PART I. FINANCIAL INFORMATION | | | | | | | | | | | | Item 1. Financial Statements |
| | | | | | | | | | | | | | | | EXXON MOBIL CORPORATION |
| CONDENSED CONSOLIDATED STATEMENT OF INCOME |
| (millions of dollars) |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Six Months Ended
| | | | |
| June 30,March 31,
| | | June 30,
| |
|
| | | 2018
| | | 2017
| | | 2018
| | | 2017
| Revenues and other income
| | | | | 2019 |
|
| 2018 |
| Revenues and other income | | | | | | | | | Sales and other operating revenue | | | 71,45661,646
| | | 56,02665,436
| | | 136,892
| | | 112,500
| | Income from equity affiliates | | | 1,7291,709
| | | 1,5251,910
| | | 3,639
| | | 3,235
| | Other income | | | 316270
| | | 526865
| | | 1,181
| | | 1,013
| | | Total revenues and other income | | | 73,50163,625
| | | 58,07768,211
| | | 141,712
| | | 116,748
| Costs and other deductions |
| | | | | | | | | | | | | Crude oil and product purchases | | | 41,32734,801
| | | 30,19436,288
| | | 77,615
| | | 60,553
| | Production and manufacturing expenses | | | 8,9188,970
| | | 8,0608,491
| | | 17,409
| | | 15,626
| | Selling, general and administrative expenses | | | 2,9932,770
| | | 2,5562,747
| | | 5,740
| | | 5,061
| | Depreciation and depletion | | | 4,5894,571
| | | 4,6524,470
| | | 9,059
| | | 9,171
| | Exploration expenses, including dry holes | | | 332280
| | | 514287
| | | 619
| | | 803
| | Non-service pension and postretirement benefit expense | | | 308358
| | | 419337
| | | 645
| | | 792
| | Interest expense | | | 147181
| | | 158204
| | | 351
| | | 304
| | Other taxes and duties | | | 8,3757,405
| | | 7,3688,147
| | | 16,522
| | | 14,364
| | | Total costs and other deductions | | | 66,98959,336
| | | 53,92160,971
| | | 127,960
| | | 106,674
| Income before income taxes | | | 6,5124,289
| | | 4,1567,240
| | | 13,752
| | | 10,074
| | Income taxes | | | 2,5261,883
| | | 8922,457
| | | 4,983
| | | 2,720
| Net income including noncontrolling interests | | | 3,9862,406
| | | 3,2644,783
| | | 8,769
| | | 7,354
| | Net income attributable to noncontrolling interests | | | 3656
| | | (86)133
| | | 169
| | | (6)
| Net income attributable to ExxonMobil | | | 3,9502,350
| | | 3,3504,650
| | | 8,600
| | | 7,360
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings per common share (dollars) | | | 0.920.55
| | | 0.781.09
| | | 2.01
| | | 1.73
| | | | | | | | | | | | | | | Earnings per common share - assuming dilution (dollars) | | | 0.920.55
| | | 0.78
| | | 2.01
| | | 1.73
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends per common share(dollars)
| | | 0.82
| | | 0.77
| | | 1.59
| | | 1.52
| | | | | | | | | | | | | | 1.09 | |
The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.
EXXON MOBIL CORPORATION | CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended | | | Six Months Ended | | | | | | | June 30, | | | June 30, | | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | | | | | | | | | | Net income including noncontrolling interests | | | 3,986 | | | 3,264 | | | 8,769 | | | 7,354 | Other comprehensive income (net of income taxes) | | | | | | | | | | | | | | Foreign exchange translation adjustment | | | (2,040) | | | 1,674 | | | (2,844) | | | 3,082 | | Adjustment for foreign exchange translation (gain)/loss | | | | | | | | | | | | | | | | included in net income | | | 18 | | | 234 | | | 186 | | | 234 | | Postretirement benefits reserves adjustment | | | | | | | | | | | | | | | | (excluding amortization) | | | 43 | | | (159) | | | (391) | | | (184) | | Amortization and settlement of postretirement benefits reserves | | | | | | | | | | | | | | | | adjustment included in net periodic benefit costs | | | 229 | | | 283 | | | 466 | | | 539 | | | Total other comprehensive income | | | (1,750) | | | 2,032 | | | (2,583) | | | 3,671 | Comprehensive income including noncontrolling interests | | | 2,236 | | | 5,296 | | | 6,186 | | | 11,025 | | Comprehensive income attributable to | | | | | | | | | | | | | | | | noncontrolling interests | | | (97) | | | 169 | | | (106) | | | 328 | Comprehensive income attributable to ExxonMobil | | | 2,333 | | | 5,127 | | | 6,292 | | | 10,697 |
EXXON MOBIL CORPORATION | | CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended | | | | | | | | | | March 31, | | | | | | | | | | 2019 | | | 2018 | | | | | | | | | | | | | | | Net income including noncontrolling interests | | | | 2,406 | | | 4,783 | | | Other comprehensive income (net of income taxes) | | | | | | | | | | | Foreign exchange translation adjustment | | | | 749 | | | (804) | | | | Adjustment for foreign exchange translation (gain)/loss included in net income | | | - | | | 168 | | | | Postretirement benefits reserves adjustment (excluding amortization) | | | (26) | | | (434) | | | | Amortization and settlement of postretirement benefits reserves adjustment | | | | | | | | | | | | included in net periodic benefit costs | | | | 185 | | | 237 | | | | | Total other comprehensive income | | | | 908 | | | (833) | | | Comprehensive income including noncontrolling interests | | | 3,314 | | | 3,950 | | | | Comprehensive income attributable to noncontrolling interests | | | 182 | | | (9) | | | Comprehensive income attributable to ExxonMobil | | | | 3,132 | | | 3,959 | |
The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.
EXXON MOBIL CORPORATION | EXXON MOBIL CORPORATION | | EXXON MOBIL CORPORATION | | CONDENSED CONSOLIDATED BALANCE SHEET | CONDENSED CONSOLIDATED BALANCE SHEET | | CONDENSED CONSOLIDATED BALANCE SHEET | | (millions of dollars) | (millions of dollars) | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | June 30, | | | Dec. 31, | | | | | | | Mar. 31, | | | Dec. 31, | | | | | | | | 2018 | | | 2017 | | | | | | | 2019 | | | 2018 | | Assets | Assets | | | | | | Assets | | | | | | | Current assets | | | | | | Current assets | | | | | | | | Cash and cash equivalents | | | 3,430 | | | 3,177 | | | Cash and cash equivalents | | | 4,586 | | | 3,042 | | | | Notes and accounts receivable – net | | 26,993 | | 25,597 | | | Notes and accounts receivable – net | | 27,105 | | 24,701 | | | | Inventories | | | | | | | Inventories | | | | | | | | | Crude oil, products and merchandise | | 14,373 | | 12,871 | | | | Crude oil, products and merchandise | | 13,979 | | 14,803 | | | | | Materials and supplies | | 4,110 | | 4,121 | | | | Materials and supplies | | 4,353 | | 4,155 | | | | Other current assets | | 1,649 | | 1,368 | | | Other current assets | | 1,553 | | 1,272 | | | | | Total current assets | | 50,555 | | 47,134 | | | | Total current assets | | 51,576 | | 47,973 | | | Investments, advances and long-term receivables | | 39,691 | | 39,160 | | Investments, advances and long-term receivables | | 42,068 | | 40,790 | | | Property, plant and equipment – net | | 248,209 | | 252,630 | | Property, plant and equipment – net | | 248,563 | | 247,101 | | | Other assets, including intangibles – net | | 10,335 | | 9,767 | | Other assets, including intangibles – net | | 13,982 | | 10,332 | | | | | Total assets | | | 348,790 | | | 348,691 | | | | Total assets | | | 356,189 | | | 346,196 | | | | | | | | | | | | | | | | | | | Liabilities | Liabilities | | | | | | Liabilities | | | | | | | Current liabilities | | | | | | Current liabilities | | | | | | | | Notes and loans payable | | | 20,500 | | | 17,930 | | | Notes and loans payable | | | 21,794 | | | 17,258 | | | | Accounts payable and accrued liabilities | | 38,490 | | 36,796 | | | Accounts payable and accrued liabilities | | 42,090 | | 37,268 | | | | Income taxes payable | | 3,457 | | 3,045 | | | Income taxes payable | | 2,748 | | 2,612 | | | | | Total current liabilities | | 62,447 | | 57,771 | | | | Total current liabilities | | 66,632 | | 57,138 | | | Long-term debt | | 20,720 | | 24,406 | | Long-term debt | | 19,031 | | 20,538 | | | Postretirement benefits reserves | | 21,504 | | 21,132 | | Postretirement benefits reserves | | 20,051 | | 20,272 | | | Deferred income tax liabilities | | 26,783 | | 26,893 | | Deferred income tax liabilities | | 27,287 | | 27,244 | | | Long-term obligations to equity companies | | 4,575 | | 4,774 | | Long-term obligations to equity companies | | 4,430 | | 4,382 | | | Other long-term obligations | | 19,228 | | 19,215 | | Other long-term obligations | | 20,737 | | 18,094 | | | | | Total liabilities | | | 155,257 | | | 154,191 | | | | Total liabilities | | | 158,168 | | | 147,668 | | | | | | | | | | | | | | | | | | | Commitments and contingencies (Note 3) | Commitments and contingencies (Note 3) | | | | | | Commitments and contingencies (Note 3) | | | | | | | | | | | | | | | | | | | Equity | Equity | | | | | | Equity | | | | | | | Common stock without par value | | | | | | Common stock without par value | | | | | | | | (9,000 million shares authorized, 8,019 million shares issued) | | 15,086 | | 14,656 | | | (9,000 million shares authorized, 8,019 million shares issued) | | 15,476 | | 15,258 | | | Earnings reinvested | | 416,418 | | 414,540 | | Earnings reinvested | | 420,498 | | 421,653 | | | Accumulated other comprehensive income | | (18,609) | | (16,262) | | Accumulated other comprehensive income | | (18,782) | | (19,564) | | | Common stock held in treasury | | | | | | Common stock held in treasury | | | | | | | | (3,785 million shares at June 30, 2018 and | | | | | | | (3,788 million shares at March 31, 2019 and | | | | | | | | 3,780 million shares at December 31, 2017) | | (225,673) | | (225,246) | | | 3,782 million shares at December 31, 2018) | | (225,970) | | (225,553) | | | | | ExxonMobil share of equity | | 187,222 | | 187,688 | | | | ExxonMobil share of equity | | 191,222 | | 191,794 | | | Noncontrolling interests | | 6,311 | | 6,812 | | Noncontrolling interests | | 6,799 | | 6,734 | | | | | Total equity | | 193,533 | | 194,500 | | | | Total equity | | 198,021 | | 198,528 | | | | | Total liabilities and equity | | | 348,790 | | | 348,691 | | | | Total liabilities and equity | | | 356,189 | | | 346,196 | |
The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.
EXXON MOBIL CORPORATION | EXXON MOBIL CORPORATION | | EXXON MOBIL CORPORATION | | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | | (millions of dollars) | (millions of dollars) | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | Six Months Ended | | | | | | Three Months Ended | | | | | | | June 30, | | | | | | March 31, | | | | | | | 2018 | | | 2017 | | | | | | 2019 | | | 2018 | | Cash flows from operating activities | Cash flows from operating activities | | | | | | | | Cash flows from operating activities | | | | | | | | | Net income including noncontrolling interests | | | 8,769 | | | 7,354 | | Net income including noncontrolling interests | | | 2,406 | | | 4,783 | | | Depreciation and depletion | | | 9,059 | | | 9,171 | | Depreciation and depletion | | | 4,571 | | | 4,470 | | | Changes in operational working capital, excluding cash and debt | | | (982) | | | (228) | | Changes in operational working capital, excluding cash and debt | | | 2,257 | | | 351 | | | All other items – net | | | (547) | | | (1,177) | | All other items – net | | | (896) | | | (1,085) | | | | Net cash provided by operating activities | | | 16,299 | | | 15,120 | | | Net cash provided by operating activities | | | 8,338 | | | 8,519 | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities | Cash flows from investing activities | | | | | | | | Cash flows from investing activities | | | | | | | | | Additions to property, plant and equipment | | | (8,276) | | | (5,988) | | Additions to property, plant and equipment | | | (5,199) | | | (3,349) | | | Proceeds associated with sales of subsidiaries, property, plant and | | | | | | | | Proceeds associated with sales of subsidiaries, property, plant and | | | | | | | | | | equipment, and sales and returns of investments | | | 1,748 | | | 841 | | | equipment, and sales and returns of investments | | | 107 | | | 1,441 | | | Additional investments and advances | | | (704) | | | (1,793) | | Additional investments and advances | | | (910) | | | (138) | | | Other investing activities including collection of advances | | | 277 | | | 301 | | Other investing activities including collection of advances | | | 209 | | | 187 | | | | Net cash used in investing activities | | | (6,955) | | | (6,639) | | | Net cash used in investing activities | | | (5,793) | | | (1,859) | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities | Cash flows from financing activities | | | | | | | | Cash flows from financing activities | | | | | | | | | Additions to long-term debt | | | - | | | 60 | | Reductions in short-term debt | | | (3,777) | | | (3,872) | | | Additions to short-term debt | | | - | | | 1,735 | | Additions/(reductions) in commercial paper, and debt with three | | | | | | | | | Reductions in short-term debt | | | (4,256) | | | (2,722) | | | months or less maturity (1) | | | 6,776 | | | 1,950 | | | Additions/(reductions) in commercial paper, and debt with three | | | | | | | | Cash dividends to ExxonMobil shareholders | | | (3,505) | | | (3,291) | | | | months or less maturity (1) | | | 2,902 | | | (321) | | Cash dividends to noncontrolling interests | | | (43) | | | (43) | | | Cash dividends to ExxonMobil shareholders | | | (6,793) | | | (6,423) | | Changes in noncontrolling interests | | | (74) | | | (59) | | | Cash dividends to noncontrolling interests | | | (135) | | | (91) | | Common stock acquired | | | (421) | | | (427) | | | Changes in noncontrolling interests | | | (275) | | | (29) | | | Net cash used in financing activities | | | (1,044) | | | (5,742) | | | Common stock acquired | | | (429) | | | (514) | | | | | Net cash used in financing activities | | | (8,986) | | | (8,305) | | | Effects of exchange rate changes on cash | Effects of exchange rate changes on cash | | | (105) | | | 209 | | Effects of exchange rate changes on cash | | | 43 | | | 30 | | Increase/(decrease) in cash and cash equivalents | Increase/(decrease) in cash and cash equivalents | | | 253 | | | 385 | | Increase/(decrease) in cash and cash equivalents | | | 1,544 | | | 948 | | Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | | 3,177 | | | 3,657 | | Cash and cash equivalents at beginning of period | | | 3,042 | | | 3,177 | | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | | 3,430 | | | 4,042 | | Cash and cash equivalents at end of period | | | 4,586 | | | 4,125 | | | | | | | | | | | | | | | | | | | | | Supplemental Disclosures | Supplemental Disclosures | | | | | | | | Supplemental Disclosures | | | | | | | | | Income taxes paid | | | 4,426 | | | 3,247 | | Income taxes paid | | | 1,793 | | | 2,117 | | | Cash interest paid | | | 477 | | | 587 | | Cash interest paid | | | | | | | | | | | Included in cash flows from operating activities | | | 247 | | | 206 | | | | | Capitalized, included in cash flows from investing activities | | | 175 | | | 154 | | | | | Total cash interest paid | | | 422 | | | 360 | |
2017 Noncash Transactions
In the first six months of 2017, the Corporation completed the acquisitions of InterOil Corporation and of companies that own certain oil and gas properties in the Permian Basin and other assets. These transactions included a significant noncash component associated with the issuance of a combined 96 million shares of Exxon Mobil Corporation common stock in acquisition consideration.
(1) Includes a net addition of commercial paper with a maturity of over three months of $0.9$5.3 billion in 20182019 and a net additionreduction of $0.2$0.3 billion in 2017.2018. The gross amount of commercial paper with a maturity of over three months issued was $2.2$6.4 billion in both2019 and $0.4 billion in 2018, and 2017, while the gross amount repaid was $1.3$1.1 billion in 20182019 and $2.0$0.7 billion in 2017.2018. The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.
| EXXON MOBIL CORPORATION | | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ExxonMobil Share of Equity | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | | Other | | Common | | | | | | | | | | | | | | | | | | | | | Compre- | | Stock | | ExxonMobil | | Non- | | | | | | | | | Common | | Earnings | | hensive | | Held in | | Share of | | controlling | | Total | | | | | | Stock | | Reinvested | | Income | | Treasury | | Equity | | Interests | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2016 | | | 12,157 | | | 407,831 | | | (22,239) | | | (230,424) | | | 167,325 | | | 6,505 | | | 173,830 | | Amortization of stock-based awards | | | 467 | | | - | | | - | | | - | | | 467 | | | - | | | 467 | | Other | | | (85) | | | - | | | - | | | - | | | (85) | | | (53) | | | (138) | | Net income for the period | | | - | | | 7,360 | | | - | | | - | | | 7,360 | | | (6) | | | 7,354 | | Dividends | | | - | | | (6,423) | | | - | | | - | | | (6,423) | | | (91) | | | (6,514) | | Other comprehensive income | | | - | | | - | | | 3,337 | | | - | | | 3,337 | | | 334 | | | 3,671 | | Acquisitions, at cost | | | - | | | - | | | - | | | (595) | | | (595) | | | (29) | | | (624) | | Issued for acquisitions | | | 2,078 | | | - | | | - | | | 5,711 | | | 7,789 | | | - | | | 7,789 | | Dispositions | | | - | | | - | | | - | | | 3 | | | 3 | | | - | | | 3 | Balance as of June 30, 2017 | | | 14,617 | | | 408,768 | | | (18,902) | | | (225,305) | | | 179,178 | | | 6,660 | | | 185,838 | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2017 | | | 14,656 | | | 414,540 | | | (16,262) | | | (225,246) | | | 187,688 | | | 6,812 | | | 194,500 | | Amortization of stock-based awards | | | 436 | | | - | | | - | | | - | | | 436 | | | - | | | 436 | | Other | | | (6) | | | - | | | - | | | - | | | (6) | | | (7) | | | (13) | | Net income for the period | | | - | | | 8,600 | | | - | | | - | | | 8,600 | | | 169 | | | 8,769 | | Dividends | | | - | | | (6,793) | | | - | | | - | | | (6,793) | | | (135) | | | (6,928) | | Cumulative effect of accounting | | | | | | | | | | | | | | | | | | | | | | | | | change | | | - | | | 71 | | | (39) | | | - | | | 32 | | | 15 | | | 47 | | Other comprehensive income | | | - | | | - | | | (2,308) | | | - | | | (2,308) | | | (275) | | | (2,583) | | Acquisitions, at cost | | | - | | | - | | | - | | | (429) | | | (429) | | | (268) | | | (697) | | Dispositions | | | - | | | - | | | - | | | 2 | | | 2 | | | - | | | 2 | Balance as of June 30, 2018 | | | 15,086 | | | 416,418 | | | (18,609) | | | (225,673) | | | 187,222 | | | 6,311 | | | 193,533 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2018 | | | | | Six Months Ended June 30, 2017 | | | | | | | | | Held in | | | | | | | | | | | Held in | | | | | Common Stock Share Activity | | Issued | | Treasury | | Outstanding | | | | | Issued | | Treasury | | Outstanding | | | | | (millions of shares) | | | | | (millions of shares) | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31 | | | 8,019 | | | (3,780) | | | 4,239 | | | | | | 8,019 | | | (3,871) | | | 4,148 | | | | Acquisitions | | | - | | | (5) | | | (5) | | | | | | - | | | (7) | | | (7) | | | | Issued for acquisitions | | | - | | | - | | | - | | | | | | - | | | 96 | | | 96 | | | | Dispositions | | | - | | | - | | | - | | | | | | - | | | - | | | - | | Balance as of June 30 | | | 8,019 | | | (3,785) | | | 4,234 | | | | | | 8,019 | | | (3,782) | | | 4,237 |
| EXXON MOBIL CORPORATION | | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ExxonMobil Share of Equity | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | | Other | | Common | | | | | | | | | | | | | | | | | | | | | Compre- | | Stock | | ExxonMobil | | Non- | | | | | | | | | Common | | Earnings | | hensive | | Held in | | Share of | | controlling | | Total | | | | | | Stock | | Reinvested | | Income | | Treasury | | Equity | | Interests | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2017 | | | 14,656 | | | 414,540 | | | (16,262) | | | (225,246) | | | 187,688 | | | 6,812 | | | 194,500 | | Amortization of stock-based awards | | | 237 | | | - | | | - | | | - | | | 237 | | | - | | | 237 | | Other | | | (5) | | | - | | | - | | | - | | | (5) | | | - | | | (5) | | Net income for the period | | | - | | | 4,650 | | | - | | | - | | | 4,650 | | | 133 | | | 4,783 | | Dividends - common shares | | | - | | | (3,291) | | | - | | | - | | | (3,291) | | | (43) | | | (3,334) | | Cumulative effect of accounting | | | | | | | | | | | | | | | | | | | | | | | | | change | | | - | | | 71 | | | (39) | | | - | | | 32 | | | 15 | | | 47 | | Other comprehensive income | | | - | | | - | | | (691) | | | - | | | (691) | | | (142) | | | (833) | | Acquisitions, at cost | | | - | | | - | | | - | | | (427) | | | (427) | | | (59) | | | (486) | | Dispositions | | | - | | | - | | | - | | | 2 | | | 2 | | | - | | | 2 | Balance as of March 31, 2018 | | | 14,888 | | | 415,970 | | | (16,992) | | | (225,671) | | | 188,195 | | | 6,716 | | | 194,911 | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2018 | | | 15,258 | | | 421,653 | | | (19,564) | | | (225,553) | | | 191,794 | | | 6,734 | | | 198,528 | | Amortization of stock-based awards | | | 223 | | | - | | | - | | | - | | | 223 | | | - | | | 223 | | Other | | | (5) | | | - | | | - | | | - | | | (5) | | | - | | | (5) | | Net income for the period | | | - | | | 2,350 | | | - | | | - | | | 2,350 | | | 56 | | | 2,406 | | Dividends - common shares | | | - | | | (3,505) | | | - | | | - | | | (3,505) | | | (43) | | | (3,548) | | Other comprehensive income | | | - | | | - | | | 782 | | | - | | | 782 | | | 126 | | | 908 | | Acquisitions, at cost | | | - | | | - | | | - | | | (421) | | | (421) | | | (83) | | | (504) | | Dispositions | | | - | | | - | | | - | | | 4 | | | 4 | | | 9 | | | 13 | Balance as of March 31, 2019 | | | 15,476 | | | 420,498 | | | (18,782) | | | (225,970) | | | 191,222 | | | 6,799 | | | 198,021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, 2019 | | | | | Three Months Ended March 31, 2018 | | | | | | | | | Held in | | | | | | | | | | | Held in | | | | | Common Stock Share Activity | | Issued | | Treasury | | Outstanding | | | | | Issued | | Treasury | | Outstanding | | | | | (millions of shares) | | | | | (millions of shares) | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31 | | | 8,019 | | | (3,782) | | | 4,237 | | | | | | 8,019 | | | (3,780) | | | 4,239 | | | | Acquisitions | | | - | | | (6) | | | (6) | | | | | | - | | | (5) | | | (5) | | | | Dispositions | | | - | | | - | | | - | | | | | | - | | | - | | | - | | Balance as of March 31 | | | 8,019 | | | (3,788) | | | 4,231 | | | | | | 8,019 | | | (3,785) | | | 4,234 |
The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.
EXXON MOBIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1.Basis of Financial Statement Preparation These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation's 20172018 Annual Report on Form 10-K. In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. Prior data has been reclassified in certain cases to conform to the current presentation basis. The Corporation's exploration and production activities are accounted for under the "successful efforts" method.
2.Accounting Changes Effective January 1, 2018, ExxonMobil adopted the Financial Accounting Standards Board’s standard, Revenue from Contracts with Customers (Topic 606), as amended. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry and transaction specific requirements, and expands disclosure requirements. The standard was adopted using the Modified Retrospective method, under which prior year results are not restated, but supplemental information is provided for any material impacts of the standard on 2018 results. The adoption of the standard did not have a material impact on any of the lines reported in the Corporation’s financial statements. The cumulative effect of adoption of the standard was de minimis. The Corporation did not elect any practical expedients that require disclosure. See Note 9.
Effective January 1, 2018, ExxonMobil2019, the Corporation adopted the Financial Accounting Standards Board’s Update, Financial Instruments–Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires investments in equity securities other than consolidated subsidiaries and equity method investments to be measured at fair value with changes in the fair value recognized through net income. The Corporation elected a modified approach for equity securities that do not have a readily determinable fair value. This modified approach measures investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The cumulative effect adjustment related to the adoption of this standard increased equity $47 million. The portion of unrealized gains and losses recognized during the reporting period on equity securities still held at June 30, 2018 and the carrying value of equity securities without readily determinable fair values at June 30, 2018 were not significant to the Corporation. The standard also expanded disclosures related to financial instruments. See Note 7. Effective January 1, 2018, ExxonMobil adopted the Financial Accounting Standards Board’s Update, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires separate presentation of the service cost component from other components of net benefit costs. The other components are reported in a new line on the Corporation’s Statement of Income, “Non-service pension and postretirement benefit expense.” The Corporation elected to use the practical expedient which uses the amounts disclosed in the pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements, as it is impracticable to determine the amounts capitalized in those periods. Beginning in 2018, the other components of net benefit costs are included in the Corporate and financing segment. The estimated after-tax impact from the change in segmentation is an increase in Corporate and financing expenses of about $100 million for the second quarter and $200 million for the first six months of 2018. The increase in the Corporate and financing expenses is offset by lower expenses across the operating segments. Additionally, only the service cost component of net benefit costs is eligible for capitalization in situations where it is otherwise appropriate to capitalize employee costs in connection with the construction or production of an asset.
The impact of the retrospective presentation change on ExxonMobil's Consolidated Statement of Income for the three months and six months ended June 30, 2017, is shown below. | | | Three Months Ended | | Six Months Ended | | | | June 30, 2017 | | June 30, 2017 | | | | As Reported | | Change | | As Adjusted | | As Reported | | Change | | As Adjusted | | | | (millions of dollars) | | | | | | | | | | | | | | | Production and manufacturing expenses | 8,407 | | (347) | | 8,060 | | 16,252 | | (626) | | 15,626 | Selling, general and administrative expenses | 2,628 | | (72) | | 2,556 | | 5,227 | | (166) | | 5,061 | Non-service pension and postretirement benefit expense | - | | 419 | | 419 | | - | | 792 | | 792 |
Effective January 1, 2019, ExxonMobil will adopt the Financial Accounting Standards Board’s standard,Standard, Leases (Topic 842), as amended. The standard requires all leases with an initial term greater than one year to be recorded on the balance sheet as a right of use asset and a lease liability. The Corporation acquiredused a transition method that applies the new lease accounting softwarestandard at January 1, 2019. The Corporation applied a policy election to facilitate implementation,exclude short-term leases from balance sheet recognition and is currently installing, configuring and testing the software. Based on leases outstandingalso elected certain practical expedients at the end of 2017,adoption. As permitted, the Corporation estimatesdid not reassess whether existing contracts are or contain leases, the lease classification for any existing leases, initial direct costs for any existing lease and whether existing land easements and rights of way, which were not previously accounted for as leases, are or contain a lease. At adoption on January 1, 2019, an operating lease liability of $3.3 billion was recorded and the operating lease right of use asset and lease liability would have been in the range of $4 billion to $5was $4.3 billion, atincluding $1.0 billion of previously recorded prepaid leases. There was no cumulative earnings effect adjustment.
Effective January 1, 2020, ExxonMobil will adopt the Financial Accounting Standards Board’s update, Financial Instruments – Credit Losses (Topic 326), as amended. The standard requires a valuation allowance for credit losses be recognized for certain financial assets that time.reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and expectations of the future. The Corporation is evaluating the standard and its effect on the Corporation’s balance sheet as a result of implementing the standard on January 1, 2019, could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors such as the expiry or renewal of leasesfinancial statements. during the year.
3.Litigation and Other Contingencies Litigation A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. For purposes of our contingency disclosures, “significant” includes material matters, as well as other matters which management believes should be disclosed. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a material adverse effect upon the Corporation's operations, financial condition, or financial statements taken as a whole. Other Contingencies The Corporation and certain of its consolidated subsidiaries were contingently liable at June 30, 2018,March 31, 2019, for guarantees relating to notes, loans and performance under contracts. Where guarantees for environmental remediation and other similar matters do not include a stated cap, the amounts reflect management’s estimate of the maximum potential exposure. These guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. | | | | | | As of June 30, 2018 | | | | | | | | | Equity | | | Other | | | | | | | | | | | | Company | | | Third Party | | | | | | | | | | | | Obligations (1) | | | Obligations | | | Total | | | | | | | | | (millions of dollars) | | | | Guarantees | | | | | | | | | | | | | | Debt-related | | | 408 | | | 58 | | | 466 | | | | | Other | | | 1,188 | | | 4,678 | | | 5,866 | | | | | | Total | | | 1,596 | | | 4,736 | | | 6,332 | | | | | | | | | | | | | | | | | | | (1) ExxonMobil share | | | | | | | | | | | |
| | | | | | As of March 31, 2019 | | | | | | | | | Equity | | | Other | | | | | | | | | | | | Company | | | Third Party | | | | | | | | | | | | Obligations (1) | | | Obligations | | | Total | | | | | | | | | (millions of dollars) | | | | Guarantees | | | | | | | | | | | | | | Debt-related | | | 612 | | | 79 | | | 691 | | | | | Other | | | 1,081 | | | 4,288 | | | 5,369 | | | | | | Total | | | 1,693 | | | 4,367 | | | 6,060 | | | | | | | | | | | | | | | | | | | (1) | ExxonMobil share | | | | | | | | | | | |
Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. The operations and earnings of the Corporation and its affiliates throughout the world have been, and may in the future be, affected from time to time in varying degree by political developments and laws and regulations, such as forced divestiture of assets; restrictions on production, imports and exports; price controls; tax increases and retroactive tax claims; expropriation of property; cancellation of contract rights and environmental regulations. Both the likelihood of such occurrences and their overall effect upon the Corporation vary greatly from country to country and are not predictable. In accordance with a Venezuelan 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.Project. 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, affiliatesExxonMobil collected awards of ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID). The ICSID Tribunal issued a decision on June 10, 2010, finding that it had jurisdiction to proceed on the basis of the Netherlands-Venezuela Bilateral Investment Treaty. On October 9, 2014, the ICSID Tribunal issued its final award finding in favor of the ExxonMobil affiliates and awarding $1.6 billion as of the date of expropriation, June 27, 2007, and interest from that date at 3.25 percent compounded annually until the date of payment in full. The Tribunal also noted that one of the Cerro Negro Project agreements provides a mechanism to prevent double recovery between the ICSID award and all or part of an earlier award of $908 million to an ExxonMobil affiliate, Mobil Cerro Negro, Ltd., against PdVSA and a PdVSA affiliate, PdVSA CN, in an arbitration against PdVSA under the rules of the International Chamber of Commerce.
On February 2, 2015, Venezuela filed a RequestCommerce in respect of an indemnity related to the Cerro Negro Project and $260 million in an arbitration for Annulment of the ICSID award. On March 9, 2017, the ICSID Committee hearing the Request for Annulment issued a decision partially annulling the award of the Tribunal issued on October 9, 2014. The Committee affirmed the compensation due for the La Ceiba Project and for export curtailments at the Cerro Negro Project but annulled the portionunder rules of theInternational Centre for Settlement of Investment Disputes (ICSID). An ICSID arbitration award relating to the Cerro Negro Project’s expropriation ($1.4 billion) was annulled based on itsa determination that thea prior Tribunal failed to adequately explain why the cap on damages in the indemnity owed by PdVSA did not affect or limit the amount owed for the expropriation of the Cerro Negro Project. AsExxonMobil filed a result, ExxonMobil retained annew claim seeking to restore the original award for $260 million (including accrued interest). In accordance with an agreement between ExxonMobil and Venezuela the $260 million has been fully paid. The agreement does not impact ExxonMobil’s ability to re-arbitrate the issue that was the basisof damages for the annulment in a newCerro Negro Project with ICSID arbitration proceeding.on September 26, 2018.
The net impact of these mattersthis matter on the Corporation’s consolidated financial results cannot be reasonably estimated. Regardless, the Corporation does not expect the resolution to have a material effect upon the Corporation’s operations or financial condition. An affiliate of ExxonMobil is one of the Contractors under a Production Sharing Contract (PSC) with the Nigerian National Petroleum Corporation (NNPC) covering the Erha block located in the offshore waters of Nigeria. ExxonMobil's affiliate is the operator of the block and owns a 56.25 percent interest under the PSC. The Contractors are in dispute with NNPC regarding NNPC's lifting of crude oil in excess of its entitlement under the terms of the PSC. In accordance with the terms of the PSC, the Contractors initiated arbitration in Abuja, Nigeria, under the Nigerian Arbitration and Conciliation Act. On October 24, 2011, a three-member arbitral Tribunal issued an award upholding the Contractors' position in all material respects and awarding damages to the Contractors jointly in an amount of approximately $1.8 billion plus $234 million in accrued interest. The Contractors petitioned a Nigerian federal court for enforcement of the award, and NNPC petitioned the same court to have the award set aside. On May 22, 2012, the court set aside the award. The Contractors appealed that judgment to the Court of Appeal, Abuja Judicial Division. On July 22, 2016, the Court of Appeal upheld the decision of the lower court setting aside the award. On October 21, 2016, the Contractors appealed the decision to the Supreme Court of Nigeria. In June 2013, the Contractors filed a lawsuit against NNPC in the Nigerian federal high court in order to preserve their ability to seek enforcement of the PSC in the courts if necessary. Following dismissal by this court, the Contractors appealed to the Nigerian Court of Appeal in June 2016. In October 2014, the Contractors filed suit in the United States District Court for the Southern District of New York to enforce, if necessary, the arbitration award against NNPC assets residing within that jurisdiction. NNPC has moved to dismiss the lawsuit. At this time, the net impact of this matter on the Corporation's consolidated financial results cannot be reasonably estimated. However, regardless of the outcome of enforcement proceedings, the Corporation does not expect the proceedings to have a material effect upon the Corporation's operations or financial condition.
4. Other Comprehensive Income Information | | | | | | Cumulative | | | Post- | | | | | | | | | | Foreign | | | retirement | | | | | | | | | | Exchange | | | Benefits | | | | | ExxonMobil Share of Accumulated Other | | | Translation | | | Reserves | | | | | Comprehensive Income | | | Adjustment | | | Adjustment | | | Total | | | | | | | (millions of dollars) | | | | | | | | | | | | | | | Balance as of December 31, 2016 | | | (14,501) | | | (7,738) | | | (22,239) | | Current period change excluding amounts reclassified | | | | | | | | | | | | from accumulated other comprehensive income | | | 2,849 | | | (172) | | | 2,677 | | Amounts reclassified from accumulated other | | | | | | | | | | | | comprehensive income | | | 140 | | | 520 | | | 660 | | Total change in accumulated other comprehensive income | | | 2,989 | | | 348 | | | 3,337 | | Balance as of June 30, 2017 | | | (11,512) | | | (7,390) | | | (18,902) | | | | | | | | | | | | | | | Balance as of December 31, 2017 | | | (9,482) | | | (6,780) | | | (16,262) | | Current period change excluding amounts reclassified | | | | | | | | | | | | from accumulated other comprehensive income | | | (2,573) | | | (409) | | | (2,982) | | Amounts reclassified from accumulated other | | | | | | | | | | | | comprehensive income | | | 186 | | | 449 | | | 635 | | Total change in accumulated other comprehensive income | | | (2,387) | | | 40 | | | (2,347) | | Balance as of June 30, 2018 | | | (11,869) | | | (6,740) | | | (18,609) |
| | | | | | Cumulative | | | Post- | | | | | | | | | | Foreign | | | retirement | | | | | | | | | | Exchange | | | Benefits | | | | | ExxonMobil Share of Accumulated Other | | | Translation | | | Reserves | | | | | Comprehensive Income | | | Adjustment | | | Adjustment | | | Total | | | | | (millions of dollars) | | | | | | | | | | | | | | | Balance as of December 31, 2017 | | | (9,482) | | | (6,780) | | | (16,262) | | Current period change excluding amounts reclassified | | | | | | | | | | | | from accumulated other comprehensive income | | | (686) | | | (440) | | | (1,126) | | Amounts reclassified from accumulated other | | | | | | | | | | | | comprehensive income | | | 168 | | | 228 | | | 396 | | Total change in accumulated other comprehensive income | | | (518) | | | (212) | | | (730) | | Balance as of March 31, 2018 | | | (10,000) | | | (6,992) | | | (16,992) | | | | | | | | | | | | | | | Balance as of December 31, 2018 | | | (13,881) | | | (5,683) | | | (19,564) | | Current period change excluding amounts reclassified | | | | | | | | | | | | from accumulated other comprehensive income | | | 627 | | | (23) | | | 604 | | Amounts reclassified from accumulated other | | | | | | | | | | | | comprehensive income | | | - | | | 178 | | | 178 | | Total change in accumulated other comprehensive income | | | 627 | | | 155 | | | 782 | | Balance as of March 31, 2019 | | | (13,254) | | | (5,528) | | | (18,782) |
| | | | | | | | | | | | Three Months Ended | | | Six Months Ended | | Amounts Reclassified Out of Accumulated Other | | | June 30, | | | June 30, | | Comprehensive Income - Before-tax Income/(Expense) | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | Foreign exchange translation gain/(loss) included in net income | | | | | | | | | | | | | (Statement of Income line: Other income) | (18) | | | (234) | | | (186) | | | (234) | | Amortization and settlement of postretirement benefits reserves | | | | | | | | | | | | | adjustment included in net periodic benefit costs | | | | | | | | | | | | | (Statement of Income Line: Non-service pension and | | | | | | | | | | | | | postretirement benefit expense) | (290) | | | (406) | | | (610) | | | (765) |
| | | | | | | | | | Three Months Ended | | Amounts Reclassified Out of Accumulated Other | | | | | | | March 31, | | Comprehensive Income - Before-tax Income/(Expense) | | | | 2019 | | | 2018 | | | | | | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | Foreign exchange translation gain/(loss) included in net income | | | | | | | | (Statement of Income line: Other income) | | | | - | | | (168) | | Amortization and settlement of postretirement benefits reserves | | | | | | | | | | adjustment included in net periodic benefit costs | | | | | | | (Statement of Income line: Non-service pension and postretirement benefit expense) | (237) | | | (320) | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | Six Months Ended | | Income Tax (Expense)/Credit For | | | June 30, | | | June 30, | | Components of Other Comprehensive Income | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | Foreign exchange translation adjustment | | | 5 | | | (8) | | | 5 | | | (26) | | Postretirement benefits reserves adjustment | | | | | | | | | | | | | | | (excluding amortization) | | | (58) | | | 75 | | | 66 | | | 80 | | Amortization and settlement of postretirement benefits reserves | | | | | | | | | | | | | | adjustment included in net periodic benefit costs | | | (61) | | | (123) | | | (144) | | | (226) | | Total | | | (114) | | | (56) | | | (73) | | | (172) |
| | | | | | | | | Three Months Ended | | Income Tax (Expense)/Credit For | | | | | | March 31, | | Components of Other Comprehensive Income | | | | | | 2019 | | | 2018 | | | | | | | | | | (millions of dollars) | | | | | | | | | | | | | | | Postretirement benefits reserves adjustment (excluding amortization) | | | | | | 10 | | | 124 | | Amortization and settlement of postretirement benefits reserves | | | | | | | | | | | | adjustment included in net periodic benefit costs | | | | | | (52) | | | (83) | | Total | | | | | | (42) | | | 41 |
5. Earnings Per Share | | | | | Three Months Ended | | | Six Months Ended | | | | | | June 30, | | | June 30, | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | | | | | | | | | | | | Earnings per common share | | | | | | | | | | | | | Net income attributable to ExxonMobil (millions of dollars) | | 3,950 | | | 3,350 | | | 8,600 | | | 7,360 | | | | | | | | | | | | | | | Weighted average number of common shares | | | | | | | | | | | | | | outstanding (millions of shares) | | 4,271 | | | 4,271 | | | 4,270 | | | 4,244 | | | | | | | | | | | | | | | | | Earnings per common share (dollars) (1) | | 0.92 | | | 0.78 | | | 2.01 | | | 1.73 | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended | | | | | | | | | | March 31, | | | | | | | | | | 2019 | | | 2018 | | | | | | | | | | | | | | | Earnings per common share | | | | | | | | | | | | | | | | Net income attributable to ExxonMobil (millions of dollars) | | | 2,350 | | | 4,650 | | | | | | | | | | Weighted average number of common shares outstanding (millions of shares) | | | 4,270 | | | 4,270 | | | | | | | | | | Earnings per common share (dollars) (1) | | | 0.55 | | | 1.09 | | | | | | | | | | Dividends paid per common share (dollars) | | | 0.82 | | | 0.77 | | | | | | | | | | | | | |
(1) The calculation of earnings per common share and earnings per common share – assuming dilution are the same in each period shown.
6. Pension and Other Postretirement Benefits | | | | | | | | Three Months Ended | | | | | | | | | March 31, | | | | | | | | | 2019 | | | 2018 | | | | | | | | | (millions of dollars) | | Components of net benefit cost | | | | | | | | | | Pension Benefits - U.S. | | | | | | | | | | | Service cost | | | | 175 | | | 209 | | | | Interest cost | | | | 193 | | | 180 | | | | Expected return on plan assets | | | | (142) | | | (182) | | | | Amortization of actuarial loss/(gain) and prior service cost | | | 77 | | | 91 | | | | Net pension enhancement and curtailment/settlement cost | | | 54 | | | 63 | | | | Net benefit cost | | | | 357 | | | 361 | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits - Non-U.S. | | | | | | | | | | | Service cost | | | | 139 | | | 158 | | | | Interest cost | | | | 192 | | | 200 | | | | Expected return on plan assets | | | | (197) | | | (252) | | | | Amortization of actuarial loss/(gain) and prior service cost | | | 103 | | | 118 | | | | Net pension enhancement and curtailment/settlement cost | | | - | | | 33 | | | | Net benefit cost | | | | 237 | | | 257 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other Postretirement Benefits | | | | | | | | | | | Service cost | | | | 33 | | | 36 | | | | Interest cost | | | | 79 | | | 75 | | | | Expected return on plan assets | | | | (4) | | | (6) | | | | Amortization of actuarial loss/(gain) and prior service cost | | | 3 | | | 17 | | | | Net benefit cost | | | | 111 | | | 122 | | | | | | | | | | | | |
| | | | | | | Three Months Ended | | | Six Months Ended | | | | | | | | June 30, | | | June 30, | | | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | | | | | | | | | | | | | | | | | | | (millions of dollars) | | Components of net benefit cost | | | | | | | | | | | | | | | Pension Benefits - U.S. | | | | | | | | | | | | | | | | Service cost | | | 204 | | | 186 | | | 413 | | | 383 | | | | Interest cost | | | 181 | | | 200 | | | 361 | | | 399 | | | | Expected return on plan assets | | | (181) | | | (194) | | | (363) | | | (388) | | | | Amortization of actuarial loss/(gain) and prior | | | | | | | | | | | | | | | | | service cost | | | 92 | | | 112 | | | 183 | | | 222 | | | | Net pension enhancement and | | | | | | | | | | | | | | | | | curtailment/settlement cost | | | 63 | | | 158 | | | 126 | | | 263 | | | | Net benefit cost | | | 359 | | | 462 | | | 720 | | | 879 | | | | | | | | | | | | | | | | | | | | Pension Benefits - Non-U.S. | | | | | | | | | | | | | | | | Service cost | | | 154 | | | 145 | | | 312 | | | 290 | | | | Interest cost | | | 186 | | | 189 | | | 386 | | | 376 | | | | Expected return on plan assets | | | (237) | | | (244) | | | (489) | | | (483) | | | | Amortization of actuarial loss/(gain) and prior | | | | | | | | | | | | | | | | | service cost | | | 113 | | | 126 | | | 231 | | | 253 | | | | Net pension enhancement and | | | | | | | | | | | | | | | | | curtailment/settlement cost | | | - | | | - | | | 33 | | | (5) | | | | Net benefit cost | | | 216 | | | 216 | | | 473 | | | 431 | | | | | | | | | | | | | | | | | | | | Other Postretirement Benefits | | | | | | | | | | | | | | | | Service cost | | | 35 | | | 30 | | | 71 | | | 56 | | | | Interest cost | | | 76 | | | 67 | | | 151 | | | 139 | | | | Expected return on plan assets | | | (6) | | | (5) | | | (12) | | | (11) | | | | Amortization of actuarial loss/(gain) and prior | | | | | | | | | | | | | | | | | service cost | | | 21 | | | 10 | | | 38 | | | 27 | | | | Net benefit cost | | | 126 | | | 102 | | | 248 | | | 211 |
7. Financial Instruments and Derivatives Financial Instruments. Effective January 1, 2018, ExxonMobil adopted the Financial Accounting Standards Board’s Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The estimated fair value of financial instruments at June 30,March 31, 2019 and December 31, 2018, and the related hierarchy level for the fair value measurement is as follows: | | | | | At June 30, 2018 | | | | | At March 31, 2019 | | | | | | (millions of dollars) | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying | | Fair Value | | | | | Fair Value | | | | | | | | | | | | | | Value | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | Level 1 | | Level 2 | | Level 3 | | Total Gross Assets & Liabilities | | Effect of Counterparty Netting | | Effect of Collateral Netting | | Difference in Carrying Value and Fair Value | | Net Carrying Value | Assets | Assets | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | Derivative assets (included in the Balance Sheet line: Other | | | | | | | | | | | | | | current assets) | | 98 | | 98 | | - | | - | | 98 | | | Advances to/receivables from equity companies (included in | | | | | | | | | | | | | | the Balance Sheet line: Investments, advances and | | | | | | | | | | | Derivative assets (1) | | 145 | | 24 | | - | | 169 | | (145) | | - | | - | | 24 | | | long-term receivables) | | 8,828 | | - | | 1,774 | | 6,953 | | 8,727 | Advances to/receivables | | | | | | | | | | | | | | | | | | Other long-term financial assets (included in the Balance | | | | | | | | | | | | from equity companies (2)(7) | | - | | 2,157 | | 6,703 | | 8,860 | | - | | - | | 54 | | 8,914 | | | Sheet lines: Investments, advances and long-term receivables | | | | | | | | | | | Other long-term | | | | | | | | | | | | | | | | | | | and Other assets, including intangibles – net) | | 1,698 | | 759 | | - | | 990 | | 1,749 | | financial assets (3) | | 914 | | - | | 806 | | 1,720 | | - | | - | | 93 | | 1,813 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | Liabilities | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Derivative liabilities (included in the Balance Sheet line: | | | | | | | | | | | Derivative liabilities (4) | | 213 | | 13 | | - | | 226 | | (145) | | (68) | | - | | 13 | | | Accounts payable and accrued liabilities) | | 240 | | 240 | | - | | - | | 240 | Long-term debt (5) | | 18,088 | | 111 | | 4 | | 18,203 | | - | | - | | (473) | | 17,730 | | Long-term debt (excluding capitalized lease obligations) | | 19,282 | | 19,065 | | 117 | | 4 | | 19,186 | Long-term obligations | | | | | | | | | | | | | | | | | | Long-term obligations to equity companies | | 4,575 | | - | | - | | 4,646 | | 4,646 | | to equity companies (7) | | - | | - | | 4,526 | | 4,526 | | - | | - | | (96) | | 4,430 | | Other long-term financial liabilities (included in the | | | | | | | | | | | Other long-term | | | | | | | | | | | | | | | | | | | Balance Sheet line: Other long-term obligations) | | 1,088 | | - | | - | | 1,085 | | 1,085 | | financial liabilities (6) | | - | | - | | 1,039 | | 1,039 | | - | | - | | 3 | | 1,042 |
| | | | | At December 31, 2018 | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value | | | | | | | | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total Gross Assets & Liabilities | | Effect of Counterparty Netting | | Effect of Collateral Netting | | Difference in Carrying Value and Fair Value | | Net Carrying Value | Assets | | | | | | | | | | | | | | | | | | Derivative assets (1) | | 297 | | - | | - | | 297 | | (151) | | (146) | | - | | - | | Advances to/receivables | | | | | | | | | | | | | | | | | | | from equity companies (2)(7) | | - | | 2,100 | | 6,293 | | 8,393 | | - | | - | | 215 | | 8,608 | | Other long-term | | | | | | | | | | | | | | | | | | | financial assets (3) | | 848 | | - | | 974 | | 1,822 | | - | | - | | 112 | | 1,934 | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Derivative liabilities (4) | | 151 | | - | | - | | 151 | | (151) | | - | | - | | - | | Long-term debt (5) | | 19,029 | | 117 | | 4 | | 19,150 | | - | | - | | 85 | | 19,235 | | Long-term obligations | | | | | | | | | | | | | | | | | | | to equity companies (7) | | - | | - | | 4,330 | | 4,330 | | - | | - | | 52 | | 4,382 | | Other long-term | | | | | | | | | | | | | | | | | | | financial liabilities (6) | | - | | - | | 1,046 | | 1,046 | | - | | - | | (3) | | 1,043 |
(1) Included in the Balance Sheet line: Notes and accounts receivable, less estimated doubtful amounts (2) Included in the Balance Sheet line: Investments, advances and long-term receivables (3) Included in the Balance Sheet lines: Investments, advances and long-term receivables and Other assets, including intangibles, net (4) Included in the Balance Sheet line: Accounts payable and accrued liabilities (5) Excluding finance lease obligations (6) Included in the Balance Sheet line: Other long-term obligations (7) Advances to/receivables from equity companies and long-term obligations to equity companies are mainly designated as hierarchy level 3 inputs. The fair value is calculated by discounting the remaining obligations by a rate consistent with the credit quality and industry of the equity company.
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,commodity prices, currency rates and commodity prices.interest rates. In addition, the Corporation uses commodity-based contracts, including derivatives, to manage commodity price risk and for trading purposes. Commodity contracts held for trading purposes are presented in the Consolidated Statement of Income on a net basis in the line “Sales and other operating revenue.” The Corporation’s commodity derivatives are not accounted for under hedge accounting. At times, the Corporation also enters into forward currency and interest rate derivatives, none of which are material to the Corporation’s financial position as of March 31, 2019 and December 31, 2018, or results of operations for the periods ended March 31, 2019 and 2018. Credit risk associated with the Corporation’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. 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 derivatives. The Corporation maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity. Derivative instruments are currently not subject to a master netting agreement, and the Corporation has not offset collateral against the carrying value. The carrying value of derivative instruments, none of which are designated as hedging instruments, is as follows: | | | | | | | | | June 30, | | | Dec. 31, | | | | | | | | | | 2018 | | | 2017 | | | | | | | | | | (millions of dollars) | Exchange Traded Futures and Swaps | | | | | | | | | | | Assets | | | | | | 98 | | | 25 | | Liabilities | | | | | | (240) | | | (63) | | Collateral receivable/(payable) | | | | | | 189 | | | 94 | | | Total | | | | | | 47 | | | 56 |
At June 30,March 31, 2019, the net notional long/(short) position of derivative instruments was (35) million barrels for crude oil, was (36) million barrels for products, and was (10) million MMBtus of natural gas. At December 31, 2018, the net notional long/(short) position of derivative instruments was (22)(19) million barrels for crude oil and was (7)(9) million barrels for products.
Realized and unrealized gains/(losses) on derivative instruments that were recognized in the Consolidated Statement of Income are included in the following lines on a before-tax basis: | | | | | | Three Months Ended | | Six Months Ended | | | | | | Three Months Ended | | | | | | | June 30, | | June 30, | | | | | | March 31, | | | | | | | 2018 | | 2017 | | 2018 | | 2017 | | | | | | 2019 | | 2018 | | | | | | | (millions of dollars) | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | Sales and other operating revenue | Sales and other operating revenue | | | (11) | | 8 | | (3) | | 27 | Sales and other operating revenue | | | (275) | | 8 | Crude oil and product purchases | Crude oil and product purchases | | | (193) | | 25 | | (274) | | 43 | Crude oil and product purchases | | | (18) | | (81) | | | Total | | | (204) | | 33 | | (277) | | 70 | | Total | | | (293) | | (73) |
8. Disclosures about Segments and Related Information | | | | | | Three Months Ended | | | Six Months Ended | | | | | | | June 30, | | | June 30, | | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Earnings After Income Tax | | (millions of dollars) | | | Upstream | | | | | | | | | | | | | | | | United States | | | 439 | | | (183) | | | 868 | | | (201) | | | | Non-U.S. | | | 2,601 | | | 1,367 | | | 5,669 | | | 3,637 | | | Downstream | | | | | | | | | | | | | | | | United States | | | 695 | | | 347 | | | 1,014 | | | 639 | | | | Non-U.S. | | | 29 | | | 1,038 | | | 650 | | | 1,862 | | | Chemical | | | | | | | | | | | | | | | | United States | | | 453 | | | 481 | | | 956 | | | 1,010 | | | | Non-U.S. | | | 437 | | | 504 | | | 945 | | | 1,146 | | | Corporate and financing (1) | | | (704) | | | (204) | | | (1,502) | | | (733) | | | Corporate total | | | 3,950 | | | 3,350 | | | 8,600 | | | 7,360 | | | | | | | | | | | | | | | | | | Sales and Other Operating Revenue | | | | | | | | | | | | | | | Upstream | | | | | | | | | | | | | | | | United States | | | 2,548 | | | 2,349 | | | 4,909 | | | 4,673 | | | | Non-U.S. | | | 3,587 | | | 3,444 | | | 7,215 | | | 6,953 | | | Downstream | | | | | | | | | | | | | | | | United States | | | 19,658 | | | 14,528 | | | 36,653 | | | 29,110 | | | | Non-U.S. | | | 37,406 | | | 28,867 | | | 71,778 | | | 57,911 | | | Chemical | | | | | | | | | | | | | | | | United States | | | 3,019 | | | 2,746 | | | 6,008 | | | 5,529 | | | | Non-U.S. | | | 5,226 | | | 4,078 | | | 10,304 | | | 8,296 | | | Corporate and financing | | | 12 | | | 14 | | �� | 25 | | | 28 | | | Corporate total | | | 71,456 | | | 56,026 | | | 136,892 | | | 112,500 | | | | | | | | | | | | | | | | | Intersegment Revenue | | | | | | | | | | | | | | | Upstream | | | | | | | | | | | | | | | | United States | | | 2,071 | | | 1,282 | | | 4,133 | | | 2,572 | | | | Non-U.S. | | | 7,381 | | | 4,723 | | | 14,252 | | | 10,622 | | | Downstream | | | | | | | | | | | | | | | | United States | | | 5,749 | | | 3,841 | | | 10,693 | | | 7,487 | | | | Non-U.S. | | | 7,611 | | | 4,968 | | | 14,700 | | | 10,182 | | | Chemical | | | | | | | | | | | | | | | | United States | | | 2,350 | | | 1,845 | | | 4,544 | | | 3,615 | | | | Non-U.S. | | | 1,973 | | | 1,104 | | | 3,816 | | | 2,294 | | | Corporate and financing | | | 50 | | | 47 | | | 99 | | | 103 |
| | | | | | | Three Months Ended | | | | | | | | March 31, | | | | | | | | 2019 | | | 2018 | | Earnings After Income Tax | | | | (millions of dollars) | | | Upstream | | | | | | | | | | | United States | | | | 96 | | | 429 | | | | Non-U.S. | | | | 2,780 | | | 3,068 | | | Downstream | | | | | | | | | | | United States | | | | (161) | | | 319 | | | | Non-U.S. | | | | (95) | | | 621 | | | Chemical | | | | | | | | | | | United States | | | | 161 | | | 503 | | | | Non-U.S. | | | | 357 | | | 508 | | | Corporate and financing | | | | (788) | | | (798) | | | Corporate total | | | | 2,350 | | | 4,650 | | | | | | | | | | | |
(1) See Note 2 for additional details regarding the change in segmentation of Non-service pension and postretirement benefit expense.
�� | Sales and Other Operating Revenue | | | | | | | | | | Upstream | | | | | | | | | | | United States | | | | 2,693 | | | 2,361 | | | | Non-U.S. | | | | 3,804 | | | 3,628 | | | Downstream | | | | | | | | | | | United States | | | | 15,642 | | | 16,995 | | | | Non-U.S. | | | | 32,297 | | | 34,372 | | | Chemical | | | | | | | | | | | United States | | | | 2,505 | | | 2,989 | | | | Non-U.S. | | | | 4,695 | | | 5,078 | | | Corporate and financing | | | | 10 | | | 13 | | | Corporate total | | | | 61,646 | | | 65,436 | | | | | | | | | | | | | Intersegment Revenue | | | | | | | | | | Upstream | | | | | | | | | | | United States | | | | 2,311 | | | 2,062 | | | | Non-U.S. | | | | 7,129 | | | 6,871 | | | Downstream | | | | | | | | | | | United States | | | | 4,761 | | | 4,944 | | | | Non-U.S. | | | | 6,169 | | | 7,089 | | | Chemical | | | | | | | | | | | United States | | | | 1,889 | | | 2,194 | | | | Non-U.S. | | | | 1,547 | | | 1,843 | | | Corporate and financing | | | | 53 | | | 49 |
| Geographic | | | | | | | | | | | | | | | Three Months Ended | | | Six Months Ended | | | | | | June 30, | | | June 30, | | Sales and Other Operating Revenue | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | United States | | 25,225 | | | 19,623 | | | 47,570 | | | 39,312 | | Non-U.S. | | 46,231 | | | 36,403 | | | 89,322 | | | 73,188 | | | Total | | 71,456 | | | 56,026 | | | 136,892 | | | 112,500 | | | | | | | | | | | | | | | | | Significant Non-U.S. revenue sources include: (1) | | | | | | | | | | | | | | Canada | | 6,163 | | | 4,598 | | | 11,538 | | | 9,232 | | | United Kingdom | | 4,771 | | | 4,117 | | | 9,443 | | | 8,252 | | | Belgium | | 4,090 | | | 3,321 | | | 8,067 | | | 6,586 | | | Singapore | | 3,458 | | | 2,625 | | | 6,885 | | | 5,376 | | | France | | 3,572 | | | 2,738 | | | 6,817 | | | 5,306 | | | Italy | | 3,214 | | | 2,735 | | | 6,368 | | | 5,404 | | | Germany | | 2,435 | | | 2,069 | | | 4,666 | | | 4,073 |
| Geographic | | | | | | | | | | | Three Months Ended | | | | | | | March 31, | | Sales and Other Operating Revenue | | | 2019 | | | 2018 | | | | | | | (millions of dollars) | | | | | | | | | | | | United States | | | 20,840 | | | 22,345 | | Non-U.S. | | | 40,806 | | | 43,091 | | | Total | | | 61,646 | | | 65,436 | | | | | | | | | | | | Significant Non-U.S. revenue sources include: (1) | | | | | | | | | Canada | | | 4,850 | | | 5,375 | | | United Kingdom | | | 4,421 | | | 4,672 | | | Belgium | | | 3,529 | | | 3,977 | | | Singapore | | | 3,121 | | | 3,427 | | | France | | | 3,074 | | | 3,245 | | | Italy | | | 2,645 | | | 3,154 | | | Germany | | | 1,897 | | | 2,231 |
(1) Revenue is determined by primary country of operations. Excludes certain sales and other operating revenues in Non‑U.S. operations where attribution to a specific country is not practicable.
9. Additional Information on Revenue Recognition
Accounting Policy for Revenue Recognition
The Corporation generally sells crude oil, natural gas and petroleum and chemical products under short-term agreements at prevailing market prices. In some cases (e.g., natural gas), products may be sold under long-term agreements, with periodic price adjustments to reflect market conditions. Revenue is recognized at the amount the Corporation expects to receive when the customer has taken control, which is typically when title transfers and the customer has assumed the risks and rewards of ownership. The prices of certain sales are based on price indexes that are sometimes not available until the next period. In such cases, estimated realizations are accrued when the sale is recognized, and are finalized when the price is available. Such adjustments to revenue from performance obligations satisfied in previous periods are not significant. Payment for revenue transactions is typically due within 30 days. Future volume delivery obligations that are unsatisfied at the end of the period are expected to be fulfilled through ordinary production or purchases. These performance obligations are based on market prices at the time of the transaction and are fully constrained due to market price volatility.
“Sales and other operating revenue” and “Notes and accounts receivable” primarily arise from contracts with customers. Long-term receivables are primarily from non-customers. Contract assets are mainly from marketing assistance programs and are not significant. Contract liabilities are mainly customer prepayments and accruals of expected volume discounts and are not significant.
9. Leases The Corporation and its consolidated affiliates generally purchase the property, plant and equipment used in operations, but there are situations where assets are leased, primarily for drilling equipment, tankers, office buildings, railcars, and other moveable equipment. Right of use assets and lease liabilities are established on the balance sheet for leases with an expected term greater than one year, by discounting the amounts fixed in the lease agreement for the duration of the lease which is reasonably certain, considering the probability of exercising any early termination and extension options. The portion of the fixed payment related to service costs for drilling equipment and tankers is excluded from the calculation of right of use assets and lease liabilities. Generally assets are leased only for a portion of their useful lives, and are accounted for as operating leases. In limited situations assets are leased for nearly all of their useful lives, and are accounted for as finance leases. Variable payments under these lease agreements are not significant. Residual value guarantees, restrictions, or covenants related to leases, and transactions with related parties are also not significant. In general, leases are capitalized using the incremental borrowing rate of the leasing affiliate. The Corporation’s activities as a lessor are not significant. At adoption of the lease accounting change (see Note 2), on January 1, 2019, an operating lease liability of $3.3 billion was recorded and the operating lease right of use asset was $4.3 billion, including $1.0 billion of previously recorded prepaid leases. There was no cumulative earnings effect adjustment. | | | | Operating Leases | | | | | | | | Drilling Rigs | | | | | | | | | | and Related | | | | Finance | | | | | | Equipment | Other | | Total | | Leases | | | | | | (millions of dollars) | | | | | | | | | | | | | | | Lease Cost | | | Three Months Ended March 31, 2019 | Operating lease cost | | | 40 | | 255 | | 295 | | | Short-term and other (net of sublease rental income) | | | 195 | | 273 | | 468 | | | | | | | | | | | | | | | Amortization of right of use assets | | | | | | | | | 31 | Interest on lease liabilities | | | | | | | | | 31 | | Total | | | 235 | | 528 | | 763 | | 62 | | | | | | | | | | | | |
| | | | | | | | | | | | Balance Sheet | | | March 31, 2019 | Right of use assets | | | | | | | | | | | Included in Other assets, including intangibles - net | | | 539 | | 3,901 | | 4,440 | | | | Included in Property, plant and equipment - net | | | | | | | | | 1,554 | | | Total right of use assets | | | 539 | | 3,901 | | 4,440 | | 1,554 | | | | | | | | | | | | | Lease liability due within one year | | | | | | | | | | | Included in Accounts payable and accrued liabilities | | | 167 | | 699 | | 866 | | 34 | | Included in Notes and loans payable | | | | | | | | | 174 | Long-term lease liability | | | | | | | | | | | Included in Other long-term obligations | | | 373 | | 2,238 | | 2,611 | | | | Included in Long-term debt | | | | | | | | | 1,301 | | Included in Long-term obligations to equity companies | | | | | | | | | 146 | | | Total lease liability | | | 540 | | 2,937 | | 3,477 | | 1,655 |
| | | | Operating Leases | | | | | | | | Drilling Rigs | | | | | | | | | | and Related | | | | Finance | | | | | | Equipment | Other | | Total | | Leases | | | | | | (millions of dollars) | | | | | | | | | | | | | | | Maturity Analysis of Lease Liabilities | | | March 31, 2019 | 2019 remaining months | | | 137 | | 608 | | 745 | | 293 | 2020 | | | 154 | | 622 | | 776 | | 204 | 2021 | | | 96 | | 441 | | 537 | | 180 | 2022 | | | 57 | | 290 | | 347 | | 173 | 2023 | | | 40 | | 253 | | 293 | | 171 | 2024 | | | 29 | | 213 | | 242 | | 172 | 2025 and beyond | | | 70 | | 924 | | 994 | | 2,411 | | Total lease payments | | | 583 | | 3,351 | | 3,934 | | 3,604 | Discount to present value | | | (43) | | (414) | | (457) | | (1,949) | | Total lease liability | | | 540 | | 2,937 | | 3,477 | | 1,655 | | | | | | | | | | | | | Weighted average remaining lease term - years | | | 5 | | 8 | | 7 | | 25 | Weighted average discount rate - percent | | | 3.0% | | 3.2% | | 3.1% | | 9.7% | | | | | | | | | | | | |
In addition to the operating lease liabilities in the table immediately above, at March 31, 2019, additional undiscounted commitments for leases not yet commenced totaled $2.6 billion. Included among these commitments is $1.7 billion for crude oil pipeline transportation that is expected to commence later in 2019. The underlying assets for these leases were primarily designed by, and are being constructed by, the lessors. These unrecorded lease commitments are the primary difference between the operating lease liabilities reflected in the table above and the $6.1 billion disclosed at December 31, 2018, for minimum lease commitments under the prior lease accounting standard. | | | | Operating Leases | | | | | | | | Drilling Rigs | | | | | | | | | | and Related | | | | Finance | | | | | | Equipment | Other | | Total | | Leases | | | | | | (millions of dollars) | | | | | | | | | | | | | | | Other Information | | | Three Months Ended March 31, 2019 | Cash paid for amounts included in the measurement of lease liabilities | | | | | | | | | | | Cash flows from operating activities | | | | | 228 | | 228 | | 14 | | Cash flows from investing activities | | | 40 | | | | 40 | | | | Cash flows from financing activities | | | | | | | | | 16 | | | | | | | | | | | | | Noncash right of use assets recorded for lease liabilities | | | | | | | | | | | For January 1 adoption of Topic 842 | | | 445 | | 2,818 | | 3,263 | | | | In exchange for new lease liabilities during the period | | | 125 | | 320 | | 445 | | | | | | | | | | | | | | |
At December 31, 2018, the Corporation and its consolidated subsidiaries held noncancelable operating leases and charters covering drilling equipment, tankers and other assets with minimum undiscounted lease commitments totaling $6,112 million as indicated in the table. Estimated related sublease rental income from noncancelable subleases totals $22 million. | | Lease Payments | | | Under Minimum Commitments | | | As of December 31, 2018 | | | | Drilling Rigs | | | | | | and Related | | | | | | Equipment | Other | | Total | | | | (millions of dollars) | | | | | | | | | 2019 | | | 222 | | 934 | | 1,156 | 2020 | | | 166 | | 819 | | 985 | 2021 | | | 107 | | 658 | | 765 | 2022 | | | 43 | | 506 | | 549 | 2023 | | | 32 | | 422 | | 454 | 2024 and beyond | | | 53 | | 2,150 | | 2,203 | Total | | | 623 | | 5,489 | | 6,112 |
Net rental cost under both cancelable and noncancelable operating leases incurred during 2018, 2017 and 2016 were as follows: | | | | For full year | | | | | 2018 | | 2017 | | 2016 | | | | | (millions of dollars) | | | | | | | | | | Rental cost | | | | | | | | Drilling rigs and related equipment | | 723 | | 792 | | 1,274 | | Other (net of sublease rental income) | | 1,992 | | 1,826 | | 1,817 | | | Total | | 2,715 | | 2,618 | | 3,091 |
EXXON MOBIL CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FUNCTIONAL EARNINGS SUMMARY | FUNCTIONAL EARNINGS SUMMARY | FUNCTIONAL EARNINGS SUMMARY | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | | First Six Months | | | | First Three Months | Earnings (U.S. GAAP) | Earnings (U.S. GAAP) | | | 2018 | | | 2017 | | 2018 | | | 2017 | Earnings (U.S. GAAP) | | | 2019 | | | 2018 | | | | (millions of dollars) | | | | (millions of dollars) | Upstream | Upstream | | | | | | | | | | | | | Upstream | | | | | | | | United States | | | 439 | | | (183) | | 868 | | | (201) | United States | | | 96 | | | 429 | | Non-U.S. | | | 2,601 | | | 1,367 | | 5,669 | | | 3,637 | Non-U.S. | | | 2,780 | | | 3,068 | Downstream | Downstream | | | | | | | | | | | | Downstream | | | | | | | | United States | | | 695 | | | 347 | | 1,014 | | | 639 | United States | | | (161) | | | 319 | | Non-U.S. | | | 29 | | | 1,038 | | 650 | | | 1,862 | Non-U.S. | | | (95) | | | 621 | Chemical | Chemical | | | | | | | | | | | | Chemical | | | | | | | | United States | | | 453 | | | 481 | | 956 | | | 1,010 | United States | | | 161 | | | 503 | | Non-U.S. | | | 437 | | | 504 | | 945 | | | 1,146 | Non-U.S. | | | 357 | | | 508 | Corporate and financing (1) | | | (704) | | | (204) | | (1,502) | | | (733) | | Corporate and financing | | Corporate and financing | | | (788) | | | (798) | | Net income attributable to ExxonMobil (U.S. GAAP) | | | 3,950 | | | 3,350 | | 8,600 | | | 7,360 | Net income attributable to ExxonMobil (U.S. GAAP) | | | 2,350 | | | 4,650 | | | | | | | | | | | | | | | | | | | | | Earnings per common share (dollars) | Earnings per common share (dollars) | | | 0.92 | | | 0.78 | | 2.01 | | | 1.73 | Earnings per common share (dollars) | | | 0.55 | | | 1.09 | | | | | | | | | | | | | | | | | | | | | Earnings per common share - assuming dilution (dollars) | Earnings per common share - assuming dilution (dollars) | | | 0.92 | | | 0.78 | | 2.01 | | | 1.73 | Earnings per common share - assuming dilution (dollars) | | 0.55 | | | 1.09 | | | | | | | | |
(1) See Note 2 to the financial statements for additional details regarding the change in segmentation of Non-service pension and postretirement benefit expense.
References in this discussion to Corporate earnings mean net income attributable to ExxonMobil (U.S. GAAP) from the consolidated income statement. Unless otherwise indicated, references to earnings, 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 SECONDFIRST QUARTER 20182019 RESULTS ExxonMobil’s secondfirst quarter 20182019 earnings were $4$2.4 billion, or $0.92$0.55 per diluted share, compared with $3.4$4.7 billion a year earlier, as liquids realizations increasedearlier. The decrease in earnings was primarily the result of lower Downstream and refiningChemical margins improved. Earnings of $8.6 billion for the first six months of 2018 increased 17 percent from $7.4 billion in 2017.
Earnings per share assuming dilution were $2.01.
Capital and exploration expenditures were $11.5 billion, up 42 percent from 2017.higher scheduled maintenance activity.
Oil‑equivalent production was 3.84.0 million barrels per day, down 7up 2 percent from the prior year. Excluding entitlement effects and divestments, oil‑equivalent production was down 4up 3 percent from the prior year. The Corporation distributed $6.8$3.5 billion in dividends to shareholders.
| | | | | Second Quarter | | | First Six Months | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | (millions of dollars) | Upstream earnings | | | | | | | | | | | | | | United States | | | 439 | | | (183) | | | 868 | | | (201) | | Non-U.S. | | | 2,601 | | | 1,367 | | | 5,669 | | | 3,637 | | | Total | | | 3,040 | | | 1,184 | | | 6,537 | | | 3,436 |
| | | | | First Three Months | | | | | | 2019 | | | 2018 | | | | | | (millions of dollars) | Upstream earnings | | | | | | | | United States | | | 96 | | | 429 | | Non-U.S. | | | 2,780 | | | 3,068 | | | Total | | | 2,876 | | | 3,497 |
Upstream earnings were $3,040$2,876 million in the secondfirst quarter of 2018, up $1,8562019, down $621 million from the secondfirst quarter of 2017.2018. · Realizations decreased earnings by $30 million due to lower liquids realizations of $360 million, partly offset by higher gas realizations of $330 million. ·Higher volume and mix effects increased earnings by $2,380$80 million mainly due to higher liquids realizations. ·Lower volume and mix effects decreased earningsvolumes of $230 million, partly offset by $270lower gas volumes of $150 million.
· All other items decreased earnings by $250$670 million mainly due to the absence of a gain on the Scarborough asset sale of $366 million, higher expenses.growth-related expenses and asset impairment charges. · U.S. Upstream earnings were $439$96 million, up $622down $333 million from the prior year quarter. · Non‑U.S. Upstream earnings were $2,601$2,780 million, up $1,234down $288 million from the prior year quarter. · On an oil‑equivalent basis, production decreased 7increased 2 percent from the secondfirst quarter of 2017.2018. · Liquids production totaled 2.22.3 million barrels per day, down 57,000up 111,000 barrels per day as lower volumes from decline, divestments, lower entitlementsdue to U.S. growth and scheduled maintenance, were partiallyimproved reliability, partly offset by growth in North America.decline. · Natural gas production was 8.69.9 billion cubic feet per day, down 1,307114 million cubic feet per day driven by decline largely in the U.S. aligned with value focus, higher downtime, lower entitlements and divestments. Upstream earnings were $6,537 million in the first six months of 2018, up $3,101 million from the first six months of 2017.
·Realizations increased earnings by $3,830 million mainly due to higher liquids realizations.
·Lower volumelower demand, decline and mix effects decreased earnings by $480 million.
·All other items decreased earnings by $250 million, mainly due to higher expenses,divestments, partly offset by the gain on the Scarborough sale in Australia.
·U.S. Upstream earnings were $868 million, up $1,069 million from the first six months of prior year.
·Non-U.S. Upstream earnings were $5,669 million, up $2,032 million from the first six months of prior year.
·On an oil-equivalent basis, production decreased 7 percent from the first six months of 2017.
·Liquids production totaled 2.2 million barrels per day, down 87,000 barrels per day as lower volumes from decline, divestmentsmaintenance and entitlements, were partially offset by growth in North America.
·Natural gas production was 9.3 billion cubic feet per day, down 1,090 million cubic feet per day driven by lower volumes from downtime, decline and entitlements.growth.
| | | | Second Quarter | | | First Six Months | | | First Quarter | Upstream additional information | Upstream additional information | | | | (thousands of barrels daily) | | Upstream additional information | | (thousands of barrels daily) | Volumes reconciliation (Oil-equivalent production)(1) | Volumes reconciliation (Oil-equivalent production)(1) | | | | | | | | | Volumes reconciliation (Oil-equivalent production) (1) | | | | | 2017 | | | | 3,922 | | | | 4,036 | | | 2018 | | 2018 | | | | 3,889 | | | Entitlements - Net Interest | | | | (3) | | | | (3) | | Entitlements - Net Interest | | | | - | | | Entitlements - Price / Spend / Other | | | | (52) | | | | (58) | | Entitlements - Price / Spend / Other | | | | 10 | | | Quotas | | | | - | | | | - | | Quotas | | | | - | | | Divestments | | | | (68) | | | | (61) | | Divestments | | | | (27) | | | Growth / Other | | | | (152) | | | | (146) | | Growth / Other | | | | 109 | | 2018 | | | | 3,647 | | | | 3,768 | | | 2019 | | 2019 | | | | 3,981 | | | | | | | | | | | | | | | | | | | (1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels. | (1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels. | | | (1) Gas converted to oil-equivalent at 6 million cubic feet = 1 thousand barrels. |
Listed below are descriptions of ExxonMobil’s volumes reconciliation factors which are provided to facilitate understanding of the terms. Entitlements - Net Interest are changes to ExxonMobil’s share of production volumes caused by non-operational changes to volume-determining factors. These factors consist of net interest changes specified in Production Sharing Contracts (PSCs) which typically occur when cumulative investment returns or production volumes achieve defined thresholds, changes in equity upon achieving pay-out in partner investment carry situations, equity redeterminations as specified in venture agreements, or as a result of the termination or expiry of a concession. Once a net interest change has occurred, it typically will not be reversed by subsequent events, such as lower crude oil prices. Entitlements - Price, Spend and Other are changes to ExxonMobil’s share of production volumes resulting from temporary changes to non-operational volume-determining factors. These factors include changes in oil and gas prices or spending levels from one period to another. According to the terms of contractual arrangements or government royalty regimes, price or spending variability can increase or decrease royalty burdens and/or volumes attributable to ExxonMobil. For example, at higher prices, fewer barrels are required for ExxonMobil to recover its costs. These effects generally vary from period to period with field spending patterns or market prices for oil and natural gas. Such factors can also include other temporary changes in net interest as dictated by specific provisions in production agreements. Quotas are changes in ExxonMobil’s allowable production arising from production constraints imposed by countries which are members of the Organization of the Petroleum Exporting Countries (OPEC). Volumes reported in this category would have been readily producible in the absence of the quota. Divestments are reductions in ExxonMobil’s production arising from commercial arrangements to fully or partially reduce equity in a field or asset in exchange for financial or other economic consideration. Growth and Other factors comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable to ExxonMobil. Such factors include, but are not limited to, production enhancements from project and work program activities, acquisitions including additions from asset exchanges, downtime, market demand, natural field decline, and any fiscal or commercial terms that do not affect entitlements.
| | | | | Second Quarter | | | First Six Months | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | (millions of dollars) | Downstream earnings | | | | | | | | | | | | | | United States | | | 695 | | | 347 | | | 1,014 | | | 639 | | Non-U.S. | | | 29 | | | 1,038 | | | 650 | | | 1,862 | | | Total | | | 724 | | | 1,385 | | | 1,664 | | | 2,501 |
| | | | | First Three Months | | | | | | 2019 | | | 2018 | | | | | | (millions of dollars) | Downstream earnings | | | | | | | | United States | | | (161) | | | 319 | | Non-U.S. | | | (95) | | | 621 | | | Total | | | (256) | | | 940 |
Downstream earnings were $724($256) million in the secondfirst quarter of 2018,2019, down $661$1,196 million from the secondfirst quarter of 2017.2018. · Margins increaseddecreased earnings by $260 million, as higher U.S. margins were partially offset by lower Non‑U.S. margins.$860 million. · Lower volumeVolume and mix effects decreased earnings by $210 million, primarilyremained essentially flat due to downtime and maintenance.higher scheduled maintenance, offset by improved yield / sales mix impacts. · All other items decreased earnings by $710$340 million includingdue to higher scheduled maintenance and unfavorable foreign exchange impacts of $240 million, lower divestment gains of $130 million, and other unfavorable impacts of $340 million.yield / sales mix impacts. · U.S. Downstream earnings were $695($161) million, up $348down $480 million from the prior year quarter. · Non‑U.S. Downstream earnings were $29($95) million, down $1,009$716 million from the prior year quarter. · Petroleum product sales of 5.55.4 million barrels per day were 56,00017,000 barrels per day lower than the prior year quarter. Downstream earnings were $1,664 million in the first six months of 2018, down $837 million from the first six months of 2017.
·Margins increased earnings by $230 million, as higher U.S. margins were partially offset by lower Non-U.S. margins.
·Lower volume and mix effects decreased earnings by $270 million, primarily due to downtime and maintenance.
·All other items decreased earnings by $800 million, including unfavorable foreign exchange impacts of $220 million, lower divestment gains of $220 million, and other unfavorable impacts of $360 million.
·U.S. Downstream earnings were $1,014 million, up $375 million from the first six months of prior year.
·Non-U.S. Downstream earnings were $650 million, down $1,212 million from the first six months of prior year.
·Petroleum product sales of 5.5 million barrels per day were 10,000 barrels per day lower than the first six months of prior year.
| | | | | Second Quarter | | | First Six Months | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | (millions of dollars) | Chemical earnings | | | | | | | | | | | | | | United States | | | 453 | | | 481 | | | 956 | | | 1,010 | | Non-U.S. | | | 437 | | | 504 | | | 945 | | | 1,146 | | | Total | | | 890 | | | 985 | | | 1,901 | | | 2,156 |
| | | | | First Three Months | | | | | | 2019 | | | 2018 | | | | | | (millions of dollars) | Chemical earnings | | | | | | | | United States | | | 161 | | | 503 | | Non-U.S. | | | 357 | | | 508 | | | Total | | | 518 | | | 1,011 |
Chemical earnings of $890$518 million in the secondfirst quarter of 2018,2019 were $95$493 million lower than the secondfirst quarter of 2017.2018. · WeakerLower margins decreased earnings by $210$360 million. · Volume and mix effects increased earnings by $120$60 million. · All other items decreased earnings by $10$190 million, asmainly due to higher growth-related expenses were partially offset by favorableand unfavorable foreign exchange impacts. · U.S. Chemical earnings were $453$161 million, down $28$342 million from the prior year quarter. · Non‑U.S. Chemical earnings were $437$357 million, down $67$151 million from the prior year quarter. · SecondFirst quarter prime product sales of 6.96.8 million metric tons were 732,000104,000 metric tons higher than the prior year quarter due to project growth and acquisitions.growth. Chemical earnings were $1,901 million in the first six months of 2018, down $255 million from the first six months of 2017.
·Weaker margins decreased earnings by $460 million.
·Volume and mix effects increased earnings by $220 million.
·All other items decreased earnings by $20 million, as higher expenses were partially offset by favorable foreign exchange and tax impacts.
·U.S. Chemical earnings were $956 million, down $54 million from the first six months of prior year.
·Non-U.S. Chemical earnings were $945 million, down $201 million from the first six months of prior year.
·Prime product sales of 13.5 million metric tons in the first six months were 1.3 million metric tons higher than the first six months of prior year due to project growth and acquisitions.
| | | Second Quarter | | | First Six Months | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | (millions of dollars) | | | | | | | | | | | | | | Corporate and financing earnings | | | (704) | | | (204) | | | (1,502) | | | (733) |
| | | | | First Three Months | | | | | | 2019 | | | 2018 | | | | | | (millions of dollars) | | | | | | | | | | Corporate and financing earnings | | | (788) | | | (798) |
Corporate and financing expenses were $704$788 million for the secondfirst quarter of 2018, up $5002019, down $10 million from the second quarter of 2017, mainly due to the absence of favorable tax items, the impact of a lower U.S. tax rate, and higher pension-related costs. Corporate and financing expenses were $1,502 million in the first six months of 2018, up $769 million from the first six months of 2017, mainly due to the absence of favorable tax items, the impact of a lower U.S. tax rate, and higher pension and financing related costs.prior year quarter.
LIQUIDITY AND CAPITAL RESOURCES | LIQUIDITY AND CAPITAL RESOURCES | LIQUIDITY AND CAPITAL RESOURCES | | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | | First Six Months | | | | | First Three Months | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | 2019 | | | 2018 | | | | | (millions of dollars) | | | | | (millions of dollars) | Net cash provided by/(used in) | Net cash provided by/(used in) | | | | | | | | | | | | | Net cash provided by/(used in) | | | | | | | | Operating activities | | | | | | | | 16,299 | | 15,120 | Operating activities | | | 8,338 | | | 8,519 | | Investing activities | | | | | | | | (6,955) | | (6,639) | Investing activities | | | (5,793) | | | (1,859) | | Financing activities | | | | | | | | (8,986) | | (8,305) | Financing activities | | | (1,044) | | | (5,742) | Effect of exchange rate changes | Effect of exchange rate changes | | | | | | | | (105) | | 209 | Effect of exchange rate changes | | | 43 | | | 30 | Increase/(decrease) in cash and cash equivalents | Increase/(decrease) in cash and cash equivalents | | | | | | | | 253 | | 385 | Increase/(decrease) in cash and cash equivalents | | | 1,544 | | | 948 | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents (at end of period) | Cash and cash equivalents (at end of period) | | | | | | | | 3,430 | | 4,042 | Cash and cash equivalents (at end of period) | | | 4,586 | | | 4,125 | | | | | | | | | | | | | | | | | | | | | | Cash flow from operations and asset sales | Cash flow from operations and asset sales | | | | | | | | | | | Cash flow from operations and asset sales | | | | | | | | Net cash provided by operating activities (U.S. GAAP) | | | 7,780 | | 6,947 | | 16,299 | | 15,120 | Net cash provided by operating activities (U.S. GAAP) | | | 8,338 | | | 8,519 | | Proceeds associated with sales of subsidiaries, property, | | | | | | | | | | Proceeds associated with sales of subsidiaries, property, plant & equipment, | | | | | | | | plant & equipment, and sales and returns of investments | | | 307 | | 154 | | 1,748 | | 841 | | and sales and returns of investments | | | 107 | | | 1,441 | | Cash flow from operations and asset sales | | | 8,087 | | 7,101 | | 18,047 | | 15,961 | Cash flow from operations and asset sales | | | 8,445 | | | 9,960 |
Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider proceeds associated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities, including shareholder distributions. Cash flow from operations and asset sales in the secondfirst quarter of 20182019 was $8.1$8.4 billion, including asset sales of $0.3$0.1 billion, an increasea decrease of $1.0$1.5 billion from the comparable 20172018 period primarily reflecting higher earnings.lower asset sale proceeds. Cash provided by operating activities totaled $16.3$8.3 billion for the first sixthree months of 2018, $1.22019, $0.2 billion higherlower than 2017.2018. The major source of funds was net income including noncontrolling interests of $8.8$2.4 billion, an increasea decrease of $1.4$2.4 billion from the prior year period. The adjustment for the noncash provision of $9.1$4.6 billion for depreciation and depletion was downup $0.1 billion from 2017.2018. Changes in operational working capital reduced cash flows by $1.0contributed $2.3 billion, compared to a decrease of $0.2up $1.9 billion infrom the prior year period. All other items net decreased cash flows by $0.5$0.9 billion in 20182019 versus a reduction of $1.2$1.1 billion in 2017.2018. See the Condensed Consolidated Statement of Cash Flows for additional details. Investing activities for the first sixthree months of 20182019 used net cash of $7.0$5.8 billion, an increase of $0.3$3.9 billion compared to the prior year. Spending for additions to property, plant and equipment of $8.3$5.2 billion was $2.3$1.9 billion higher than 2017.2018. Proceeds from asset sales of $1.7$0.1 billion increased $0.9decreased $1.3 billion. Investments and advances decreased $1.1increased $0.8 billion principally reflecting the absence of the deposit into escrow of the maximum potential contingent consideration payable as a result of the acquisition of InterOil Corporation in 2017. This was partly offset by cash outflows in 2018 related to the acquisition of a Downstream business in Indonesia. Cash flow from operations and asset sales in the first six months of 2018 was $18.0 billion, including asset sales of $1.7 billion, an increase of $2.1 billion from the comparable 2017 period primarily reflecting higher earnings and increased asset sale proceeds.$0.9 billion.
Net cash used by financing activities was $9.0$1.0 billion in the first sixthree months of 2018, an increase2019, a decrease of $0.7$4.7 billion from 2017.2018. The net reduction in short and long termaddition to short-term debt was $1.4$3.0 billion compared to $1.2a net reduction of $1.9 billion in 2017.2018. During the first sixthree months of 2018,2019, Exxon Mobil Corporation purchased 5 million shares of its common stock for the treasury at a gross cost of $0.4 billion. These purchases were made to offset shares or units settled in shares issued in conjunction with the company’s benefit plans and programs. Shares outstanding decreased from 4,2394,237 million at year-end to 4,2344,231 million at the end of the secondfirst quarter of 2018.2019. Purchases may be made both in the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice. The Corporation distributed a total of $6.8$3.5 billion to shareholders in the first six monthsquarter of 20182019 through dividends.
Total cash and cash equivalents of $3.4$4.6 billion at the end of the secondfirst quarter of 20182019 compared to $3.2$3.0 billion at year-end 2017.2018. Total debt at the end of the secondfirst quarter of 20182019 was $41.2$40.8 billion compared to $42.3$37.8 billion at year-end 2017.2018. The Corporation's debt to total capital ratio was 17.617.1 percent at the end of the secondfirst quarter of 20182019 compared to 17.916.0 percent at year-end 2017.2018.
The Corporation has access to significant capacity of long-term and short-term liquidity. Internally generated funds are generally expected to cover financial requirements, supplemented by short-term and long-term debt as required. 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. Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time. Key criteria for evaluating acquisitions include potential for future growth and attractive current valuations. Acquisitions may be made with cash, shares of the Corporation’s common stock, or both. Litigation and other contingencies are discussed in Note 3 to the unaudited condensed consolidated financial statements.
TAXES | TAXES | | | | | | | | | | | TAXES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | | First Six Months | | | | | | First Three Months | | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | 2019 | | | 2018 | | | | | | (millions of dollars) | | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | Income taxes | Income taxes | | | 2,526 | | 892 | | 4,983 | | 2,720 | | Income taxes | | | 1,883 | | | 2,457 | | | Effective income tax rate | | | 44 | % | | 31 | % | | 42 | % | | 35 | % | Effective income tax rate | | | 53 | % | | 40 | % | | Total other taxes and duties (1) | Total other taxes and duties (1) | | | 9,003 | | 7,960 | | 17,818 | | 15,589 | | Total other taxes and duties (1) | | | 8,087 | | | 8,815 | | | | Total | | | 11,529 | | 8,852 | | 22,801 | | 18,309 | | Total | | | 9,970 | | | 11,272 | |
(1) Includes “Other taxes and duties” plus taxes that are included in “Production and manufacturing expenses” and “Selling, general and administrative expenses.” Total taxes were $11.5$10.0 billion for the secondfirst quarter of 2018, an increase2019, a decrease of $2.7$1.3 billion from 2017.2018. Income tax expense increaseddecreased by $1.6$0.6 billion to $2.5$1.9 billion reflecting higherlower pre-tax income. The effective income tax rate was 4453 percent compared to 3140 percent in the prior year period. This increase mainly reflects the absence of favorable one-time tax items and a higher share of earnings in higher tax jurisdictions.jurisdictions in the Non-U.S. Upstream segment. Total other taxes and duties increaseddecreased by $1.0$0.7 billion to $9.0$8.1 billion. Total taxes were $22.8 billion for the first six months of 2018, an increase of $4.5 billion from 2017. Income tax expense increased by $2.3 billion to $5.0 billion reflecting higher pre-tax income. The effective income tax rate was 42 percent compared to 35 percent in the prior year period due to a higher share of earnings in higher tax jurisdictions. Total other taxes and duties increased by $2.2 billion to $17.8 billion.
During the first six months of 2018, there were no significant changes to the Corporation’s reasonable estimates of the income tax effects reflected in 2017 for the changes in tax law and tax rate from the enactment of the U.S. Tax Cuts and Jobs Act and following guidance outlined in the SEC Staff Accounting Bulletin No. 118. The impact of tax law changes on the Corporation’s financial statements could differ from its estimates due to further analysis of the new law, regulatory guidance, technical corrections legislation, guidance under U.S. GAAP, or other considerations. If significant changes occur, the Corporation will provide updated information in connection with future regulatory filings.
In the United States, the Corporation has various ongoing U.S. federal income tax positions at issue with the Internal Revenue Service (IRS) for tax years beginning in 2006. The IRS has asserted penalties associated with several of those positions. The Corporation has not recognized the penalties as an expense because the Corporation does not expect the penalties to be sustained under applicable law. The Corporation has filed a refund suit for tax years 2006-2009 in a U.S. federal district court with respect to the positions at issue for those years. Unfavorable resolution of all positions at issue with the IRS would not have a materially adverse effect on the Corporation’s net income or liquidity.
CAPITAL AND EXPLORATION EXPENDITURES | CAPITAL AND EXPLORATION EXPENDITURES | | CAPITAL AND EXPLORATION EXPENDITURES | | | | �� | | | | | | | | | | | | | | | | | | | | | | | | Second Quarter | | | First Six Months | | | | | First Three Months | | | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | 2019 | | | 2018 | | | | | (millions of dollars) | | | | | (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | Upstream (including exploration expenses) | Upstream (including exploration expenses) | | | 4,855 | | 2,786 | | | 8,614 | | | 5,905 | | Upstream (including exploration expenses) | | | 5,361 | | | 3,759 | | Downstream | Downstream | | | 1,230 | | 586 | | | 1,844 | | | 1,131 | | Downstream | | | 829 | | | 614 | | Chemical | Chemical | | | 533 | | 535 | | | 998 | | | 1,032 | | Chemical | | | 696 | | | 465 | | Other | Other | | | 9 | | 18 | | | 38 | | | 26 | | Other | | | 4 | | | 29 | | | Total | | | 6,627 | | 3,925 | | | 11,494 | | | 8,094 | | Total | | | 6,890 | | | 4,867 | |
Capital and exploration expenditures in the secondfirst quarter of 20182019 were $6.6 billion, up 69 percent from the second quarter of 2017. Capital and exploration expenditures in the first six months of 2018 were $11.5$6.9 billion, up 42 percent from the first six monthsquarter of 2017 due primarily to increased U.S. drilling activity.2018. The Corporation anticipates an investment level of $24approximately $30 billion in 2018.2019. Actual spending could vary depending on the progress of individual projects and property acquisitions.
In 2013 and 2014, the Corporation and Rosneft established various entities to conduct exploration and research activities. In 2014, the European Union and United States imposed sanctions relating to the Russian energy sector. ExxonMobil continues to comply with all sanctions and regulatory licenses applicable to its affiliates’ investments in the Russian Federation. See Part II. Other Information, Item 1. Legal Proceedings in this report for information concerning a civil penalty assessment related to this matter which the Corporation is contesting. The Corporation withdrew from the aforementioned joint ventures with Rosneft, effective April 30, 2018.
The Groningen field is operated by Nederlandse Aardolie Maatschappij (NAM), a Netherlands company owned 50 percent by affiliates of the Corporation. NAM has a 60 percent interest in the Groningen field. On March 29, 2018, the Dutch Cabinet notified Parliament of its intention to further reduce previously legislated Groningen gas extraction in response to seismic events over the last several years. Affiliates of the Corporation and their partners have actively been in discussions with the government on the associated implementation measures which resulted in a signed Heads of Agreement (HoA – agreement on principles) on June 25, 2018. The HoA stipulates that additional agreements must be negotiated which will define further details, and the parties will endeavor to execute them by the end of September. In anticipation of a lower production outlook, the Corporation has reduced its estimate of proved reserves by 0.8 billion oil-equivalent barrels. In addition, the seismic activity has yielded various claims. Where losses are probable and reasonably estimable, liabilities have been recorded. The Corporation does not expect these matters to have a material effect on the Corporation’s operations or financial condition. While the future production profile and other considerations related to the Groningen field could vary depending on a wide variety of factors, reduced gas extraction in the future is expected to result in lower reported production, earnings and cash flows than in recent years for the Corporation’s share of NAM.
RECENTLY ISSUED ACCOUNTING STANDARDS Effective January 1, 2019,2020, ExxonMobil will adopt the Financial Accounting Standards Board’s standard,update, LeasesFinancial Instruments – Credit Losses (Topic 842)326), as amended. The standard requires all leases with an initial term greater than one year toa valuation allowance for credit losses be recorded onrecognized for certain financial assets that reflects the balance sheet as a rightcurrent expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of use assetloss, even if remote, and a lease liability.considers past events, current conditions and expectations of the future. The Corporation acquired lease accounting software to facilitate implementation,is evaluating the standard and is currently installing, configuring and testing the software. Based on leases outstanding at the end of 2017, the Corporation estimates the operating lease right of use asset and lease liability would have been in the range of $4 billion to $5 billion at that time. Theits effect on the Corporation’s balance sheet as a result of implementing the standard on January 1, 2019, could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors such as the expiry or renewal of leasesfinancial statements. during the year.
FORWARD-LOOKING STATEMENTS Statements relatingrelated to futureoutlooks, projections, goals, targets, descriptions of strategic plans and objectives, projections,and other statements of future events or conditions are forward-looking statements. FutureActual future results, including business and project plans, capacities, costs, timing, and capacities; business growth; integration benefits;timing; resource recoveries;recoveries and production rates; and the impact of new technologies;technologies, including to increase capital efficiency and share purchase levels,production and to reduce greenhouse gas emissions, could differ materially due to a number of factors. These include global or regional changes in supply and demand for oil, gas, orand petrochemicals orand other market conditions affectingthat impact prices and differentials; reservoir performance; the oil, gasoutcome of exploration projects and petrochemical industries; reservoir performance; timely completion of newdevelopment and construction projects; the impact of fiscal and commercial terms and the outcome of commercial negotiations;negotiations or acquisitions; changes in law, taxes, or government regulation, including environmental regulations, and timely granting of governmental permits; war and other political or security disturbances; the actions of competitors; the capture of efficiencies between business lines; unforeseen technical or operating difficulties; unexpected technological developments; the ability to bring new technologies to commercial scale on a cost-competitive basis; general economic conditions including the occurrence and duration of economic recessions; the results of research programs; and other factors discussed under the heading Factors Affecting Future Results on the Investors page of our website at www.exxonmobil.com and in Item 1A of ExxonMobil's 2017ExxonMobil’s 2018 Form 10-K. We assume no duty to update these statements as of any future date. The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
Item 3. Quantitative and Qualitative Disclosures About Market Risk Information about market risks for the sixthree months ended June 30, 2018,March 31, 2019, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2017.2018.
Item 4. Controls and Procedures As indicated in the certifications in Exhibit 31 of this report, the Corporation’s Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer have evaluated the Corporation’s disclosure controls and procedures as of June 30, 2018.March 31, 2019. Based on that evaluation, these officers have concluded that the Corporation’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There were no changes during the Corporation’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
PART II. OTHER INFORMATION Item 1. Legal Proceedings AsOn March 20, 2019, the State of California Air Resources Board (CARB) informed ExxonMobil Oil Corporation (EMOC) of its intention to attempt to settle an enforcement matter involving the formerly owned Torrance Refinery in California under the California Health and Safety Code. Specifically, CARB contends that the refinery failed to timely calibrate and inspect a greenhouse gas reporting meter as required by the applicable regulations and to accurately report greenhouse gas emissions from refinery operations in 2014 and 2015 in a manner consistent with applicable regulations. The alleged violations have been corrected, but CARB is seeking penalties in excess of $100,000 to resolve the matter. EMOC is in settlement discussions with CARB, and the parties have entered into a tolling agreement to facilitate settlement discussions.
In a matter last reported in the Corporation’s Form 10-K10-Q for 2017, on June 20,first quarter of 2017, the United StatesU.S. Department of Justice (DOJ) and the United StatesU.S. Environmental Protection Agency (EPA) notified XTO Energy Inc. (XTO) concerningfiled a complaint and proposed consent decree on March 6, 2019, to settle a pending enforcement action with EMOC regarding alleged violations ofat EMOC’s Beaumont Refinery in Texas under the Clean Air Act and various sections of the Fort Berthold Indian Reservation Federal Implementation Plan regardingEPA’s Chemical Accident Prevention Provisions. The DOJ and EPA had contended that EMOC failed to identify hazards, failed to design and maintain a safe facility, and failed to mitigate the alleged failureconsequences of vapor control systemsa claimed accidental release related to properly route tank vapors to control devices at well pads and tank farmsa flash fire that occurred on the Fort Berthold Indian Reservation. In January 2018, XTO,April 17, 2013. Additionally, based on an on-site inspection in 2013, the DOJ and the EPA agreedclaim that EMOC failed to the terms ofinclude all covered processes in its risk management program and failed to inspect certain process equipment in a Consent Decree concerning those alleged violations. XTO has agreed to pay a penalty of $320,000, install automatic tank gauging on 30 well sites, and monitor and report emissions for three years. The executed Consent Decree was approvedtimely fashion. Pending approval by the United States FederalU.S. District Court for the Eastern District of North Dakota – WesternTexas, Beaumont Division, the parties have agreed to a civil penalty of $616,000, payment of $730,000 to a Supplemental Environmental Project, and additional corrective actions to resolve the matter. As most recently reported in Bismarck, North Dakota,the Corporation’s Form 10-Q for the second quarter of 2014, the DOJ contacted ExxonMobil Pipeline Company (EMPCo) concerning possible civil charges under the Clean Water Act arising in connection with the July 1, 2011, discharge of crude oil into the Yellowstone River from EMPCo’s Silvertip Pipeline near Laurel, Montana. In March 2019, EMPCo reached an agreement with the DOJ on July 10, 2018.a Consent Decree to resolve the matter. The Consent Decree, once entered by the U.S. District Court in the District of Montana, will require EMPCo to pay a civil penalty to the United States in the amount of $1.05 million. As last reported in the Corporation’s 2018 Form 10-Q for the third quarter of 2017, the company agreed with the DOJ and the EPA to resolve claims of non-compliance with the Clean Air Act related to flaring at its eight U.S. chemical facilities with flares. The EPA alleged the sites failed to properly operate and monitor flares. The company reached a settlement agreement with the DOJ, the EPA and the Louisiana Department of Environmental Quality to resolve these claims. The complaint and the consent decree were filed in the U.S. District Court for the Southern District of Texas on October 31, 2017, and became effective June 6, 2018. The company paid a total penalty of $2,500,000, and agreed to pay $2,572,000 to fund supplemental environmental projects. The company has also agreed to make investments in new equipment at the facilities. On May 24, 2018, the State of Ohio Department of Natural Resources, Division of Oil & Gas Resources Management (ODNR) notified XTO of its interest in settling possible enforcement of alleged violations by XTO of the Ohio Revised Code, Ohio Administrative Code, and implementing regulations arising out of the Schnegg well incident in Belmont County, Ohio, in early 2018. The ODNR alleges the following violations by XTO: (1) causing brine to be discharged and contact the ground and/or surface water; (2) failure to place cement in the casing string per Ohio codes; (3) allowing a well to flow gas uncontrolled; (4) failure to construct, drill and operate a well in the manner as permitted and planned; and (5) failure to notify ODNR upon discovery the well had sustained annular pressure above the prescribed pressure. The ODNR is seeking a civil penalty in excess of $100,000 as well as injunctive relief, and XTO is working with the state to resolve the matter.
Also relating to the Schnegg well incident, on May 25, 2018, the State of Ohio Environmental Protection Agency (OEPA) notified XTO of its interest in settling possible enforcement of alleged violations by XTO of the Ohio Revised Code and implementing regulations, including but not limited to: (1) failure to maintain and operate its facility in a manner using good pollution control practices; (2) failure to provide a malfunction report; (3) failure to complete and properly report quarterly inspections; and (4) failure to submit site-specific work practice plans within applicable time limits. The OEPA is seeking a civil penalty in excess of $100,000 as well as injunctive relief, and XTO is working with the state to resolve the matter.
As last reported in the Corporation’s Form 10-Q for the first quarter of 2018,10-K, on July 20, 2017, the United States Department of Treasury, Office of Foreign Assets Control (OFAC) assessed a civil penalty against Exxon Mobil Corporation, ExxonMobil Development Company and ExxonMobil Oil Corporation for violating the Ukraine-Related Sanctions Regulations, 31 C.F.R. part 589. The assessed civil penalty is in the amount of $2,000,000. ExxonMobil and its affiliates have been and continue to be in compliance with all sanctions and disagree that any violation has occurred. ExxonMobil and its affiliates filed a complaint on July 20, 2017, in the United States Federal District Court, Northern District of Texas seeking judicial review of, and to enjoin, the civil penalty under the Administrative Procedures Act and the United States Constitution, including on the basis that it represents an arbitrary and capricious action by OFAC and a violation of the Company’s due process rights.
Refer to the relevant portions of Note 3 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | | | | | | | | | | | | Issuer Purchase of Equity Securities for Quarter Ended June 30, 2018March 31, 2019 | | | | | | | | | | | | | | | | | | | | Total Number of | | Maximum Number | | | | | | | | | Shares Purchased | | of Shares that May | | | | | Total Number | | Average | | as Part of Publicly | | Yet Be Purchased | | | | | of Shares | | Price Paid | | Announced Plans | | Under the Plans or | Period | | | Purchased | | per Share | | or Programs | | Programs | | | | | | | | | | | | April 2018January 2019
| | -1,872,444
| | $71.48 | | -1,872,444
| | | May 2018February 2019
| | -1,729,545
| | $76.57 | | -1,729,545
| | | June 2018March 2019
| | -1,837,011
| | $80.32 | | -1,837,011
| | | | Total | | | -5,439,000
| | | | -5,439,000
| | (See Note 1) |
Note 1 - On August 1, 2000, the Corporation announced its intention to resume purchases of shares of its common stock for the treasury both to offset shares issued in conjunction with company benefit plans and programs and to gradually reduce the number of shares outstanding. The announcement did not specify an amount or expiration date. The Corporation has continued to purchase shares since this announcement and to report purchased volumes in its quarterly earnings releases. In its earnings release dated February 2, 2016, the Corporation stated it will continue to acquire shares to offset dilution in conjunction with benefit plans and programs, but had suspended making purchases to reduce shares outstanding effective beginning the first quarter of 2016.
Item 6. Exhibits See Index to Exhibits of this report.
INDEX TO EXHIBITS Exhibit | | Description | | | | 31.1 | | Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Executive Officer. | 31.2 | | Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal Financial Officer. | 31.3 | | Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal Accounting Officer. | 32.1 | | Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief Executive Officer. | 32.2 | | Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Financial Officer. | 32.3 | | Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Accounting Officer. | 101 | | Interactive Data Files. |
EXXON MOBIL CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | EXXON MOBIL CORPORATION | Date: AugustMay 2, 20182019 | By: | /s/ DAVID S. ROSENTHAL | | | David S. Rosenthal | | | Vice President, Controller and | | | Principal Accounting Officer | | | |
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