UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended JuneSeptember 30, 2010

or

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number 1-2256

EXXON MOBIL CORPORATION

(Exact name of registrant as specified in its charter)

 

NEW JERSEY 13-5409005

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

5959 Las Colinas Boulevard, Irving, Texas 75039-2298
(Address of principal executive offices) (Zip Code)

(972) 444-1000

(Registrant’s telephone number, including area code)

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

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

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

 

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

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

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

 

Class

  Outstanding as of JuneSeptember 30, 2010
Common stock, without par value  5,091,804,2655,042,556,546

 

 

 


EXXON MOBIL CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNESEPTEMBER 30, 2010

TABLE OF CONTENTS

 

      Page
Number
PART I. FINANCIAL INFORMATION  

Item 1.

  Financial Statements  

Condensed Consolidated Statement of Income
Three and sixnine months ended JuneSeptember 30, 2010 and 2009

  3

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

  4

Condensed Consolidated Statement of Cash Flows
SixNine months ended JuneSeptember 30, 2010 and 2009

  5

Condensed Consolidated Statement of Changes in Equity
SixNine months ended JuneSeptember 30, 2010 and 2009

  6

Notes to Condensed Consolidated Financial Statements

  7

Item 2.

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

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk  31

Item 4.

  Controls and Procedures  31
PART II. OTHER INFORMATION  

Item 1.

  Legal Proceedings  31

Item 1A.

  Risk Factors  32

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds  3233

Item 6.

  Exhibits  3334

Signature

  3435

Index to Exhibits

  3536

 

-2-


PART I. FINANCIAL INFORMATION

 

Item 1.Financial Statements

EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(millions of dollars)

 

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

REVENUES AND OTHER INCOME

               

Sales and other operating revenue(1)

  $89,693  $72,167   $176,730  $134,295  $92,353    $80,090    $269,083    $214,385  

Income from equity affiliates

   2,244   1,583    4,781   3,053   2,443     1,675     7,224     4,728  

Other income

   549   707    1,226   1,137   502     495     1,728     1,632  
                            

Total revenues and other income

   92,486   74,457    182,737   138,485   95,298     82,260     278,035     220,745  
                            

COSTS AND OTHER DEDUCTIONS

               

Crude oil and product purchases

   48,469   36,903    95,254   64,697   48,875     41,689     144,129     106,386  

Production and manufacturing expenses

   8,376   8,029    16,811   16,008   8,982     8,097     25,793     24,105  

Selling, general and administrative expenses

   3,607   3,519    7,121   6,967   3,707     3,887     10,828     10,854  

Depreciation and depletion

   3,366   3,004    6,646   5,797   3,844     2,927     10,490     8,724  

Exploration expenses, including dry holes

   407   490    1,093   841   500     495     1,593     1,336  

Interest expense

   40   343    95   450   54     62     149     512  

Sales-based taxes(1)

   6,946   6,216    13,761   12,122   7,172     6,805     20,933     18,927  

Other taxes and duties

   8,569   8,436    17,182   16,236   9,306     9,094     26,488     25,330  
                            

Total costs and other deductions

   79,780   66,940    157,963   123,118   82,440     73,056     240,403     196,174  
                            

Income before income taxes

   12,706   7,517    24,774   15,367   12,858     9,204     37,632     24,571  

Income taxes

   4,960   3,571    10,453   6,719   5,297     4,333     15,750     11,052  
                            

Net income including noncontrolling interests

   7,746   3,946    14,321   8,648   7,561     4,871     21,882     13,519  

Net income/(loss) attributable to noncontrolling interests

   186   (4  461   148

Net income attributable to noncontrolling interests

   211     141     672     289  
                            

Net income attributable to ExxonMobil

  $7,560  $3,950   $13,860  $8,500  $7,350    $4,730    $21,210    $13,230  
                            

Earnings per common share (dollars)

  $1.61  $0.82   $2.94  $1.74  $1.44    $0.98    $4.38    $2.72  

Earnings per common share - assuming dilution (dollars)

  $1.60  $0.81   $2.93  $1.73  $1.44    $0.98    $4.37    $2.71  

Dividends per common share (dollars)

  $0.44  $0.42   $0.86  $0.82  $0.44    $0.42    $1.30    $1.24  

       

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

  $6,946  $6,216   $13,761  $12,122

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

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

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-3-


EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(millions of dollars)

 

  June 30,
2010
 Dec. 31,
2009
   Sept. 30,
2010
 Dec. 31,
2009
 

ASSETS

      

Current assets

      

Cash and cash equivalents

  $13,252   $10,693    $12,244   $10,693  

Marketable securities

   15    169     15    169  

Notes and accounts receivable - net

   29,206    27,645     30,244    27,645  

Inventories

      

Crude oil, products and merchandise

   10,439    8,718     11,154    8,718  

Materials and supplies

   3,000    2,835     3,148    2,835  

Other current assets

   6,304    5,175     5,828    5,175  
              

Total current assets

   62,216    55,235     62,633    55,235  

Investments, advances and long-term receivables

   32,642    31,665     33,173    31,665  

Property, plant and equipment - net

   188,069    139,116     195,440    139,116  

Other assets, including intangibles, net

   8,141    7,307     8,748    7,307  
              

Total assets

  $291,068   $233,323    $299,994   $233,323  
              

LIABILITIES

      

Current liabilities

      

Notes and loans payable

  $2,946   $2,476    $3,046   $2,476  

Accounts payable and accrued liabilities

   45,454    41,275     48,251    41,275  

Income taxes payable

   9,421    8,310     10,443    8,310  
              

Total current liabilities

   57,821    52,061     61,740    52,061  

Long-term debt

   17,486    7,129     15,248    7,129  

Postretirement benefits reserves

   17,143    17,942     18,012    17,942  

Deferred income tax liabilities

   34,283    23,148     35,304    23,148  

Other long-term obligations

   18,968    17,651     19,090    17,651  
              

Total liabilities

   145,701    117,931     149,394    117,931  
              

Commitments and contingencies (note 3)

      

EQUITY

      

Common stock, without par value:

      

Authorized: 9,000 million shares

      

Issued: 8,019 million shares

   9,002    5,503     9,341    5,503  

Earnings reinvested

   286,745    276,937     291,861    276,937  

Accumulated other comprehensive income

      

Cumulative foreign exchange translation adjustment

   2,051    4,402     4,476    4,402  

Postretirement benefits reserves adjustment

   (8,886  (9,863   (8,968  (9,863

Unrealized gain/(loss) on cash flow hedges

   80    0     153    0  

Common stock held in treasury:

      

2,927 million shares at June 30, 2010

   (148,820 

2,976 million shares at September 30, 2010

   (151,832 

3,292 million shares at December 31, 2009

    (166,410    (166,410
              

ExxonMobil share of equity

   140,172    110,569     145,031    110,569  

Noncontrolling interests

   5,195    4,823     5,569    4,823  
              

Total equity

   145,367    115,392     150,600    115,392  
              

Total liabilities and equity

  $291,068   $233,323    $299,994   $233,323  
              

The number of shares of common stock issued and outstanding at JuneSeptember 30, 2010 and December 31, 2009 were 5,091,804,2655,042,556,546 and 4,726,922,580, respectively.

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-4-


EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(millions of dollars)

 

  Six Months Ended
June 30,
 
    Nine Months Ended
September  30,
 
  2010 2009   2010 2009 

CASH FLOWS FROM OPERATING ACTIVITIES

      

Net income including noncontrolling interests

  $14,321   $8,648    $21,882   $13,519  

Depreciation and depletion

   6,646    5,797     10,490    8,724  

Changes in operational working capital, excluding cash and debt

   2,068    (992   3,722    (852

All other items - net

   (754  (2,346   (736  (1,457
              

Net cash provided by operating activities

   22,281    11,107     35,358    19,934  
              

CASH FLOWS FROM INVESTING ACTIVITIES

      

Additions to property, plant and equipment

   (11,400  (10,238   (19,201  (15,728

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

   852    911     1,607    1,083  

Other investing activities - net

   303    (386   470    (1,352
              

Net cash used in investing activities

   (10,245  (9,713   (17,124  (15,997
              

CASH FLOWS FROM FINANCING ACTIVITIES

      

Additions to long-term debt

   33    145     374    192  

Reductions in long-term debt

   (16  (20   (2,587  (27

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

   (697  (350   (729  (202

Cash dividends to ExxonMobil shareholders

   (4,052  (4,020   (6,286  (6,031

Cash dividends to noncontrolling interests

   (139  (133   (244  (238

Changes in noncontrolling interests

   (2  (124   (3  (126

Tax benefits related to stock-based awards

   28    55     47    79  

Common stock acquired

   (4,063  (13,098   (7,335  (17,331

Common stock sold

   111    185     269    296  
              

Net cash used in financing activities

   (8,797  (17,360   (16,494  (23,388
              

Effects of exchange rate changes on cash

   (680  105     (189  486  
              

Increase/(decrease) in cash and cash equivalents

   2,559    (15,861   1,551    (18,965

Cash and cash equivalents at beginning of period

   10,693    31,437     10,693    31,437  
              

Cash and cash equivalents at end of period

  $13,252   $15,576    $12,244   $12,472  
              

SUPPLEMENTAL DISCLOSURES

      

Income taxes paid

  $9,487   $8,540    $13,950   $12,142  

Cash interest paid

  $294   $195    $460   $723  

NON-CASH TRANSACTIONS

      

The Corporation acquired all the outstanding equity of XTO Energy Inc. in an all-stock transaction valued at $24,659 million in 2010 (see note 9)10).

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-5-


EXXON MOBIL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(millions of dollars)

 

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

Balance as of December 31, 2008

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

Amortization of stock-based awards

   364       364     364     521       521     521  

Tax benefits related to stock- based awards

   12       12     12  

Tax benefits related to stock-based awards

   61       61     61  

Other

   (430     (430   (430   (451     (451   (451

Net income for the period

    8,500      8,500    148    8,648      13,230      13,230    289    13,519  

Dividends - common shares

    (4,020    (4,020  (133  (4,153    (6,031    (6,031  (238  (6,269

Foreign exchange translation adjustment

     1,530     1,530    94    1,624       3,195     3,195    361    3,556  

Postretirement benefits reserves adjustment

     (530   (530  (4  (534     (652   (652  (38  (690

Amortization of postretirement benefits reserves adjustment included in periodic benefit costs

     682     682    22    704       1,008     1,008    34    1,042  

Acquisitions at cost

      (13,098  (13,098  (124  (13,222      (17,331  (17,331  (126  (17,457

Dispositions

      617    617     617        750    750     750  
                                            

Balance as of June 30, 2009

  $5,260   $270,160   $(8,249 $(160,579 $106,592   $4,561   $111,153  

Balance as of September 30, 2009

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

Balance as of December 31, 2009

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

Amortization of stock-based awards

   365       365     365     572       572     572  

Tax benefits related to stock- based awards

   10       10     10  

Tax benefits related to stock-based awards

   240       240     240  

Other

   (396     (396  12    (384   (494     (494  12    (482

Net income for the period

    13,860      13,860    461    14,321      21,210      21,210    672    21,882  

Dividends - common shares

    (4,052    (4,052  (139  (4,191    (6,286    (6,286  (244  (6,530

Foreign exchange translation adjustment

     (2,351   (2,351  (13  (2,364     74     74    267    341  

Postretirement benefits reserves adjustment

     363     363    27    390       (6   (6  3    (3

Amortization of postretirement benefits reserves adjustment included in periodic benefit costs

     614     614    26    640       901     901    39    940  

Change in fair value of cash flow hedges

     80     80     80       195     195     195  

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

     (42   (42   (42

Acquisitions at cost

      (4,063  (4,063  (2  (4,065      (7,335  (7,335  (3  (7,338

Issued for XTO merger

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

Other dispositions

      514    514     514        774    774     774  
                                            

Balance as of June 30, 2010

  $9,002   $286,745   $(6,755 $(148,820 $140,172   $5,195   $145,367  

Balance as of September 30, 2010

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

Common Stock Share Activity

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

Balance as of December 31

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

Acquisitions

    (61  (61    (183  (183    (115  (115    (244  (244

Issued for XTO merger

    416    416          416    416      

Other dispositions

    10    10      13    13      15    15      15    15  
                                        

Balance as of June 30

   8,019    (2,927  5,092     8,019    (3,213  4,806  

Balance as of September 30

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

The information in the Notes to Condensed Consolidated Financial Statements

is an integral part of these statements.

 

-6-


EXXON MOBIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

Basis of Financial Statement Preparation. These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation’s 2009 Annual Report on Form 10-K. In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The Corporation’s exploration and production activities are accounted for under the “successful efforts” method.

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

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

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

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

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

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

 

2.Accounting Changes

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

 

-7-


3.Litigation and Other Contingencies

Litigation

A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a materially adverse effect upon the Corporation’s operations or financial condition.

Other Contingencies

 

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

Total guarantees

  $5,650  $3,036  $8,686
   As of September 30, 2010 
   Equity
Company
Obligations
   Other
Third Party
Obligations
   Total 
   (millions of dollars) 

Total guarantees

  $ 5,591    $3,146    $8,737  

The Corporation and certain of its consolidated subsidiaries were contingently liable at JuneSeptember 30, 2010, for $8,686$8,737 million, primarily relating to guarantees for notes, loans and performance under contracts. Included in this amount were guarantees by consolidated affiliates of $5,650$5,591 million, representing ExxonMobil’s share of obligations of certain equity companies. These guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. The Corporation’s outstanding unconditional purchase obligations at JuneSeptember 30, 2010, were similar to those at the prior year-end period. Unconditional purchase obligations as defined by accounting standards are those long-term commitments that are noncancelable or cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services.

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

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

 

-8-


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

 

4.Comprehensive Income

 

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

Net income including noncontrolling interests

  $7,746   $3,946   $14,321   $8,648    $7,561   $4,871   $21,882   $13,519  

Other comprehensive income (net of income taxes)

          

Foreign exchange translation adjustment

   (1,847  3,035    (2,364  1,624     2,705    1,932    341    3,556  

Postretirement benefits reserves adjustment (excluding amortization)

   178    (492  390    (534   (393  (156  (3  (690

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

   312    354    640    704     300    338    940    1,042  

Change in fair value of cash flow hedges

   80    0    80    0     115    0    195    0  

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

   (42  0    (42  0  
                          

Comprehensive income including noncontrolling interests

   6,469    6,843    13,067    10,442     10,246    6,985    23,313    17,427  

Comprehensive income attributable to noncontrolling interests

   127    242    501    260     480    386    981    646  
                          

Comprehensive income attributable to ExxonMobil

  $6,342   $6,601   $12,566   $10,182    $9,766   $6,599   $22,332   $16,781  
                          

 

5.Earnings Per Share

 

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

EARNINGS PER COMMON SHARE

                

Net income attributable to ExxonMobil (millions of dollars)

  $7,560  $3,950  $13,860  $8,500  $7,350    $4,730    $21,210    $13,230  

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

   4,716   4,851   4,720   4,896   5,076     4,784     4,838     4,859  

Earnings per common share (dollars)

  $1.61  $0.82  $2.94  $1.74  $1.44    $0.98    $4.38    $2.72  

EARNINGS PER COMMON SHARE - ASSUMING DILUTION

                

Net income attributable to ExxonMobil (millions of dollars)

  $7,560  $3,950  $13,860  $8,500  $7,350    $4,730    $21,210    $13,230  

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

   4,716   4,851   4,720   4,896   5,076     4,784     4,838     4,859  

Effect of employee stock-based awards

   13   20   13   20   13     19     13     19  
                            

Weighted average number of common shares outstanding - assuming dilution

   4,729   4,871   4,733   4,916   5,089     4,803     4,851     4,878  
                            

Earnings per common share - assuming dilution (dollars)

  $1.60  $0.81  $2.93  $1.73  $1.44    $0.98    $4.37    $2.71  

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

 

-9-


6.Pension and Other Postretirement Benefits

 

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

Pension Benefits - U.S.

          

Components of net benefit cost

          

Service cost

  $114   $106   $224   $209    $125   $116   $349   $325  

Interest cost

   200    202    399    404     199    202    598    606  

Expected return on plan assets

   (182  (164  (363  (328   (182  (165  (545  (493

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

   133    174    264    347     132    174    396    521  

Net pension enhancement and curtailment/settlement cost

   126    121    253    242     127    122    380    364  
                          

Net benefit cost

  $391   $439   $777   $874    $401   $449   $1,178   $1,323  
                          

Pension Benefits - Non-U.S.

          

Components of net benefit cost

          

Service cost

  $113   $100   $236   $203    $112   $111   $348   $314  

Interest cost

   283    275    579    536     288    287    867    823  

Expected return on plan assets

   (242  (216  (494  (421   (247  (227  (741  (648

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

   160    177    325    344     137    184    462    528  

Net pension enhancement and curtailment/settlement cost

   0    0    1    0     3    0    4    0  
                          

Net benefit cost

  $314   $336   $647   $662    $293   $355   $940   $1,017  
                          

Other Postretirement Benefits

          

Components of net benefit cost

          

Service cost

  $28   $23   $52   $50    $26   $22   $78   $72  

Interest cost

   108    104    211    214     93    98    304    312  

Expected return on plan assets

   (11  (2  (20  (18   (9  (9  (29  (27

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

   46    58    108    129     46    59    154    188  
                          

Net benefit cost

  $171   $183   $351   $375    $156   $170   $507   $545  
                          

 

7.Financial and Derivative Instruments

Financial Instruments

The fair value of financial instruments is determined by reference to observable market data and other valuation techniques as appropriate. The only category of financial instruments where the difference between fair value and recorded book value is of significance is long-term debt. The estimated fair value of total long-term debt, including capitalized lease obligations, was $18.1$16.1 billion and $7.7 billion, at JuneSeptember 30, 2010 and December 31, 2009, respectively, as compared to recorded book values of $17.5$15.2 billion and $7.1 billion at JuneSeptember 30, 2010 and December 31, 2009, respectively.

Derivative Instruments

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

 

-10-


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

The estimated fair value of derivative instruments outstanding is summarized below. Derivative instruments of $995$721 million acquired as a result of the XTO merger are included in JuneSeptember 30, 2010, amounts and once the current positions settle, these programs will be discontinued.

 

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

Other current assets

  $49  $30   $1   $20  $949  $0  $999  $50    $83   $30   $1   $20    $708    $0    $792    $50  

Other assets

   4   0    0    0   74   0   78   0     1    0    0    0     52     0     53     0  
                                                      

Total assets

   53   30    1    20   1,023   0   1,077   50     84    30    1    20     760     0     845     50  
                                                      

Accounts payable and accrued liabilities

   24   54    15    1   32   0   71   55     89    54    8    1     39     0     136     55  

Other long-term obligations

   2   0    0    0   3   0   5   0     2    0    0    0     1     0     3     0  
                                                      

Total liabilities

   26   54    15    1   35   0   76   55     91    54    8    1     40     0     139     55  
                                                      

Total net asset/(liability)

  $27  $(24 $(14 $19  $988  $0  $1,001  $(5  $(7 $(24 $(7 $19    $720    $0    $706    $(5
                                                      

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

 

  June 30, 2010 December 31, 2009   September 30, 2010 December 31, 2009 
  Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
  Significant Other
Observable Inputs

(Level 2)
 Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
 Significant Other
Observable Inputs

(Level 2)
   Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
 Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
 Significant Other
Observable Inputs
(Level 2)
 
  (millions of dollars)   (millions of dollars) 

Commodity derivative instruments

  $1  $1,015   $(23 $(2  $1    $712   $(23 $(2

Foreign currency exchange instruments

  $0  $(15 $0   $20    $0    $(7 $0   $20  

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

For the three months and six months ended June 30, 2010, the

-11-


The before tax earnings impact of the Corporation’sgain or (loss) related to derivative activity, net of the fair value change of physical commitments associated with fair value hedges, was a gain of $24 million and $33 million, respectively, versus a loss of $87 million and $88 millioninstruments for the three months and sixnine months ended JuneSeptember 30, 2010 and 2009 respectively.is summarized below. The ineffective portion of derivatives designated as hedges is recorded either in “Sales and other operating revenue” or “Crude oil and product purchases” and the amounts were de minimis.

 

-11-


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

Not Designated as a Hedge:

     

Commodity derivative instruments

     

Sales and other operating revenue

  $(7 $(1 $(3 $4  

Crude oil and product purchases

   (11  27    16    (70

Foreign currency instruments

     

Crude oil and product purchases

   0    (1  0    (1

Fair Value Hedge:

     

Commodity derivative instruments

     

Sales and other operating revenue

   2    (1  3    (64

Offsetting physical firm commitment

   (2  1    (2  64  

Foreign currency instruments

     

Crude oil and product purchases

   (40  (48  (64  (30

Offsetting physical firm commitment

   48    52    73    39  

Cash Flow Hedge:

     

Commodity derivative instruments

     

Sales and other operating revenue

   80    0    80    0  
                 

Total income statement gain/(loss)

  $70   $29   $103   $(58
                 

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

 

Product

  

Production Period

  Volume  Weighted Average
NYMEX Price
  

Production Period

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

Natural Gas

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

Crude Oil

  July - December 2010  70  $95.70  October - December 2010  70  $95.70

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

 

-12-


8.Disclosures about Segments and Related Information

 

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

EARNINGS AFTER INCOME TAX

          

Upstream

          

United States

  $865   $813   $1,956   $1,173    $999   $709   $2,955   $1,882  

Non-U.S.

   4,471    2,999    9,194    6,142     4,468    3,303    13,662    9,445  

Downstream

          

United States

   440    (15  380    337     164    (203  544    134  

Non-U.S.

   780    527    877    1,308     996    528    1,873    1,836  

Chemical

          

United States

   685    79    1,224    162     676    315    1,900    477  

Non-U.S.

   683    288    1,393    555     553    561    1,946    1,116  

All other

   (364  (741  (1,164  (1,177   (506  (483  (1,670  (1,660
                          

Corporate total

  $7,560   $3,950   $13,860   $8,500    $7,350   $4,730   $21,210   $13,230  
                          

SALES AND OTHER OPERATING REVENUE(1)

          

Upstream

          

United States

  $1,081   $753   $2,347   $1,574    $3,278   $833   $5,625   $2,407  

Non-U.S.

   5,950    5,101    12,258    10,277     5,923    4,987    18,181    15,264  

Downstream

          

United States

   23,700    18,853    45,513    34,046     22,787    20,568    68,300    54,614  

Non-U.S.

   49,883    41,238    98,740    77,223     51,850    46,112    150,590    123,335  

Chemical

          

United States

   3,425    2,317    6,822    4,165     3,352    2,857    10,174    7,022  

Non-U.S.

   5,649    3,897    11,042    7,000     5,160    4,726    16,202    11,726  

All other

   5    8    8    10     3    7    11    17  
                          

Corporate total

  $89,693   $72,167   $176,730   $134,295    $92,353   $80,090   $269,083   $214,385  
                          

(1) Includes sales-based taxes

     

(1)Includes sales-based taxes

     

INTERSEGMENT REVENUE

          

Upstream

          

United States

  $1,944   $1,615   $4,088   $2,819    $1,716   $1,752   $5,804   $4,571  

Non-U.S.

   9,314    7,250    18,866    13,826     9,270    9,446    28,136    23,272  

Downstream

          

United States

   3,650    2,568    7,034    4,237     3,213    2,930    10,247    7,167  

Non-U.S.

   12,254    9,525    25,211    16,404     12,624    10,923    37,835    27,327  

Chemical

          

United States

   2,614    1,834    4,922    3,055     2,380    1,980    7,302    5,035  

Non-U.S.

   2,117    1,647    4,154    2,931     2,020    1,941    6,174    4,872  

All other

   68    72    138    143     78    70    216    213  

9.Accounting for Suspended Exploratory Well Costs

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

 

-13-


9.10.Acquisition of XTO Energy Inc.

Description of the Transaction

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

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

The components of the consideration transferred follow:

 

   (millions of dollars) 

Consideration attributable to stock issued (1) (2)

  $24,480  

Consideration attributable to converted stock options (2)

   179  
     

Total consideration transferred

  $24,659  
     

 

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

 

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

Recording of Assets Acquired and Liabilities Assumed

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

The following table summarizes the assets acquired and liabilities assumed:

 

  (millions of dollars)   (millions of dollars) 

Cash and cash equivalents

  $47    $47  

Notes and accounts receivable

   925     925  

Inventories

   170     170  

Other current assets (1)

   911     911  

Investments, advances and long-term receivables

   52     52  

Property, plant and equipment (2)

   47,300     47,300  

Identifiable intangible assets (3)

   493     493  

Goodwill (4)

   39     39  

Other assets (1)

   75     75  
        

Total assets acquired

  $50,012    $50,012  
        

Notes and loans payable (5)

  $1,026    $1,026  

Accounts payable and accrued liabilities (1) (6)

   1,788     1,788  

Income taxes payable

   (199   (199

Long-term debt (5)

   10,574     10,574  

Postretirement benefits reserves

   65     65  

Deferred income tax liabilities (6)

   11,204     11,204  

Other long-term obligations (1)

   895     895  
        

Total liabilities assumed

  $25,353    $25,353  
        

Net assets acquired

  $24,659    $24,659  
        

 

-14-


 

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

 

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

 

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

 

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

 

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

 

   (millions of dollars) 

Bank Debt:

  

Commercial Paper

  $175  

Term loan due April 1, 2013, 0.775%

   500  

Term loan due February 5, 2013, 0.697%

   100  

Senior Notes:

  

5.000% due 2010 includes premium of $1

   251  

7.500% due 2012 includes premium of $39

   389  

5.900% due 2012 includes premium of $51

   601  

6.250% due 2013 includes premium of $51

   451  

4.625% due 2013 includes premium of $31

   431  

5.750% due 2013 includes premium of $66

   566  

4.900% due 2014 includes premium of $45

   545  

5.000% due 2015 includes premium of $40

   388  

5.300% due 2015 includes premium of $53

   453  

5.650% due 2016 includes premium of $58

   458  

6.250% due 2017 includes premium of $138

   874  

5.500% due 2018 includes premium of $108

   880  

6.500% due 2018 includes premium of $209

   1,209  

6.100% due 2036 includes premium of $101

   692  

6.750% due 2037 includes premium of $379

   1,778  

6.375% due 2038 includes premium of $155

   859  
     

Total Debt

  $11,600  

Less: Current portion

   1,026  
     

Long-term Debt

  $10,574  
     

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

During the quarter ended June 30, 2010, the commercial paper was repaid. FollowingDuring the endthird quarter of the second quarter,2010, XTO term loans of $600 million were repaid, the XTO 5% senior note due in 2010 matured, and XTO fixed-rate bonds with a book value of $2.5$2.6 billion were repurchased via tender offers.

 

-15-


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

 

   (millions of dollars) 

Property, plant and equipment

  $12,238  

Other

   367  
     

Total deferred tax liabilities

  $12,605  
     

Asset retirement obligations

  $(324

Other

   (769
     

Total deferred tax assets

  $(1,093
     

Net deferred tax liabilities

  $11,512  
     

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

 

   (millions of dollars) 

Accounts payable and accrued liabilities

  $308  

Deferred income tax liabilities

   11,204  
     

Net deferred tax liabilities

  $11,512  
     

ActualXTO Results and Pro Forma Impact of Merger

The following table presents revenues and earnings for XTO included in the Corporation’s condensed consolidated statement of income for the three months and six months ended June 30, 2010, were de minimis.periods presented:

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

Revenues

  $2,231    $2,302  

Upstream earnings

  $153    $139  

Transaction-related costs were expensed as incurred. The Corporation recognized less than $15$17 million in transaction costs related to the merger in the sixnine months ended JuneSeptember 30, 2010.

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

 

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

Revenues

  $91,196  $73,608  $179,949  $137,058  $95,298    $83,786    $281,180    $225,040  

Net income attributable to ExxonMobil

  $7,372  $3,757  $13,672  $8,118  $7,350    $4,864    $21,418    $13,410  

Earnings per common share (dollars)

  $1.45  $0.72  $2.67  $1.53  $1.44    $0.93    $4.19    $2.54  

Earnings per common share – assuming dilution (dollars)

  $1.44  $0.71  $2.66  $1.52  $1.44    $0.93    $4.18    $2.53  

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

-16-


the merger been completed on January 1, 2010, or on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company. The unaudited pro forma consolidated results reflect pro forma adjustments for the elimination of deferred gains and

-16-


losses recognized in earnings for derivatives outstanding at the beginning of the year presented, additional depreciation expense related to the fair value adjustment to property, plant and equipment acquired, additional amortization expense related to the fair value of identifiable intangible assets acquired, capitalization of interest expense and applicable income tax impacts.

Incentive Program

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

Restricted Stock

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

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

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

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

 

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

Awards granted under 2003

            

Incentive Program

  1,423  $85  $59.67   1,423    $85    $59.67  

Converted XTO awards

  2,783  $165  $59.13   2,783    $165    $59.13  

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

 

-17-


Performance Stock

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

 

Performance Stock

Awards

  

Vesting Price

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

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

 

Performance stock  Shares  

Fair Value
at Date of

Grant

  

Weighted Average
Grant-Date Fair
Value per Share

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

Converted XTO awards

  157  $  5  $  30.64   157    $  5  $  30.64

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

Stock Options

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

 

Unvested Stock Options

  

Vesting Term/Price

  

Vesting Term/Price

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

 

-18-


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

 

Stock Options  Shares  

Fair Value

at Date of

Grant

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

Converted XTO awards

  12,393  $  182  $  55.15  3.6 years   12,393    $  182  $  55.15    3.6 years

Exercisable

  11,500  $  176  $  53.36  3.4 years   11,500    $  176  $  53.36    3.4 years

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

Estimated Fair Value of Grants

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

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

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

Fair values were determined using the following assumptions:

 

Weighted average expected term (years)

  2.5

Range of risk-free interest rates

  0.1% - 2.6%

Weighted average risk-free interest rates

  0.9%

Dividend yield

  3.0%

Weighted average volatility

  28.5%

Range of volatility

  22.5% - 33.6%

 

-19-


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

Exxon Mobil Corporation has fully and unconditionally guaranteed the deferred interest debentures due 2012 ($2,2672,328 million long-term at JuneSeptember 30, 2010) and the debt securities due 2010-2011 ($13 million long-term and $13 million short-term) of SeaRiver Maritime Financial Holdings, Inc., a 100 percent owned subsidiary of Exxon Mobil Corporation.

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

 

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

Condensed consolidated statement of income for three months ended June 30, 2010

  

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

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

  

Revenues and other income

                 

Sales and other operating revenue, including sales-based taxes

  $3,854    $—      $85,839    $—      $89,693    $3,835   $—     $88,518    $—     $92,353  

Income from equity affiliates

   7,375     —       2,215     (7,346   2,244     6,858    (3  2,422     (6,834  2,443  

Other income

   235     —       314     —       549     106    —      396     —      502  

Intercompany revenue

   9,600     1     80,955     (90,556   —       9,244    1    81,258     (90,503  —    
                                     

Total revenues and other income

   21,064     1     169,323     (97,902   92,486     20,043    (2  172,594     (97,337  95,298  
                                     

Costs and other deductions

                 

Crude oil and product purchases

   10,541     —       125,956     (88,028   48,469     9,545    —      127,361     (88,031  48,875  

Production and manufacturing expenses

   1,832     —       7,849     (1,305   8,376     1,972    —      8,229     (1,219  8,982  

Selling, general and administrative expenses

   736     —       3,049     (178   3,607     693    —      3,190     (176  3,707  

Depreciation and depletion

   440     —       2,926     —       3,366     410    —      3,434     —      3,844  

Exploration expenses, including dry holes

   53     —       354     —       407     35    —      465     —      500  

Interest expense

   64     62     975     (1,061   40     67    62    1,020     (1,095  54  

Sales-based taxes

   —       —       6,946     —       6,946     —      —      7,172     —      7,172  

Other taxes and duties

   7     —       8,562     —       8,569     8    —      9,298     —      9,306  
                                     

Total costs and other deductions

   13,673     62     156,617     (90,572   79,780     12,730    62    160,169     (90,521  82,440  
                                     

Income before income taxes

   7,391     (61   12,706     (7,330   12,706     7,313    (64  12,425     (6,816  12,858  

Income taxes

   (169   (22   5,151     —       4,960     (37  (23  5,357     —      5,297  
                                     

Net income including noncontrolling interests

   7,560     (39   7,555     (7,330   7,746     7,350    (41  7,068     (6,816  7,561  

Net income attributable to noncontrolling interests

   —       —       186     —       186     —      —      211     —      211  
                                     

Net income attributable to ExxonMobil

  $7,560    $(39  $7,369    $(7,330  $7,560    $7,350   $(41 $6,857    $(6,816 $7,350  
                                     

 

-20-


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

Condensed consolidated statement of income for three months ended June 30, 2009

  

Condensed consolidated statement of income for three months ended September 30, 2009

Condensed consolidated statement of income for three months ended September 30, 2009

  

Revenues and other income

                 

Sales and other operating revenue,

including sales-based taxes

  $2,633    $—      $69,534    $—      $72,167    $3,207   $—     $76,883    $—     $80,090  

Income from equity affiliates

   4,271     (3   1,560     (4,245   1,583     5,238    1    1,648     (5,212  1,675  

Other income

   440     —       267     —       707     170    —      325     —      495  

Intercompany revenue

   7,441     1     64,665     (72,107   —       8,067    1    74,420     (82,488  —    
                                     

Total revenues and other income

   14,785     (2   136,026     (76,352   74,457     16,682    2    153,276     (87,700  82,260  
                                     

Costs and other deductions

                 

Crude oil and product purchases

   7,511     —       98,426     (69,034   36,903     8,844    —      112,285     (79,440  41,689  

Production and manufacturing expenses

   1,913     —       7,458     (1,342   8,029     1,924    —      7,681     (1,508  8,097  

Selling, general and administrative expenses

   560     —       3,128     (169   3,519     783    —      3,289     (185  3,887  

Depreciation and depletion

   361     —       2,643     —       3,004     405    —      2,522     —      2,927  

Exploration expenses, including dry holes

   77     —       413     —       490     59    —      436     —      495  

Interest expense

   597     56     1,272     (1,582   343     174    55    1,208     (1,375  62  

Sales-based taxes

   —       —       6,216     —       6,216     —      —      6,805     —      6,805  

Other taxes and duties

   (43   —       8,479     —       8,436     4    —      9,090     —      9,094  
                                     

Total costs and other deductions

   10,976     56     128,035     (72,127   66,940     12,193    55    143,316     (82,508  73,056  
                                     

Income before income taxes

   3,809     (58   7,991     (4,225   7,517     4,489    (53  9,960     (5,192  9,204  

Income taxes

   (141   (21   3,733     —       3,571     (241  (20  4,594     —      4,333  
                                     

Net income including noncontrolling interests

   3,950     (37   4,258     (4,225   3,946     4,730    (33  5,366     (5,192  4,871  

Net income attributable to noncontrolling interests

   —       —       (4   —       (4   —      —      141     —      141  
                                     

Net income attributable to ExxonMobil

  $3,950    $(37  $4,262    $(4,225  $3,950    $4,730   $(33 $5,225    $(5,192 $4,730  
                                     

Condensed consolidated statement of income for six months ended June 30, 2010

  

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

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

  

Revenues and other income

                 

Sales and other operating revenue, including sales-based taxes

  $7,787    $—      $168,943    $—      $176,730    $11,622   $—     $257,461    $—     $269,083  

Income from equity affiliates

   13,587     —       4,729     (13,535   4,781     20,445    (3  7,151     (20,369  7,224  

Other income

   297     —       929     —       1,226     403    —      1,325     —      1,728  

Intercompany revenue

   19,086     2     161,601     (180,689   —       28,330    3    242,859     (271,192  —    
                                     

Total revenues and other income

   40,757     2     336,202     (194,224   182,737     60,800    —      508,796     (291,561  278,035  
                                     

Costs and other deductions

                 

Crude oil and product purchases

   20,341     —       250,591     (175,678 �� 95,254     29,886    —      377,952     (263,709  144,129  

Production and manufacturing expenses

   3,769     —       15,653     (2,611   16,811     5,741    —      23,882     (3,830  25,793  

Selling, general and administrative expenses

   1,466     —       6,001     (346   7,121     2,159    —      9,191     (522  10,828  

Depreciation and depletion

   858     —       5,788     —       6,646     1,268    —      9,222     —      10,490  

Exploration expenses, including dry holes

   128     —       965     —       1,093     163    —      1,430     —      1,593  

Interest expense

   132     123     1,929     (2,089   95     199    185    2,949     (3,184  149  

Sales-based taxes

   —       —       13,761     —       13,761     —      —      20,933     —      20,933  

Other taxes and duties

   15     —       17,167     —       17,182     23    —      26,465     —      26,488  
                                     

Total costs and other deductions

   26,709     123     311,855     (180,724   157,963     39,439    185    472,024     (271,245  240,403  
                                     

Income before income taxes

   14,048     (121   24,347     (13,500   24,774     21,361    (185  36,772     (20,316  37,632  

Income taxes

   188     (45   10,310     —       10,453     151    (68  15,667     —      15,750  
                                     

Net income including noncontrolling interests

   13,860     (76   14,037     (13,500   14,321     21,210    (117  21,105     (20,316  21,882  

Net income attributable to noncontrolling interests

   —       —       461     —       461     —      —      672     —      672  
                                     

Net income attributable to ExxonMobil

  $13,860    $(76  $13,576    $(13,500  $13,860    $21,210   $(117 $20,433    $(20,316 $21,210  
                                     

 

-21-


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

Condensed consolidated statement of income for six months ended June 30, 2009

  

Revenues and other income

          

Sales and other operating revenue, including sales-based taxes

  $4,800    $—      $129,495    $—      $134,295  

Income from equity affiliates

   9,023     4     3,010     (8,984   3,053  

Other income

   585     —       552     —       1,137  

Intercompany revenue

   13,306     2     117,300     (130,608   —    
                         

Total revenues and other income

   27,714     6     250,357     (139,592   138,485  
                         

Costs and other deductions

          

Crude oil and product purchases

   12,585     —       176,277     (124,165   64,697  

Production and manufacturing expenses

   3,879     —       14,752     (2,623   16,008  

Selling, general and administrative expenses

   1,218     —       6,096     (347   6,967  

Depreciation and depletion

   728     —       5,069     —       5,797  

Exploration expenses, including dry holes

   132     —       709     —       841  

Interest expense

   958     111     2,894     (3,513   450  

Sales-based taxes

   —       —       12,122     —       12,122  

Other taxes and duties

   (34   —       16,270     —       16,236  
                         

Total costs and other deductions

   19,466     111     234,189     (130,648   123,118  
                         

Income before income taxes

   8,248     (105   16,168     (8,944   15,367  

Income taxes

   (252   (41   7,012     —       6,719  
                         

Net income including noncontrolling interests

   8,500     (64   9,156     (8,944   8,648  

Net income attributable to noncontrolling interests

   —       —       148     —       148  
                         

Net income attributable to ExxonMobil

  $8,500    $(64  $9,008    $(8,944  $8,500  
                         

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

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

  

   

Revenues and other income

       

Sales and other operating revenue,
including sales-based taxes

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

Income from equity affiliates

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

Other income

   755    —      877     —      1,632  

Intercompany revenue

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

Total revenues and other income

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

Costs and other deductions

       

Crude oil and product purchases

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

Production and manufacturing expenses

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

Selling, general and administrative expenses

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

Depreciation and depletion

   1,133    —      7,591     —      8,724  

Exploration expenses, including dry holes

   191    —      1,145     —      1,336  

Interest expense

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

Sales-based taxes

   —      —      18,927     —      18,927  

Other taxes and duties

   (30  —      25,360     —      25,330  
                      

Total costs and other deductions

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

Income before income taxes

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

Income taxes

   (493  (61  11,606     —      11,052  
                      

Net income including noncontrolling interests

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

Net income attributable to noncontrolling interests

   —      —      289     —      289  
                      

Net income attributable to ExxonMobil

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

 

-22-


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

Condensed consolidated balance sheet as of June 30, 2010

  

Condensed consolidated balance sheet as of September 30, 2010

Condensed consolidated balance sheet as of September 30, 2010

  

    

Cash and cash equivalents

  $603    $—      $12,649    $—      $13,252    $386    $—      $11,858    $—      $12,244  

Marketable securities

   —       —       15     —       15     —       —       15     —       15  

Notes and accounts receivable - net

   2,608     25     27,389     (816   29,206     3,293     38     28,523     (1,610   30,244  

Inventories

   1,576     —       11,863     —       13,439     1,491     —       12,811     —       14,302  

Other current assets

   427     —       5,877     —       6,304     463     —       5,365     —       5,828  
                                        

Total current assets

   5,214     25     57,793     (816   62,216     5,633     38     58,572     (1,610   62,633  

Property, plant and equipment - net

   18,327     —       169,742     —       188,069     18,346     —       177,094     —       195,440  

Investments and other assets

   231,569     473     454,154     (645,413   40,783     240,901     469     461,178     (660,627   41,921  

Intercompany receivables

   22,621     2,407     444,579     (469,607   —       17,553     2,409     467,724     (487,686   —    
                                        

Total assets

  $277,731    $2,905    $1,126,268    $(1,115,836  $291,068    $282,433    $2,916    $1,164,568    $(1,149,923  $299,994  
                                        

Notes and loan payables

  $6    $13    $2,927    $—      $2,946    $982    $13    $2,051    $—      $3,046  

Accounts payable and accrued liabilities

   2,874     —       42,580     —       45,454     2,988     —       45,263     —       48,251  

Income taxes payable

   —       —       10,237     (816   9,421     —       —       12,053     (1,610   10,443  
                                        

Total current liabilities

   2,880     13     55,744     (816   57,821     3,970     13     59,367     (1,610   61,740  

Long-term debt

   296     2,280     14,910     —       17,486     296     2,341     12,611     —       15,248  

Postretirement benefits reserves

   8,961     —       8,182     —       17,143     9,131     —       8,881     —       18,012  

Deferred income tax liabilities

   869     131     33,283     —       34,283     960     122     34,222     —       35,304  

Other long-term obligations

   5,163     —       13,805     —       18,968     4,517     —       14,573     —       19,090  

Intercompany payables

   119,390     382     349,835     (469,607   —       118,528     382     368,776     (487,686   —    
                                        

Total liabilities

   137,559     2,806     475,759     (470,423   145,701     137,402     2,858     498,430     (489,296   149,394  
                                        

Earnings reinvested

   286,745     (770   117,827     (117,057   286,745     291,861     (811   124,603     (123,792   291,861  

Other ExxonMobil equity

   (146,573   869     527,487     (528,356   (146,573   (146,830   869     535,966     (536,835   (146,830
                                        

ExxonMobil share of equity

   140,172     99     645,314     (645,413   140,172     145,031     58     660,569     (660,627   145,031  

Noncontrolling interests

   —       —       5,195     —       5,195     —       —       5,569     —       5,569  
                                        

Total equity

   140,172     99     650,509     (645,413   145,367     145,031     58     666,138     (660,627   150,600  
                                        

Total liabilities and equity

  $277,731    $2,905    $1,126,268    $(1,115,836  $291,068    $282,433    $2,916    $1,164,568    $(1,149,923  $299,994  
                                        

Condensed consolidated balance sheet as of December 31, 2009

Condensed consolidated balance sheet as of December 31, 2009

  

Condensed consolidated balance sheet as of December 31, 2009

  

    

Cash and cash equivalents

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

Marketable securities

   —       —       169     —       169     —       —       169     —       169  

Notes and accounts receivable - net

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

Inventories

   1,202     —       10,351     —       11,553     1,202     —       10,351     —       11,553  

Other current assets

   313     —       4,862     —       5,175     313     —       4,862     —       5,175  
                                        

Total current assets

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

Property, plant and equipment - net

   18,015     —       121,101     —       139,116     18,015     —       121,101     —       139,116  

Investments and other assets

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

Intercompany receivables

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

Total assets

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

Notes and loan payables

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

Accounts payable and accrued liabilities

   2,779     —       38,496     —       41,275     2,779     —       38,496     —       41,275  

Income taxes payable

   —       2     8,571     (263   8,310     —       2     8,571��    (263   8,310  
                                        

Total current liabilities

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

Long-term debt

   279     2,157     4,693     —       7,129     279     2,157     4,693     —       7,129  

Postretirement benefits reserves

   8,673     —       9,269     —       17,942     8,673     —       9,269     —       17,942  

Deferred income tax liabilities

   818     151     22,179     —       23,148     818     151     22,179     —       23,148  

Other long-term obligations

   5,286     —       12,365     —       17,651     5,286     —       12,365     —       17,651  

Intercompany payables

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

Total liabilities

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

Earnings reinvested

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

Other ExxonMobil equity

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

ExxonMobil share of equity

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

Noncontrolling interests

   —       —       4,823     —       4,823     —       —       4,823     —       4,823  
                                        

Total equity

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

Total liabilities and equity

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

 

-23-


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

Condensed consolidated statement of cash flows for six months ended June 30, 2010

  

Cash provided by/(used in) operating activities

  $30,671    $1    $(3,039  $(5,352  $22,281  
                         

Cash flows from investing activities

          

Additions to property, plant and equipment

   (1,234   —       (10,166   —       (11,400

Sales of long-term assets

   319     —       533     —       852  

Net intercompany investing

   (21,586   (151   21,383     354     —    

All other investing, net

   —       —       303     —       303  
                         

Net cash provided by/(used in) investing activities

   (22,501   (151   12,053     354     (10,245
                         

Cash flows from financing activities

          

Additions to long-term debt

   —       —       33     —       33  

Reductions in long-term debt

   —       —       (16   —       (16

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

   (40   —       (657   —       (697

Cash dividends

   (4,052   —       (5,352   5,352     (4,052

Net ExxonMobil shares sold/(acquired)

   (3,952   —       —       —       (3,952

Net intercompany financing activity

   —       —       204     (204   —    

All other financing, net

   28     150     (141   (150   (113
                         

Net cash provided by/(used in) financing activities

   (8,016   150     (5,929   4,998     (8,797
                         

Effects of exchange rate changes on cash

   —       —       (680   —       (680
                         

Increase/(decrease) in cash and cash equivalents

  $154    $—      $2,405    $—      $2,559  
                         

Condensed consolidated statement of cash flows for six months ended June 30, 2009

  

Cash provided by/(used in) operating activities

  $(2,130  $1    $13,424    $(188  $11,107  
                         

Cash flows from investing activities

          

Additions to property, plant and equipment

   (1,321   —       (8,917   —       (10,238

Sales of long-term assets

   97     —       814     —       911  

Net intercompany investing

   17,178     (151   (17,349   322     —    

All other investing, net

   —       —       (386   —       (386
                         

Net cash provided by/(used in) investing activities

   15,954     (151   (25,838   322     (9,713
                         

Cash flows from financing activities

          

Additions to long-term debt

   —       —       145     —       145  

Reductions in long-term debt

   —       —       (20   —       (20

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

   3     —       (353   —       (350

Cash dividends

   (4,020   —       (188   188     (4,020

Net ExxonMobil shares sold/(acquired)

   (12,913   —       —       —       (12,913

Net intercompany financing activity

   —       —       172     (172   —    

All other financing, net

   55     150     (257   (150   (202
                         

Net cash provided by/(used in) financing activities

   (16,875   150     (501   (134   (17,360
                         

Effects of exchange rate changes on cash

   —       —       105     —       105  
                         

Increase/(decrease) in cash and cash equivalents

  $(3,051  $—      $(12,810  $—      $(15,861
                         

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

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

  

Cash provided by/(used in) operating activities

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

Cash flows from investing activities

          

Additions to property, plant and
equipment

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

Sales of long-term assets

   528     —       1,079     —       1,607  

Net intercompany investing

   (18,096   (152   17,894     354     —    

All other investing, net

   7     —       463     —       470  
                         

Net cash provided by/(used in) investing activities

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

Cash flows from financing activities

          

Additions to long-term debt

   —       —       374     —       374  

Reductions in long-term debt

   —       —       (2,587   —       (2,587

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

   936     —       (1,665   —       (729

Cash dividends

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

Net ExxonMobil shares sold/(acquired)

   (7,066   —       —       —       (7,066

Net intercompany financing activity

   —       —       204     (204   —    

All other financing, net

   47     150     (247   (150   (200
                         

Net cash provided by/(used in) financing activities

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

Effects of exchange rate changes on cash

   —       —       (189   —       (189
                         

Increase/(decrease) in cash and cash equivalents

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

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

  

Cash provided by/(used in) operating activities

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

Cash flows from investing activities

          

Additions to property, plant and equipment

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

Sales of long-term assets

   191     —       892     —       1,083  

Net intercompany investing

   22,485     (152   (22,646   313     —    

All other investing, net

   —       —       (1,352   —       (1,352
                         

Net cash provided by/(used in) investing activities

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

Cash flows from financing activities

          

Additions to long-term debt

   —       —       192     —       192  

Reductions in long-term debt

   —       —       (27   —       (27

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

   —       —       (202   —       (202

Cash dividends

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

Net ExxonMobil shares sold/(acquired)

   (17,035   —       —       —       (17,035

Net intercompany financing activity

   —       —       163     (163   —    

All other financing, net

   79     150     (364   (150   (285
                         

Net cash provided by/(used in) financing activities

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

Effects of exchange rate changes on cash

   —       —       486     —       486  
                         

Increase/(decrease) in cash and cash equivalents

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

 

-24-


EXXON MOBIL CORPORATION

 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

FUNCTIONAL EARNINGS SUMMARY

 

  Second Quarter First Six Months   Third Quarter First Nine Months 

Earnings (U.S. GAAP)

  2010 2009 2010 2009   2010 2009 2010 2009 
  (millions of dollars)   (millions of dollars) 

Upstream

          

United States

  $865   $813   $1,956   $1,173    $999   $709   $2,955   $1,882  

Non-U.S.

   4,471    2,999    9,194    6,142     4,468    3,303    13,662    9,445  

Downstream

          

United States

   440    (15  380    337     164    (203  544    134  

Non-U.S.

   780    527    877    1,308     996    528    1,873    1,836  

Chemical

          

United States

   685    79    1,224    162     676    315    1,900    477  

Non-U.S.

   683    288    1,393    555     553    561    1,946    1,116  

Corporate and financing

   (364  (741  (1,164  (1,177   (506  (483  (1,670  (1,660
                          

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

  $7,560   $3,950   $13,860   $8,500    $7,350   $4,730   $21,210   $13,230  
                          

Earnings per common share (dollars)

  $1.61   $0.82   $2.94   $1.74    $1.44   $0.98   $4.38   $2.72  

Earnings per common share - assuming dilution (dollars)

  $1.60   $0.81   $2.93   $1.73    $1.44   $0.98   $4.37   $2.71  

Special items included in earnings

          

Corporate and financing
Valdez litigation

  $0   $(140 $0   $(140  $0   $0   $0   $(140

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

REVIEW OF SECONDTHIRD QUARTER 2010 RESULTS

ExxonMobil’s focus on operational excellence continues to deliver strong results. SecondThird quarter earnings were $7.6 billion,$7,350 million, up 9155 percent from secondthird quarter of last year reflectingdue to higher crude oil and natural gas realizations, improved downstreamrefining margins, and strongsolid chemical results. Second quarter 2009 earnings included a special charge of $140 million for interest relatedDespite continuing economic uncertainty, we had strong quarterly results and continued to the Valdez punitive damages award. Earnings for the second quarter of 2010 did not include any special items.advance our robust investment opportunities.

The Corporation’s second quarter 2010 earnings and production volumes included de minimis amounts for the period from June 25 to June 30 resulting from the merger with XTO Energy Inc. which closed on June 25, 2010.

We continued our focus on investing for the future with capitalCapital and exploration spending for the first nine months of $13.42010 was $22.2 billion, year to date, up 918 percent from the first halfnine months of last year.

Over $3The Corporation returned over $5 billion was returned to shareholders in the secondthird quarter through dividends and share purchases to reduce shares outstanding.

 

 

Earnings in the first sixnine months of 2010 of $13,860$21,210 million ($2.934.37 per share) increased $5,360$7,980 million from 2009.

Earnings were up 6360 percent from 2009. Earnings for 2009 included a special charge of $140 million for interest related to the Valdez punitive damages award. Earnings for the first halfnine months of 2010 did not include any special items.

 

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   Second Quarter  First Six Months
   2010  2009  2010  2009
   (millions of dollars)

Upstream earnings

        

United States

  $865  $813  $1,956  $1,173

Non-U.S.

   4,471   2,999   9,194   6,142
                

Total

  $5,336  $3,812  $11,150  $7,315
                

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

Upstream earnings

        

United States

  $999    $709    $2,955    $1,882  

Non-U.S.

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

Total

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

Upstream earnings in the secondthird quarter of 2010 were $5,336$5,467 million, up $1,524$1,455 million from the secondthird quarter of 2009. Higher crude oil and natural gas realizations drove the improvement and increased earnings by $1.6 billion.$1 billion, while higher liquids and gas volumes improved earnings by $270 million.

On an oil-equivalent basis, production increased 8over 20 percent from the secondthird quarter of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up about 1020 percent.

Liquids production totaled 2,3252,421 kbd (thousands of barrels per day), down 21up 86 kbd or nearly 4 percent from the secondthird quarter of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was up 13 percent, as increased production from projects in Qatar and Kazakhstanthe addition of XTO volumes more than offset net field decline.

SecondThird quarter natural gas production was 10,02512,192 mcfd (millions of cubic feet per day), up 1,9844,037 mcfd from 2009, driven by additional U.S. unconventional gas volumes and project ramp-ups in Qatar and higher demand in Europe, partly offset by net field decline.Qatar.

Earnings from U.S. Upstream operations were $865$999 million, $52$290 million higher than the secondthird quarter of 2009. Non-U.S. Upstream earnings were $4,471$4,468 million, up $1,472$1,165 million from last year.

 

 

Upstream earnings infor the first sixnine months of 2010 were $11,150$16,617 million, up $3,835$5,290 million from 2009. Higher netcrude oil and natural gas realizations increased earnings approximately $4$5.1 billion. The favorable impact of higher volumes of $0.4 billion$590 million was partially offset by higher operating costs of $0.3 billion.$340 million.

On an oil-equivalent basis, production for the first six months of 2010 was up 611 percent compared to the same period infirst nine months of 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was up 812 percent.

Liquids production for the first six months of 2010 of 2,3702,387 kbd decreased 41increased 2 kbd compared with 2009. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, liquids production was flatincreased 1 percent compared with 2009, as new volumes from project ramp-ups in Qatar and Kazakhstan were offset by net field decline.

Natural gas production for the first six months of 2010 of 10,85211,304 mcfd increased 1,7442,518 mcfd from 2009, driven by higher volumes from Qatar projects and higher demand in Europe.additional U.S. unconventional gas volumes.

Earnings for the first six months of 2010 from U.S. Upstream operations for 2010 were $1,956$2,955 million, an increase of $783 million. Earnings outside the U.S.$1,073 million from 2009. Non-U.S. earnings were $9,194$13,662 million, up $3,052 million.$4,217 million from 2009.

 

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

Downstream earnings

              

United States

  $440  $(15 $380  $337  $164    $(203 $544    $134  

Non-U.S.

   780   527    877   1,308   996     528    1,873     1,836  
                           

Total

  $1,220  $512   $1,257  $1,645  $1,160    $325   $2,417    $1,970  
                           

SecondThird quarter 2010 Downstream earnings of $1,220$1,160 million were up $708$835 million from secondthe third quarter of 2009. Higher industry refining andmargins, partly offset by lower marketing margins increased earnings by $780$300 million. VolumesVolume and product mix effects increased earnings by $170$150 million while other factors, mainly unfavorableasset sales and favorable foreign exchange impacts, decreasedincreased earnings by $240$390 million. Petroleum product sales of 6,2416,574 kbd were 246273 kbd lowerhigher than last year’s secondthird quarter, mainly reflecting lowerhigher demand.

Earnings from the U.S. Downstream were $440$164 million, up $455$367 million from the secondthird quarter of 2009. Non-U.S. Downstream earnings of $780$996 million were $253$468 million higher than last year.

 

 

 

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Downstream earnings for the first sixnine months of 2010 of $1,257$2,417 million were $388$447 million lowerhigher than 2009. Lower refining margins decreasedPositive sales volume mix effects increased earnings by $0.5 billion. Unfavorable$430 million. Negative foreign exchange impacts of $0.4 billion$320 million were offset by improved marketing margins, and favorable sales volume mix and refining operations effects.tax items. Petroleum product sales of 6,1936,359 kbd decreased 268 kbd, mainly reflecting lower demand.48 kbd.

U.S. Downstream earnings were $380$544 million, up $43$410 million from first six months of 2009. Non-U.S. Downstream earnings were $877$1,873 million, $431$37 million lowerhigher than last year.

 

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

Chemical earnings

                

United States

  $685  $79  $1,224  $162  $676    $315    $1,900    $477  

Non-U.S.

   683   288   1,393   555   553     561     1,946     1,116  
                            

Total

  $1,368  $367  $2,617  $717  $1,229    $876    $3,846    $1,593  
                            

SecondThird quarter 2010 Chemical earnings of $1,368$1,229 million were $1,001$353 million higher than the secondthird quarter of 2009. StrongerImproved margins improved earnings by $840 million and higher sales volumes increased earnings by $120$370 million. SecondThird quarter prime product sales of 6,4966,558 kt (thousands of metric tons) were 229202 kt higher than the prior year primarily due to improved global demand.demand and start-up of the Fujian facility in China.

 

 

Chemical earnings of $2,617$3,846 million increased $1,900$2,253 million from the first sixnine months of 2009. StrongerImproved margins increased earnings by approximately $1.4$1.7 billion while higher volumes increased earnings about $0.3 billion.$370 million. Prime product sales of 12,98419,542 kt were up 1,1901,392 kt from 2009.

 

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

Corporate and financing earnings

  $(364 $(741 $(1,164 $(1,177  $(506 $(483 $(1,670 $(1,660

Special items included in earnings

          

Corporate and financing
Valdez litigation

  $0   $(140 $0   $(140  $0   $0   $0   $(140

Corporate and financing expenses were $364$506 million during the secondthird quarter of 2010, down $377up $23 million due mainly to favorable tax items andfrom the absencethird quarter of the Valdez litigation charge.2009.

 

 

Corporate and financing expenses were $1,164$1,670 million for the first sixnine months of 2010, down $13up $10 million from 2009 mainly due to the absence of the Valdez litigation charge offset by a tax charge related to the U.S. health care legislation during the first halfquarter of 2010.2010 partially offset by the absence of the 2009 Valdez litigation charge.

 

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LIQUIDITY AND CAPITAL RESOURCES

 

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

Net cash provided by/(used in)

              

Operating activities

      $22,281   $11,107        $35,358   $19,934  

Investing activities

       (10,245  (9,713       (17,124  (15,997

Financing activities

       (8,797  (17,360       (16,494  (23,388

Effect of exchange rate changes

       (680  105         (189  486  
                      

Increase/(decrease) in cash and cash equivalents

      $2,559   $(15,861      $1,551   $(18,965
                      

Cash and cash equivalents (at end of period)

      $13,252   $15,576        $12,244   $12,472  

Cash flow from operations and asset sales

              

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

  $9,235  $2,197  $22,281   $11,107    $13,077    $8,827    $35,358   $19,934  

Sales of subsidiaries, investments and property, plant and equipment

   428   770   852    911     755     172     1,607    1,083  
                            

Cash flow from operations and asset sales

  $9,663  $2,967  $23,133   $12,018    $13,832    $8,999    $36,965   $21,017  
                            

Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider asset sales proceeds together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities.

Total cash and cash equivalents of $13.3$12.2 billion at the end of the secondthird quarter of 2010 compared to $15.6$12.5 billion at the end of the secondthird quarter of 2009.

Cash provided by operating activities totaled $22.3$35.4 billion for the first sixnine months of 2010, $11.2$15.4 billion higher than 2009. The major source of funds was net income including noncontrolling interests of $14.3$21.9 billion, adjusted for the noncash provision of $6.6$10.5 billion for depreciation and depletion, both of which increased. Changes in operational working capital added to cash flows in 2010. All other items net in 2009 included $3.9$4.1 billion of pension fund contributions. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.

Investing activities for the first sixnine months of 2010 used net cash of $10.2$17.1 billion compared to $9.7$16.0 billion in the prior year. Spending for additions to property, plant and equipment increased $1.2$3.5 billion to $11.4$19.2 billion.

Cash flow from operations and asset sales in the secondthird quarter of 2010 of $9.7$13.8 billion, including asset sales of $0.4$0.8 billion, increased $6.7$4.8 billion from the comparable 2009 period. Cash flow from operations and asset sales in the first sixnine months of 2010 of $23.1$37.0 billion, including asset sales of $0.9$1.6 billion, were up $11.1increased $15.9 billion from 2009.

Net cash used in financing activities of $8.8$16.5 billion in the first sixnine months of 2010 was $8.6$6.9 billion lower reflecting a lower level of purchases of shares of ExxonMobil stock. The Corporation’s acquisition of all the outstanding equity of XTO Energy Inc. in 2010 was a non-cash, all-stock transaction valued at $24.7 billion.

During the secondthird quarter of 2010, Exxon Mobil Corporation purchased 2454 million shares of its common stock for the treasury at a gross cost of $1.6$3.3 billion. These purchases included over $1$3 billion to reduce the number of shares outstanding, with the balance used to offset shares issued in conjunction with the company’s benefit plans and programs. As a result of regulatory requirements, no open market purchases of shares were made during the proxy solicitation period for the XTO transaction. Including 416 million shares issued in connection with the XTO merger, sharesShares outstanding increaseddecreased from 4,698 million at the end of the first quarter to 5,092 million at the end of the second quarter to 5,043 million at the end of the third quarter. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.

The Corporation distributed to shareholders a total of over $3$5.2 billion in the secondthird quarter of 2010 through dividends and share purchases to reduce shares outstanding.

Total debt of $20.4$18.3 billion at JuneSeptember 30, 2010, which included $11.4$8.0 billion of debt in connection with the XTO acquisition, compared to $9.6 billion at year-end 2009. The Corporation’s debt to total capital ratio was 12.310.8 percent at the end of the secondthird quarter of 2010 compared to 7.7 percent at year-end 2009.

 

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Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds are expected to cover the majority of its net near-term financial requirements. Effective with the closing of the merger, XTO’s long-term debt securities were unconditionally guaranteed by ExxonMobil. The guarantees may be revoked by the Corporation under certain conditions. FollowingDuring the endthird quarter of the second quarter,2010, XTO term loans of $600 million were repaid, the XTO 5% senior note due in 2010 matured, and XTO fixed-rate bonds with a book value of $2.5$2.6 billion were repurchased via tender offers. The Corporation expects to consider additional opportunities to restructure XTO debt where economic.

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

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

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

TAXES

 

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

Income taxes

  $4,960   $3,571   $10,453   $6,719    $5,297   $4,333   $15,750   $11,052  

Effective income tax rate

   43  50  46  47   45  50  46  48

Sales-based taxes

   6,946    6,216    13,761    12,122     7,172    6,805    20,933    18,927  

All other taxes and duties

   9,244    9,124    18,593    17,713     10,071    9,729    28,664    27,442  
                          

Total

  $21,150   $18,911   $42,807   $36,554    $22,540   $20,867   $65,347   $57,421  
                          

Income, sales-based and all other taxes and duties for the secondthird quarter of 2010 of $21,150$22,540 million were higher than 2009. In the secondthird quarter of 2010 income tax expense increased to $4,960$5,297 million reflecting the higher level of earnings and the effective income tax rate was 4345 percent, compared to $3,571$4,333 million and 50 percent, respectively, in the prior year period. Sales-based taxes and all other taxes and duties increased slightly in 2010.

Income, sales-based and all other taxes and duties for the first nine months of 2010 of $65,347 million were higher than 2009. In the first nine months of 2010 income tax expense increased to $15,750 million reflecting the higher level of earnings and the effective income tax rate was 46 percent, compared to $11,052 million and 48 percent, respectively, in the prior year period. Sales-based taxes and all other taxes and duties increased in 2010 reflecting higher prices and foreign exchange effects.prices.

Income, sales-based and all other taxes and duties for the first six months of 2010 of $42,807 million were higher than 2009. In the first six months of 2010 income tax expense increased to $10,453 million reflecting the higher level of earnings and the effective income tax rate was 46 percent, compared to $6,719 million and 47 percent, respectively, in the prior year period. Sales-based taxes and all other taxes and duties increased in 2010 reflecting higher prices and foreign exchange effects.

 

-29-


CAPITAL AND EXPLORATION EXPENDITURES

 

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

Upstream (including exploration expenses)

  $5,342  $4,905  $10,888  $9,271  $7,632    $4,907    $18,520    $14,178  

Downstream

   584   817   1,258   1,463   558     831     1,816     2,294  

Chemical

   558   830   1,172   1,588   525     747     1,697     2,335  

Other

   35   10   78   14   54     8     132     22  
                            

Total

  $6,519  $6,562  $13,396  $12,336  $8,769    $6,493    $22,165    $18,829  
                            

Capital and exploration expenditures in the secondthird quarter 2010 were $6.5$8.8 billion, down 1up 35 percent from the secondthird quarter of 2009. The capital and exploration expenditures2009, primarily related to Upstream projects and acquired XTO included in the Corporation’s second quarter 2010 results were de minimis.properties.

 

 

ExxonMobil continued its focus on investing for the future with capitalCapital and exploration spending of $13.4 billion infor the first sixnine months of 2010 was $22.2 billion, up 918 percent from 2009.the first nine months of last year. Capital and exploration expenditures for full year 2009 were $27.1 billion. Capital and exploration expenditures are expected to range from $25 billion to $30 billion for the next several years. Actual spending could vary depending on the progress of individual projects.

ACQUISITION OF XTO ENERGY INC.

On June 25, 2010, following approval by the stockholders of XTO Energy Inc. (“XTO”), ExxonMobil acquired XTO by merging a wholly-owned subsidiary of ExxonMobil with and into XTO (the “merger”), with XTO continuing as the surviving corporation and wholly-owned subsidiary of ExxonMobil.

At the effective time of the merger, each share of XTO common stock was converted into the right to receive 0.7098 shares of common stock of ExxonMobil (the “Exchange Ratio”), with cash being payable in lieu of any fractional shares of ExxonMobil stock. Also at the effective time, each outstanding option to purchase XTO common stock was converted into an option to purchase a number of shares of ExxonMobil stock based on the Exchange Ratio, and each outstanding restricted stock award and performance stock award of XTO was converted into a restricted stock award or performance stock award, as applicable, of ExxonMobil stock based on the Exchange Ratio. In connection with the merger, 416 million shares were issued at closing. An additional 12 million shares were reserved for issuance for stock option awards.

XTO’s reported year-end 2009 proved reserves of 2.5 billion oil-equivalent barrels include shale gas, tight gas, coal-bed methane and shale oil, in addition to conventional oil and gas. ExxonMobil reported year-end 2009 proved reserves of 23.0 billion oil-equivalent barrels. The XTO portfolio complements ExxonMobil’s unconventional gas resource and acreage holdings in the United States, Canada, Germany, Poland, Indonesia and Argentina.

XTO’s reported 2009 production was 2,342 mcfd gas and 87 kbd liquids. ExxonMobil’s reported 2009 production was 9,273 mcfd gas and 2,387 kbd liquids. Through the first half of 2010, XTO’s production has averaged 2,423 mcfd gas and 85 kbd liquids.

FORWARD-LOOKING STATEMENTS

Statements in this report relating to future plans, projections, events or conditions are forward-looking statements. Actual results, including benefits resulting from the XTO transaction; project plans, costs, timing, and capacities; capital and exploration expenditures; and share purchase levels, could differ materially due to factors including: our ability to integrate the businesses of XTO and ExxonMobil effectively; changes in long-term oil or gas prices or other market or economic conditions affecting the oil and gas industry; unforeseen technical difficulties; political events or disturbances; reservoir performance; the outcome of commercial negotiations; wars and acts of terrorism or sabotage; changes in technical or operating conditions; and other factors discussed under the heading “Factors Affecting Future Results” in the “investors” section of our website and in Item 1A of ExxonMobil’s 2009 Form 10-K and Form 10-Q for the quarterly period ended June 30, 2010. We assume no duty to update these statements as of any future date.

 

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

Information about market risks for the sixnine months ended JuneSeptember 30, 2010, does not differ materially from that discussed under Item 7A of the registrant’s Annual Report on Form 10-K for 2009. With respect to derivatives activities, 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 activities described in Note 7. The Corporation does not engage in speculative derivative activities or derivative trading activities and does not use derivatives with leveraged features. Credit risk associated with the Corporation’s derivative position is mitigated by several factors including the number, quality and financial limits placed on derivative counterparties. Additionally, a substantial portion of the XTO derivative contracts are expected to be substantially reducedwill settle by year-end 2010.

 

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 JuneSeptember 30, 2010. 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

In Aprila Consent Agreement and Final Order filed with the EPA on September 27, 2010, ExxonMobil Oil Corporation agreed to resolve allegations brought by the Texas CommissionU.S. Environmental Protection Agency (EPA) relating to a former phosphate mining operation of Mobil Mining and Minerals in Pasadena, Texas. Mobil sold the site to Agrifos Fertilizer, Inc. in 1998, but, under the sales agreement, retained obligations to perform closure and post-closure management of the existing phosphogypsum stacks at the site. EPA alleged that ExxonMobil Oil Corporation had violated Resource Conservation and Recovery Act regulations at Pasadena by improperly managing certain phosphoric acid manufacturing wastes associated with Mobil Mining and Minerals activities, as well as during ExxonMobil’s current closure activities at the site on behalf of Agrifos. In the Consent Agreement and Final Order, ExxonMobil agreed to perform closure and post-closure management of the existing gypsum stacks at the site and to pay a civil penalty of $100,000.

Regarding a matter previously reported in the Corporation’s Form 10-Q for the first quarter of 2009, the Wyoming Department of Environmental Quality (“TCEQ”) demandedand Exxon Mobil Corporation settled by a penalty of $135,000 for Notices of Violation issued in January and Februaryconsent decree, approved on August 16, 2010, relating to sixcertain alleged violations of the state air emissionpermitting and state and federal air quality regulations associated with the operation of the three AGI cogeneration turbines located at the Beaumont Refinery. Settlement discussions are ongoing withExxonMobil Shute Creek Treatment facility in LaBarge, Wyoming. The consent decree requires that Exxon Mobil Corporation pay $1,300,000 as a partial penalty payment and $1,100,000 in supplemental environmental projects to resolve the TCEQ.alleged violations. The consent decree also requires ExxonMobil to install and operate selective catalytic reduction NOx emission controls (SCRs) for these turbines. The SCRs must be operational by no later than June 30, 2012.

OnAs previously reported in the Corporation’s Form 10-Q for the second quarter of 2010, on December 21, 2009, prior to the Corporation’s acquisition of XTO Energy Inc., the Texas Commission on Environmental Quality (TCEQ) issued a Notice of Violation to XTO alleging violations of air emission regulations as a result of an unauthorized flaring of natural gas at XTO facilities in Yoakum County, Texas, between July 29, 2008 and May 4, 2009 and the untimely filing of a report of the event. TCEQ has proposed a penalty of $237,247. Settlement discussions withOn August 5, 2010, XTO signed a settlement agreement and paid $118,624 to the TCEQ.

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When the settlement agreement is signed by TCEQ, are ongoing.the remaining $118,623 will be paid to an environmental project designated by TCEQ (Texas Association of Resource Conservation and Development Areas Inc: Clean School Buses, Amarillo-Lubbock).

As previously reported in the Corporation’s Form 10-Q for the third quarter of 2008, on August 1, 2008, the Connecticut Department of Environmental Protection (CTDEP) proposed that ExxonMobil Oil Corporation enter into a Consent Order as a result of an alleged June 2007 discharge of gasoline at a Mobil-branded service station in South Windsor, Connecticut. The proposed Consent Order sought a penalty of $180,000. On August 31, 2010, ExxonMobil Oil Corporation and the CTDEP entered into a Consent Order that requires ExxonMobil to pay a penalty of $90,000.

Regarding a matter previously reported in the Corporation’s Form 10-Q for the secondthird quarter of 2008, two ExxonMobil affiliates, Mobil Oil Guam, Inc. and Mobil Oil Mariana Islands, Inc., have entered into a Consent Decree with2009, the Corporation has settled allegations brought by the U.S. Environmental Protection Agency and(EPA) regarding certain incidents of acid gas flaring at its refinery in Baytown, Texas. The allegations were brought pursuant to the Corporation’s 2005 Consent Decree with the EPA, entered by the U.S. Department of Justice (DOJ) to resolve certain alleged violations of the Clean Air Act air permitting requirements and air quality rules associated with certain storage tanks and loading racks at the Cabras Terminal (Guam) and Saipan Terminal (Saipan). The DOJ lodged the executed Consent Decree in federal District Court in Guam on April 16, 2010, andfor the court enteredNorthern District of Illinois, relating to the EPA’s New Source Review Enforcement Initiative. The Corporation reported these incidents as covered by the force majeure provisions of the Consent Decree, but the EPA responded with a demand for stipulated penalties of $385,000. On September 10, 2010, the Corporation settled this matter with the EPA for a civil payment of $27,500.

Regarding several previously reported matters, on July 27, 2010. The parties have agreedAugust 25, 2010, ExxonMobil entered into Consent Orders with the New York State Department of Environmental Conservation (NYSDEC) to resolve a number of allegations associated with operation of petroleum bulk storage facilities at service stations by the Corporation or its subsidiary ExxonMobil Oil Corporation between 2002 and 2009. Specifically, ExxonMobil paid a civil penalty of $100,000 to resolve allegations relating to a $2.4 million cash settlementMobil-branded service station in Springfield Gardens, New York, previously reported in the Corporation’s Forms 10-Q for the first and corrective actionsecond quarters of 2004, and $270,000 to resolve the case.

Regarding a matterallegations with respect to 16 other service station sites, previously reported in the Corporation’s Form 10-Q10-K for the second quarter of 2009, on June 28, 2010, the Corporation2004, and two of its affiliates (ExxonMobil Oil Corporation and ExxonMobil Pipeline Company) entered into a Settlement Agreement with the Massachusetts Department of Environmental Protection and the State Attorney General regarding certain allegations of violations of air permit requirements and provisions of the Clean Air Act between 2000 and 2008 at the Everett and Springfield terminals in Massachusetts. The settlement includes a penalty payment of $2.9 million and a $200,000 cash payment to the Chelsea Collaborative for a supplemental environmental project. Certain corrective actions also will be undertaken at the Everett and Springfield terminals.

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As reported the Corporation’s Form 10-Q for the first quarter of 2010, in the matter,In re Exxon Mobil, Corp. Derivative Litigation, on April 30, 2010, the District Court of Dallas County, Texas, granted the defendants’ special exceptions due to the plaintiffs’ failure 1) to make a pre-suit demand on the Board of Directors, or 2) to plead facts sufficient to excuse such a demand. The trial court gave the plaintiffs until June 1, 2010, to re-file their pleading to allege with specificity a legally sufficient basis to excuse the plaintiffs’ failure to make a pre-suit demand on the Board. The plaintiffs failed to timely replead and agreed that the case should be dismissed. On July 20, 2010, the court issued an order dismissing the case.3 additional sites.

Refer to the relevant portions of note 3 on pages 8 and 9 of this Quarterly Report on Form 10-Q for further information on legal proceedings.

 

Item 1A.Risk Factors

Information about risk factors does not differ materially from the discussion found in Item 1A of the registrant’s Annual Report on Form 10-K for 2009. Recent events2009, as supplemented by the discussion found in the Gulf of Mexico illustrate the magnitudeItem 1A of the operational risks inherent in oil and gas exploration and production activities, as well asregistrant’s Quarterly Report on Form 10-Q for the potential to incur substantial financial liabilities if those risks are not effectively managed. The ability to insure such risks is limited by the capacity of the applicable insurance markets, which may not be sufficient to cover the likely cost of a major adverse operating event such as a deepwater well blowout. Accordingly, ExxonMobil’s primary focus is on prevention, including through our rigorous Operations Integrity Management System. Our future results will depend on the continued effectiveness of these efforts.period ended June 30, 2010.

The Gulf of Mexico spill may result in changes to U.S. federal and state laws and regulations which would have the effect of increasing the cost of, and reducing available opportunities for, offshore exploration and production.

 

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchase of Equity Securities for Quarter Ended JuneSeptember 30, 2010

 

 

   

Period

  Total Number
Of Shares
Purchased
  Average
Price Paid
per Share
  Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
  Maximum Number
Of Shares that May
Yet Be Purchased
Under the Plans or
Programs
 

April, 2010

  12,961,778  68.52  12,961,778  

May, 2010

  8,659,639  64.40  8,659,639  

June, 2010

  2,090,627  58.43  2,090,627  
          

Total

  23,712,044  66.12  23,712,044  (See Note 1
           

Period

  Total Number
Of Shares
Purchased
   Average
Price Paid
per Share
   Total Number of
Shares  Purchased
as Part of Publicly
Announced Plans
or Programs
   Maximum Number
Of Shares that  May
Yet Be Purchased
Under the Plans or
Programs
 

July, 2010

   17,446,605     58.90     17,446,605    

August, 2010

   17,827,440     60.35     17,827,440    

September, 2010

   19,079,955     61.23     19,079,955    
              

Total

   54,354,000     60.19     54,354,000     (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 most recent earnings release dated July 29,October 28, 2010, the Corporation stated that thirdfourth quarter 2010 share purchases to reduce shares outstanding are anticipated to equal $3$5 billion. Purchases may be made in both the open market and through negotiated transactions, and purchases may be increased, decreased or discontinued at any time without prior notice.

 

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Item 6.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.

 

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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: August 4,November 3, 2010

  By: /s/    Patrick T. Mulva
   

Name:

Title:

Patrick T. Mulva

Title:      Vice President, Controller and Principal

Accounting Officer

 

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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.

 

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