   

198

   

619

   

593

 

      Expected return on plan assets

 

(175

)

 

(170

)

 

(589

)

 

(506

)

      Amortization of actuarial loss/(gain)

                       

        and prior service cost

 

101

   

93

   

314

   

274

 

      Net pension enhancement and

                       

        curtailment/settlement expense

 

1

   

13

   

2

   

30

 

      Net benefit cost

$

209

 

$

216

 

$

630

 

$

644

 
                         
                         

Other Postretirement Benefits

                       

   Components of net benefit cost

                       

      Service cost

$

18

 

$

17

 

$

52

 

$

43

 

      Interest cost

 

77

   

80

   

227

   

218

 

      Expected return on plan assets

 

(10

)

 

(10

)

 

(29

)

 

(28

)

      Amortization of actuarial loss/(gain)

                       

        and prior service cost

 

51

   

52

   

151

   

128

 

      Net benefit cost

$

136

 

$

139

 

$

401

 

$

361

 



-14-



8.

Disclosures about Segments and Related Information


 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2005

 

2004

 

2005

 

2004

 
 

(millions of dollars)

 

EARNINGS AFTER INCOME TAX

                       

  Upstream

                       

    United States

$

1,671

 

$

1,173

 

$

4,413

 

$

3,564

 

    Non-U.S.

 

5,678

   

2,756

   

12,898

   

8,224

 

  Downstream

                       

    United States

 

1,109

   

11

   

2,753

   

1,310

 

    Non-U.S.

 

1,019

   

840

   

2,849

   

2,052

 

  Chemical

                       

    United States

 

70

   

329

   

905

   

595

 

    Non-U.S.

 

402

   

680

   

1,813

   

1,585

 

  All other

 

(29

)

 

(109

)

 

(211

)

 

(420

)

  Corporate total

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 
                         

SALES AND OTHER OPERATING REVENUE (1) (2)

                   

  Upstream

                       

     United States

$

1,470

 

$

1,442

 

$

4,713

 

$

4,323

 

     Non-U.S.

 

6,585

   

3,921

   

17,066

   

12,338

 

  Downstream

                       

     United States

 

26,026

   

18,284

   

67,768

   

52,041

 

     Non-U.S.

 

54,966

   

43,837

   

149,910

   

121,676

 

  Chemical

                       

     United States

 

2,853

   

2,808

   

8,946

   

7,633

 

     Non-U.S.

 

4,814

   

4,557

   

14,402

   

12,101

 

  All other

 

17

   

5

   

23

   

22

 

  Corporate total

$

96,731

 

$

74,854

 

$

262,828

 

$

210,134

 
                         

(1) Includes excise taxes

                       

(2) Includes amounts in sales and other operating

                       

        revenue for purchases/sales contracts with

                       

        the same counterparty

                       
                         

INTERSEGMENT REVENUE

                       

  Upstream

                       

     United States

$

1,922

 

$

1,677

 

$

5,396

 

$

4,808

 

     Non-U.S.

 

8,782

   

5,843

   

21,832

   

15,400

 

  Downstream

                       

     United States

 

2,732

   

2,130

   

7,230

   

5,768

 

     Non-U.S.

 

12,067

   

8,310

   

30,578

   

22,096

 

  Chemical

                       

     United States

 

1,920

   

1,368

   

4,997

   

3,604

 

     Non-U.S.

 

1,680

   

1,126

   

4,372

   

3,115

 

  All other

 

81

   

73

   

225

   

240

 


-15-



9.

Condensed Consolidating Financial Information Related to Guaranteed Securities Issued by Subsidiaries


Exxon Mobil Corporation has fully and unconditionally guaranteed the 6.125% notes due 2008 ($160 million of long-term debt at September 30, 2005) of Exxon Capital Corporation and the deferred interest debentures due 2012 ($1,356 million long-term) and the debt securities due 2006-2011 ($75 million long-term and $10 million short-term) of SeaRiver Maritime Financial Holdings, Inc.  Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc. are 100 percent owned subsidiaries of Exxon Mobil Corporation.


The following condensed consolidating financial information is provided for Exxon Mobil Corporation, as guarantor, and for Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc., as issuers, as an alternative to providing separate financial statements for the issuers.  The accounts of Exxon Mobil Corporation, Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc. are presented utilizing the equity method of accounting for investments in subsidiaries.



 

Exxon Mobil Corporation Parent  Guarantor

 



Exxon Capital Corporation

 

SeaRiver Maritime Financial Holdings, Inc.

 




All Other Subsidiaries

 


Consolidating and Eliminating Adjustments

 





Consolidated

 
 

(millions of dollars)

 
                                     

Condensed consolidated statement of income for three months ended September 30, 2005

           

Revenues and other income

                                   

Sales and other operating revenue,

including excise taxes


$


3,465

 


$


-

 


$


-

 


$


93,266

 


$


-

 


$


96,731

 

Income from equity affiliates

 

9,197

   

-

   

(9

)

 

3,085

   

(9,193

)

 

3,080

 

Other income

 

255

   

-

   

-

   

651

   

-

   

906

 

Intercompany revenue

 

9,632

   

14

   

14

   

76,063

   

(85,723

)

 

-

 

Total revenues and other income

 

22,549

   

14

   

5

   

173,065

   

(94,916

)

 

100,717

 

Costs and other deductions

                                   

Crude oil and product purchases

 

8,565

   

-

   

-

   

125,338

   

(81,558

)

 

52,345

 

Production and manufacturing

expenses

 


1,754

   


1

   


-

   


6,061

   


(1,279


)

 


6,537

 

 

Selling, general and administrative

expenses

 


578

   


-

   


-

   


3,327

   


(140


)

 


3,765

 

Depreciation and depletion

 

344

   

1

   

-

   

2,168

   

-

   

2,513

 

Exploration expenses, including dry

holes

 


38

   


-

   


-

   


210

   


-

   


248

 

Interest expense

 

707

   

4

   

40

   

2,089

   

(2,767

)

 

73

 

Excise taxes

 

-

   

-

   

-

   

8,160

   

-

   

8,160

 

Other taxes and duties

 

7

   

-

   

-

   

10,843

   

-

   

10,850

 

Income applicable to minority and

preferred interests

 


-

   


-

   


-

   


174

   


-

   


174

 

Total costs and other deductions

 

11,993

   

6

   

40

   

158,370

   

(85,744

)

 

84,665

 

Income before income taxes

 

10,556

   

8

   

(35

)

 

14,695

   

(9,172

)

 

16,052

 

Income taxes

 

636

   

3

   

(9

)

 

5,502

   

-

   

6,132

 

Net income

$

9,920

 

$

5

 

$

(26

)

$

9,193

 

$

(9,172

)

$

9,920

 


-16-



 

Exxon Mobil Corporation Parent  Guarantor

 



Exxon Capital Corporation

 

SeaRiver Maritime Financial Holdings,  Inc.

 




All Other Subsidiaries

 


Consolidating and Eliminating Adjustments

 





Consolidated

 
 

(millions of dollars)

 
                                     

Condensed consolidated statement of income for three months ended September 30, 2004

             

Revenues and other income

                                   

Sales and other operating revenue,

   including excise taxes


$


3,240

 


$


-

 


$


-

 


$


71,614

 


$


-

 


$


74,854

 

Income from equity affiliates

 

5,488

   

-

   

2

   

1,216

   

(5,487

)

 

1,219

 

Other income

 

111

   

-

   

-

   

191

   

-

   

302

 

Intercompany revenue

 

6,395

   

9

   

5

   

51,628

   

(58,037

)

 

-

 

Total revenues and other income

 

15,234

   

9

   

7

   

124,649

   

(63,524

)

 

76,375

 

Costs and other deductions

                                   

Crude oil and product purchases

 

6,106

   

-

   

-

   

86,128

   

(55,187

)

 

37,047

 

Production and manufacturing

expenses

 


1,660

   


1

   


-

   


5,327

   


(1,267


)

 


5,721

 

 

Selling, general and administrative

expenses

 


525

   


1

   


-

   


2,921

   


(75


)

 


3,372

 

Depreciation and depletion

 

349

   

1

   

-

   

2,081

   

-

   

2,431

 

Exploration expenses, including dry

holes

 


73

   


-

   


-

   


315

   


-

 



388

 

Interest expense

 

683

   

8

   

34

   

1,260

   

(1,526

)

 

459

 

Excise taxes

 

-

   

-

   

-

   

7,045

   

-

   

7,045

 

Other taxes and duties

 

4

   

-

   

-

   

10,175

   

-

   

10,179

 

Income applicable to minority and

  preferred interests

 


-

   


-

   


-

   


199

   


-

   


199

 

Total costs and other deductions

 

9,400

   

11

   

34

   

115,451

   

(58,055

)

 

66,841

 

Income before income taxes

 

5,834

   

(2

)

 

(27

)

 

9,198

   

(5,469

)

 

9,534

 

Income taxes

 

154

   

(1

)

 

(10

)

 

3,711

   

-

   

3,854

 

Net income

$

5,680

 

$

(1

)

$

(17

)

$

5,487

 

$

(5,469

)

$

5,680

 


Condensed consolidated statement of income for nine months ended September 30, 2005

           

Revenues and other income

                                   

Sales and other operating revenue,

including excise taxes


$


11,260

 


$


-

 


$


-

 


$


251,568

 


$


-

 


$


262,828

 

Income from equity affiliates

 

23,272

   

-

   

(1

)

 

5,957

   

(23,271

)

 

5,957

 

Other income

 

564

   

-

   

-

   

1,987

   

-

   

2,551

 

Intercompany revenue

 

24,412

   

36

   

37

   

201,023

   

(225,508

)

 

-

 

Total revenues and other income

 

59,508

   

36

   

36

   

460,535

   

(248,779

)

 

271,336

 

Costs and other deductions

                                   

Crude oil and product purchases

 

22,696

   

-

   

-

   

327,907

   

(214,269

)

 

136,334

 

Production and manufacturing

expenses

 


5,031

   


2

   


-

   


17,969

   


(3,913


)

 


19,089

 

 

Selling, general and administrative

expenses

 


1,776

   


1

   


-

   


9,315

   


(368


)

 


10,724

 

Depreciation and depletion

 

1,011

   

3

   

-

   

6,568

   

-

   

7,582

 

Exploration expenses, including dry

holes

 


115

   


-

   


-

   


520

   


-

   


635

 

Interest expense

 

1,795

   

11

   

118

   

5,462

   

(7,013

)

 

373

 

Excise taxes

 

-

   

-

   

-

   

22,913

   

-

   

22,913

 

Other taxes and duties

 

15

   

-

   

-

   

31,489

   

-

   

31,504

 

Income applicable to minority and

preferred interests

 


-

   


-

   


-

   


468

   


-

   


468

 

Total costs and other deductions

 

32,439

   

17

   

118

   

422,611

   

(225,563

)

 

229,622

 

Income before income taxes

 

27,069

   

19

   

(82

)

 

37,924

   

(23,216

)

 

41,714

 

Income taxes

 

1,649

   

7

   

(28

)

 

14,666

   

-

   

16,294

 

Net income

$

25,420

 

$

12

 

$

(54

)

$

23,258

 

$

(23,216

)

$

25,420

 


-17-



 

Exxon Mobil Corporation Parent  Guarantor

 



Exxon Capital Corporation

 

SeaRiver Maritime Financial Holdings, Inc.

 




All Other Subsidiaries

 


Consolidating and Eliminating Adjustments

 





Consolidated

 
 

(millions of dollars)

 
                                     

Condensed consolidated statement of income for nine months ended September 30, 2004

           

Revenues and other income

                                   

Sales and other operating revenue,

including excise taxes


$


9,571

 


$


-

 


$


-

 


$


200,563

 


$


-

 


$


210,134

 

Income from equity affiliates

 

15,639

   

-

   

10

   

3,486

   

(15,648

)

 

3,487

 

Other income

 

264

   

-

   

-

   

785

   

-

   

1,049

 

Intercompany revenue

 

17,311

   

23

   

14

   

139,442

   

(156,790

)

 

-

 

Total revenues and other income

 

42,785

   

23

   

24

   

344,276

   

(172,438

)

 

214,670

 

Costs and other deductions

                                   

Crude oil and product purchases

 

16,410

   

-

   

-

   

232,660

   

(148,498

)

 

100,572

 

Production and manufacturing

expenses

 


4,912

   


2

   


-

   


15,781

   


(3,763


)

 


16,932

 

 

Selling, general and administrative

expenses

 


1,484

   


3

   


-

   


8,665

   


(206


)

 


9,946

 

Depreciation and depletion

 

1,062

   

3

   

1

   

6,088

   

-

   

7,154

 

Exploration expenses, including dry

holes

 


174

   


-

   


-

   


615

   


-

   


789

 

Interest expense

 

1,016

   

17

   

101

   

3,771

   

(4,348

)

 

557

 

Excise taxes

 

-

   

-

   

-

   

19,975

   

-

   

19,975

 

Other taxes and duties

 

10

   

-

   

-

   

30,264

   

-

   

30,274

 

Income applicable to minority and

preferred interests

 


-

   


-

   


-

   


495

   


-

   


495

 

Total costs and other deductions

 

25,068

   

25

   

102

   

318,314

   

(156,815

)

 

186,694

 

Income before income taxes

 

17,717

   

(2

)

 

(78

)

 

25,962

   

(15,623

)

 

27,976

 

Income taxes

 

807

   

(2

)

 

(31

)

 

10,292

   

-

   

11,066

 

Net income

$

16,910

 

$

-

 

$

(47

)

$

15,670

 

$

(15,623

)

$

16,910

 


-18-


 

Exxon Mobil Corporation Parent  Guarantor

 



Exxon Capital Corporation

 

SeaRiver Maritime Financial Holdings,  Inc.

 




All Other Subsidiaries

 


Consolidating and Eliminating Adjustments

 





Consolidated

 
 

(millions of dollars)

 
                                     

Condensed consolidated balance sheet as of September 30, 2005

             

Cash and cash equivalents

$

13,671

 

$

-

 

$

-

 

$

15,569

 

$

-

 

$

29,240

 

Cash and cash equivalents - restricted

 

4,604

   

-

   

-

   

-

   

-

   

4,604

 

Notes and accounts receivable - net

 

2,194

   

-

   

-

   

23,999

   

-

   

26,193

 

Inventories

 

1,253

   

-

   

-

   

9,723

   

-

   

10,976

 

Prepaid taxes and expenses

 

1,914

   

-

   

22

   

1,781

   

-

   

3,717

 

      Total current assets

 

23,636

   

-

   

22

   

51,072

   

-

   

74,730

 

Property, plant and equipment - net

 

15,548

   

92

   

-

   

91,454

   

-

   

107,094

 

Investments and other assets

 

159,753

   

-

   

458

   

396,907

   

(529,221

)

 

27,897

 

Intercompany receivables

 

10,522

   

1,069

   

1,723

   

374,522

   

(387,836

)

 

-

 

      Total assets

$

209,459

 

$

1,161

 

$

2,203

 

$

913,955

 

$

(917,057

)

$

209,721

 
                                     

Notes and loan payables

$

67

 

$

-

 

$

10

 

$

2,254

 

$

-

 

$

2,331

 

Accounts payable and accrued liabilities

 

3,322

   

1

   

1

   

35,731

   

-

   

39,055

 

Income taxes payable

 

-

   

8

   

-

   

9,481

   

-

   

9,489

 

      Total current liabilities

 

3,389

   

9

   

11

   

47,466

   

-

   

50,875

 

Long-term debt

 

261

   

160

   

1,431

   

4,274

   

-

   

6,126

 

Deferred income tax liabilities

 

2,650

   

27

   

263

   

17,585

   

-

   

20,525

 

Other long-term liabilities

 

5,788

   

28

   

-

   

18,489

   

-

   

24,305

 

Intercompany payables

 

89,481

   

134

   

383

   

297,838

   

(387,836

)

 

-

 

      Total liabilities

 

101,569

   

358

   

2,088

   

385,652

   

(387,836

)

 

101,831

 
                                     

Earnings reinvested

 

154,420

   

18

   

(354

)

 

103,803

   

(103,467

)

 

154,420

 

Other shareholders' equity

 

(46,530

)

 

785

   

469

   

424,500

   

(425,754

)

 

(46,530

)

      Total shareholders' equity

 

107,890

   

803

   

115

   

528,303

   

(529,221

)

 

107,890

 

      Total liabilities and

        shareholders' equity


$


209,459

 


$


1,161

 


$


2,203

 


$


913,955

 


$


(917,057


)


$


209,721

 



Condensed consolidated balance sheet as of December 31, 2004

             

Cash and cash equivalents

$

10,055

 

$

4

 

$

-

 

$

8,472

 

$

-

 

$

18,531

 

Cash and cash equivalents - restricted

 

4,604

   

-

   

-

   

-

   

-

   

4,604

 

Notes and accounts receivable - net

 

3,262

   

-

   

-

   

22,097

   

-

   

25,359

 

Inventories

 

1,117

   

-

   

-

   

8,370

   

-

   

9,487

 

Prepaid taxes and expenses

 

79

   

-

   

-

   

2,317

   

-

   

2,396

 

      Total current assets

 

19,117

   

4

   

-

   

41,256

   

-

   

60,377

 

Property, plant and equipment - net

 

15,601

   

95

   

-

   

92,943

   

-

   

108,639

 

Investments and other assets

 

139,907

   

-

   

506

   

375,689

   

(489,862

)

 

26,240

 

Intercompany receivables

 

9,728

   

1,090

   

1,594

   

322,469

   

(334,881

)

 

-

 

      Total assets

$

184,353

 

$

1,189

 

$

2,100

 

$

832,357

 

$

(824,743

)

$

195,256

 
                                     

Notes and loan payables

$

-

 

$

-

 

$

10

 

$

3,270

 

$

-

 

$

3,280

 

Accounts payable and accrued liabilities

 

2,934

   

3

   

-

   

28,826

   

-

   

31,763

 

Income taxes payable

 

1,348

   

-

   

1

   

6,589

   

-

   

7,938

 

      Total current liabilities

 

4,282

   

3

   

11

   

38,685

   

-

   

42,981

 

Long-term debt

 

261

   

160

   

1,324

   

3,268

   

-

   

5,013

 

Deferred income tax liabilities

 

3,152

   

28

   

268

   

17,644

   

-

   

21,092

 

Other long-term liabilities

 

5,461

   

22

   

-

   

18,931

   

-

   

24,414

 

Intercompany payables

 

69,441

   

185

   

403

   

264,852

   

(334,881

)

 

-

 

      Total liabilities

 

82,597

   

398

   

2,006

   

343,380

   

(334,881

)

 

93,500

 
                                     

Earnings reinvested

 

134,390

   

6

   

(300

)

 

81,380

   

(81,086

)

 

134,390

 

Other shareholders' equity

 

(32,634

)

 

785

   

394

   

407,597

   

(408,776

)

 

(32,634

)

      Total shareholders' equity

 

101,756

   

791

   

94

   

488,977

   

(489,862

)

 

101,756

 

      Total liabilities and

        shareholders' equity


$


184,353

 


$


1,189

 


$


2,100

 


$


832,357

 


$


(824,743


)


$


195,256

 


-19-


 

Exxon Mobil Corporation Parent  Guarantor

 



Exxon Capital Corporation

 

SeaRiver Maritime Financial Holdings,  Inc.

 




All Other Subsidiaries

 


Consolidating and Eliminating Adjustments

 





Consolidated

 
 

(millions of dollars)

 
                                     

Condensed consolidated statement of cash flows for nine months ended September 30, 2005

       

Cash provided by/(used in) operating

activities


$


2,940

 


$


25

 


$


74

 


$


35,544

 


$


(835


)


$


37,748

 

Cash flows from investing activities

                                   

Additions to property, plant and

equipment

 


(999


)

 


-

   


-

   


(8,941


)

 


-

   


(9,940


)

Sales of long-term assets

 

220

   

-

   

-

   

4,360

   

-

   

4,580

 

Increase in restricted cash and cash

equivalents

 


-

   


-

   


-

   


-

   


-

   


-

 

Net intercompany investing

 

18,762

   

21

   

(129

)

 

(18,820

)

 

166

   

-

 

All other investing, net

 

1

   

-

   

-

   

(2,020

)

 

-

   

(2,019

)

Net cash provided by/(used in)

investing activities

 


17,984

   


21


 


(129


)

 


(25,421


)

 


166


 


(7,379


)

Cash flows from financing activities

                                   

Additions to long-term debt

 

-

   

-

   

-

   

61

   

-

   

61

 

Reductions in long-term debt

 

-

   

-

   

-

   

(83

)

 

-

   

(83

)

Additions/(reductions) in short-term

debt - net

 


67

   


-


 


-

   


(1,060


)

 


-

   


(993


)

Cash dividends

 

(5,390

)

 

-

   

-

   

(835

)

 

835

   

(5,390

)

Net ExxonMobil shares sold/(acquired)

 

(11,985

)

 

-

   

-

   

-

   

-

   

(11,985

)

Net intercompany financing activity

 

-

   

(50

)

 

(20

)

 

161

   

(91

)

 

-

 

All other financing, net

 

-

   

-

   

75

   

(580

)

 

(75

)

 

(580

)

Net cash provided by/(used in)

financing activities

 


(17,308


)

 


(50


)

 


55


 


(2,336


)

 


669

   


(18,970


)

Effects of exchange rate changes

on cash

 


-

   


-

   


-

   


(690


)

 


-

   


(690


)

Increase/(decrease) in cash and cash

equivalents


$


3,616



$


(4


)


$


-

 


$


7,097

 


$


-

 


$


10,709

 


Condensed consolidated statement of cash flows for nine months ended September 30, 2004

           

Cash provided by/(used in) operating

activities


$


5,665

 


$


(6


)


$


10

 


$


25,207

 


$


(2,633


)


$


28,243

 

Cash flows from investing activities

                                   

Additions to property, plant and

equipment

 


(802


)

 


-

   


-

   


(7,777


)

 


-

   


(8,579


)

Sales of long-term assets

 

360

   

-

   

-

   

1,592

   

-

   

1,952

 

Increase in restricted cash and cash

equivalents

 


(4,602


)

 


-

   


-

   


-

   


-

   


(4,602


)

Net intercompany investing

 

11,583

   

(24

)

 

(10

)

 

(11,723

)

 

174

   

-

 

All other investing, net

 

-

   

-

   

-

   

209

   

-

   

209

 

Net cash provided by/(used in)

investing activities

 


6,539

   


(24


)

 


(10


)

 


(17,699


)

 


174

   


(11,020


)

Cash flows from financing activities

                                   

Additions to long-term debt

 

-

   

-

   

-

   

371

   

-

   

371

 

Reductions in long-term debt

 

-

   

(106

)

 

-

   

(7

)

 

-

   

(113

)

Additions/(reductions) in short-term

debt - net

 


-

   


-


 


-

   


(244


)

 


-

   


(244


)

Cash dividends

 

(5,158

)

 

-

   

-

   

(2,633

)

 

2,633

   

(5,158

)

Net ExxonMobil shares sold/(acquired)

 

(6,235

)

 

-

   

-

   

-

   

-

   

(6,235

)

Net intercompany financing activity

 

-

   

136

   

-

   

38

   

(174

)

 

-

 

All other financing, net

 

-

   

-

   

-

   

(328

)

 

-

   

(328

)

Net cash provided by/(used in)

financing activities

 


(11,393


)

 


30

   


-

   


(2,803


)

 


2,459

   


(11,707


)

Effects of exchange rate changes

on cash

 


-

   


-

   


-

   


(34


)

 


-

   


(34


)

Increase/(decrease) in cash and cash

equivalents


$


811



$


-

 


$


-

 


$


4,671

 


$


-

 


$


5,482

 


-20-


EXXON MOBIL CORPORATION


Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations


FUNCTIONAL EARNINGS SUMMARY

 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

2005

 

2004

 
 


    (millions of dollars)


 

Net Income (U.S. GAAP)

                       

Upstream

                       

   United States

$

1,671

 

$

1,173

 

$

4,413

 

$

3,564

 

   Non-U.S.

 

5,678

   

2,756

   

12,898

   

8,224

 

Downstream

                       

   United States

 

1,109

   

11

   

2,753

   

1,310

 

   Non-U.S.

 

1,019

   

840

   

2,849

   

2,052

 

Chemical

                       

   United States

 

70

   

329

   

905

   

595

 

   Non-U.S.

 

402

   

680

   

1,813

   

1,585

 

Corporate and financing

 

(29

)

 

(109

)

 

(211

)

 

(420

)

Net Income (U.S. GAAP)

$

9,920

 

$

5,680

 

$

25,420

 

$

16,910

 
                         
                         

Net income per common share (dollars)

$

1.60

 

$

0.88

 

$

4.04

 

$

2.60

 

Net income per common share

                       

   - assuming dilution (dollars)

$

1.58

 

$

0.88

 

$

4.00

 

$

2.59

 
                         

Special items included in net income

                       

Non-U.S. Upstream

                       

   Gain on Dutch gas restructuring

$

1,620

 

$

0

 

$

1,620

 

$

0

 

U.S. Downstream

                       

   Allapattah lawsuit provision

$

0

 

$

(550

)

$

(200

)

$

(550

)

Non-U.S. Downstream

                       

   Gain on sale of Sinopec investment

$

0

 

$

0

 

$

310

 

$

0

 

Non-U.S. Chemical

                       

   Gain on sale of Sinopec investment

$

0

 

$

0

 

$

150

 

$

0

 


REVIEW OF THIRD QUARTER AND FIRST NINE MONTHS 2005 RESULTS


Exxon Mobil Corporation estimated third quarter 2005 net income of $9,920 million ($1.58 per share) increased $4,240 million from the third quarter of 2004.  Third quarter 2005 net income included a gain of $1,620 million from the restructuring of the Corporation's interest in the Dutch gas transportation business ("Gasunie"), while third quarter 2004 included a special charge of $550 million for the Allapattah lawsuit provision.


Third quarter 2005 results were adversely impacted by hurricanes Katrina and Rita, with U.S. production volumes down 50 thousand oil-equivalent barrels per day and additional costs of approximately $45 million before tax.  ExxonMobil's earnings in the third quarter reflect the impact of the relatively volatile industry environment on commodity prices and industry margins.  Reduced volumes and higher costs will also impact the fourth quarter.


_____________________________________________


Net income of $25,420 million ($4.00 per share) for the first nine months of 2005 increased $8,510 million from the first nine months of 2004, with improvements in all segments of the business.  Net income for the first nine months 2005 included a $1,620 million special gain related to Gasunie, a $460 million positive impact from the sale of the Corporation's stake in Sinopec, and a special charge of $200 million for the Allapattah lawsuit provision.  Net income for the first nine months of 2004 included a $550 million special charge for the Allapattah lawsuit provision.


-21-



 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

2005

 

2004

 
 


    (millions of dollars)


 

Upstream earnings

                       

   United States

$

1,671

 

$

1,173

 

$

4,413

 

$

3,564

 

   Non-U.S.

 

5,678

   

2,756

   

12,898

   

8,224

 

Total

$

7,349

 

$

3,929

 

$

17,311

 

$

11,788

 

Special items included in net income

                       

Non-U.S. Upstream

                       

   Gain on Dutch gas restructuring

$

1,620

 

$

0

 

$

1,620

 

$

0

 



Upstream earnings in the third quarter 2005 were $7,349 million, up $3,420 million from the third quarter of 2004 reflecting higher crude oil and natural gas realizations and the $1,620 gain on the Dutch gas restructuring.


On an oil-equivalent basis, production decreased by 4.7 percent from the third quarter of 2004.  Excluding the impact of hurricanes Katrina and Rita, divestments, and entitlement effects, production decreased 1 percent.


Liquids production of 2,447 kbd (thousands of barrels per day) was 58 kbd lower.  Higher production from new fields in West Africa was more than offset by the impact of mature field decline, hurricanes Katrina and Rita, maintenance activities, as well as entitlement and divestment impacts.


Third quarter natural gas production decreased to 7,724 mcfd (millions of cubic feet per day) compared with 8,488 mcfd last year.  Higher volumes from projects in Qatar and the U.K. were more than offset by the impact of mature field decline, hurricanes Katrina and Rita, maintenance activities, as well as entitlement and divestment impacts.


Earnings from U.S. Upstream operations were $1,671 million, $498 million higher than last year's third quarter.  Non-U.S. Upstream earnings of $5,678 million were up $1,302 million from 2004 before the Gasunie gain.

_____________________________________________


Upstream earnings of $17,311 million for the first nine months of 2005 increased $5,523 million from 2004 due to higher liquids and natural gas realizations and the $1,620 gain on the Dutch gas restructuring, partly offset by lower production.


On an oil-equivalent basis, production decreased 4.5 percent from the first nine months of last year.  Excluding the impact of hurricanes Katrina and Rita, divestments and entitlement effects, production decreased by 2 percent from the first nine months of last year.


Liquids production of 2,486 kbd decreased by 87 kbd from 2004.  Higher production from new fields in West Africa and the North Sea was more than offset by mature field decline, the impact of hurricanes Katrina and Rita, as well as entitlement effects and divestment impacts.


Natural gas production of 9,061 mcfd, decreased 614 mcfd from 2004.  Higher volumes from projects in Qatar and the U.K. were more than offset by mature field decline, the impact of hurricanes Katrina and Rita, maintenance activity, and the impact of divestments.


Earnings from U.S. Upstream operations for the first nine months of 2005 were $4,413 million, an increase of $849 million.  Earnings outside the U.S. of  $12,898 million were up $3,054 million from 2004 before the Gasunie gain.


-22-




 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

     2005

 

     2004

 
 


    (millions of dollars)


 

Downstream earnings

                       

   United States

$

1,109

 

$

11

 

$

2,753

 

$

1,310

 

   Non-U.S.

 

1,019

   

840

   

2,849

   

2,052

 

Total

$

2,128

 

$

851

 

$

5,602

 

$

3,362

 

Special items included in net income

                       

U.S. Downstream

                       

   Allapattah lawsuit provision

$

0

 

$

(550

)

$

(200

)

$

(550

)

Non-U.S. Downstream

                       

   Gain on sale of Sinopec investment

$

0

 

$

0

 

$

310

 

$

0

 



Downstream earnings were $2,128  million, up $1,277 million from the third quarter 2004, reflecting higher refining margins partly offset by weaker marketing margins and the absence of the Allapattah lawsuit provision in the prior year period.  Petroleum product sales were 8,217 kbd, 25 kbd lower than last year's third quarter.


U.S. Downstream third quarter 2005 earnings of $1,109 million were up $1,098 million, including the absence of the Allapattah lawsuit provision.  Non-U.S. Downstream earnings of $1,019 million were $179 million higher than last year's third quarter.

_____________________________________________


Downstream earnings of $5,602 million increased $2,240 million from the first nine months of 2004 reflecting stronger worldwide refining margins, partly offset by weak marketing margins, and a smaller Allapattah lawsuit provision in 2005.  Petroleum product sales of 8,235 kbd compared with 8,131 kbd in the first nine months of 2004.


U.S. Downstream earnings were $2,753 million, up $1,443 million.  Non-U.S. Downstream earnings were $2,849 million, $487 million higher than last year before the Sinopec gain.




 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

     2005

 

     2004

 
 


    (millions of dollars)


 

Chemical earnings

                       

   United States

$

70

 

$

329

 

$

905

 

$

595

 

   Non-U.S.

 

402

   

680

   

1,813

   

1,585

 

Total

$

472

 

$

1,009

 

$

2,718

 

$

2,180

 

Special items included in net income

                       

Non-U.S. Chemical

                       

   Gain on sale of Sinopec investment

$

0

 

$

0

 

$

150

 

$

0

 



Chemical earnings were $472 million, down $537 million from the same quarter a year ago with reduced margins due to increased feedstock costs.  Prime product sales of 6,955 kt (thousands of metric tons) were down 162 kt from last year's third quarter.

_____________________________________________


Chemical earnings of $2,718 million for the first nine months of 2005 were up $388 million, before the Sinopec gain, due to improved margins partly offset by lower volumes.  Prime product sales were 20,485 kt, down 354 kt from 2004.


-23-



 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

     2005

 

     2004

 
 


    (millions of dollars)


 

All other segments earnings

                       

Corporate and financing

$

(29

)

$

(109

)

$

(211

)

$

(420

)



Corporate and financing expenses in the third quarter of $29 million decreased by $80 million mainly due to higher interest income.

_____________________________________________


Corporate and financing expenses of $211 million for the first nine months of 2005 decreased by $209 million mainly due to higher interest income.



LIQUIDITY AND CAPITAL RESOURCES


 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

2005

 

2004

 
 


    (millions of dollars)


 

Net cash provided by/(used in)

                       

Operating activities

           

$

37,748

 

$

28,243

 

Investing activities

             

(7,379

)

 

(11,020

)

Financing activities

             

(18,970

)

 

(11,707

)

Effect of exchange rate changes

             

(690

)

 

(34

)

Increase/(decrease) in cash and cash equivalents

           

$

10,709

 

$

5,482

 
                         

Cash and cash equivalents

           

$

29,240

 

$

16,108

 

Cash and cash equivalents - restricted (note 4)

             

4,604

   

4,602

 

Total cash and cash equivalents (at end of period)

           

$

33,844

 

$

20,710

 
                         

Cash flow from operations and asset sales

                       

Net cash provided by operating activities (U.S. GAAP)

$

15,767

 

$

9,453

 

$

37,748

 

$

28,243

 

Sales of subsidiaries, investments and property,

                       

    plant and equipment

 

754

   

570

   

4,580

   

1,952

 

Cash flow from operations and asset sales

$

16,521

 

$

10,023

 

$

42,328

 

$

30,195

 


Because of the ongoing nature of our asset management and divestment program, we believe

it is useful for investors to consider sales proceeds together with cash provided by operating

activities when evaluating cash available for investment in the business and financing activities.


Total cash and cash equivalents, including the $4.6 billion of restricted cash, was $33.8 billion at the end of the third quarter of 2005.


Cash provided by operating activities totaled $37,748 million for the first nine months of 2005, an increase of $9,505 million versus $28,243 million in the same period last year reflecting higher net income.  Major sources of funds were net income of $25,420 million and non-cash provisions of $7,582 million for depreciation and depletion.  Cash provided by operating activities totaled $15,767 million in the third quarter of 2005, an increase of $6,314 million from the 2004 period.  For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.


Investing activities for the first nine months of 2005 used net cash of $7,379 million compared to $11,020 million in the prior year. Spending for additions to property, plant and equipment increased $1,361 million to $9,940 million.  Proceeds from asset divestments of $4,580 million in 2005 increased $2,628 million, including almost $1.4 billion from the sale of the Corporation's interest in Sinopec. As discussed in note 4 to the condensed consolidated financial statements, investing activities in 2004 included a pledge in the second quarter by the Corporation to the issuer of a litigation related appeal bond of collateral consisting of restricted cash and cash equivalents of $4,602 million.  Other investing activities reflect net additional investments and advances in 2005 compared to collections of advances in 2004.

-24-



Cash flow from operations and asset sales in the third quarter 2005 increased $6.5 billion to $16.5 billion, including asset sales of $0.8 billion.  Cash flow from operations and asset sales in the first nine months of 2005 was $42.3 billion, including $4.6 billion from asset sales, an increase of $12.1 billion from the 2004 period.


Net cash used in financing activities of $18,970 million in the first nine months of 2005 compared to $11,707 million in the 2004 period reflecting higher levels of purchases of ExxonMobil shares and debt reductions in the current year.


During the third quarter of 2005, Exxon Mobil Corporation purchased 91 million shares of its common stock for the treasury at a gross cost of $5,535 million.  These purchases included $5.0 billion to reduce the number of shares outstanding, a $1.5 billion increase from the $3.5 billion of share reduction purchases in the second quarter.  The balance of the purchases offset shares issued in conjunction with company benefit plans and programs.  Shares outstanding were reduced from 6,305 million at the end of the second quarter to 6,222 million at the end of the third quarter.  During the first nine months of 2005, shares outstanding were reduced by 2.8 percent as the Corporation purchased 219 million shares of its common stock for the treasury at a gross cost of $12,872 million, including $11.0 billion to reduce shares outstanding.  Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or

discontinued at any time without prior notice.


The Corporation distributed a total of $6.8 billion to shareholders in the third quarter, and  $16.4 billion in the first nine months of 2005, through dividends and share purchases to reduce shares outstanding.


Total debt of $8.5 billion at September 30, 2005 was comparable to year-end 2004.  The Corporation's debt to total capital ratio was 7.0 percent at the end of the third quarter of 2005, comparable to year-end 2004.


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


Litigation and other contingencies are discussed in note 4 to the unaudited condensed consolidated financial statements. On October 11, 2005, the United States Supreme Court denied certiorari on the appeal filed by Saudi Basic Industries Corporation (SABIC) in connection with litigation related to joint venture license agreements. In light of the U.S. Supreme Court's action the Corporation will recognize a positive after-tax earnings impact of approximately $390 million in fourth quarter 2005 results.  There are no other events or uncertainties known to management beyond those already included in reported financial information that would indicate a material change in future operating results or future financial condition.


The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade.  Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses.  

-25-


On July 1, 2005 the Corporation announced that its subsidiary, Esso Nederland B.V., completed the restructuring of its interest in the Dutch gas transportation business.  This restructuring had in principle been agreed under the terms of a Heads of Agreement signed on November 1, 2004 between Esso Nederland B.V., Shell Nederland B.V. and the State of the Netherlands. Following the successful completion of various regulatory reviews and detailed agreements, Esso Nederland B.V. and Shell Nederland B.V. formally transferred their ownership share of 25 percent each in Gasunie's gas transportation business to the State of the Netherlands. At the same time the State of the Netherlands paid an agreed net compensation in the amount of 2.77 billion Euros to Nederlandse Aardolie Maatschappij B. V., the Dutch oil and gas producing company jointly owned by ExxonMobil and Shell.  ExxonMobil's positive after-tax earnings impact for this transaction of $1,620 million was reported in third quarter 2005 results.



TAXES

 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

      2005

 

      2004

 
 


    (millions of dollars)


 

Taxes

                       

Income taxes

$

6,132

 

$

3,854

 

$

16,294

 

$

11,066

 

Excise taxes

 

8,160

   

7,045

   

22,913

   

19,975

 

All other taxes and duties

 

11,544

   

10,791

   

33,700

   

32,186

 

Total

$

25,836

 

$

21,690

 

$

72,907

 

$

63,227

 
                         

Effective income tax rate

 

41.8

%

 

41.9

%

 

41.5

%

 

41.4

%


Income, excise and all other taxes for the third quarter of 2005 of $25,836 million were up $4,146 million compared to 2004.  In the third quarter of 2005 income tax expense was $6,132 million and the effective income tax rate was 41.8 percent, compared to $3,854 million and 41.9 percent, respectively, in the prior year period.  Excise and all other taxes and duties were higher reflecting higher prices and foreign exchange effects.

_____________________________________________


Income, excise and all other taxes for the first nine months of 2005 of $72,907 million were up $9,680 million compared to the prior year.  Income tax expense for the first nine months was $16,294 million and the effective income tax rate was 41.5 percent, compared to $11,066 million and 41.4 percent, respectively, in the prior year period.  During both years, the Corporation continued to benefit from the favorable resolution of tax related issues.  Excise and all other taxes and duties were higher reflecting higher prices and foreign exchange effects.



CAPITAL AND EXPLORATION EXPENDITURES


 

Third Quarter

 

First Nine Months

 
 

2005

 

2004

 

     2005

 

      2004

 
 


    (millions of dollars)


 

Capital and exploration expenditures

                       

Upstream (including exploration expenses)

$

3,586

 

$

2,877

 

$

10,076

 

$

8,421

 

Downstream

 

646

   

600

   

1,747

   

1,734

 

Chemical

 

162

   

154

   

485

   

434

 

Other

 

20

   

3

   

60

   

63

 

Total

$

4,414

 

$

3,634

 

$

12,368

 

$

10,652

 


ExxonMobil continued its active investment program in the third quarter, spending $4,414 million on capital and exploration projects, bringing the nine months year-to-date spending to $12,368 million, an increase of $1,716 million versus 2004.  Our disciplined project management systems remain a competitive advantage, delivering new supplies of crude oil and natural gas to the global market.


The Corporation expects the level of capital and exploration spending to be about $18 billion in 2005 compared to $15 billion in 2004.


-26-



RECENTLY ISSUED ACCOUNTING STANDARDS


In December 2004, the Financial Accounting Standards Board (FASB) issued a revised Statement of Financial Accounting Standards No. 123 (FAS 123R), "Share-based Payment." FAS 123R requires compensation costs related to share-based payments to be recognized in the income statement over the requisite service period. The amount of the compensation cost will be measured based on the grant-date fair value of the instrument issued. FAS 123R is effective for the Corporation as of January 1, 2006, for awards granted or modified after that date and for awards granted prior to that date that have not vested.  In 2003, the Corporation adopted a policy of expensing all share-based payments that is consistent with the provisions of FAS 123R.  All prior year outstanding stock option awards have vested.


The cumulative compensation expense associated with stock grants made in 2002, 2003 and 2004 has been recognized in the income statement using the "nominal vesting period approach."  The full cost of awards given to employees who have retired before the end of the vesting period has been expensed.  The use of a "non-substantive vesting period approach" reflecting amortization based on the retirement eligibility age, would not be significantly different from the nominal vesting period approach.  The non-substantive vesting period approach will be applicable to grants made after the adoption of FAS 123R on January 1, 2006.



FORWARD-LOOKING STATEMENTS


Statements in this discussion relating to future plans, projections, events, or conditions are forward-looking statements.  Actual results, including production growth and capital spending, could differ materially due to changes in long-term oil or gas prices or other changes in market conditions affecting the oil and gas industry; political events or disturbances; severe weather events; reservoir performance; changes in OPEC quotas; timely completion of development projects; changes in technical or operating conditions; and other factors including those discussed herein and under the heading "Factors Affecting Future Results" in Item 1 of ExxonMobil's 2004 Form 10-K.


-27-


EXXON MOBIL CORPORATION



Item 3