Form 10-Q
Table of Contents

 

 

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, 2010

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

incorporation or organization)

 

(I.R.S. Employer

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer     x     Accelerated filer   ¨
Non-accelerated filer   ¨     Smaller reporting company     ¨

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, 2010
Common stock, without par value    5,042,556,546

 

 

 

 


Table of Contents

 

EXXON MOBIL CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

TABLE OF CONTENTS

 

          Page
Number
 
PART I. FINANCIAL INFORMATION   

Item 1.

   Financial Statements   

Condensed Consolidated Statement of Income
Three and nine months ended September 30, 2010 and 2009

     3   

Condensed Consolidated Balance Sheet
As of September 30, 2010 and December 31, 2009

     4   

Condensed Consolidated Statement of Cash Flows
Nine months ended September 30, 2010 and 2009

     5   

Condensed Consolidated Statement of Changes in Equity
Nine months ended September 30, 2010 and 2009

     6   

Notes to Condensed Consolidated Financial Statements

     7   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      25   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      31   

Item 4.

   Controls and Procedures      31   
PART II. OTHER INFORMATION   

Item 1.

   Legal Proceedings      31   

Item 1A.

   Risk Factors      32   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      33   

Item 6.

   Exhibits      34   

Signature

        35   

Index to Exhibits

     36   

 

-2-


Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(millions of dollars)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

REVENUES AND OTHER INCOME

           

Sales and other operating revenue (1)

   $ 92,353       $ 80,090       $ 269,083       $ 214,385   

Income from equity affiliates

     2,443         1,675         7,224         4,728   

Other income

     502         495         1,728         1,632   
                                   

Total revenues and other income

     95,298         82,260         278,035         220,745   
                                   

COSTS AND OTHER DEDUCTIONS

           

Crude oil and product purchases

     48,875         41,689         144,129         106,386   

Production and manufacturing expenses

     8,982         8,097         25,793         24,105   

Selling, general and administrative expenses

     3,707         3,887         10,828         10,854   

Depreciation and depletion

     3,844         2,927         10,490         8,724   

Exploration expenses, including dry holes

     500         495         1,593         1,336   

Interest expense

     54         62         149         512   

Sales-based taxes (1)

     7,172         6,805         20,933         18,927   

Other taxes and duties

     9,306         9,094         26,488         25,330   
                                   

Total costs and other deductions

     82,440         73,056         240,403         196,174   
                                   

Income before income taxes

     12,858         9,204         37,632         24,571   

Income taxes

     5,297         4,333         15,750         11,052   
                                   

Net income including noncontrolling interests

     7,561         4,871         21,882         13,519   

Net income attributable to noncontrolling interests

     211         141         672         289   
                                   

Net income attributable to ExxonMobil

   $ 7,350       $ 4,730       $ 21,210       $ 13,230   
                                   

Earnings per common share (dollars)

   $ 1.44       $ 0.98       $ 4.38       $ 2.72   

Earnings per common share - assuming dilution (dollars)

   $ 1.44       $ 0.98       $ 4.37       $ 2.71   

Dividends per common share (dollars)

   $ 0.44       $ 0.42       $ 1.30       $ 1.24   

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

   $ 7,172       $ 6,805       $ 20,933       $ 18,927   

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-3-


Table of Contents

 

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(millions of dollars)

 

     Sept. 30,
2010
    Dec. 31,
2009
 

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 12,244      $ 10,693   

Marketable securities

     15        169   

Notes and accounts receivable - net

     30,244        27,645   

Inventories

    

Crude oil, products and merchandise

     11,154        8,718   

Materials and supplies

     3,148        2,835   

Other current assets

     5,828        5,175   
                

Total current assets

     62,633        55,235   

Investments, advances and long-term receivables

     33,173        31,665   

Property, plant and equipment - net

     195,440        139,116   

Other assets, including intangibles, net

     8,748        7,307   
                

Total assets

   $ 299,994      $ 233,323   
                

LIABILITIES

    

Current liabilities

    

Notes and loans payable

   $ 3,046      $ 2,476   

Accounts payable and accrued liabilities

     48,251        41,275   

Income taxes payable

     10,443        8,310   
                

Total current liabilities

     61,740        52,061   

Long-term debt

     15,248        7,129   

Postretirement benefits reserves

     18,012        17,942   

Deferred income tax liabilities

     35,304        23,148   

Other long-term obligations

     19,090        17,651   
                

Total liabilities

     149,394        117,931   
                

Commitments and contingencies (note 3)

    

EQUITY

    

Common stock, without par value:

    

Authorized: 9,000 million shares

    

Issued: 8,019 million shares

     9,341        5,503   

Earnings reinvested

     291,861        276,937   

Accumulated other comprehensive income

    

Cumulative foreign exchange translation adjustment

     4,476        4,402   

Postretirement benefits reserves adjustment

     (8,968     (9,863

Unrealized gain/(loss) on cash flow hedges

     153        0   

Common stock held in treasury:

    

2,976 million shares at September 30, 2010

     (151,832  

3,292 million shares at December 31, 2009

       (166,410
                

ExxonMobil share of equity

     145,031        110,569   

Noncontrolling interests

     5,569        4,823   
                

Total equity

     150,600        115,392   
                

Total liabilities and equity

   $ 299,994      $ 233,323   
                

The number of shares of common stock issued and outstanding at September 30, 2010 and December 31, 2009 were 5,042,556,546 and 4,726,922,580, respectively.

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-4-


Table of Contents

 

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(millions of dollars)

 

     Nine Months Ended
September  30,
 
     2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income including noncontrolling interests

   $ 21,882      $ 13,519   

Depreciation and depletion

     10,490        8,724   

Changes in operational working capital, excluding cash and debt

     3,722        (852

All other items - net

     (736     (1,457
                

Net cash provided by operating activities

     35,358        19,934   
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Additions to property, plant and equipment

     (19,201     (15,728

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

     1,607        1,083   

Other investing activities - net

     470        (1,352
                

Net cash used in investing activities

     (17,124     (15,997
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Additions to long-term debt

     374        192   

Reductions in long-term debt

     (2,587     (27

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

     (729     (202

Cash dividends to ExxonMobil shareholders

     (6,286     (6,031

Cash dividends to noncontrolling interests

     (244     (238

Changes in noncontrolling interests

     (3     (126

Tax benefits related to stock-based awards

     47        79   

Common stock acquired

     (7,335     (17,331

Common stock sold

     269        296   
                

Net cash used in financing activities

     (16,494     (23,388
                

Effects of exchange rate changes on cash

     (189     486   
                

Increase/(decrease) in cash and cash equivalents

     1,551        (18,965

Cash and cash equivalents at beginning of period

     10,693        31,437   
                

Cash and cash equivalents at end of period

   $ 12,244      $ 12,472   
                

SUPPLEMENTAL DISCLOSURES

    

Income taxes paid

   $ 13,950      $ 12,142   

Cash interest paid

   $ 460      $ 723   

NON-CASH TRANSACTIONS

    

The Corporation acquired all the outstanding equity of XTO Energy Inc. in an all-stock transaction valued at $24,659 million in 2010 (see note 10).

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-5-


Table of Contents

 

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(millions of dollars)

 

     ExxonMobil Share of Equity              
     Common
Stock
    Earnings
Reinvested
    Accumulated
Other
Compre-
hensive
Income
    Common
Stock
Held in
Treasury
    ExxonMobil
Share of
Equity
    Noncontrolling
Interest
    Total Equity  

Balance as of December 31, 2008

   $ 5,314      $ 265,680      $ (9,931   $ (148,098   $ 112,965      $ 4,558      $ 117,523   

Amortization of stock-based awards

     521              521          521   

Tax benefits related to stock-based awards

     61              61          61   

Other

     (451           (451       (451

Net income for the period

       13,230            13,230        289        13,519   

Dividends - common shares

       (6,031         (6,031     (238     (6,269

Foreign exchange translation adjustment

         3,195          3,195        361        3,556   

Postretirement benefits reserves adjustment

         (652       (652     (38     (690

Amortization of postretirement benefits reserves adjustment included in periodic benefit costs

         1,008          1,008        34        1,042   

Acquisitions at cost

           (17,331     (17,331     (126     (17,457

Dispositions

           750        750          750   
                                                        

Balance as of September 30, 2009

   $ 5,445      $ 272,879      $ (6,380   $ (164,679   $ 107,265      $ 4,840      $ 112,105   
                                                        

Balance as of December 31, 2009

   $ 5,503      $ 276,937      $ (5,461   $ (166,410   $ 110,569      $ 4,823      $ 115,392   

Amortization of stock-based awards

     572              572          572   

Tax benefits related to stock-based awards

     240              240          240   

Other

     (494           (494     12        (482

Net income for the period

       21,210            21,210        672        21,882   

Dividends - common shares

       (6,286         (6,286     (244     (6,530

Foreign exchange translation adjustment

         74          74        267        341   

Postretirement benefits reserves adjustment

         (6       (6     3        (3

Amortization of postretirement benefits reserves adjustment included in periodic benefit costs

         901          901        39        940   

Change in fair value of cash flow hedges

         195          195          195   

Realized (gain)/loss from settled cash flow hedges included in net income

         (42       (42       (42

Acquisitions at cost

           (7,335     (7,335     (3     (7,338

Issued for XTO merger

     3,520            21,139        24,659          24,659   

Other dispositions

           774        774          774   
                                                        

Balance as of September 30, 2010

   $ 9,341      $ 291,861      $ (4,339   $ (151,832   $ 145,031      $ 5,569      $ 150,600   
                                                        
     Nine Months Ended September 30, 2010           Nine Months Ended September 30, 2009  

Common Stock Share Activity

   Issued     Held in
Treasury
    Outstanding           Issued     Held in
Treasury
    Outstanding  
     (millions of shares)           (millions of shares)  

Balance as of December 31

     8,019        (3,292     4,727          8,019        (3,043     4,976   

Acquisitions

       (115     (115         (244     (244

Issued for XTO merger

       416        416           

Other dispositions

       15        15            15        15   
                                                  

Balance as of September 30

     8,019        (2,976     5,043          8,019        (3,272     4,747   
                                                  

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-6-


Table of Contents

 

EXXON MOBIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Summary of Accounting Policies and Basis of Financial Statement Preparation

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 2009 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.

Derivative Instruments. The Corporation historically made limited use of derivative instruments. The Corporation does not engage in speculative derivative activities or derivative trading activities, nor does it use derivatives with leveraged features. When the Corporation does enter into derivative transactions, it is to offset exposures associated with interest rates, foreign currency exchange rates and hydrocarbon prices that arise from existing assets, liabilities and forecasted transactions. For derivatives designated as cash flow hedges, the Corporation’s activity is intended to manage the price risk posed by physical transactions.

The Corporation records all derivatives on the balance sheet at fair value. The change in fair value of derivatives designated as fair value hedges is recognized in earnings, offset by the change in fair value of the hedged item. The change in fair value of derivatives designated as cash flow hedges is recorded in other comprehensive income and recognized in earnings when the hedged transaction is recognized in earnings. The change in fair value of derivatives not designated as hedging instruments is recognized in earnings. Any ineffectiveness between the derivative and the hedged item is recorded in earnings.

Hedge effectiveness is reviewed at least quarterly and is generally based on the most recent relevant correlation between the derivative and the item hedged. Hedge ineffectiveness is calculated based on the difference between the change in fair value of the derivative and change in cash flow or fair value of the items hedged. If it is determined that a derivative is no longer highly effective, hedge accounting is then discontinued and the change in fair value since inception that is on the balance sheet either as other comprehensive income for cash flow hedges, or the underlying hedged item for fair value hedges, is recorded in earnings.

Fair Value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2 or 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Hierarchy Level 3 inputs are inputs that are not observable in the market.

Goodwill. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill is evaluated for impairment on at least an annual basis.

Stock-Based Awards. The Corporation recognizes compensation expense for stock-based awards through amortization of the grant-date fair value over the requisite service period for each award.

 

2. Accounting Changes

Effective January 1, 2010, ExxonMobil adopted the authoritative guidance for variable-interest entities (VIEs). The guidance requires the enterprise to qualitatively assess if it is the primary beneficiary of the VIE and, if so, the VIE must be consolidated. The adoption of the guidance did not have a material impact on the Corporation’s financial statements.

 

-7-


Table of Contents

 

3. Litigation and Other Contingencies

Litigation

A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. 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.

Other Contingencies

 

     As of September 30, 2010  
     Equity
Company
Obligations
     Other
Third Party
Obligations
     Total  
     (millions of dollars)  

Total guarantees

   $  5,591       $ 3,146       $ 8,737   

The Corporation and certain of its consolidated subsidiaries were contingently liable at September 30, 2010, for $8,737 million, primarily relating to guarantees for notes, loans and performance under contracts. Included in this amount were guarantees by consolidated affiliates of $5,591 million, representing ExxonMobil’s share of obligations of certain equity companies. These guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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, 2010, 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.

In accordance with a nationalization decree issued by Venezuela’s president in February 2007, by May 1, 2007, a subsidiary of the Venezuelan National Oil Company (PdVSA) assumed the operatorship of the Cerro Negro Heavy Oil Project. This Project had been operated and owned by ExxonMobil affiliates holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a “mixed enterprise” and an increase in PdVSA’s or one of its affiliate’s ownership interest in the Project, with the stipulation that if ExxonMobil refused to accept the terms for the formation of the mixed enterprise within a specified period of time, the government would “directly assume the activities” carried out by the joint venture. ExxonMobil refused to accede to the terms proffered by the government, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project.

 

-8-


Table of Contents

 

On September 6, 2007, affiliates of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID) invoking ICSID jurisdiction under Venezuela’s Investment Law and the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID Tribunal issued a decision on June 10, 2010, finding that it had jurisdiction to proceed on the basis of the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID arbitration proceeding is continuing. An affiliate of ExxonMobil has also filed an arbitration under the rules of the International Chamber of Commerce (ICC) against PdVSA and a PdVSA affiliate for breach of their contractual obligations under certain Cerro Negro Project agreements. Hearings on the merits of the case were held during August and September 2010. The parties filed post-hearing briefs in the ICC arbitration on October 25, 2010, with reply briefs due to be filed on November 8, 2010. At this time, the net impact of this matter on the Corporation’s consolidated financial results cannot be reasonably estimated. However, the Corporation does not expect the resolution to have a material effect upon the Corporation’s operations or financial condition. ExxonMobil’s remaining net book investment in Cerro Negro producing assets is about $750 million.

 

4. Comprehensive Income

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  
     (millions of dollars)  

Net income including noncontrolling interests

   $ 7,561      $ 4,871      $ 21,882      $ 13,519   

Other comprehensive income (net of income taxes)

        

Foreign exchange translation adjustment

     2,705        1,932        341        3,556   

Postretirement benefits reserves adjustment (excluding amortization)

     (393     (156     (3     (690

Amortization of postretirement benefits reserves adjustment included in net periodic benefit costs

     300        338        940        1,042   

Change in fair value of cash flow hedges

     115        0        195        0   

Realized (gain)/loss from settled cash flow hedges included in net income

     (42     0        (42     0   
                                

Comprehensive income including noncontrolling interests

     10,246        6,985        23,313        17,427   

Comprehensive income attributable to noncontrolling interests

     480        386        981        646   
                                

Comprehensive income attributable to ExxonMobil

   $ 9,766      $ 6,599      $ 22,332      $ 16,781   
                                

 

5. Earnings Per Share

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

EARNINGS PER COMMON SHARE

           

Net income attributable to ExxonMobil (millions of dollars)

   $ 7,350       $ 4,730       $ 21,210       $ 13,230   

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

     5,076         4,784         4,838         4,859   

Earnings per common share (dollars)

   $ 1.44       $ 0.98       $ 4.38       $ 2.72   

EARNINGS PER COMMON SHARE - ASSUMING DILUTION

           

Net income attributable to ExxonMobil (millions of dollars)

   $ 7,350       $ 4,730       $ 21,210       $ 13,230   

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

     5,076         4,784         4,838         4,859   

Effect of employee stock-based awards

     13         19         13         19   
                                   

Weighted average number of common shares outstanding - assuming dilution

     5,089         4,803         4,851         4,878   
                                   

Earnings per common share - assuming dilution (dollars)

   $ 1.44       $ 0.98       $ 4.37       $ 2.71   

The anti-dilutive options to purchase shares that have been excluded were de minimis.

 

-9-


Table of Contents

 

6. Pension and Other Postretirement Benefits

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  
     (millions of dollars)  

Pension Benefits - U.S.

        

Components of net benefit cost

        

Service cost

   $ 125      $ 116      $ 349      $ 325   

Interest cost

     199        202        598        606   

Expected return on plan assets

     (182     (165     (545     (493

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

     132        174        396        521   

Net pension enhancement and curtailment/settlement cost

     127        122        380        364   
                                

Net benefit cost

   $ 401      $ 449      $ 1,178      $ 1,323   
                                

Pension Benefits - Non-U.S.

        

Components of net benefit cost

        

Service cost

   $ 112      $ 111      $ 348      $ 314   

Interest cost

     288        287        867        823   

Expected return on plan assets

     (247     (227     (741     (648

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

     137        184        462        528   

Net pension enhancement and curtailment/settlement cost

     3        0        4        0   
                                

Net benefit cost

   $ 293      $ 355      $ 940      $ 1,017   
                                

Other Postretirement Benefits

        

Components of net benefit cost

        

Service cost

   $ 26      $ 22      $ 78      $ 72   

Interest cost

     93        98        304        312   

Expected return on plan assets

     (9     (9     (29     (27

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

     46        59        154        188   
                                

Net benefit cost

   $ 156      $ 170      $ 507      $ 545   
                                

 

7. Financial and Derivative Instruments

Financial Instruments

The fair value of financial instruments is determined by reference to observable market data and other valuation techniques as appropriate. The only category of financial instruments where the difference between fair value and recorded book value is of significance is long-term debt. The estimated fair value of total long-term debt, including capitalized lease obligations, was $16.1 billion and $7.7 billion, at September 30, 2010 and December 31, 2009, respectively, as compared to recorded book values of $15.2 billion and $7.1 billion at September 30, 2010 and December 31, 2009, respectively.

Derivative Instruments

The Corporation’s size, strong capital structure, geographic diversity and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the Corporation’s enterprise-wide risk from changes in interest rates, currency rates and commodity prices. As a result, the Corporation historically made limited use of derivatives to mitigate the impact of such changes. The Corporation does not engage in speculative derivative activities or derivative trading activities nor does it use derivatives with leveraged features.

 

-10-


Table of Contents

 

When the Corporation does enter into derivative transactions, it is to offset exposures associated with interest rates, foreign currency exchange rates and hydrocarbon prices that arise from existing assets, liabilities and forecasted transactions. For derivatives designated as cash flow hedges, the Corporation’s activity is intended to manage the price risk posed by physical transactions.

The estimated fair value of derivative instruments outstanding is summarized below. Derivative instruments of $721 million acquired as a result of the XTO merger are included in September 30, 2010, amounts and once the current positions settle, these programs will be discontinued.

 

     Not Designated as a Hedge     Fair Value Hedge      Cash Flow Hedge      Total Derivatives  
     Sept. 30,
2010
    Dec. 31,
2009
    Sept. 30,
2010
    Dec. 31,
2009
     Sept. 30,
2010
     Dec. 31,
2009
     Sept. 30,
2010
     Dec. 31,
2009
 
     (millions of dollars)  

Other current assets

   $ 83      $ 30      $ 1      $ 20       $ 708       $ 0       $ 792       $ 50   

Other assets

     1        0        0        0         52         0         53         0   
                                                                    

Total assets

     84        30        1        20         760         0         845         50   
                                                                    

Accounts payable and accrued liabilities

     89        54        8        1         39         0         136         55   

Other long-term obligations

     2        0        0        0         1         0         3         0   
                                                                    

Total liabilities

     91        54        8        1         40         0         139         55   
                                                                    

Total net asset/(liability)

   $ (7   $ (24   $ (7   $ 19       $ 720       $ 0       $ 706       $ (5
                                                                    

The fair value measurement hierarchy level associated with the Corporation’s derivative instruments is summarized below.

 

     September 30, 2010     December 31, 2009  
     Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
    Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
 
     (millions of dollars)  

Commodity derivative instruments

   $ 1       $ 712      $ (23   $ (2

Foreign currency exchange instruments

   $ 0       $ (7   $ 0      $ 20   

The Corporation’s fair value measurement of its derivative instruments includes Level 1 inputs for derivatives that are traded directly on the NYMEX and Level 2 inputs for derivatives that are determined by either market prices on an active market for similar assets or by prices quoted by a broker or other market-corroborated prices.

 

-11-


Table of Contents

 

The before tax gain or (loss) related to derivative instruments for the three months and nine months ended September 30, 2010 and 2009 is summarized below. The ineffective portion of derivatives designated as hedges is recorded either in “Sales and other operating revenue” or “Crude oil and product purchases” and the amounts were de minimis.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  
     (millions of dollars)  

Not Designated as a Hedge:

        

Commodity derivative instruments

        

Sales and other operating revenue

   $ (7   $ (1   $ (3   $ 4   

Crude oil and product purchases

     (11     27        16        (70

Foreign currency instruments

        

Crude oil and product purchases

     0        (1     0        (1

Fair Value Hedge:

        

Commodity derivative instruments

        

Sales and other operating revenue

     2        (1     3        (64

Offsetting physical firm commitment

     (2     1        (2     64   

Foreign currency instruments

        

Crude oil and product purchases

     (40     (48     (64     (30

Offsetting physical firm commitment

     48        52        73        39   

Cash Flow Hedge:

        

Commodity derivative instruments

        

Sales and other operating revenue

     80        0        80        0   
                                

Total income statement gain/(loss)

   $ 70      $ 29      $ 103      $ (58
                                

The principal commodity futures contracts and swap agreements acquired as part of the XTO merger that are in place as of September 30, 2010, are summarized below. These derivative contracts are designated and qualify for cash flow hedge accounting. The Corporation will receive the cash flow related to these derivative contracts at the prices indicated below. However, the amount of the income statement gain or loss realized from these contracts will be limited to the change in fair value of the derivative instruments from the acquisition date.

 

Product

  

Production Period

   Volume    Weighted Average
NYMEX Price
          (millions of cubic feet daily)    (per thousand cubic feet)

Natural Gas

   October - December 2010    1,250    $7.49
   January - December 2011    250    $7.02
          (thousands of barrels daily)    (per barrel)

Crude Oil

   October - December 2010    70    $95.70

The Corporation believes that there are no material market or credit risks to the Corporation’s financial position, results of operations or liquidity as a result of the derivative activities described above.

 

-12-


Table of Contents

 

8. Disclosures about Segments and Related Information

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  
     (millions of dollars)  

EARNINGS AFTER INCOME TAX

        

Upstream

        

United States

   $ 999      $ 709      $ 2,955      $ 1,882   

Non-U.S.

     4,468        3,303        13,662        9,445   

Downstream

        

United States

     164        (203     544        134   

Non-U.S.

     996        528        1,873        1,836   

Chemical

        

United States

     676        315        1,900        477   

Non-U.S.

     553        561        1,946        1,116   

All other

     (506     (483     (1,670     (1,660
                                

Corporate total

   $ 7,350      $ 4,730      $ 21,210      $ 13,230   
                                

SALES AND OTHER OPERATING REVENUE (1)

        

Upstream

        

United States

   $ 3,278      $ 833      $ 5,625      $ 2,407   

Non-U.S.

     5,923        4,987        18,181        15,264   

Downstream

        

United States

     22,787        20,568        68,300        54,614   

Non-U.S.

     51,850        46,112        150,590        123,335   

Chemical

        

United States

     3,352        2,857        10,174        7,022   

Non-U.S.

     5,160        4,726        16,202        11,726   

All other

     3        7        11        17   
                                

Corporate total

   $ 92,353      $ 80,090      $ 269,083      $ 214,385   
                                

(1)Includes sales-based taxes

        

INTERSEGMENT REVENUE

        

Upstream

        

United States

   $ 1,716      $ 1,752      $ 5,804      $ 4,571   

Non-U.S.

     9,270        9,446        28,136        23,272   

Downstream

        

United States

     3,213        2,930        10,247        7,167   

Non-U.S.

     12,624        10,923        37,835        27,327   

Chemical

        

United States

     2,380        1,980        7,302        5,035   

Non-U.S.

     2,020        1,941        6,174        4,872   

All other

     78        70        216        213   

 

9. Accounting for Suspended Exploratory Well Costs

The Corporation’s capitalized suspended exploratory well costs balance was $2,954 million at September 30, 2010, compared to $2,005 million at December 31, 2009. The increase is mainly a result of additions pending the determination of proved reserves.

 

-13-


Table of Contents

 

10. Acquisition of XTO Energy Inc.

Description of the Transaction

On June 25, 2010, ExxonMobil acquired XTO Energy Inc. (XTO) by merging a wholly-owned subsidiary of ExxonMobil with and into XTO (the “merger”), with XTO continuing as the surviving corporation and wholly-owned subsidiary of ExxonMobil. XTO is involved in the exploration for, production of, and transportation and sale of crude oil and natural gas. XTO’s asset base, technical capabilities and operating expertise together with ExxonMobil’s extensive research and development expertise, project management and operational skills, global scale and financial capacity, should enable effective development of additional supplies of unconventional oil and gas resources.

At the effective time of the merger, each share of XTO common stock was converted into the right to receive 0.7098 shares of common stock of ExxonMobil (the “Exchange Ratio”), with cash being paid in lieu of any fractional shares of ExxonMobil stock. Also at the effective time, each outstanding option to purchase XTO common stock was converted into an option to purchase a number of shares of ExxonMobil stock based on the Exchange Ratio, and each outstanding restricted stock award and performance stock award of XTO was converted into a restricted stock award or performance stock award, as applicable, of ExxonMobil stock based on the Exchange Ratio.

The components of the consideration transferred follow:

 

     (millions of dollars)  

Consideration attributable to stock issued (1) (2)

   $ 24,480   

Consideration attributable to converted stock options (2)

     179   
        

Total consideration transferred

   $ 24,659   
        

 

  (1) The fair value of the Corporation’s common stock on the acquisition date was $59.10 per share based on the closing value on the NYSE. The Corporation issued 416 million shares of stock previously held in treasury. The treasury stock issued, based on the average cost, was valued at $21,139 million. The excess of the fair value of the consideration transferred over the cost of treasury stock issued was $3,520 million and was included in common stock without par value.

 

  (2) The portion of the fair value of XTO converted stock-based awards attributable to pre-merger employee service was part of consideration. The remaining fair value of the awards will be recognized in future periods over the requisite service period.

Recording of Assets Acquired and Liabilities Assumed

The transaction was accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

The following table summarizes the assets acquired and liabilities assumed:

 

     (millions of dollars)  

Cash and cash equivalents

   $ 47   

Notes and accounts receivable

     925   

Inventories

     170   

Other current assets (1)

     911   

Investments, advances and long-term receivables

     52   

Property, plant and equipment (2)

     47,300   

Identifiable intangible assets (3)

     493   

Goodwill (4)

     39   

Other assets (1)

     75   
        

Total assets acquired

   $ 50,012   
        

Notes and loans payable (5)

   $ 1,026   

Accounts payable and accrued liabilities (1) (6)

     1,788   

Income taxes payable

     (199

Long-term debt (5)

     10,574   

Postretirement benefits reserves

     65   

Deferred income tax liabilities (6)

     11,204   

Other long-term obligations (1)

     895   
        

Total liabilities assumed

   $ 25,353   
        

Net assets acquired

   $ 24,659   
        

 

-14-


Table of Contents

 

  (1) Derivatives were measured using Level 1 inputs for derivatives that are traded directly on the NYMEX and Level 2 inputs for derivatives that are determined by either market prices on an active market for similar assets or by prices quoted by a broker or other market-corroborated prices.

 

  (2) Property, plant and equipment were measured primarily using an income approach. The fair value measurements of the oil and gas assets were based, in part, on significant inputs not observable in the market and thus represent a Level 3 measurement. The significant inputs included XTO resources, assumed future production profiles, commodity prices (mainly based on observable market inputs), risk adjusted discount rate of 7.0 percent, inflation of 2.0 percent and assumptions on the timing and amount of future development and operating costs. The property, plant and equipment additions were segmented to the Upstream business, with substantially all of the assets in the United States.

 

  (3) Identifiable intangible assets and other assets were measured using a combination of an income approach and a market approach (Level 3). Identifiable intangible assets will be amortized over 20 years.

 

  (4) Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill was recognized in the Upstream reporting unit. Goodwill is not amortized and is not deductible for tax purposes.

 

  (5) Long-term debt was recognized mainly at market rates at closing (Level 1). Long-term debt at closing was as follows:

 

     (millions of dollars)  

Bank Debt:

  

Commercial Paper

   $ 175   

Term loan due April 1, 2013, 0.775%

     500   

Term loan due February 5, 2013, 0.697%

     100   

Senior Notes:

  

5.000% due 2010 includes premium of $1

     251   

7.500% due 2012 includes premium of $39

     389   

5.900% due 2012 includes premium of $51

     601   

6.250% due 2013 includes premium of $51

     451   

4.625% due 2013 includes premium of $31

     431   

5.750% due 2013 includes premium of $66

     566   

4.900% due 2014 includes premium of $45

     545   

5.000% due 2015 includes premium of $40

     388   

5.300% due 2015 includes premium of $53

     453   

5.650% due 2016 includes premium of $58

     458   

6.250% due 2017 includes premium of $138

     874   

5.500% due 2018 includes premium of $108

     880   

6.500% due 2018 includes premium of $209

     1,209   

6.100% due 2036 includes premium of $101

     692   

6.750% due 2037 includes premium of $379

     1,778   

6.375% due 2038 includes premium of $155

     859   
        

Total Debt

   $ 11,600   

Less: Current portion

     1,026   
        

Long-term Debt

   $ 10,574   
        

The amounts of long-term debt maturing in each of the four years after December 31, 2010, in millions of dollars, are: 2011 – $0, 2012 – $900, 2013 – $1,300 and 2014 – $500.

During the quarter ended June 30, 2010, the commercial paper was repaid. During the third quarter of 2010, XTO term loans of $600 million were repaid, the XTO 5% senior note due in 2010 matured, and XTO fixed-rate bonds with a book value of $2.6 billion were repurchased via tender offers.

 

-15-


Table of Contents

 

  (6) Deferred income taxes reflect the temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. The deferred income taxes recorded as part of the XTO merger were:

 

     (millions of dollars)  

Property, plant and equipment

   $ 12,238   

Other

     367   
        

Total deferred tax liabilities

   $ 12,605   
        

Asset retirement obligations

   $ (324

Other

     (769
        

Total deferred tax assets

   $ (1,093
        

Net deferred tax liabilities

   $ 11,512   
        

Deferred income tax (assets) and liabilities are included in the table summarizing assets acquired and liabilities assumed as shown below.

 

     (millions of dollars)  

Accounts payable and accrued liabilities

   $ 308   

Deferred income tax liabilities

     11,204   
        

Net deferred tax liabilities

   $ 11,512   
        

XTO Results and Pro Forma Impact of Merger

The following table presents revenues and earnings for XTO for the periods presented:

 

     Three Months Ended
September 30, 2010
     Acquisition Date
Through
September 30, 2010
 
     (millions of dollars)  

Revenues

   $ 2,231       $ 2,302   

Upstream earnings

   $ 153       $ 139   

Transaction-related costs were expensed as incurred. The Corporation recognized $17 million in transaction costs related to the merger in the nine months ended September 30, 2010.

The following table presents pro forma information for the Corporation as if the merger of XTO had occurred at the beginning of each year presented:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  
     (millions of dollars, except per share amounts)  

Revenues

   $ 95,298       $ 83,786       $ 281,180       $ 225,040   

Net income attributable to ExxonMobil

   $ 7,350       $ 4,864       $ 21,418       $ 13,410   

Earnings per common share (dollars)

   $ 1.44       $ 0.93       $ 4.19       $ 2.54   

Earnings per common share – assuming dilution (dollars)

   $ 1.44       $ 0.93       $ 4.18       $ 2.53   

The historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the merger and factually supportable. The unaudited pro forma consolidated results are not necessarily indicative of what the consolidated results of operations actually would have been had

 

-16-


Table of Contents

the merger been completed on January 1, 2010, or on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company. The unaudited pro forma consolidated results reflect pro forma adjustments for the elimination of deferred gains and losses recognized in earnings for derivatives outstanding at the beginning of the year presented, depreciation expense related to the fair value adjustment to property, plant and equipment acquired, additional amortization expense related to the fair value of identifiable intangible assets acquired, capitalization of interest expense and applicable income tax impacts.

Incentive Program

Under the terms of the merger agreement, outstanding XTO stock-based awards were converted into ExxonMobil stock-based awards based on the merger exchange ratio. The converted XTO awards, granted under XTO’s 1998 or 2004 Stock Incentive Plans, include restricted stock awards, stock options and performance stock awards. The grant date for the converted XTO awards is considered to be the effective date of the merger for purposes of calculating fair value. Compensation cost for the converted XTO awards will be recognized in income over the requisite service period. The maximum term of the XTO awards is ten years under the 1998 plan and seven years under the 2004 plan. No additional awards will be issued under either XTO plan. In connection with the closing of the merger, the Corporation also made new grants of restricted stock under the Corporation’s 2003 Incentive Program to certain current or former XTO employees as described in more detail below.

Restricted Stock

Long-term incentive awards totaling 4,206 thousand of restricted (nonvested) common stock were granted in association with the XTO merger. This included the granting of 1,423 thousand of restricted common stock awards under the Corporation’s 2003 Incentive Program and 2,783 thousand of converted XTO restricted common stock awards. Compensation cost for the restricted stock awards is based on the price of the stock at the date of grant. During the applicable restriction periods, the shares may not be sold or transferred and are subject to forfeiture. Otherwise, holders of restricted stock awards generally have all voting, dividend and other rights of other common stockholders.

The majority of the awards granted under the Corporation’s 2003 Incentive Program have graded vesting periods, with 50 percent of the shares in each award vesting after three years and the remaining 50 percent vesting after seven years. In addition, awards granted to certain former senior executives of XTO in connection with consulting agreements negotiated as part of the merger have vesting periods of one year for 50 percent of the award and of two or three years for the remaining 50 percent of the award, depending on the actual term of the consulting engagements.

The majority of the converted XTO awards vest in three installments over a period of three years or three and a half years after the initial grant. The remainder of converted XTO awards which were granted to certain senior XTO employees will vest on the first anniversary of the effective date of the merger.

The following table summarizes information about the merger related restricted stock awards issued.

 

Restricted Stock    Shares      Fair Value at
Date of Grant
     Weighted
Average
Grant-Date Fair
Value per Share
 
     (thousands)      (millions of dollars)         

Awards granted under 2003

        

Incentive Program

     1,423       $ 85       $ 59.67   

Converted XTO awards

     2,783       $ 165       $ 59.13   

Unrecognized compensation cost of $175 million related to the restricted stock awards detailed above is expected to be recognized over a weighted average period of 3.1 years.

 

-17-


Table of Contents

 

Performance Stock

The Corporation granted 157 thousand of converted XTO performance stock awards. Compensation cost for the performance stock awards is based on the estimated grant date fair values. The XTO performance stock awards vest depending on the achievement of certain XTO common stock price thresholds. Upon conversion of these awards to ExxonMobil performance stock awards in connection with the merger, the performance thresholds were adjusted to equivalent market price thresholds for common stock of the Corporation. The performance stock awards are subject to forfeiture if the performance criteria are not met within the maximum term. Otherwise, holders of performance stock awards generally have all voting, dividend and other rights of other common stockholders. The table below shows the number of shares and vesting prices of these converted performance stock awards.

 

Performance Stock

Awards

  

Vesting Price

 
(in thousands)       
55    $ 70.45   
51    $ 108.49   
51    $ 119.76   

The following table summarizes information about the merger related performance stock awards issued.

 

Performance stock    Shares      Fair Value
at Date of
Grant
   Weighted Average
Grant-Date Fair
Value per Share
     (thousands)      (millions of dollars)     

Converted XTO awards

     157       $  5    $  30.64

Unrecognized compensation cost of $4 million related to the performance stock awards detailed above is expected to be recognized over a weighted average period of 1.2 years.

Stock Options

The Corporation granted 12,393 thousand of converted XTO stock options as a result of the XTO merger. The converted XTO stock option awards are accounted for under current authoritative guidance which requires the measurement and recognition of compensation expense based on estimated grant date fair values. The stock options granted by XTO generally vest and become exercisable ratably over a three-year period, and may include a provision for accelerated vesting when the common stock price reaches specified levels. Some stock option tranches vest only when the common stock price reaches specified levels. Upon conversion of these stock options to ExxonMobil stock options in connection with the merger, the performance thresholds were adjusted to equivalent market price thresholds for common stock of the Corporation. The table below shows the terms under which the converted XTO stock option awards vest.

 

Unvested Stock Options

  

Vesting Term/Price

(in thousands)     
206    Ratably over 3 years
190    $   70.45
189    $   76.08
    1    $   77.49
307    $ 126.80

 

-18-


Table of Contents

 

The following table summarizes information about the merger related stock options issued.

 

Stock Options    Shares      Fair Value
at Date of
Grant
   Average
Exercise
Price
     Weighted Average
Remaining
Contractual Term
     (thousands)      (millions of dollars)            

Converted XTO awards

     12,393       $  182    $   55.15       3.6 years

Exercisable

     11,500       $  176    $   53.36       3.4 years

The intrinsic value for these stock options is $129 million. Unrecognized compensation cost of $3 million related to the non-vested stock options detailed above is expected to be recognized over a weighted average period of 1.3 years.

Estimated Fair Value of Grants

For restricted stock grants, the fair value was equal to the price of the common stock on the grant date. For the converted XTO stock options and performance stock, the Corporation used a Monte Carlo simulation model to estimate fair value. The Monte Carlo simulation model requires inputs for the risk-free interest rate, dividend yield, volatility, contract term, target vesting price, post-vesting turnover rate and suboptimal exercise factor. Expected life, derived vesting period and fair value are outputs of this model.

The risk-free interest rate is based on the constant maturity nominal rates of U.S. Treasury securities with remaining lives throughout the contract term on the day of the grant. The dividend yield is the expected common stock annual dividend yield over the expected life of the option or performance stock, expressed as a percentage of the stock price on the date of grant. The volatility factors are based on a combination of both the historical volatilities of ExxonMobil’s stock and the implied volatility of traded options on ExxonMobil common stock. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by certain employees who receive stock option grants, and subsequent events are not indicative of the reasonableness of the original fair value estimates.

The total estimated fair value calculated at acquisition for the converted XTO stock-based awards was $352 million.

Fair values were determined using the following assumptions:

 

Weighted average expected term (years)

   2.5

Range of risk-free interest rates

   0.1% - 2.6%

Weighted average risk-free interest rates

   0.9%

Dividend yield

   3.0%

Weighted average volatility

   28.5%

Range of volatility

   22.5% - 33.6%

 

-19-


Table of Contents

 

11. Condensed Consolidating Financial Information Related to Guaranteed Securities Issued by Subsidiaries

Exxon Mobil Corporation has fully and unconditionally guaranteed the deferred interest debentures due 2012 ($2,328 million long-term at September 30, 2010) and the debt securities due 2010-2011 ($13 million long-term and $13 million short-term) of SeaRiver Maritime Financial Holdings, Inc., a 100 percent owned subsidiary of Exxon Mobil Corporation.

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

 

     Exxon Mobil
Corporation
Parent
Guarantor
    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, 2010

  

Revenues and other income

           

Sales and other operating revenue, including sales-based taxes

   $ 3,835      $ —        $ 88,518       $ —        $ 92,353   

Income from equity affiliates

     6,858        (3     2,422         (6,834     2,443   

Other income

     106        —          396         —          502   

Intercompany revenue

     9,244        1        81,258         (90,503     —     
                                         

Total revenues and other income

     20,043        (2     172,594         (97,337     95,298   
                                         

Costs and other deductions

           

Crude oil and product purchases

     9,545        —          127,361         (88,031     48,875   

Production and manufacturing expenses

     1,972        —          8,229         (1,219     8,982   

Selling, general and administrative
expenses

     693        —          3,190         (176     3,707   

Depreciation and depletion

     410        —          3,434         —          3,844   

Exploration expenses, including dry holes

     35        —          465         —          500   

Interest expense

     67        62        1,020         (1,095     54   

Sales-based taxes

     —          —          7,172         —          7,172   

Other taxes and duties

     8        —          9,298         —          9,306   
                                         

Total costs and other deductions

     12,730        62        160,169         (90,521     82,440   
                                         

Income before income taxes

     7,313        (64     12,425         (6,816     12,858   

Income taxes

     (37     (23     5,357         —          5,297   
                                         

Net income including noncontrolling
interests

     7,350        (41     7,068         (6,816     7,561   

Net income attributable to noncontrolling interests

     —          —          211         —          211   
                                         

Net income attributable to ExxonMobil

   $ 7,350      $ (41   $ 6,857       $ (6,816   $ 7,350   
                                         

 

-20-


Table of Contents
     Exxon Mobil
Corporation
Parent
Guarantor
    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, 2009

  

Revenues and other income

           

Sales and other operating revenue, including sales-based taxes

   $ 3,207      $ —        $ 76,883       $ —        $ 80,090   

Income from equity affiliates

     5,238        1        1,648         (5,212     1,675   

Other income

     170        —          325         —          495   

Intercompany revenue

     8,067        1        74,420         (82,488     —     
                                         

Total revenues and other income

     16,682        2        153,276         (87,700     82,260   
                                         

Costs and other deductions

           

Crude oil and product purchases

     8,844        —          112,285         (79,440     41,689   

Production and manufacturing expenses

     1,924        —          7,681         (1,508     8,097   

Selling, general and administrative expenses

     783        —          3,289         (185     3,887   

Depreciation and depletion

     405        —          2,522         —          2,927   

Exploration expenses, including dry holes

     59        —          436         —          495   

Interest expense

     174        55        1,208         (1,375     62   

Sales-based taxes

     —          —          6,805         —          6,805   

Other taxes and duties

     4        —          9,090         —          9,094   
                                         

Total costs and other deductions

     12,193        55        143,316         (82,508     73,056   
                                         

Income before income taxes

     4,489        (53     9,960         (5,192     9,204   

Income taxes

     (241     (20     4,594         —          4,333   
                                         

Net income including noncontrolling interests

     4,730        (33     5,366         (5,192     4,871   

Net income attributable to noncontrolling interests

     —          —          141         —          141   
                                         

Net income attributable to ExxonMobil

   $ 4,730      $ (33   $ 5,225       $ (5,192   $ 4,730   
                                         

Condensed consolidated statement of income for nine months ended September 30, 2010

  

Revenues and other income

           

Sales and other operating revenue, including sales-based taxes

   $ 11,622      $ —        $ 257,461       $ —        $ 269,083   

Income from equity affiliates

     20,445        (3     7,151         (20,369     7,224   

Other income

     403        —          1,325         —          1,728   

Intercompany revenue

     28,330        3        242,859         (271,192     —     
                                         

Total revenues and other income

     60,800        —          508,796         (291,561     278,035   
                                         

Costs and other deductions

           

Crude oil and product purchases

     29,886        —          377,952         (263,709     144,129   

Production and manufacturing expenses

     5,741        —          23,882         (3,830     25,793   

Selling, general and administrative expenses

     2,159        —          9,191         (522     10,828   

Depreciation and depletion

     1,268        —          9,222         —          10,490   

Exploration expenses, including dry holes

     163        —          1,430         —          1,593   

Interest expense

     199        185        2,949         (3,184     149   

Sales-based taxes

     —          —          20,933         —          20,933   

Other taxes and duties

     23        —          26,465         —          26,488   
                                         

Total costs and other deductions

     39,439        185        472,024         (271,245     240,403   
                                         

Income before income taxes

     21,361        (185     36,772         (20,316     37,632   

Income taxes

     151        (68     15,667         —          15,750   
                                         

Net income including noncontrolling interests

     21,210        (117     21,105         (20,316     21,882   

Net income attributable to noncontrolling interests

     —          —          672         —          672   
                                         

Net income attributable to ExxonMobil

   $ 21,210      $ (117   $ 20,433       $ (20,316   $ 21,210   
                                         

 

-21-


Table of Contents

 

     Exxon  Mobil
Corporation
Parent
Guarantor
    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, 2009

  

    

Revenues and other income

           

Sales and other operating revenue,
including sales-based taxes

   $ 8,007      $ —        $ 206,378       $ —        $ 214,385   

Income from equity affiliates

     14,261        5        4,658         (14,196     4,728   

Other income

     755        —          877         —          1,632   

Intercompany revenue

     21,373        3        191,720         (213,096     —     
                                         

Total revenues and other income

     44,396        8        403,633         (227,292     220,745   
                                         

Costs and other deductions

           

Crude oil and product purchases

     21,429        —          288,562         (203,605     106,386   

Production and manufacturing expenses

     5,803        —          22,433         (4,131     24,105   

Selling, general and administrative expenses

     2,001        —          9,385         (532     10,854   

Depreciation and depletion

     1,133        —          7,591         —          8,724   

Exploration expenses, including dry holes

     191        —          1,145         —          1,336   

Interest expense

     1,132        166        4,102         (4,888     512   

Sales-based taxes

     —          —          18,927         —          18,927   

Other taxes and duties

     (30     —          25,360         —          25,330   
                                         

Total costs and other deductions

     31,659        166        377,505         (213,156     196,174   
                                         

Income before income taxes

     12,737        (158     26,128         (14,136     24,571   

Income taxes

     (493     (61     11,606         —          11,052   
                                         

Net income including noncontrolling interests

     13,230        (97     14,522         (14,136     13,519   

Net income attributable to noncontrolling interests

     —          —          289         —          289   
                                         

Net income attributable to ExxonMobil

   $ 13,230      $ (97   $ 14,233       $ (14,136   $ 13,230   
                                         

 

-22-


Table of Contents
     Exxon Mobil
Corporation
Parent
Guarantor
     SeaRiver
Maritime
Financial
Holdings
Inc.
     All Other
Subsidiaries
     Consolidating
and
Eliminating
Adjustments
     Consolidated  
     (millions of dollars)  

Condensed consolidated balance sheet as of September 30, 2010

  

     

Cash and cash equivalents

   $ 386       $ —         $ 11,858       $ —         $ 12,244   

Marketable securities

     —           —           15         —           15   

Notes and accounts receivable - net

     3,293         38         28,523         (1,610      30,244   

Inventories

     1,491         —           12,811         —           14,302   

Other current assets

     463         —           5,365         —           5,828   
                                            

Total current assets

     5,633         38         58,572         (1,610      62,633   

Property, plant and equipment - net

     18,346         —           177,094         —           195,440   

Investments and other assets

     240,901         469         461,178         (660,627      41,921   

Intercompany receivables

     17,553         2,409         467,724         (487,686      —     
                                            

Total assets

   $ 282,433       $ 2,916       $ 1,164,568       $ (1,149,923    $ 299,994   
                                            

Notes and loan payables

   $ 982       $ 13       $ 2,051       $ —         $ 3,046   

Accounts payable and accrued liabilities

     2,988         —           45,263         —           48,251   

Income taxes payable

     —           —           12,053         (1,610      10,443   
                                            

Total current liabilities

     3,970         13         59,367         (1,610      61,740   

Long-term debt

     296         2,341         12,611         —           15,248   

Postretirement benefits reserves

     9,131         —           8,881         —           18,012   

Deferred income tax liabilities

     960         122         34,222         —           35,304   

Other long-term obligations

     4,517         —           14,573         —           19,090   

Intercompany payables

     118,528         382         368,776         (487,686      —     
                                            

Total liabilities

     137,402         2,858         498,430         (489,296      149,394   
                                            

Earnings reinvested

     291,861         (811      124,603         (123,792      291,861   

Other ExxonMobil equity

     (146,830      869         535,966         (536,835      (146,830
                                            

ExxonMobil share of equity

     145,031         58         660,569         (660,627      145,031   

Noncontrolling interests

     —           —           5,569         —           5,569   
                                            

Total equity

     145,031         58         666,138         (660,627      150,600   
                                            

Total liabilities and equity

   $ 282,433       $ 2,916       $ 1,164,568       $ (1,149,923    $ 299,994   
                                            

Condensed consolidated balance sheet as of December 31, 2009

  

     

Cash and cash equivalents

   $ 449       $ —         $ 10,244       $ —         $ 10,693   

Marketable securities

     —           —           169         —           169   

Notes and accounts receivable - net

     2,050         —           25,858         (263      27,645   

Inventories

     1,202         —           10,351         —           11,553   

Other current assets

     313         —           4,862         —           5,175   
                                            

Total current assets

     4,014         —           51,484         (263      55,235   

Property, plant and equipment - net

     18,015         —           121,101         —           139,116   

Investments and other assets

     199,317         473         446,788         (607,606      38,972   

Intercompany receivables

     19,637         2,257         442,903         (464,797      —     
                                            

Total assets

   $ 240,983       $ 2,730       $ 1,062,276       $ (1,072,666    $ 233,323   
                                            

Notes and loan payables

   $ 43       $ 13       $ 2,420       $ —         $ 2,476   

Accounts payable and accrued liabilities

     2,779         —           38,496         —           41,275   

Income taxes payable

     —           2         8,571         (263      8,310   
                                            

Total current liabilities

     2,822         15         49,487         (263      52,061   

Long-term debt

     279         2,157         4,693         —           7,129   

Postretirement benefits reserves

     8,673         —           9,269         —           17,942   

Deferred income tax liabilities

     818         151         22,179         —           23,148   

Other long-term obligations

     5,286         —           12,365         —           17,651   

Intercompany payables

     112,536         382         351,879         (464,797      —     
                                            

Total liabilities

     130,414         2,705         449,872         (465,060      117,931   
                                            

Earnings reinvested

     276,937         (694      109,603         (108,909      276,937   

Other ExxonMobil equity

     (166,368      719         497,978         (498,697      (166,368
                                            

ExxonMobil share of equity

     110,569         25         607,581         (607,606      110,569   

Noncontrolling interests

     —           —           4,823         —           4,823   
                                            

Total equity

     110,569         25         612,404         (607,606      115,392   
                                            

Total liabilities and equity

   $ 240,983       $ 2,730       $ 1,062,276       $ (1,072,666    $ 233,323   
                                            

 

-23-


Table of Contents

 

     Exxon Mobil
Corporation
Parent
Guarantor
     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, 2010

  

Cash provided by/(used in) operating activities

   $ 32,326       $ 2       $ 8,463       $ (5,433    $ 35,358   
                                            

Cash flows from investing activities

              

Additions to property, plant and
equipment

     (2,459      —           (16,742      —           (19,201

Sales of long-term assets

     528         —           1,079         —           1,607   

Net intercompany investing

     (18,096      (152      17,894         354         —     

All other investing, net

     7         —           463         —           470   
                                            

Net cash provided by/(used in) investing activities

     (20,020      (152      2,694         354         (17,124
                                            

Cash flows from financing activities

              

Additions to long-term debt

     —           —           374         —           374   

Reductions in long-term debt

     —           —           (2,587      —           (2,587

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

     936         —           (1,665      —           (729

Cash dividends

     (6,286      —           (5,433      5,433         (6,286

Net ExxonMobil shares sold/(acquired)

     (7,066      —           —           —           (7,066

Net intercompany financing activity

     —           —           204         (204      —     

All other financing, net

     47         150         (247      (150      (200
                                            

Net cash provided by/(used in) financing activities

     (12,369      150         (9,354      5,079         (16,494
                                            

Effects of exchange rate changes on cash

     —           —           (189      —           (189
                                            

Increase/(decrease) in cash and cash equivalents

   $ (63    $ —         $ 1,614       $ —         $ 1,551   
                                            

Condensed consolidated statement of cash flows for nine months ended September 30, 2009

  

Cash provided by/(used in) operating activities

   $ (1,554    $ 2       $ 21,764       $ (278    $ 19,934   
                                            

Cash flows from investing activities

              

Additions to property, plant and equipment

     (1,999      —           (13,729      —           (15,728

Sales of long-term assets

     191         —           892         —           1,083   

Net intercompany investing

     22,485         (152      (22,646      313         —     

All other investing, net

     —           —           (1,352      —           (1,352
                                            

Net cash provided by/(used in) investing activities

     20,677         (152      (36,835      313         (15,997
                                            

Cash flows from financing activities

              

Additions to long-term debt

     —           —           192         —           192   

Reductions in long-term debt

     —           —           (27      —           (27

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

     —           —           (202      —           (202

Cash dividends

     (6,031      —           (278      278         (6,031

Net ExxonMobil shares sold/(acquired)

     (17,035      —           —           —           (17,035

Net intercompany financing activity

     —           —           163         (163      —     

All other financing, net

     79         150         (364      (150      (285
                                            

Net cash provided by/(used in) financing activities

     (22,987      150         (516      (35      (23,388
                                            

Effects of exchange rate changes on cash

     —           —           486         —           486   
                                            

Increase/(decrease) in cash and cash equivalents

   $ (3,864    $ —         $ (15,101    $ —         $ (18,965
                                            

 

-24-


Table of Contents

 

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  

Earnings (U.S. GAAP)

   2010     2009     2010     2009  
     (millions of dollars)  

Upstream

        

United States

   $ 999      $ 709      $ 2,955      $ 1,882   

Non-U.S.

     4,468        3,303        13,662        9,445   

Downstream

        

United States

     164        (203     544        134   

Non-U.S.

     996        528        1,873        1,836   

Chemical

        

United States

     676        315        1,900        477   

Non-U.S.

     553        561        1,946        1,116   

Corporate and financing

     (506     (483     (1,670     (1,660
                                

Net Income attributable to ExxonMobil (U.S. GAAP)

   $ 7,350      $ 4,730      $ 21,210      $ 13,230   
                                

Earnings per common share (dollars)

   $ 1.44      $ 0.98      $ 4.38      $ 2.72   

Earnings per common share - assuming dilution (dollars)

   $ 1.44      $ 0.98      $ 4.37      $ 2.71   

Special items included in earnings

        

Corporate and financing
Valdez litigation

   $ 0      $ 0      $ 0      $ (140

References in this discussion to total corporate earnings mean net income attributable to ExxonMobil (U.S. GAAP) from the income statement. Unless otherwise indicated, references to earnings, special items, Upstream, Downstream, Chemical and Corporate and Financing segment earnings, and earnings per share are ExxonMobil’s share after excluding amounts attributable to noncontrolling interests.

REVIEW OF THIRD QUARTER 2010 RESULTS

Third quarter earnings were $7,350 million, up 55 percent from third quarter of last year due to higher crude oil and natural gas realizations, improved refining margins, and solid chemical results. Despite continuing economic uncertainty, we had strong quarterly results and continued to advance our robust investment opportunities.

Capital and exploration spending for the first nine months of 2010 was $22.2 billion, up 18 percent from the first nine months of last year.

The Corporation returned over $5 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding.

 

 

Earnings in the first nine months of $21,210 million ($4.37 per share) increased $7,980 million from 2009.

Earnings were up 60 percent from 2009. Earnings for 2009 included a special charge of $140 million for interest related to the Valdez punitive damages award. Earnings for the first nine months of 2010 did not include any special items.

 

-25-


Table of Contents

 

     Third Quarter      First Nine Months  
         2010              2009               2010                2009       
     (millions of dollars)  

Upstream earnings

           

United States

   $ 999       $ 709       $ 2,955       $ 1,882   

Non-U.S.

     4,468         3,303         13,662         9,445   
                                   

Total

   $ 5,467       $ 4,012       $ 16,617       $ 11,327   
                                   

Upstream earnings in the third quarter of 2010 were $5,467 million, up $1,455 million from the third quarter of 2009. Higher crude oil and natural gas realizations increased earnings by $1 billion, while higher liquids and gas volumes improved earnings by $270 million.

On an oil-equivalent basis, production increased over 20 percent from the third quarter of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up 20 percent.

Liquids production totaled 2,421 kbd (thousands of barrels per day), up 86 kbd or nearly 4 percent from the third quarter of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up 3 percent, as increased production from projects in Qatar and the addition of XTO volumes more than offset net field decline.

Third quarter natural gas production was 12,192 mcfd (millions of cubic feet per day), up 4,037 mcfd from 2009, driven by additional U.S. unconventional gas volumes and project ramp-ups in Qatar.

Earnings from U.S. Upstream operations were $999 million, $290 million higher than the third quarter of 2009. Non-U.S. Upstream earnings were $4,468 million, up $1,165 million from last year.

 

 

Upstream earnings for the first nine months of 2010 were $16,617 million, up $5,290 million from 2009. Higher crude oil and natural gas realizations increased earnings approximately $5.1 billion. The favorable impact of higher volumes of $590 million was partially offset by higher operating costs of $340 million.

On an oil-equivalent basis, production was up 11 percent compared to the first nine months of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up 12 percent.

Liquids production of 2,387 kbd increased 2 kbd compared with 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production increased 1 percent compared with 2009, as new volumes from project ramp-ups in Qatar were offset by net field decline.

Natural gas production of 11,304 mcfd increased 2,518 mcfd from 2009, driven by higher volumes from Qatar projects and additional U.S. unconventional gas volumes.

Earnings from U.S. Upstream operations for 2010 were $2,955 million, an increase of $1,073 million from 2009. Non-U.S. earnings were $13,662 million, up $4,217 million from 2009.

 

     Third Quarter     First Nine Months  
         2010              2009              2010                2009       
     (millions of dollars)  

Downstream earnings

          

United States

   $ 164       $ (203   $ 544       $ 134   

Non-U.S.

     996         528        1,873         1,836   
                                  

Total

   $ 1,160       $ 325      $ 2,417       $ 1,970   
                                  

Third quarter Downstream earnings of $1,160 million were up $835 million from the third quarter of 2009. Higher industry refining margins, partly offset by lower marketing margins increased earnings by $300 million. Volume and product mix effects increased earnings by $150 million while other factors, mainly asset sales and favorable foreign exchange impacts, increased earnings by $390 million. Petroleum product sales of 6,574 kbd were 273 kbd higher than last year’s third quarter, mainly reflecting higher demand.

Earnings from the U.S. Downstream were $164 million, up $367 million from the third quarter of 2009. Non-U.S. Downstream earnings of $996 million were $468 million higher than last year.

 

 

 

-26-


Table of Contents

 

Downstream earnings for the first nine months of 2010 of $2,417 million were $447 million higher than 2009. Positive sales volume mix effects increased earnings by $430 million. Negative foreign exchange impacts of $320 million were offset by favorable tax items. Petroleum product sales of 6,359 kbd decreased 48 kbd.

U.S. Downstream earnings were $544 million, up $410 million from 2009. Non-U.S. Downstream earnings were $1,873 million, $37 million higher than last year.

 

     Third Quarter      First Nine Months  
     2010      2009      2010      2009  
     (millions of dollars)  

Chemical earnings

           

United States

   $ 676       $ 315       $ 1,900       $ 477   

Non-U.S.

     553         561         1,946         1,116   
                                   

Total

   $ 1,229       $ 876       $ 3,846       $ 1,593   
                                   

Third quarter 2010 Chemical earnings of $1,229 million were $353 million higher than the third quarter of 2009. Improved margins increased earnings by $370 million. Third quarter prime product sales of 6,558 kt (thousands of metric tons) were 202 kt higher than the prior year primarily due to improved global demand and start-up of the Fujian facility in China.

 

 

Chemical earnings of $3,846 million increased $2,253 million from the first nine months of 2009. Improved margins increased earnings by approximately $1.7 billion while higher volumes increased earnings about $370 million. Prime product sales of 19,542 kt were up 1,392 kt from 2009.

 

     Third Quarter     First Nine Months  
     2010     2009     2010     2009  
     (millions of dollars)  

Corporate and financing earnings

   $ (506   $ (483   $ (1,670   $ (1,660

Special items included in earnings

        

Corporate and financing
Valdez litigation

   $ 0      $ 0      $ 0      $ (140

Corporate and financing expenses were $506 million during the third quarter of 2010, up $23 million from the third quarter of 2009.

 

 

Corporate and financing expenses were $1,670 million for the first nine months of 2010, up $10 million from 2009 mainly due to a tax charge related to the U.S. health care legislation during the first quarter of 2010 partially offset by the absence of the 2009 Valdez litigation charge.

 

-27-


Table of Contents

 

LIQUIDITY AND CAPITAL RESOURCES

 

     Third Quarter      First Nine Months  
     2010      2009      2010     2009  
     (millions of dollars)  

Net cash provided by/(used in)

          

Operating activities

         $ 35,358      $ 19,934   

Investing activities

           (17,124     (15,997

Financing activities

           (16,494     (23,388

Effect of exchange rate changes

           (189     486   
                      

Increase/(decrease) in cash and cash equivalents

         $ 1,551      $ (18,965
                      

Cash and cash equivalents (at end of period)

         $ 12,244      $ 12,472   

Cash flow from operations and asset sales

          

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

   $ 13,077       $ 8,827       $ 35,358      $ 19,934   

Sales of subsidiaries, investments and property, plant and equipment

     755         172         1,607        1,083   
                                  

Cash flow from operations and asset sales

   $ 13,832       $ 8,999       $ 36,965      $ 21,017   
                                  

Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider asset 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 of $12.2 billion at the end of the third quarter of 2010 compared to $12.5 billion at the end of the third quarter of 2009.

Cash provided by operating activities totaled $35.4 billion for the first nine months of 2010, $15.4 billion higher than 2009. The major source of funds was net income including noncontrolling interests of $21.9 billion, adjusted for the noncash provision of $10.5 billion for depreciation and depletion, both of which increased. Changes in operational working capital added to cash flows in 2010. All other items net in 2009 included $4.1 billion of pension fund contributions. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.

Investing activities for the first nine months of 2010 used net cash of $17.1 billion compared to $16.0 billion in the prior year. Spending for additions to property, plant and equipment increased $3.5 billion to $19.2 billion.

Cash flow from operations and asset sales in the third quarter of 2010 of $13.8 billion, including asset sales of $0.8 billion, increased $4.8 billion from the comparable 2009 period. Cash flow from operations and asset sales in the first nine months of 2010 of $37.0 billion, including asset sales of $1.6 billion, increased $15.9 billion from 2009.

Net cash used in financing activities of $16.5 billion in the first nine months of 2010 was $6.9 billion lower reflecting a lower level of purchases of shares of ExxonMobil stock. The Corporation’s acquisition of all the outstanding equity of XTO Energy Inc. in 2010 was a non-cash, all-stock transaction valued at $24.7 billion.

During the third quarter of 2010, Exxon Mobil Corporation purchased 54 million shares of its common stock for the treasury at a gross cost of $3.3 billion. These purchases included $3 billion to reduce the number of shares outstanding, with the balance used to offset shares issued in conjunction with the company’s benefit plans and programs. Shares outstanding decreased from 5,092 million at the end of the second quarter to 5,043 million at the end of the third quarter. 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 to shareholders a total of $5.2 billion in the third quarter of 2010 through dividends and share purchases to reduce shares outstanding.

Total debt of $18.3 billion at September 30, 2010, which included $8.0 billion of debt in connection with the XTO acquisition, compared to $9.6 billion at year-end 2009. The Corporation’s debt to total capital ratio was 10.8 percent at the end of the third quarter of 2010 compared to 7.7 percent at year-end 2009.

 

-28-


Table of Contents

 

Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds are expected to cover the majority of its net near-term financial requirements. Effective with the closing of the merger, XTO’s long-term debt securities were unconditionally guaranteed by ExxonMobil. The guarantees may be revoked by the Corporation under certain conditions. During the third quarter of 2010, XTO term loans of $600 million were repaid, the XTO 5% senior note due in 2010 matured, and XTO fixed-rate bonds with a book value of $2.6 billion were repurchased via tender offers. The Corporation expects to consider additional opportunities to restructure XTO debt where economic.

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.

In accordance with a nationalization decree issued by Venezuela’s president in February 2007, by May 1, 2007, a subsidiary of the Venezuelan National Oil Company (PdVSA) assumed the operatorship of the Cerro Negro Heavy Oil Project. This Project had been operated and owned by ExxonMobil affiliates holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a “mixed enterprise” and an increase in PdVSA’s or one of its affiliate’s ownership interest in the Project, with the stipulation that if ExxonMobil refused to accept the terms for the formation of the mixed enterprise within a specified period of time, the government would “directly assume the activities” carried out by the joint venture. ExxonMobil refused to accede to the terms proffered by the government, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project.

On September 6, 2007, affiliates of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID) invoking ICSID jurisdiction under Venezuela’s Investment Law and the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID Tribunal issued a decision on June 10, 2010, finding that it had jurisdiction to proceed on the basis of the Netherlands-Venezuela Bilateral Investment Treaty. The ICSID arbitration proceeding is continuing. An affiliate of ExxonMobil has also filed an arbitration under the rules of the International Chamber of Commerce (ICC) against PdVSA and a PdVSA affiliate for breach of their contractual obligations under certain Cerro Negro Project agreements. Hearings on the merits of the case were held during August and September 2010. The parties filed post-hearing briefs in the ICC arbitration on October 25, 2010, with reply briefs due to be filed on November 8, 2010. At this time, the net impact of this matter on the Corporation’s consolidated financial results cannot be reasonably estimated. However, the Corporation does not expect the resolution to have a material effect upon the Corporation’s operations or financial condition. ExxonMobil’s remaining net book investment in Cerro Negro producing assets is about $750 million.

TAXES

 

     Third Quarter     First Nine Months  
     2010     2009     2010     2009  
     (millions of dollars)  

Income taxes

   $ 5,297      $ 4,333      $ 15,750      $ 11,052   

Effective income tax rate

     45     50     46     48

Sales-based taxes

     7,172        6,805        20,933        18,927   

All other taxes and duties

     10,071        9,729        28,664        27,442   
                                

Total

   $ 22,540      $ 20,867      $ 65,347      $ 57,421   
                                

Income, sales-based and all other taxes and duties for the third quarter of 2010 of $22,540 million were higher than 2009. In the third quarter of 2010 income tax expense increased to $5,297 million reflecting the high