TABLE OF CONTENTS
Letter to Shareholders...............................................1
Vision, Mission, Values..............................................4
Exploration & Producing..............................................5
Marketing & Refining.................................................9
Chemical and Other Businesses.......................................13
The Environment.....................................................16
Financial Section
Financial Highlights................................................17
Management Discussion and Analysis..................................18
Consolidated Financial Statements...................................29
Notes to Financial Statements.......................................36
Reports of Management and Independent Auditors......................49
Supplementary Information...........................................50
Shareholder Information.............................................58
Directors and Officers..............................................59
An important part of the domestic and foreign operations covered by this
report is carried on by operating divisions, subsidiaries and affiliates
conducting their respective businesses under the direction and control of
their own managements. Except as otherwise indicated by the context, this
report uses such terms as "Mobil," "corporation," "company," "we" and "our,"
sometimes for the parent corporation and all such divisions, subsidiaries and
affiliates collectively, and sometimes for one or more of them.
Mobil Annual Report is printed on recycled and recyclable paper.
Financial Highlights
1993 1994 % Change
- --------------------------------------------------------------------------------------------------
Income before change in accounting principle (millions) $2,084 $1,759 (16)
Per common share (based on average shares outstanding) 5.07 4.28 (16)
- --------------------------------------------------------------------------------------------------
Net income(1)(millions) $2,084 $1,079 (48)
Per common share (based on average shares outstanding) 5.07 2.57 (49)
- --------------------------------------------------------------------------------------------------
Return on average shareholders' equity(2) 12.3% 10.4% -
Return on average capital employed(2) 9.7% 8.4% -
Income per dollar of revenue(2) 3.3 cents 2.6 cents (21)
Petroleum earnings per gallon sold 3.9 cents 3.1 cents (21)
- --------------------------------------------------------------------------------------------------
Revenues (millions) $63,975 $67,383 5
Total assets, year-end(3)(millions) 40,733 41,542 2
Capital and exploration expenditures (millions) 3,656 3,825 5
Shareholders' equity, year-end (millions) 17,237 17,146 (1)
Per common share (based on shares outstanding at year-end) 42.74 42.61 -
- --------------------------------------------------------------------------------------------------
Common shares outstanding, year-end (thousands) 398,168 395,987 (1)
Shareholders of common stock, year-end 200,100 193,900 (3)
Number of employees, year-end 61,900 58,500 (5)
- --------------------------------------------------------------------------------------------------
(1) After 1994 charge of $680 million for change in accounting principle.
(2) Based on income before 1994 change in accounting principle.
(3) 1993 data reclassified to conform with current year presentation.
Annual Dividends
(per share of common stock, in dollars)
<GRAPH APPEARS HERE>
LETTER TO SHAREHOLDERS
You can be proud of the strong performance turned in by Mobil people
around the world in 1994. We met the challenge of weak business
conditions. Operating income of more than $2.2 billion rose slightly
from 1993. The big negatives our people faced were: worldwide crude oil
prices around $1 a barrel lower than 1993, U.S. natural-gas prices down
by more than 30 cents a thousand cubic feet, and refinery margins down
some 30%. In terms of business conditions, the only bright spots were a
substantial improvement in chemical industry fundamentals and better
international petroleum marketing margins. Overall, business factors
lowered 1994 income by more than $500 million after taxes.
The big bright spot was how we performed-how we met our customers'
needs better and more efficiently. Worldwide, we raised our oil and gas
production by 2% and petroleum product sales by 5%. At the same time
that volumes were up, we brought costs down. We reduced controllable
cash operating expenses by more than $250 million before taxes in 1994.
That's on top of a reduction of $575 million during the previous two
years. Over the same three-year period, we were also able to offset more
than $1 billion in higher costs that arose from inflation and volume
growth. And headcount was down by 9,000, or 13%, including 3,400 in
1994.
Meanwhile, our competition is not standing still, and we're not
through. We'll always be working to improve efficiency and adapt to
changes in the business environment as well as new developments in
technology. A major study of how we supply staff support services
worldwide is on schedule for recommendations this spring and
implementation by the end of the year.
While we strive to run our businesses better and smarter, we'll
maintain our focus on growth and on valuing our people. Our goal is to
improve earnings and position the company for future growth-not merely
to cut expenses.
Last year was the seventh straight year that our shareholders saw
an increase in their annual dividend, which rose to $3.40. The total
return to Mobil shareholders in 1994 -- dividends plus stock-price
appreciation -- was 11%. That compares with an 8% average for our major
competitors and 1% for the Standard & Poor's 500. Over the last five
years, our return has also been 11% a year, compared with 8% for our
competitors and 9% for the S&P.
With our eye on attractive growth opportunities around the world,
we plan to increase our capital and exploration expenditures from $3.8
billion in 1994 to $4.1 billion for 1995. We remain flexible, and the
budget can be revised to fit unusual opportunities or changes in the
business environment. The international area accounts for an increasing
share of our spending. We'll also keep working to get more out of our
existing assets, and to sell those that are marginal or worth a lot more
to someone else.
While optimistic that we'll see some improvement from the weak
business conditions prevailing in 1994, we're not counting on improved
conditions to grow our earnings. We judge future projects on today's
market conditions. If they don't measure up, we don't invest the money.
By continuing with our programs to restructure, reduce costs, improve
operating efficiencies and invest for growth, we expect to achieve
substantial improvements. We've set a target of increasing our return on
capital employed by the end of 1998 to 12% from a little over 10%, based
on operating earnings, in 1994. That means earnings in excess of $3
billion.
To help keep the company focused on our goals, we've developed a
statement of Vision, Mission and Values (reprinted on Page 4), and we're
formulating key performance
<PHOTO APPEARS HERE>
Lucio A. Noto
Mobil 1
LETTER TO SHAREHOLDERS
Our people will
continue to meet
the challenge.
We'll build on our
strengths, deal
with our weaknesses,
and enter new markets
and countries that
promise good
opportunities for
growth.
indicators to measure our progress. Our compensation will be consistent
with these measurements.
Although we must increase our efficiency by downsizing to stay
competitive, people remain our greatest strength. One thing that makes
us so strong is the diversity of our work force. We've rededicated
ourselves to fostering that diversity. We're removing from our
workplaces any impediments that may still stand in the way of fully
utilizing the strengths of all our employees, and we're redoubling our
efforts to achieve greater internationalization at all levels of
management.
Each of our business segments performed well in 1994:
In Exploration & Producing, our production levels increased again
as we set records in the U.K. and Nigeria and brought several new fields
on stream. Plus we were able to replace 117% of our production with new
proved reserves, excluding purchases and sales. Our long-term target is
to increase production at about the 2% pace of recent years and replace
at least 100% of production. Development projects now under way in
Canada, Nigeria, Qatar and other countries should allow us to accomplish
this. And we will continue to build on our leadership position in
liquefied natural gas.
In Marketing & Refining, many of our refineries set production
records, and our sales grew. A wide range of business initiatives are
blunting the impact of poor refining margins. By year-end we had
achieved the changeover to cleaner-burning reformulated gasoline for
more than 50% of our U.S. sales. We're making investments for growth-in
the lubricants business, for example, and in the emerging Asia-Pacific
region and Latin America. At the same time, we are reviewing the
performance of some of our assets in more-mature markets in the U.S. and
Europe.
It was the best year since 1990 for Mobil Chemical's operating
income. Margins improved, especially for petrochemicals. All our
chemical businesses showed early benefits from ongoing re-engineering
programs. We've begun plans to build a paraxylene plant in Texas and
expand ones in Singapore and Louisiana, doubling our capacity to make
this key building block in the manufacture of polyester.
Both Marketing & Refining and Mobil Chemical were helped by the new
refinery units and aromatics complex at our manufacturing facility in
Singapore. Just a few months after the aromatics plant was brought on
stream early in the year, it was functioning beyond design capacity,
turning out paraxylene and other intermediate products to meet the fast-
Earnings
(Millions of dollars) 1993 1994 Change
- -----------------------------------------------------------------------------------------------
Petroleum
Upstream $1,530 $1,324 $ (206)
Downstream 1,088 964 (124)
Chemical 44 224 180
Corporate and Other (139) (72) 67
Net Financing Expense (299) (209) 90
- -----------------------------------------------------------------------------------------------
Operating income $2,224 $2,231 $ 7
- -----------------------------------------------------------------------------------------------
Special items $ (140) $ (472) $ (332)
- -----------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle $2,084 $1,759 $ (325)
- -----------------------------------------------------------------------------------------------
Cumulative Effect of Change in Accounting Principle(1) - $( 680) $ (680)
- -----------------------------------------------------------------------------------------------
Net income $2,084 $1,079 $(1,005)
- -----------------------------------------------------------------------------------------------
(1) Reflects adoption effective January 1, 1994, of a change in the accounting
method used to apply the lower of cost or market test for crude oil and product
inventories.
Mobil 2
LETTER TO SHAREHOLDERS
MOBIL AT A GLANCE
What we do: Mobil Corporation is a major oil, gas and petrochemical
company with operations in more than 100 countries. Our other businesses
include plastics, mining and land development.
Major strengths: An international company for over a century, our
people, our asset base, our worldwide presence, our financial
flexibility and our technology have helped us build shareholder value
and maintain a steadily rising dividend. We have a solid, growing
customer base and a record of environmental excellence.
How we did in '94: Our operating earnings were flat with 1993
despite a drop in crude-oil prices, U.S. natural-gas prices and
worldwide refinery margins. Earnings were helped by improved chemical
and international marketing margins, expense reductions, higher sales
and new investments coming on stream.
What's ahead: Growth opportunities, cost reductions and
restructurings will continue to strengthen Mobil. Investing is
increasing, particularly in the international area.
growing demand in the region for plastic fibers.
So we have many reasons to feel good about our future. The world
needs oil and natural gas. Oil demand is growing, particularly in the
Pacific Rim, where Mobil is the most leveraged among the majors, with
more than 30% of our worldwide refining capacity. Natural-gas demand is
also growing, especially for liquefied natural gas, in which Mobil has a
leading position. We have an expanding position in petrochemicals.
And our 1994 results showed once again that our people will
continue to meet the challenge. We'll build on our strengths, deal with
our weaknesses, and enter new markets and countries that promise good
opportunities for growth.
During 1994 we said goodbye to two directors. Allen E. Murray
retired after 41 years, the last eight as chairman, president and CEO.
Robert G. Weeks, senior vice president and chief financial officer,
retired after 40 years. We thank them both for their long and
distinguished careers and the many successes they brought to Mobil.
We're also grateful to William J. Kennedy III, who will be retiring at
the end of April. He has served with excellence as a non-employee
director since 1979.
Our employees and board will work together to make Mobil a company
that, in the words of our Vision statement, "sets the standard for
excellence. A company that brings value to our customers, provides
superior returns to our shareholders and respects the quality of life in
every one of our communities."
/S/LUCIO A. NOTO
----------------
Lucio A. Noto
Chairman, President and Chief Executive Officer
February 24, 1995
Mobil 3
VISION, MISSION, VALUES
VMV
Vision, Mission and Values
Our Vision:
To be a GREAT, global company. A company, built with pride by all our
people, that sets the standard for excellence. A company that brings
value to our customers, provides superior returns to our shareholders
and respects the quality of life in every one of our communities.
Our Mission:
To be a dynamic company that will continually find and develop
opportunities for profitable growth in our core businesses, and that
will realize the greatest value from our existing assets while keeping
tight control of our costs.
We Value:
People To value, trust and empower all of our people to be mutually
accountable for Mobil's success; to provide opportunities in a changing
environment without boundaries, where each person can develop to be the
best that he or she can be. Customers To understand and satisfy our
customers' needs better than anyone and to offer products and services
that provide them with the best value. Shareholders To reward our
shareholders by providing a superior long-term total return, which
exceeds that of our peers. Ethics To conduct our business to the
highest ethical standards and in compliance with all applicable laws and
regulations. Technology To develop or acquire and then rapidly apply
appropriate technology to obtain and sustain competitive advantage.
Environment, Health & Safety To protect the environment and the health
and safety of our people and the communities in which we work.
<GRAPHIC APPEARS HERE>
Mobil 4
EXPLORATION & PRODUCING
EXPLORATION & PRODUCING
AT A GLANCE
What we do: E&P searches for and produces oil and gas. Total proved
reserves are 6.6 billion barrels of oil equivalent. Production is 1.7
million barrels a day. Gas accounts for roughly half of reserves and
production.
Major strengths: Advanced technologies and focused strategies have
helped boost oil and gas production around the world. We've increased
activities in emerging areas and continue to apply reservoir-management
technologies to extract more from mature areas.
How we did in '94: Operating earnings were down 13%, due to lower
prices and higher exploration expense. Worldwide production rose 2%. We
replaced 117% of production with proved reserves, excluding asset sales
and purchases. The Griffin field in Australia, and Scott and Hudson
fields in the U.K. were on stream for a full year.
What's ahead: Replacement of reserves and new field developments in
established areas such as the U.K., Nigeria, Qatar and Hibernia will
increase near-term production. For the long term, exploration and
producing ventures we are pursuing in Kazakhstan, Peru, Italy, Southeast
Asia and other emerging areas could expand our reserve base and provide
new production.
<PHOTO APPEARS HERE>
The Hibernia project offshore Newfoundland took a big step forward when
the lower section of the production platform was towed from dry-dock to
its deepwater construction site. The platform, covering an area the size
of two football fields, will be installed at its site, 200 miles
southeast of St. John's, in 1997. Production will reach 125,000 barrels
a day by 2000.
Mobil 5
EXPLORATION & PRODUCING
Exploration & Producing's 1994 operating earnings of $1.3 billion (U.S.,
$306 million; International, $1,018 million) were down $206 million, or
13%. Reduced operating expenses, reflecting the benefits of
restructuring and continuous improvement initiatives, offset to some
degree the lower worldwide crude and natural-gas prices and higher
exploration expenses, the result of a more extensive drilling program.
Our worldwide oil and gas production level increased in 1994 for
the eighth time in the last 10 years, reaching a record of 1.7 million
barrels of oil or its equivalent per day. This is up 2% from 1993 and
22% since 1985. We accomplished this in spite of asset sales and the
natural decline of mature fields.
Excluding purchases and sales, we added 117% of our production for
the year to our proved reserves. Development projects now under way that
will come on stream before 2000 will contribute about 600,000 barrels a
day of new production. They will more than offset production declines in
existing fields.
We have developed strategies and tactics to help us extract
as much value from our existing resource base as possible and to
enable us to select new opportunities with the best chance of
success. In addition to our worldwide experience, we offer potential
partners and host countries a highly competitive portfolio of
strengths in technology, capital formation, project management and
environmental protection.
As the political climate changes around the world, E&P is
prepared to move quickly to evaluate and acquire interests in
high-potential exploration and development projects in emerging
areas. Mobil is active in many countries in areas such as the Pacific
Rim, the Middle East, the former Soviet Union and South America that
are emerging as important players in oil and gas exploration and
development, having recently opened their borders to international
oil companies.
In the Asia/Pacific/Middle East region, work continues on
several mega-projects:
In Qatar, the continued development of the Qatargas project
added the equivalent of 61 million barrels of proved reserves in
1994. Plans for the Qatargas venture (Mobil share 10%) expanded to
three trains when an agreement was completed for the sale of an
additional two million tons of liquefied natural gas (LNG) annually
to supply seven Japanese gas and electric utilities. Engineering and
construction of the first two trains are on schedule to begin LNG
deliveries in 1997. The third train is due on stream in 1999.
The Ras Laffan venture (Mobil share 30%) drilled its first North
field appraisal well in early 1994. This well confirmed a prime block
consisting of more than 35,000 acres for initial project development.
Engineering for the design of the plant and field facilities was
substantially completed in 1994. Deliveries from Ras Laffan are expected
to begin around 2000.
Collection of seismic data began in the northeastern Caspian Sea,
where Mobil is the only U.S.-based company selected by the Kazakhstan
government to participate in the exploration of the country's highly
prospective and environmentally sensitive offshore area. We are
involved in negotiations to secure exploration acreage onshore as
well.
In 1994, we were active in several of the joint ventures we
entered in 1993. We began drilling a well in Vietnam and drilled an
unsuccessful well in New Zealand. Seismic tests were conducted
offshore Malaysia.
In the Europe/Russia/Africa region, we acquired both new
development and new exploration plays, and we evaluated existing
licenses.
We acquired new exploration areas in Egypt, Italy, Algeria and
Equatorial Guinea, and
<PHOTO APPEARS HERE>
In a first for Germany, Mobil combined horizontal drilling with a
technique called "hydraulic fracturing" to recover gas economically
from an extremely tight sandstone reservoir. Our operating people
make effective use of technology to get more from the resource base.
Mobil 6
EXPLORATION & PRODUCING
In Nigeria, Mobil's
equity production
is expected to rise
to more than
240,000 barrels a
day by 1998.
a potential development opportunity in Italy. The first wells in Egypt
and Equatorial Guinea were unsuccessful. A well is currently drilling at
a second location off Equatorial Guinea. Additionally, enormous
exploration potential lies in the yet-to-be-drilled deep-water Nigerian
acreage block we were awarded in 1993. Plans are to drill in the block
in 1996.
Our Americas region drilled two unsuccessful wildcat wells in the
2.5-million-acre Madre de Dios concession in northern Bolivia and one in
Peru. Negotiations are also under way for exploration acreage adjacent
to the large undeveloped Camisea gas and condensate discovery in Peru.
Mobil opened a venture office in Caracas, Venezuela, and signed a letter
of intent with Lagoven, an affiliate of the state oil company, to
evaluate the feasibility of developing heavy crude in the Orinoco
region.
Internationally, we continued to invest in hydrocarbon reserves and
production in mature areas with proven track records where the potential
remains high. In Germany, the Netherlands, Norway, Nigeria and the U.K.,
we continued to add reserves. Internationally, Mobil replaced 152% of
production with proved reserves.
U.K. fields produced at a record rate in 1994, yet we replaced 111%
of production with new reserves. The Excalibur field in the U.K.
Southern Gas Basin was brought on stream in mid-1994. We increased our
equity interest in the producing Pickerell field and had a successful
appraisal drilling program in the Jupiter area. Ten new fields are due
on stream by 1996, included among them Nevis South, Galahad,
Ganymede/Callisto and Gawain.
In the Norwegian North Sea, production started from the Statfjord
East satellite field. Statfjord North, a second satellite to the giant
Statfjord field, came on stream in early 1995. Development plans are
being finalized for the giant Smorbukk field, scheduled to come on
stream in 2000. Mobil began drilling on one of its awards from the 14th
Norwegian licensing round and was preparing to test others. Mobil
acquired an interest in the Njord field, where development will begin in
1995, with first production in 1997.
In Western Europe, drilling in the Netherlands' North Friesland
area added reserves totaling 136% of 1994 production. The offshore
Netherlands is a maturing gas province with limited future potential.
Mobil has reached tentative agreement to sell its P-Quad exploration and
producing assets. In Germany, two development wells were drilled in the
new Walsrode gas field. Overall, German reserve replacement was 177% of
production in 1994.
In Nigeria, where we are the second-largest producer, we reached a
new equity production record of 175,000 barrels a day, a seventh
straight year of record production. Production increases during 1994
were primarily from horizontal drilling in the Ubit field, development
wells in the Enang field, regional workovers and optimization of
producing practices. We initiated development of the Oso natural gas
liquids recovery project. Work continued on expansion of production at
Ubit, the Ekpe gas compression project and Edop field development. With
these and other developments, Mobil's equity production is expected to
rise to more than 240,000 barrels a day by 1998. In addition, Mobil had
three exploration discoveries in 1994 in Nigeria.
In Canada, the highlight of 1994 was the float-out of the gravity
base structure for the Hibernia development project. This
615-million-barrel field off the coast of Newfoundland is scheduled for
production start-up in 1997. In addition, Mobil and partners, along with
a consortium of pipeline companies, are preparing plans to develop and
bring Sable Island natural gas to markets in eastern Canada and the U.S.
Northeast. Onshore, advanced technologies kept production in mature
western Canadian fields near 1993 levels.
In the Pacific Rim, full-year production from the Australian
Griffin/Scindian/Chinook complex averaged 25,000 barrels of oil
equivalent a day. We expanded our exploration activity to a total of 10
permits covering 8.1 million acres. Mobil relinquished its interest in
<PHOTO APPEARS HERE>
The Ras Laffan LNG venture drilled its first appraisal well early in
1994, confirming a prime block consisting of over 35,000 acres. This
venture, plus the Qatargas project, are expected to add more than a
billion barrels of oil equivalent to our reserves and more than 125,000
barrels a day to our production over the years ahead.
Mobil 7
EXPLORATION & PRODUCING
Worldwide demand
for LNG is expected
to more than double
in the next 15 years.
Papua New Guinea when gas discovered failed to meet levels that would
support development. Evaluation activities continue in Vietnam,
including drilling the Blue Dragon prospect on acreage acquired in 1994.
In the U.S., we continue to extract more from maturing assets,
relying heavily on the increased use of sophisticated enhanced-recovery
technologies and reservoir-management practices. Comparing 1994's
results with 1993's, production held steady, with a slight decline in
oil production offset by an increase in natural gas production.
Production of California heavy oil set another record at 87,000 barrels
a day and is projected to rise to 91,000 barrels a day in 1995. The
increase in natural-gas production was led by the Mary Ann and Mobile Bay
823 fields offshore Alabama, which were up 15% to 140 million cubic feet
a day. In the U.S., only 51% of hydrocarbons produced in 1994 were
replaced with new proved reserves. Initiatives to reduce operating costs
and divest nonstrategic assets continued in 1994, and 30 fields were
sold. Mobil is continuing to reduce production costs, which have
declined 21% since 1991.
Natural gas accounts for roughly half of our worldwide production
and reserves. Demand for this clean-burning fuel is expected to grow
faster than for oil as gas increasingly becomes the fuel of choice in
many applications, including electrical generation. That means
opportunities for leading gas companies like Mobil. Integrated from the
gas field to the end user, we produce, transport and process gas and
distribute it directly to customers. And now we've adopted a goal of
expanding that customer base by participating in the development and
operation of power-generation facilities.
In North America, we're a leader among natural-gas producers and
direct marketers. Mobil Natural Gas Inc. was created in 1987 to
independently market Mobil's U.S. gas production and third-party gas to
customers in the U.S., Canada and Mexico. We're expanding this
successful business.
In Europe, Mobil Gas Marketing has taken advantage of the opening
of the British gas market and is now the largest independent direct
marketer of gas in the U.K., supplying gas for power generation and to a
wide variety of industrial and commercial customers. In addition to
marketing Mobil's equity gas production, we have purchased for resale
our partners' gas from the Scott and Beryl fields. U.K. gas sales
averaged 562 million cubic feet per day. Mobil will also purchase gas
from the Britannia field starting in 1998. In 1994, we established the
Mobil Europe Gas group to coordinate all our European affiliate
gas-marketing activities and to seek new markets for gas. German gas
sales of 465 million cubic feet a day held steady. Gas sales in Norway
also held steady, while sales in the Netherlands fell slightly.
The capacity of the Mobil-operated Scottish Area Gas Evacuation
system (Mobil share 22.5%) was doubled to 1.2 billion cubic feet a day
in 1994, and treating facilities were enhanced to accommodate the
higher-sulfur gas from the Brae and Scott fields that is now being
processed. In 1994, the Excalibur field (Mobil share 100%) began
delivering gas through the Lancelot Area Pipeline System at a rate of 85
million cubic feet a day. A future Lancelot area satellite, the Galahad
field (Mobil share 72%), is currently under development for a planned
production start-up in late 1995.
Deliveries of LNG from the Arun field in Indonesia now total more
than 2,400 cargoes since 1978, with a record 224 cargoes shipped in 1994
to markets in the Asia-Pacific region. Each cargo is about 58,000 tons,
or enough to supply all the electricity needs of a city the size of
Washington, D.C., for about two weeks. Worldwide demand for LNG is
expected to more than double in the next 15 years. Mobil's PT Arun joint
venture is the largest marketer of LNG in the region, supplying some 20%
of the LNG delivered to Asia-Pacific markets. While the Arun field will
continue to produce at its current rate for some time, we are actively
developing discovered fields such as South Lhok Sukon, Pase and NSO and
are exploring for new ones to supplement supplies to the PT Arun
processing plant after Arun production decline begins in the late 1990s.
Mobil 8
MARKETING & REFINING
MARKETING & REFINING AT A GLANCE
What we do: The downstream sector processes crude oil into fuels,
lubricants, petrochemical feedstocks and other products at 21
refineries. It also includes supply, trading and transportation
activities that help optimize our worldwide system. Some 20,000 service
stations sell Mobil products around the world.
Major strengths: We have a strong presence in the high-growth
Pacific Rim region, and our U.S. refineries are among the best at
processing heavy, lower-cost crude oils into premium products. Operating
costs have been slashed and facilities upgraded to enhance their
competitiveness and meet the latest environmental standards.
How we did in '94: Operating income declined 11% from 1993. Expense
reductions and other business initiatives partially offset weaker
manufacturing margins. Product sales rose 5%.
What's ahead: Upgrades to refineries in Japan and Australia and new
marketing facilities in China will help meet Pacific Rim demand growth.
Organizational changes in Europe and the U.S. will enhance our ability
to find growth opportunities and reduce costs. Market entry programs in
Latin America are positioning us for further growth.
<PHOTO APPEARS HERE>
With a brighter, more open look, "On-the-Run" stores at Mobil service
stations carry new merchandise and a new strategy aimed at keeping
customers coming back. By the end of 1996, we expect to have franchised
more than 500 of these new convenience stores.
Mobil 9
MARKETING & REFINING
Marketing & Refining had a successful year in 1994 despite difficult
business conditions. The impact of a lingering recession and continued
growth in industry refining capacity caused worldwide refining margins
to soften, falling as much as 30% in some markets. Improved marketing
margins, particularly outside the U.S., partially offset weaker
manufacturing results.
While the business climate was difficult, operating income in 1994
was $964 million-only 11% below 1993's strong earnings performance-for
Mobil's downstream portfolio, which includes Middle East, Marine
Transportation, and Supply & Trading as well as Marketing & Refining. In
contrast, many of our competitors reported a drop in downstream income
of 20% to 30% or more.
Mobil's growing competitive strength reflects the impact of ongoing
strategies designed to make us a top global competitor-a company strong
enough to weather difficult times and positioned to prosper in the good
times. These strategies cover a wide range of business initiatives that
can be summarized in two broad objectives:
Obtain the maximum value from our existing assets through more
productive operating practices and lower costs.
Identify and develop opportunities for growth in selected
high-potential markets as well as in existing, mature markets.
Getting the most out of what we have starts with an intention to
become a true market-driven organization delivering unprecedented
customer satisfaction. To accomplish this, we need to understand our
customers, know what they want, reinvent our business to deliver it, and
do all of this at the lowest possible cost.
Starting with Mobil's refineries, our people are focusing on
sharing best practices and developing initiatives to improve operating
reliability, increase premium product yields and reduce expenses.
At our 315,000-barrel-a-day Beaumont, Texas, refinery, Mobil's
largest, records were set in 1994 for the production of Super Unleaded
gasoline, jet fuel and low-sulfur diesel. In addition, net cash
operating costs have been reduced by more than $80 million per year
since 1992. Production records were set and operating expenses reduced
at many of our U.S. and overseas refineries.
In Europe, a breakthrough was achieved in the use of multi-plant
computer models to exploit operational synergies between refineries. Our
successes there are helping Mobil refineries in other regions.
We are backing up these efforts with key investments designed to
improve our refineries and keep them in the top tier of competition. In
the early 1990s, many of these investments were in the U.S. and were
needed to meet product specifications imposed by the 1990 Clean Air Act
Amendments. As a result, all five of Mobil's U.S. refineries are capable
of producing cleaner-burning reformulated gasoline for today's markets.
In the last few years, our focus has shifted to the Pacific Rim and
the region's growing demand for quality petroleum and petrochemical
products. In Australia, construction is about to begin on a $180 million
upgrading unit for our Altona refinery, and we are expanding lubricant
base-stock production at our Adelaide refinery. In Singapore, the major
gasoline and petrochemical complex that started up at our Jurong
refinery in early 1994 is already operating above design capacity.
In Japan, our joint-venture refinery in Chiba (50% Mobil) brought
on stream two major upgrading projects costing a total of $270 million
during 1994, and approval was granted for the construction of a $370
million upgrading unit at another joint-venture refinery in Kawasaki
(25% Mobil). These facilities will upgrade lower-value products, such as
high-sulfur fuel oil, into higher-valued gasoline and low-sulfur
distillate for the Japanese market.
Continuous improvement is also a way of life for the marketing side
of our busi-
<PHOTO APPEARS HERE>
New wax-emulsion and grease plant operates at our lubricant-blending
facility on the outskirts of Mexico City. Supplying 70% of the
particle-board wax-emulsion market in Mexico, it demonstrates one way
we're investing in key growth markets.
Mobil 10
MARKETING & REFINING
We're looking closely
at all of our assets
and restructuring or
divesting them as
necessary to maximize
long-term value.
ness. Whether it is a realignment into geographical units in the U.S.,
or a restructuring along functional lines in Europe, the result is a
stronger focus on lowering expenses, identifying growth opportunities
and being fully competitive wherever we do business.
One way that we do this is by focusing on one of our most important
assets, customer loyalty. This was very much on our mind when we
launched the Friendly Serve SM program at 80 service stations in the
Orlando, Florida, area early in 1995. Friendly Serve ensures that
Mobil's customers are offered safe, clean locations, top-quality
products and speedy service from helpful, friendly employees. It is a
reflection of our intention to provide the best buying experience in the
industry.
In Europe, we pioneered a new service concept bringing together all
administrative groups that deal directly with the commercial customer
into one Customer Service Department. Customers appreciate the
simplicity of this "one-stop" approach, and our sales force is able to
spend more time with customers in the field.
We also maintained our leadership position in customer-activated,
pay-at-the-pump terminals, which are now available at more than 2,700
Mobil service stations around the world. The success of these efforts
continues to show up in our sales numbers. For example, in our key
markets in the U.S. our market share is now about 18%.
We also continue to strengthen an already impressive lubricants
business. Two out of three cars produced in North America are filled
with Mobil motor oils, and sales of Delvac 1300 Super premium
mineral-based commercial engine oil increased by 30% over 1993.
Sales of Mobil 1 (R) synthetic passenger-car engine oil continued an
impressive growth record, bolstered by sponsorship of the record-setting
Roger Penske Marlboro Indy car race team. Mobil 1 (R) lubricated the
winning car at 12 Indy car events including the Indianapolis 500. In
January 1995, Mobil also became a long-term partner of the new Marlboro
McLaren Mercedes team in Formula 1 auto racing, helping to strengthen
our position as a leading marketer of premium lubricants across Europe.
To strengthen Mobil as a top competitor, we are looking closely at
all of our assets and restructuring or divesting them as necessary for
maximum long-term value. In 1994, we exchanged noncore stations in
France for retail sites in our key Spanish market, and we outsourced our
credit-card processing operations in Kansas City. We also sold 50
nonstrategic service stations in Pennsylvania and Texas to distributors
who will operate them as Mobil-branded outlets.
Operations at our lubricant-blending plants were streamlined and
consolidated, leading to the closing of two plants in the U.S. and one
in Australia. At the same time, we launched a major modernization of the
Gravenchon, France, blending plant, Mobil's largest in Europe. The
Gravenchon project will improve customer service and reduce
manufacturing costs.
One of the tools we use to get the maximum value from what we have
is a total commitment to quality-in our facilities, in our products and
services, and in our people. The recognized standard for measuring
quality is certification by the International Standards Organization
(ISO). Mobil's downstream facilities received 26 new ISO certifications
in 1994, giving us a total of 78 and placing us with the industry
leaders. Among the most notable of the new accreditations is our
Torrance, California, refinery, the first major fuels refinery in the
U.S. to be ISO certified, and our joint-venture refinery in Wakayama
(25% Mobil), the first refinery in Japan to be fully ISO certified.
Finding ways to grow the business also is a critical ingredient for
Mobil's long-term competitive success. We're investing in high-growth
markets such as those in the Pacific Rim. Mobil has a long history in
that part of the world. Our affiliates in China, Hong Kong
<PHOTO APPEARS HERE>
Tugboat clears path through the icy Hudson River in New York State.
Meanwhile, our ocean-going fleet reached a milestone in September 1994.
Mobil became the first company to obtain from the Coast Guard a
Certificate of Financial Responsibility, now required to operate oil
tankers in U.S. waters.
Mobil 11
MARKETING & REFINING
Mobil's downstream
system is among the
best in the industry,
and getting better.
and Taiwan celebrated their 100th anniversaries in 1994.
Some 30% of Mobil's worldwide refining capacity is in the Pacific
Rim, a higher percentage than any of our major competitors. We sell a
full range of products in many of the region's most rapidly growing
economies, including China, Hong Kong, Malaysia, Singapore and Thailand.
Mobil's product sales in Southeast Asia increased by 20% in 1994,
following a similar increase in 1993.
Much of this growth is in the sale of petroleum products to China,
where we are the leading importer of finished lubricants. Product
imports are supplied from Tsing Yi, a new product terminal and
lubricant-blending plant in Hong Kong. We announced in 1994 that we will
be building a new lubricant-blending plant in Tianjin, China, that will
give us a strong logistical base from which we can supply the northern
part of the country. This is the first wholly foreign-owned oil-industry
facility approved by the Chinese authorities.
But growth has not been limited to the Pacific Rim. We achieved
significant growth in southern Europe, especially with our successful
Spanish market entry, and in Turkey. In Russia, Mobil and Mercedes-Benz
signed an agreement to cooperate in the car after-care market.
Mercedes-Benz will exclusively recommend Mobil lubricants to its dealers
in Russia and list recommended Mobil products in its owner manuals.
In Saudi Arabia, the Luberef joint venture (30% Mobil) will
construct a lubricant base-stock refinery in Yanbu, the company's second
such facility in the country, in order to meet growing Saudi and
regional demands.
Attractive long-term opportunities in Latin America also are high
on our list, building on our strong position across the region in
lubricants. The first Mobil service station in Peru opened in late 1994,
with about 50 expected to be in operation by the end of 1995. We
also are entering the retail fuels market in Ecuador and the lubricants
market in Venezuela.
And in Argentina, our lubricants business will be strengthened as a
result of an arrangement we recently entered into that gives one of the
country's leading oil marketers exclusive rights to blend and market
Mobil-branded lubricants.
In recognition of Africa's growth potential, we created a new
company, Mobil Africa, which will coordinate our interests across the
continent, improving Mobil's ability to capitalize on growth
opportunities.
Several significant environmental milestones were reached in 1994.
By December 28, any company operating oil tankers in U.S. waters was
required to obtain a Certificate of Financial Responsibility (COFR)
proving that it has the financial resources to handle an oil spill,
should one occur. In September, Mobil became the first company to
demonstrate its readiness to the Coast Guard and obtain a COFR.
We reached another milestone on December 31 with the transition to
reformulated gasoline (RFG). On that date, more than 50% of the gasoline
Mobil sells in the U.S had to be the cleaner-burning RFG. Despite press
speculation about potential industry supply problems, both the December
28 and 31 deadlines passed without disruption-testimony to Mobil's and
the industry's logistical prowess.
Throughout all of 1994, Mobil continued to operate its marine fleet
in a safe and cost-effective manner. As part of our gradual fleet
renewal program, a second environmentally advanced double-hull very
large crude carrier (VLCC) was ordered from Sumitomo shipyard in Japan.
This state-of-the-art sister ship to Mobil's first double-hull VLCC,
Eagle, will be delivered in 1996.
To sum it up, Mobil's downstream system is among the best in the
industry, and getting better. Operating expenses have been reduced by
more than $375 million since 1991 despite inflation and volume growth,
investments are being made to enhance efficiency and flexibility, and we
are aggressively pursuing short- and long-term profitable growth
opportunities.
Mobil 12
CHEMICAL & OTHER BUSINESSES
CHEMICAL & OTHER BUSINESSES AT A GLANCE
What we do: Mobil Chemical makes and markets basic petrochemicals,
plastic-packaging films and consumer plastics such as Hefty R brands.
Chemical also makes specialty products like synthetic lubricant base
stocks and additives for fuels and lubricants.
Major strengths: Chemical is diversified beyond petrochemicals,
with strong businesses in specialty chemicals, films and more. We've cut
costs, targeted investments to leverage technology and feedstock
advantages, focused markets and formed synergies with other Mobil
operations.
How we did in '94: Operating earnings were up significantly in
1994. Market fundamentals improved. Many business initiatives, including
restructuring, began showing positive results throughout the
organization. We streamed an aromatics complex in Singapore which, just
a few months after beginning operations, performed above design
capacity.
What's ahead: Mobil Chemical will continue to enhance its global
position, improve productivity, cut costs and develop innovative
products. We've initiated projects to double our capacity to make
paraxylene, a key raw material to manufacture polyester. We plan to
build a grass-roots plant in Texas and expand two existing facilities.
<PHOTO APPEARS HERE>
Team checks on construction of Amsterdam plant that will make up to 4.4
million gallons a year of ester base stocks for synthetic lubricants.
Demand is growing for our synthetics, including a line of Environmental
Awareness Lubricants used in refrigerators that help protect the ozone
layer.
Mobil 13
CHEMICAL & OTHER BUSINESSES
Chemical operating earnings of $224 million in 1994 were $180 million
higher than 1993 as all our businesses began to demonstrate early
benefits from ongoing restructuring and re-engineering programs. An
improved global economy contributed to stronger industry fundamentals,
especially for polyethylene resin and aromatics products.
Margins for our integrated polyethylene resin operations improved
as the ethylene industry's capacity utilization tightened. This
tightening resulted in part from strong worldwide demand growth for
downstream derivatives along with a decrease in available ethylene
manufacturing capacity following a wide variety of industry operational
problems. Mobil's sales volumes rose as our Singapore aromatics facility
and additions to our European OPP films and U.S. chemical specialties
businesses came on stream. Higher volumes and benefits from business
initiatives helped boost our plastics fabricating results.
Mobil Chemical initiated a program to rethink how we do business.
Our employees looked at most aspects of our operations and made
recommendations to radically redesign them. Actions taken include:
re-engineering staff functions to streamline processes and improve
services; closing three smaller, less competitive plants; rationalizing
product lines, and improving manufacturing practices and inventory
management. We're well along with a program that will reduce a total of
2,300 positions in our plastics, films and petrochemicals operations.
Full benefits of these programs will be reflected by 1996.
The need to pursue profitable growth opportunities goes
hand-in-hand with our re-engineering. We've launched a strategic study
to align the long-term vision of Mobil Chemical with the opportunities
in the marketplace.
A cornerstone of our long-term vision is to capitalize on the
rapidly growing Asia-Pacific markets. Chemical, working together with
Marketing & Refining, brought an aromatics complex on stream in
Singapore early in 1994. In just a few months after the plant started
operating, it was performing above its design capacity, making key
feedstocks for nylon and polyester. In addition, our timing in the
marketplace was excellent. Production from the plant was in strong
demand even before the unit began operating.
This facility reflects our commitment to the rapidly growing
aromatics market worldwide and in Asia-Pacific in particular. People in
the U.S. use an average 60 pounds of polyester fiber a year, while in
Asia the average is five to seven pounds per person. With high economic
growth rates and a population of more than three billion people, it
seems likely that the region's demand for polyester and its feedstocks
will increase more rapidly here than in the rest of the world. The
demand for one of these feedstocks, paraxylene, is growing at 8% to 10%
per year in Asia, while its supply is expected to remain limited for the
remainder of the decade. We've initiated projects to build a new
paraxylene plant in Texas and expand existing plants in Louisiana and
Singapore, doubling our current capacity by 1998.
Asia-Pacific's polyethylene market is expected to grow 7% annually
through the end of the decade, accounting for 30% of the world's growth
in polyethylene resin. This rapid growth lends support to plans for a
major expansion of our low-cost petrochemical complex in Saudi Arabia,
and preliminary engineering studies are under way with our Saudi joint
venture partner, SABIC.
Revenues from Asia-Pacific accounted for 7% of Chemical's total 1994
sales. By 2000, Asia-Pacific is expected to account for about 20% of
Mobil Chemical's revenues.
Performance improved significantly for our plastics-fabricating
businesses. Mobil Chemical is the premier supplier of oriented
polypropylene (OPP) films in North America and Europe, offering a full
product slate of flexible packaging options to our customers, with a
strong lead in coated films. Our new products have broadened the market
<PHOTO APPEARS HERE>
Production from our new aromatics complex in Singapore was in demand
even before it began operating early in 1994. We've begun work on
expanding the plant, which supplies key feedstocks to meet the
Asia-Pacific region's growing demand for nylon and polyester.
Mobil 14
CHEMICAL & OTHER BUSINESSES
Mobil Chemical
plays an active role
in implementing
solutions to divert
plastic scrap from
the solid-waste
stream.
with new applications and provided higher-performance films. We are
striving to shorten the time required to bring new products to the marketplace.
To meet high European growth rates for our OPP products, we are
doubling the capacity of our recently constructed facility in Kerkrade,
the Netherlands. From a strong North American and European base, we are
well positioned to support our multinational customers as they enter new
markets.
We're also a leading North American supplier of polyethylene films
and polystyrene foam products, holding the No. 1 or No. 2 position in
the majority of our markets. Products such as our Hefty R bags and
plates meet customers' need for value. We're also the leading supplier
of institutional, grocery and transport-packaging plastic products.
To meet the growing demand for synthetic lubricants, we are adding
a second reactor train in Beaumont, Texas, to boost production of
polyalphaolefin (PAO) base stocks. We are also adding a smaller unit to
produce the next generation of high viscosity PAOs. These engineered
fluids are currently manufactured in a broad range of viscosities,
including those for Advanced Formula Mobil 1 R, Mobil's premier
automotive motor oil, and industrial specialty lubes. In Europe, we're
expanding our lubricant ester capacity by building a grass-roots plant
in Amsterdam, the Netherlands. All of these facilities will come on
stream over the next two years.
Demand for lubricant additives continues to grow. In the developed
world, more-demanding lubrication specifications are leading to the need
for more additives. In emerging markets, increasing lubrication needs
are spurring overall demand. We're developing several new product lines
and market areas, which will provide future growth opportunities.
Mobil Chemical plays an active role in implementing solutions to
divert plastic scrap from the solid-waste stream. We collect used
grocery sacks from more than 4,000 supermarkets and use them to make a
wood-polymer composite building material called Trex TM. This composite
outperforms lumber in decks, bulkheads, playground equipment,
landscaping, picnic tables, benches and other applications. Trex is
highly resistant to damage from moisture, solvents and saltwater, and it
doesn't splinter, crack or need to be painted.
We reprocess scrap stretch film. Our plastic-film washing and
reprocessing line handled 12 million pounds of film scrap last year. We
are working with schools, hospitals and other industrial food-service
establishments to develop polystyrene-foam collection programs.
Scientists at our laboratories are developing ways to improve both the
virgin and recycled components of plastic blends in an effort to make
products that perform at the levels normally expected of material with
100% virgin content.
Operating performance was strong in other operations as well. Mobil
Land Development Corporation's 1994 performance reflected an improved
residential real estate market. Revenues were $230 million in 1994, up
from $156 million in 1993 and $104 million in 1992. Phosphate Minerals'
net sales to trade were $160 million in 1994, unchanged from 1993.
Mobil's Mining & Minerals Division produces and sells phosphate
rock and fertilizers. In 1994, Mobil's mines produced more than two
million tons of phosphate rock. Development of a new phosphate mine near
Fort Meade, Florida, which began in 1992, is nearly complete. Initial
production is expected to begin during the second quarter of 1995 at a
rate of 3.5 million tons per year. Mobil's phosphate operations play a
significant role in agriculture today.
Mobil Land Development Corporation engages in real estate
operations and investments. Its goal is to create value by acquiring and
developing properties with strong appreciation potential. Land holdings
at year-end totaled 34,000 acres in seven states.
<PHOTO APPEARS HERE>
In computer visualization, high-octane molecule passes through zeolite
catalyst. Mobil's proprietary zeolite technology helps keep costs down
in refining reformulated gasoline needed in many of our U.S. markets.
Mobil 15
THE ENVIRONMENT
We believe protecting the environment makes good business sense. It's
more efficient to prevent problems than to correct them after they
occur.
Stopping waste and pollution at the source is one of our primary
aims. Over the years, we've made innovative changes throughout the Mobil
system-from oil fields and ships to refineries and chemical plants-to
reduce air, water and land pollution and to recycle more waste into
salable products.
We've reduced offsite waste disposal from our five U.S. refineries
by 27% from 1991 to 1993. We've also reduced the release of pollutants
from our refineries and chemical plants by nearly 40% from 1988 to the
end of 1993, according to the U.S. Environmental Protection Agency's
(EPA's) latest Toxic Release Inventory report. In 1994, we continued to
improve: New sulfur recovery technology, for example, at our Joliet,
Illinois, refinery has reduced sulfur emissions by more than 1,500 tons
a year.
In our E&P operations, we're using biodegradable drilling muds in
environmentally sensitive areas of Indonesia and the U.S. In Germany
we're using protective concrete aprons around drilling rigs where needed
to prevent soil contamination. We've designed our exploration activities
for minimal disturbance to the rain forests in Peru and Bolivia and to
sensitive wetlands and nature preserves, such as around the Caspian Sea.
In our marine operations, we've had no major oil spills for more
than 10 years-one of the best records in the industry. We've further
reduced the risk of oil spills with one of industry's most demanding
ship inspection and loss prevention programs. And should a spill occur,
our three oil spill response teams-covering the Americas; Europe, Africa
and the Middle East; and the Pacific Rim-are ready to respond quickly
and effectively to minimize the impact on the environment. In 1994, we
put each of our response teams through major oil-spill preparedness
exercises, several of them in cooperation with government agencies of a
host country.
Mobil continues to receive awards and honors that reflect our
long-standing global commitment to environmental matters. In 1994, for
example:
We earned the U.S. EPA's first Partner of the Year award for
outstanding achievement in the voluntary Green Lights program. In our
first two years in the program, Mobil facilities across the country
reduced lighting energy consumption by nine million kilowatt hours, or
49%, by switching to high-efficiency lighting.
Australia's Environmental Protection Authority gave Kemcor
Australia, a Mobil-Exxon joint venture, the Clean Air Award in the
Industry and Commerce category. The award recognizes Kemcor for
developing new technology for reducing emissions of nitrogen oxides at
its South Melbourne plant-the largest in Australia for making plastic,
rubber and petrochemicals.
Our refinery in Chalmette received a Louisiana Department of
Environmental Quality Secretary's Award for Environmental Leadership for
reducing the disposal of sour water in underground injection wells by
98.7% from 1988 to 1992.
California's Oil and Gas Division gave our Midway-Sunset heavy-oil
field operations an Outstanding Lease Award for leadership in reducing
waste and emissions, and protecting a wildlife habitat.
Our Covington plastics plant won the Georgia Department of
Community Affairs Clean and Beautiful Award for reducing solid waste by
more than 40% over two years as the result of an aggressive recycling
program.
French authorities in Normandy granted an Environmental Excellence
Award to Mobil's Gravenchon Research Center for its project involving
the development of lubricants for use with ozone-friendly refrigerants.
We're proud of our achievements, and we'll continue to work hard to
enhance and strengthen our performance. It's the sensible thing to do.
<GRAPH APPEARS HERE>
The U.S. Environmental Protection Agency recognized Mobil for reducing
emissions of 17 high-priority chemicals by more than a million pounds in
the voluntary "33/50" project. We're well on our way to meeting the 1995
goal of 50% reduction.
Mobil 16
FINANCIAL SECTION
Highlights
1994 operating earnings of $2.2 billion (excluding $472 million of
special charges) were essentially equal to last year despite weak
worldwide petroleum sector fundamentals.
Worldwide additions to proved reserves were 117% of production in 1994,
excluding purchases and sales.
Worldwide petroleum product sales volumes grew 5%, and worldwide
production of liquids and natural gas increased 2%.
Chemical operating income rose dramatically, reflecting improvement in
petrochemical markets, higher sales volumes and benefits from business
initiatives.
Controllable cash before-tax operating expenses were reduced over $250
million this year, in addition to reductions of $575 million over the
previous two years.
Dividend payments increased for the seventh consecutive year, to $3.40
per share.
Key Financial Indicators
(In millions, except per-share and ratio amounts) 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------
Income, Excluding the Effects of Special Items
and Change in Accounting Principle(s)
in 1992 and 1994 $ 1,921 $ 1,894 $ 1,488 $ 2,224 $ 2,231
Special Items 8 26 (180) (140) (472)
--------------------------------------------
Income, Excluding the Effect of Change in
Accounting Principle(s) in 1992 and 1994 $ 1,929 $ 1,920 $ 1,308 $ 2,084 $ 1,759
Per common share 4.60 4.65 3.13 5.07 4.28
Common Stock Dividends Per Share 2.825 3.125 3.20 3.25 3.40
- -----------------------------------------------------------------------------------------------
Capital and Exploration Expenditures $ 4,374 $ 5,053 $ 4,470 $ 3,656 $ 3,825
- -----------------------------------------------------------------------------------------------
Debt-to-Capitalization Ratio 30% 32% 34% 32% 31%
Total Debt $ 7,314 $ 8,229 $ 8,520 $ 8,027 $ 7,727
- -----------------------------------------------------------------------------------------------
Shareholders' Equity $17,072 $17,534 $16,540 $17,237 $17,146
Per common share 42.44 43.74 41.06 42.74 42.61
- -----------------------------------------------------------------------------------------------
Financial Section Contents
Management Discussion and Analysis................................ 18
Consolidated Financial Statements................................. 29
Notes to Financial Statements..................................... 36
Reports of Management and Independent Auditors.................... 49
Supplementary Information......................................... 50
<GRAPH APPEARS HERE>
Mobil share price appreciation plus reinvested dividends returned 11.1%
annually - 2.4 percentage points above the S&P 500.
17 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
Outlook
Before reviewing the goals and financial results that follow, you may find
it helpful to understand Mobil's outlook for the petroleum and chemical
industries. Although we cannot be certain this view will prove accurate,
we describe below both known and anticipated trends relevant to our future
operations.
The energy business will remain highly competitive, and large capital
investments will continue to be required to support future operations and
growth. The size of such investment programs and the lead time often
needed to complete them require a long-term view.
Oil and natural gas will continue to satisfy much of the world's energy
needs in the foreseeable future. Continuing price volatility in crude oil
and natural gas markets will provide a difficult environment for the
industry in the near term. Prices and related profitability will remain
volatile in response to market forces, political uncertainties and host
country legislation; over the longer term, however, prices should rise
gradually-reflecting inflation-as supplies appear sufficient to satisfy
demand growth.
We believe the industry will continue to grow in the international
upstream sector where opportunities are attractive and where more
countries are opening to international competition, but we also recognize
that certain of these areas are subject to regional instabilities. In the
U.S., government policies continue to restrict access to opportunities
with the best economic potential.
The U.S. marketing and refining industry will continue to face a
highly competitive environment, but one in which margins should improve
gradually from the low levels seen in recent years. Refining will also
continue to require significant expenditures to meet environmental
regulations, including those pertaining to production of reformulated
gasolines. Mobil's U.S. refining system is generally well positioned since
it is among the best in the industry.
Refining margins in the Pacific Rim are expected to recover from the
low levels experienced in 1994, driven by the region's strong economic
growth. In Europe, the highly competitive environment and a forecast of
limited growth in demand for oil products could restrain improvements in
refining margins. In this environment, international marketing margins are
expected to remain at about the level experienced in 1994.
Mobil will continue to balance its overall supply and demand for
hydrocarbons and manage its price risk while providing its customers with
competitive supply. These objectives are accomplished by using different
instruments on various markets to quickly respond to the ever-changing
underlying conditions. Contracts on some of these markets require physical
deliveries, whereas contracts on others, such as forwards, futures, swaps,
and options do not require settlement with physical volumes. All of these
contracts are based on price, location and quality characteristics of
crude oil, natural gas and petroleum products, and are viewed as integral
parts of Mobil's overall business strategies.
Chemical market fundamentals have improved significantly worldwide,
particularly in petrochemicals. We believe that demand growth,
particularly in the Pacific Rim, will be strong enough to support
attractive margins despite recent capacity additions. Productivity
enhancements and cost reductions will continue to benefit earnings in
Chemical.
A strong focus on controlling expenses and improving operating
efficiencies will be a prerequisite to generating acceptable financial
returns in all our businesses, both in the U.S. and in international
areas. In October 1994, Mobil announced that it will take significant and
comprehensive action to reduce costs and further improve the effectiveness
of staff support groups across the corporation. Plans to achieve these
objectives will be finalized in the spring of 1995, and implementation is
expected to be essentially completed by the end of 1995. At present, the
impact of this planned restructuring has not been determined but is likely
to result in a restructuring charge in 1995. These cost reduction programs
will continue.
Mobil's 1995 capital and exploration expenditure program is forecast
to be $4.1 billion (35% - U.S.; 65% - International). We will continue to
monitor our business environment and remain flexible to adjust our plans
as attractive opportunities arise or economic and political conditions
warrant. Our primary focus for all business segments is to realize the
greatest value from our existing assets, to grow selected businesses and
to provide superior returns to our shareholders.
<GRAPH APPEARS HERE>
This year's lower income primarily reflects charges for ongoing
restructuring and asset review programs. Excluding these
charges, a strong operating performance offset weak fundamentals.
<GRAPH APPEARS HERE>
Capital and exploration expenditures were slightly higher in 1994, as we
focused on attractive growth opportunities around the world.
18 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Results
A discussion and analysis of consolidated financial and operating
performance appears on this page. Our business segments are separately
reviewed on pages 20-25. While reading these discussions, you may find it
helpful to refer to pages 28-48 for the Consolidated Financial Statements
and accompanying commentary and to pages 50-57 for Supplementary
Information. The graphs, charts and associated captions are not a part of
the Consolidated Financial Statements and Notes thereto.
Consolidated Results
Consolidated Earnings
- ---------------------------------------------------------------------------------------------
(In millions, except per-share amounts) 1992 1993 1994
- ---------------------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing $ 1,390 $ 1,652 $1,076
Marketing & Refining 184 705 888
- ---------------------------------------------------------------------------------------------
Total Petroleum 1,574 2,357 1,964
Chemical 136 44 102
- ---------------------------------------------------------------------------------------------
Segment Earnings 1,710 2,401 2,066
Corporate and Other (86) (190) (98)
Net Financing Expense (316) (127) (209)
- ---------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle(s) 1,308 2,084 1,759
Cumulative Effect of Change in Accounting Principle(s) (446) -- (680)
- ---------------------------------------------------------------------------------------------
Net Income $ 862 $ 2,084 $ 1,079
Per common share $ 2.01 $ 5.07 $ 2.57
- ---------------------------------------------------------------------------------------------
Our goal is to achieve a 12% return on capital employed by the end of 1998
while maintaining a strong financial position and a base of assets,
hydrocarbon reserves and human resources to ensure growth in the years
ahead.
Consolidated net income in 1994 was $1,079 million, after a noncash
charge of $680 million for a change in accounting principle (see Note 2 to
the Financial Statements on page 37). Excluding the accounting change,
earnings of $1,759 million were $325 million lower than 1993. This year's
net income reflected special charges of $472 million, primarily for
ongoing asset review programs and restructuring. In 1993, special charges
were $140 million. Mobil's strong operating performance and a recovery in
Chemical business sector conditions wholly offset the impact of
unfavorable petroleum market fundamentals and the higher expenses of an
expanded exploratory drilling program. Initiatives implemented as part of
our ongoing, continuous improvement programs reduced expenses and
increased revenues this year.
In Exploration & Producing, lower average crude oil and natural gas
prices and higher exploration expenses were only partly offset by higher
volumes and lower operating expenses. Earnings in Marketing & Refining
were higher; however, last year included a $250 million charge for a lower
of cost or market inventory adjustment. Excluding this charge, earnings
were lower this year, as weak worldwide refining margins were only
partially offset by favorable international marketing margins, higher
worldwide sales volumes and benefits from ongoing business initiatives.
Chemical earnings rebounded sharply, primarily due to substantial
improvement in the petrochemical markets, higher sales volumes and
benefits from business initiatives.
Consolidated net income in 1993 was $2,084 million, up from $862
million in 1992 when earnings included a charge of $446 million for a
change of accounting principle. The increase in consolidated income was
due, in part, to higher North American natural gas prices and reduced
exploration expenses. Additionally, earnings benefited from ongoing
business initiatives and cost reduction efforts, improved refinery
performance, higher worldwide product sales volumes and improved marketing
margins in the Pacific Rim.
Special items (not separately identified in the table above)
decreased earnings in 1994 by $472 million, compared with decreases of
$140 million in 1993 and $180 million in 1992. Special items represent the
earnings effects from events not attributable to current business
operations. Operating earnings, which exclude these special items and the
effects of changes in accounting principle(s), were $2,231 million in
1994, $2,224 million in 1993 and $1,488 million in 1992, and reflect the
steady improvement in our core businesses. Special items are more fully
described in the business segment discussions that follow.
<GRAPH APPEARS HERE>
The strengths of our integrated businesses lessened the impact of weak
petroleum market fundamentals.
19 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
Petroleum Operations
Upstream-Exploration & Producing
Exploration & Producing Segment Financial Indicators
- ---------------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- ---------------------------------------------------------------------------------------------
U.S. Earnings $ 348 $ 363 $ 125
International Earnings 1,042 1,289 951
- ---------------------------------------------------------------------------------------------
Total Earnings $ 1,390 $ 1,652 $ 1,076
- ---------------------------------------------------------------------------------------------
Revenues(1) $10,599 $10,449 $10,193
Assets $14,938 $14,334 $14,116
- ---------------------------------------------------------------------------------------------
Capital Expenditures $ 1,522 $ 1,560 $ 1,642
Exploration Expenses 507 405 516
- ---------------------------------------------------------------------------------------------
Total Capital and Exploration Expenditures $ 2,029 $ 1,965 $ 2,158
- ---------------------------------------------------------------------------------------------
(1) Includes intersegment revenues.
Our primary upstream goals are to sustain growth in production and
earnings and continue to improve our financial performance, while
maintaining our worldwide economic reserve base. We once again had
very good operating results in 1994, with another year of record
production levels; however, earnings were adversely impacted by
lower crude oil and natural gas prices and a more extensive
exploratory drilling program. Also affecting earnings were charges
for write-downs, primarily for certain producing properties in
North America, as a result of a reassessment of hydrocarbon
reserves.
Upstream earnings of $1,076 million were $576 million lower
than in 1993. Operating earnings of $1,324 million (U.S., $306
million; International, $1,018 million: refer to tables on page 21)
decreased $206 million, or 13%, due to lower worldwide crude oil
and natural gas prices and higher exploration expenses. Operating
expenses in 1994 were lower, reflecting benefits from continuous
improvement initiatives. Exploration expenses were higher due to a
more aggressive drilling program in 1994.
Worldwide production increased from 1993, as international
production continued to rise, with U.S. volumes essentially flat.
In 1994, Mobil produced 854,000 barrels per day of liquids and
4,670 million cubic feet per day of natural gas. International
liquids production increased in Nigeria and from new fields in
Australia and the United Kingdom (U.K.). Increases from record gas
production in the U.K. more than offset lower production levels in
Canada resulting from asset sales and the natural decline of mature
fields. Worldwide reserve replacement was 117% in 1994, excluding
purchases and sales, and 116% overall. The reserve replacement rate
is up from 92% in 1993, and has averaged 95% for the past five
years.
In 1993, earnings totaled $1,652 million, up $262 million from
1992. Operating earnings of $1,530 million increased $41 million,
mainly reflecting higher North American gas prices and lower
expenses.
Revenues were down slightly in 1994 as lower crude oil
and natural gas prices were only partially offset by higher sales
volumes. In 1993, revenues were slightly lower than 1992, a result
of significantly lower crude oil prices being only partly offset by
strengthening North American natural gas prices. These revenues
include sales to other segments of the company, which are
eliminated in consolidated financial information.
Capital and exploration expenditures of $2,158 million in 1994
were up 10% from 1993. Major development projects initiated,
continued and/or completed during 1994 include Hibernia (Canada);
Arun compression (Indonesia); Excalibur, Gawain and Jupiter fields
(U.K.); and liquefied natural gas (LNG) projects (Qatar). Planned
capital and exploration expenditures for 1995 are $2.4 billion, up
11% from 1994, with a continued emphasis on international areas.
In 1994, Mobil drilled 58 wildcat exploration wells resulting
in 15 discoveries. Development of natural gas reserves in the giant
North field offshore Qatar continued, and new fields were streamed
in the U.K. North Sea. The drydock fabrication phase of the gravity
base structure (GBS) for the Hibernia project was completed, and
the GBS was floated and towed to the deep-water construction site.
The project is on schedule for production start-up in late 1997.
Additional fields will come on stream in the U.K. North Sea and
Nigeria in 1995 and 1996, and development programs for both crude
oil and natural gas are planned for the U.S. and Canada to help
offset natural field declines. Exploration activities in frontier
areas, including Russia, Kazakhstan, Malaysia, Vietnam and South
America, will continue, along with efforts to replace reserves in
established areas through participation in new producing ventures
and acquisitions.
<GRAPH APPEARS HERE>
Lower worldwide prices, higher exploration expenses and asset
write-downs were only partly offset by higher volumes.
<GRAPH APPEARS HERE>
International production continued to grow, primarily in Australia,
the U.K. and Nigeria, while the U.S. held steady.
Mobil 20
MANAGEMENT DISCUSSION AND ANALYSIS
Petroleum Operations (continued)
U.S. Exploration & Producing Earnings
- --------------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- --------------------------------------------------------------------------------------------
Earnings $348 $363 $125
Special Items in Earnings
Asset sales and write-downs (20) (13) (181)
Tax rate change - (23) -
Inventory/supplies adjustments - (19) -
Restructuring provisions (55) (10) -
Environmental provision - (4) -
- --------------------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $423 $432 $306
- --------------------------------------------------------------------------------------------
U.S. Upstream operating earnings of $306 million in 1994 were $126
million lower than 1993 mainly due to significantly lower natural
gas prices, down 14%. Lower crude oil prices and higher exploration
expenses were largely offset by lower operating expenses. Operating
earnings increased slightly in 1993 versus 1992 as higher natural
gas prices and lower expenses offset the effect of lower crude oil
prices.
Our average U.S. crude oil price per barrel dropped $.63 to
$12.91 in 1994, after dropping $2.19 during 1993 and $.69 during
1992. Average natural gas prices per thousand cubic feet fell to
$1.90 in 1994 from $2.22 in 1993. In 1992, natural gas prices
averaged $1.86 per thousand cubic feet.
U.S. production was essentially flat in 1994 as increased
natural gas production, primarily from development projects in the
Gulf of Mexico, offset a slight decrease in liquids production.
Special items in 1994 included charges for property
write-downs and losses on asset sales. Earnings in 1993 included an
increase in deferred taxes resulting from a higher U.S. tax rate,
inventory/supplies adjustments, losses on asset sales and
additional provisions for environmental remediation and
restructuring. Earnings in 1992 were reduced by provisions for
restructuring and a property write-down.
International Exploration & Producing Earnings
- --------------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- --------------------------------------------------------------------------------------------
Earnings $1,042 $1,289 $ 951
- --------------------------------------------------------------------------------------------
Special Items in Earnings
Asset sales and write-downs (61) 15 (58)
Restructuring provisions (25) - (9)
Tax rate changes and other issues 62 176 -
- --------------------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $1,066 $1,098 $1,018
- --------------------------------------------------------------------------------------------
International Upstream operating earnings of $1,018 million in
1994 dropped 7% from 1993, reflecting lower crude oil and natural
gas prices, as well as higher exploration expenses. Production
volumes were higher, mainly as a result of bringing new fields on
stream in Australia and the United Kingdom. Additionally, record
LNG sales were achieved in Indonesia. Operating earnings in 1993
were 3% higher than 1992, when higher production volumes and lower
expenses offset lower crude oil and natural gas prices.
Our average international crude oil price per barrel fell
$1.33 to $15.66 in 1994, after dropping $2.12 in 1993. In 1992,
crude oil prices averaged $19.11 per barrel. International natural
gas prices tend to follow the movement of crude oil prices, but
with varying time lags depending on the country.
Production increases from 1992 to 1994 continue to reflect our
emphasis on international areas. In 1994, record liquids production
was achieved in Nigeria, and the first full-year production from
the Scott and Hudson fields contributed to a 21% increase in
liquids production in the United Kingdom. In Australia, the
streaming of Griffin area fields contributed to a further increase
in liquids production. Increased international gas production was
largely due to the first full year of Lancelot and Guinevere field
gas deliveries and the streaming of the Excalibur field, all in the
United Kingdom.
Special items in 1994 included charges for property
write-downs and a restructuring provision. Earnings in 1993
included net benefits from favorable tax rate changes, tax
settlements and gains on asset sales. Earnings in 1992 included
gains on asset sales, as well as favorable tax adjustments, offset
by property write-downs and a restructuring provision.
<GRAPH APPEARS HERE>
Worldwide crude prices fell about $1 per barrel in 1994 in response
to weak supply/demand fundamentals.
<GRAPH APPEARS HERE>
U.S. natural gas prices fell in 1994, reflecting warmer weather and
increasing supplies from Canada and the Gulf of Mexico.
Mobil 21
MANAGEMENT DISCUSSION AND ANALYSIS
Petroleum Operations (continued)
Downstream-Marketing & Refining
Marketing & Refining Segment Financial Indicators
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
U.S. Earnings (Loss) $ (145) $ 151 $ 241
International Earnings 329 554 647
- -----------------------------------------------------------------------------------------
Total Earnings $ 184 $ 705 $ 888
- -----------------------------------------------------------------------------------------
Revenues(1) $54,404 $53,950 $56,861
- -----------------------------------------------------------------------------------------
Assets $20,651 $20,914 $21,767
- -----------------------------------------------------------------------------------------
Capital Expenditures $ 1,975 $ 1,262 $ 1,297
- -----------------------------------------------------------------------------------------
Our primary downstream goal is to raise our return on assets to a
top competitive level by improving the quality of a good asset
base, streamlining operations, pursuing business opportunities
with growth potential and keeping pace with growing environmental
demands. Earnings in 1994 were good despite weak industry
fundamentals.
Downstream earnings of $888 million in 1994 were $183 million
higher than 1993. Excluding special items (refer to tables on page
23) operating earnings of $964 million (U.S., $273 million;
International, $691 million) decreased $124 million. Refining
margins were lower, reflecting ample supplies of product due to
additional capacity in the U.S., new grass-roots industry capacity
in the Pacific Rim, and weak distillate prices in the face of
warmer-than-normal weather.
The completion of upgrading projects in our Singapore
refinery, higher volumes, improved lube income and ongoing business
initiatives benefited 1994 results. We also recorded restructuring
provisions of $55 million primarily to cover severance benefits
related to work force reductions, mainly in Europe. Cash outlays
associated with these programs will mostly be made by the end of
1995. Projected annualized benefits are expected to be about $40
million after-tax. Continued implementation of cost reduction
efforts in all downstream businesses is expected to favorably
impact 1995 results. To strengthen our competitive position, we are
looking closely at all of our assets. We will continue to
restructure or divest assets, maximizing our long-term returns.
Decisions, if any, to close or sell business units could result in
exit costs for employee severance and asset write-downs.
Earnings in 1993 totaled $705 million, up $521 million from
1992. Operating earnings in 1993 were $735 million higher than in
1992, as a result of improved refinery performances, expense
reductions and strong margins in the Pacific Rim.
Downstream revenues increased 5% in 1994 due to higher product
sales volumes. Revenues were down slightly in 1993 versus 1992,
mainly reflecting lower product prices.
Capital expenditures were up slightly in 1994 with more
directed to the growing international area. Planned capital
expenditures for 1995 are $1.3 billion, unchanged from 1994, with
approximately 40% in the U.S. and 60% in International.
We continue to strengthen our position in areas with growth
potential, particularly in the Pacific Rim. A new cracking unit to
boost production of premium products and a new desulfurization unit
at our joint venture refinery (Mobil share 50%) in Chiba, Japan,
were completed in 1994. Also, our joint venture refinery (Mobil
share 25%) in Kawasaki, Japan, is embarking on a project to upgrade
lower-value residual fuels to higher-value products suitable for
the Japanese market. In 1994, Mobil obtained approval for the
construction of a lubricant blending plant in Tianjin, China, the
first 100% foreign-owned oil industry facility in China, which is
scheduled to be streamed in mid-1997. A contract has been signed
for the construction of a new cracking unit, scheduled to come on
stream in late 1996 at our Altona, Australia, refinery. In Saudi
Arabia, the Petromin Lubricating Oil Refining Company, in which
Mobil owns a 30% interest, announced the construction of a new two
million barrel-per-year lubricant base-stock refinery in Yanbu,
which is scheduled to start up in early 1997. An upgrade project
was approved to enable our Torrance, California, refinery to
produce gasoline meeting California Air Resource Board future
requirements.
<GRAPH APPEARS HERE>
Downstream earnings were bolstered by favorable international
marketing margins and lower special charges.
<GRAPH APPEARS HERE>
Refinery runs increased in the U.S. and in the Pacific Rim, offset
by lower runs in Europe due to turnarounds and weak industry
margins.
Mobil 22
MANAGEMENT DISCUSSION AND ANALYSIS
Petroleum Operations (continued)
U.S. Marketing & Refining Earnings
- --------------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- --------------------------------------------------------------------------------------------
Earnings (Loss) $(145) $ 151 $ 241
Special Items in Earnings
Property write-downs - - (35)
LIFO/other inventory adjustments (18) 22 14
Restructuring provisions (50) (23) (11)
Environmental provisions (60) (144) -
- --------------------------------------------------------------------------------------------
Operating Earnings (Loss) (Excludes Special Items) $ (17) $ 296 $ 273
- --------------------------------------------------------------------------------------------
U.S. Downstream operating earnings were $273 million in 1994,
down $23 million from 1993 due to lower industry margins and a
reduced advantage for refining heavier, higher-sulfur crudes.
Results benefited from continued emphasis on process re-engineering
studies leading to more competitive costs, and other business
initiatives, as well as increased petroleum product sales and
production and higher lube income.
Mobil's gasoline sales-to-trade volumes increased by 2% in
1994 versus 1993. Market share in key market areas increased
slightly to about 18% in 1994.
The 1993 operating income of $296 million was significantly
higher than 1992 due to net margins improving, largely the result
of refinery expansion and upgrading projects, and lower operating
expenses resulting from restructuring and business initiatives. In
addition, refinery downtime was much lower due to improved
reliability and a lighter turnaround schedule in 1993.
Special items reduced earnings in each year. In 1994, special
items were for property write-downs, a restructuring provision and
favorable LIFO/inventory adjustments. Included in 1993 earnings
were a provision for environmental remediation (mainly for service
stations), a charge for restructuring and the favorable impact of a
LIFO liquidation. In 1992, the special charges were for
environmental clean-up costs, restructuring provisions and
unfavorable inventory adjustments.
International Marketing & Refining Earnings
- --------------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- --------------------------------------------------------------------------------------------
Earnings $329 $554 $647
Special Items in Earnings
Restructuring provisions (37) (43) (44)
LIFO/other inventory adjustments (23) (250) -
Asset sales 19 35 -
Tax rate changes - 20 -
- --------------------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $370 $792 $691
- --------------------------------------------------------------------------------------------
International Downstream operating earnings in 1994 were $691
million, $101 million lower than in 1993, reflecting very weak
worldwide refining margins. These were partially offset by higher
marketing margins and benefits derived from ongoing business initiatives,
which contributed to higher trade sales volumes, particularly in the Pacific
Rim, and expense savings, particularly in Europe. This year's results
also reflected the benefit of the streaming of the Jurong, Singapore,
refinery upgrade, which increased gasoline production.
Operating earnings of $792 million in 1993 were $422 million
higher than 1992. Results in the Pacific Rim improved significantly
due to higher product sales volumes, better refining margins, and
improved marketing margins particularly in Japan. European results,
although weak, showed considerable improvement due to lower
operating expenses and improved refinery performance.
Special items in 1994 included restructuring provisions
primarily for work force reductions in Europe. In 1993, earnings
included a $250 million noncash charge for the excess of local
currency LIFO inventory values over market values, restructuring
provisions, gains on asset sales and favorable tax rate changes.
Earnings in 1992 included LIFO inventory liquidation charges and
restructuring provisions, partially offset by gains on asset sales.
<GRAPH APPEARS HERE>
Sales performance was excellent. Volumes increased for the fourth
consecutive year.
<GRAPH APPEARS HERE>
Downstream petroleum product sales revenues were up, driven by this
year's higher sales volumes.
Mobil 23
MANAGEMENT DISCUSSION AND ANALYSIS
Chemical
Chemical Segment Financial Indicators
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Petrochemicals Earnings $ 120 $ 19 $ 129
Plastics and Other Earnings 33 25 88
Restructuring Provisions (17) - (115)
- -----------------------------------------------------------------------------------------
Total Earnings $ 136 $ 44 $ 102
- -----------------------------------------------------------------------------------------
Revenues(1) $3,994 $3,720 $4,463
- -----------------------------------------------------------------------------------------
Assets $3,397 $3,451 $3,672
- -----------------------------------------------------------------------------------------
Capital Expenditures $ 371 $ 312 $ 212
- -----------------------------------------------------------------------------------------
(1) Includes intersegment revenues.
- -----------------------------------------------------------------------------------------
Chemical Earnings
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Earnings $ 136 $ 44 $ 102
Special Items in Earnings
Restructuring provisions (17) - (115)
Environmental provision - - (7)
Asset sales 80 - -
- -----------------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 73 $ 44 $ 224
- -----------------------------------------------------------------------------------------
Our primary Chemical goals are to improve financial performance
through greater productivity and cost reductions, to capitalize on
operating synergies with other Mobil units, and to exploit growth
opportunities where we have a competitive edge. Earnings increased
in 1994 due to improved industry fundamentals, higher sales volumes
and the early benefits from business initiatives, partly offset by
a restructuring provision.
Chemical operating earnings of $224 million in 1994 were $180
million higher than 1993, reflecting better performance in all our
businesses. Income this year benefited from improved industry
fundamentals, notably in polyethylene resin. Margins for our
integrated polyethylene resin operations improved on strong
worldwide demand growth and tight ethylene industry capacity that,
in part, was caused by worldwide industry operating problems.
Additionally, operating income in our plastics fabricating
businesses improved significantly on the strength of higher volumes
and benefits from business initiatives.
Operating earnings in 1993 totaled $44 million, down $29
million from 1992. The decline was primarily due to depressed
margins reflecting weak industry fundamentals.
Petrochemicals sales revenues increased 30% in 1994 due to
higher prices for our olefins and aromatic products. Sales volumes
were higher, reflecting the streaming of the Singapore
petrochemical complex earlier this year, as well as capacity
additions in our European OPP films and U.S. chemical specialties
business. In 1993, sales revenues fell due to lower prices for
commodity petrochemicals and the divestiture of our polystyrene
business. Higher sales volumes in 1993 partially offset this
decline.
Construction of our Jurong, Singapore, aromatics complex was
completed early in 1994. A debottlenecking of this facility is
currently under way as part of the recently announced worldwide
paraxylene expansion program. Other phases of the program include
an upgrading of the existing Chalmette, Louisiana, facility and a
grass-roots plant in Beaumont, Texas. Our new OPP films facility in
Kerkrade, the Netherlands, is being expanded to double in size
during 1995. In our fabricating businesses, we continued upgrading
equipment to increase efficiency and improve quality.
In 1994, Chemical recorded a restructuring charge of $115
million after-tax. The restructuring charge was for employee
severance benefits, the costs of plant closings and costs to exit
certain low-profit product lines. Cash outlays associated with the
program will, for the most part, be made in 1995. Projected
annualized benefits from the work force reductions in this phase of
our restructuring program are expected to be $65-75 million
after-tax, and there will be additional savings from other initia
tives and plant closures.
Capital expenditures were $212 million in 1994. Planned
capital expenditures are about $300 million for 1995, primarily
related to capacity expansions in the United States.
<GRAPH APPEARS HERE>
Chemical earnings benefited from improved industry fundamentals,
higher volumes and business initiatives, partly offset by
restructuring costs.
<GRAPH APPEARS HERE>
Higher revenues resulted from higher prices and volumes.
Mobil 24
MANAGEMENT DISCUSSION AND ANALYSIS
Corporate and Other
Lower effective
interest rates and
lower debt levels
benefited earnings
in 1994.
Corporate and Other Expense
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Corporate and Other Expense $ (86) $(190) $ (98)
Special Items included:
Property write-downs - - (46)
Restructuring provisions (19) (32) 20
Shutdown of solar energy program - (15) -
Claim settlement - (4) -
Tax adjustments 45 - -
Hurricane Andrew property damages (13) - -
- -----------------------------------------------------------------------------------------
Operating Expense (Excludes Special Items) $ (99) $(139) $ (72)
- -----------------------------------------------------------------------------------------
Corporate and Other expense decreased $92 million in 1994 to $98
million. This category includes results from Real Estate and Mining
and Minerals operations, administrative expenses and other corporate
items. Excluding special items (refer to table above), expenses of
$72 million were $67 million lower than last year. Phosphate and
real estate operations improved, and expenses were lower as a result
of the absence of costs incurred last year on the solar energy
program prior to discontinuation of that business.
Special items in 1994 included charges for real estate property
write-downs, partly offset by a credit for prior-year restructuring
charges allocated to the Chemical business segment when this program
was implemented. In 1993, earnings included charges for
corporate-wide restructuring, the shutdown of the solar energy
program and a claim settlement. Special items in 1992 included nonrecurring
favorable tax adjustments, partly offset by charges for corporate restructuring
and a charge for damages from Hurricane Andrew.
Mobil Land Development Corporation engages in real estate
operations and investments. Its goal is to create long-term value by
acquiring and developing properties with strong appreciation
potential. Mobil Land trade revenues were $230 million in 1994, $156
million in 1993 and $104 million in 1992. Land holdings at year-end
totaled 34,000 acres.
Mobil Mining and Minerals produces and sells phosphate rock and
fertilizers, markets Mobil's recovered sulfur in the U.S. and
administers other mineral resource assets. Phosphate minerals net
sales to trade were $160 million in 1994, unchanged from 1993 and up
7% from $149 million in 1992. Phosphate rock production totaled more
than two million tons in 1994.
Net Financing Expense
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Net Financing Expense $(316) $(127) $(209)
Special Items in Expense
Tax adjustments 12 159 -
Foreign exchange adjustment - 13 -
- -----------------------------------------------------------------------------------------
Operating Expense (Excludes Special Items) $(328) $(299) $(209)
- -----------------------------------------------------------------------------------------
Net Financing Expense is primarily the interest Mobil pays on
third-party borrowings, net of earned interest income. Special items
affecting Net Financing Expense in 1992 and 1993 were largely a
result of favorable tax adjustments. Excluding special items, Net
Financing Expense of $209 million in 1994 improved $90 million,
primarily reflecting lower interest rates and debt levels, with
average net debt down $600 million.
Mobil 25
MANAGEMENT DISCUSSION AND ANALYSIS
Over the past
three years Mobil
has spent $3.5 billion
to safeguard the
environment.
Environmental Matters
Environmental Expenditures U.S. International
- -----------------------------------------------------------------------------------------
(In millions) 1992 1993 1994 1992 1993 1994
- -----------------------------------------------------------------------------------------
Capital $372 $326 $279 $200 $182 $174
Protection and Compliance
Ongoing operations 366 359 303 152 148 191
Remediation 138 108 91 21 24 22
- -----------------------------------------------------------------------------------------
Total Environmental Expenditures $876 $793 $673 $373 $354 $387
- -----------------------------------------------------------------------------------------
Mobil's commitment and practice is to conduct its operations with
full concern for safeguarding the environment, employees, customers
and the public-wherever we operate. We accomplish this through
long-standing corporate policies, innovative technologies, extensive
training and constant attention to environmental matters in our
day-to-day operations. Environmental expenditures are a significant
cost of doing business, and the U.S. and other countries continue to
impose more stringent environmental requirements. Although we cannot
predict accurately how environmental expenditures will affect future
operations and earnings, we expect to continue to incur substantial
costs. Mobil believes its costs will not vary significantly from
those of its competitors.
Capital expenditures are additions or modifications to plants and
facilities to limit, monitor and control emissions and waste
generation. The majority of U.S. environmental capital expenditures
have been made to comply with federal and state clean air and water
regulations as well as waste-management requirements. International
capital expenditures were made in response to some tightening of
emission and product quality standards in certain areas.
Capital expenditures were also incurred in 1994 to meet federal and
state requirements related to reformulated gasoline/clean fuels. The
industry decreased the sulfur content of diesel fuel to reduce
sulfur dioxide emissions, and starting in 1995, reformulated
gasoline is required to be sold in a number of metropolitan areas.
Additional emission reductions are mandated by the year 2000.
Worldwide capital expenditures for environmental matters in 1995 are
expected to be 9% lower than in 1994.
Protection and Compliance expenditures are Mobil's recurring costs
associated with managing hazardous substances, emissions and waste
generation in ongoing operations and the costs to remediate
identified contamination.
Like many other companies, Mobil periodically receives notices from
the U.S. Environmental Protection Agency (EPA), or equivalent state
agencies, that it has been designated as a potentially responsible
party (PRP) for remediation of hazardous-waste sites. The majority
of these sites are still under investigation by the EPA or the state
agencies concerned. All PRPs are jointly and severally liable under
the federal Superfund law; however, since the early 1980s, Mobil has
been successful in sharing cleanup costs with other financially
sound companies. At December 31, 1994, Mobil had been successful in
resolving its involvement in 90 of the 230 sites where it had been
named a PRP. The number of PRP sites does not represent a relevant
measure of liability as each company's involvement in a site can
vary substantially.
Mobil believes it has provided adequate reserves for known
environmental obligations. However, Mobil may be subject to future
environmental remediation liabilities relating to assets previously
sold, closed facilities, requirements not yet identified or the sale
or disposition of operating facilities. While the amounts could be
material to Mobil's earnings in the periods in which such
liabilities arise, the extent of such future remediation
requirements and costs is not subject to reasonable estimation.
Based on our long experience in managing environmental matters in
our businesses, we do not anticipate that the aggregate level of
future remediation costs will increase above recent levels so as to
materially and adversely affect our consolidated financial position
or liquidity. See also Note 16 to Financial Statements on page 47
for further discussion of environmental liabilities.
Mobil 26
MANAGEMENT DISCUSSION AND ANALYSIS
Quarterly Financial Data (unaudited)
1993 1994
(In millions, First Second Third Fourth Full First(1) Second Third Fourth Full
except per-share amounts) Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------------------------
Revenues
Sales and services $14,881 $16,043 $15,680 $16,870 $63,474 $14,948 $16,047 $16,739 $19,023 $66,757
Income from equity
investments, asset
sales, interest
and other 174 194 204 (71)(2) 501 170 168 147 141 626
- -----------------------------------------------------------------------------------------------------------------------
Total Revenues 15,055 16,237 15,884 16,799 63,975 15,118 16,215 16,886 19,164 67,383
- -----------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Crude oil, products
and operating
supplies and
expenses 8,505 9,193 8,727 9,197 35,622 8,095 8,839 9,137 10,594 36,665
Exploration expenses 55 110 85 155 405 82 108 152 174 516
Selling and
general expenses 1,184 1,433 1,368 1,498 5,483 1,249 1,344 1,355 1,505 5,453
Depreciation, depletion
and amortization 634 620 641 734 2,629 668 1,034 673 723 3,098
Interest and debt
discount expense 134 (10) 130 70 324 120 135 101 105 461
Taxes other than
income taxes 3,448 3,840 3,807 4,402 15,497 3,827 4,155 4,404 5,126 17,512
Income taxes 605 472 460 394 1,931 542 402 561 414 1,919
- -----------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 14,565 15,658 15,218 16,450 61,891 14,583 16,017 16,383 18,641 65,624
- -----------------------------------------------------------------------------------------------------------------------
Income Before Change in
Accounting Principle 490 579 666 349 2,084 535 198 503 523 1,759
Cumulative Effect of Change in
Accounting Principle - - - - - (680) - - - (680)
- -----------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 490 $ 579 $ 666 $ 349 $ 2,084 $ (145) $ 198 $ 503 $ 523 $ 1,079
- -----------------------------------------------------------------------------------------------------------------------
Per Common Share
Income Before Change in
Accounting Principle $ 1.19 $ 1.41 $ 1.63 $ 0.84 $ 5.07 $ 1.31 $ 0.46 $ 1.23 $ 1.28 $ 4.28
Net Income $ 1.19 $ 1.41 $ 1.63 $ 0.84 $ 5.07 $ (0.40) $ 0.46 $ 1.23 $ 1.28 $ 2.57
Dividends $ 0.80 $ 0.80 $ 0.80 $ 0.85 $ 3.25 $ 0.85 $ 0.85 $ 0.85 $ 0.85 $ 3.40
- -----------------------------------------------------------------------------------------------------------------------
Special Items Included
in Net Income
Asset write-downs - - - - - - $ (220) $ (16) $ (63) $ (299)
Restructuring provisions - $ (41) $ (13) $ (54) $ (108) - (95) (9) (55) (159)
Asset sale gains/(losses) - - - 37 37 - - - (21) (21)
Inventory adjustments - - - (247) (247) - - - 14 14
Environmental provisions - (112) - (36) (148) - - - (7) (7)
Tax-related issues - 213 80 39 332 - - - - -
Mobil Solar shutdown - - - (15) (15) - - - - -
Other - - (14) 23 9 - - - - -
- -----------------------------------------------------------------------------------------------------------------------
Total Special Items - 60 53 (253) (140) - (315) (25) (132) (472)
Cumulative Effect of Change in
Accounting Principle - - - - - (680) - - - (680)
- -----------------------------------------------------------------------------------------------------------------------
Operating Earnings(3) $ 490 $ 519 $ 613 $ 602 $ 2,224 $ 535 $ 513 $ 528 $ 655 $ 2,231
- -----------------------------------------------------------------------------------------------------------------------
Sales Price per Common Share(4)
High $ 70 $75 7/8 $82 5/8 $84 3/4 $84 3/4 $82 3/4 $85 1/4 $86 1/8 $87 1/8 $87 1/8
Low $59 1/2 $67 1/2 $69 3/8 $73 1/2 $59 1/2 $74 1/8 $72 $76 5/8 $77 1/2 $72
- -----------------------------------------------------------------------------------------------------------------------
(1) Restated to reflect adoption effective January 1, 1994 of a change in the accounting method
used to apply the lower of cost or market test for crude oil and product inventories.
(2) After a $250 million charge for the excess of local currency LIFO inventory values over
market value at December 31, 1993.
(3) Excludes special items and the cumulative effect of change in accounting principle.
(4) The principal market for trading of Mobil's common stock is the New York Stock Exchange. The
stock symbol is "MOB." The reported prices represent a composite of transactions on the New York Stock
Exchange, the Chicago, Pacific, Philadelphia, Boston and Cincinnati regional exchanges, and the
over-the-counter market.
- -----------------------------------------------------------------------------------------------------------------------
Mobil 27
MANAGEMENT DISCUSSION AND ANALYSIS
Revenues from Sales and Services increased nearly $3.3 billion from
1993 due to higher sales volumes, higher chemical sales prices and
increased excise and state gasoline taxes, partly offset by lower
crude oil, natural gas and petroleum product sales prices.
Additionally, the general strengthening during 1994, relative to
the U.S. dollar, of the currencies in the international areas where
Mobil conducts business has resulted in higher revenues following
translation of sales denominated in foreign currencies into U.S.
dollars. The decrease in 1993 from 1992 resulted from lower crude
oil and petroleum product sales prices, largely offset by the
impact of higher sales volumes and increased excise and state
gasoline taxes.
Excluding a $250 million charge for the excess of local
currency LIFO inventory values over market value in 1993, income
from Equity Investments, Asset Sales, Interest and Other was lower
due to decreased gains from asset sales. In 1993, income was down
from the prior year largely due to the previously mentioned $250
million lower of cost or market inventory charge and decreased
gains on asset sales.
Total Costs and Expenses increased about $3.7 billion from
1993 primarily due to increases in volume related expenses,
currency translation effects and increased charges to Depreciation,
Depletion and Amortization for asset write-downs.
Crude Oil, Products and Operating Supplies and Expenses
increased 3% in 1994 compared with 1993, as the effects of higher
volumes were only partly offset by lower crude oil and natural gas
prices and lower operating expenses. The decrease from 1992 to 1993
reflected lower prices and fewer refinery turnarounds, partially
offset by higher petroleum product volumes. Included in this
expense category are research costs of $326 million in 1992, $301
million in 1993 and $275 million in 1994.
Exploration Expenses were higher in 1994 reflecting the
current year's expanded program. Expenses in 1993 were lower than
in 1992 mainly due to the timing of the drilling program.
Selling and General Expenses were essentially unchanged in
1994, as cost reduction initiatives offset inflation and currency
translation effects. Expenses in 1993 were up slightly over 1992,
as the impact of environmental provisions, restructuring charges
and inflation were largely offset by cost containment.
Interest and Debt Discount Expense increased in 1994, as 1993
benefited from the resolution of prior period tax issues that were
only partly offset by this year's lower interest rates and debt
levels. The decrease in 1993 from 1992 resulted from the favorable
resolution of prior-year tax issues.
Taxes Other than Income Taxes increased $2 billion, or 13%, in
1994 due to higher production and sales volumes and higher U.S.
excise tax rates. The decrease from 1992 to 1993 primarily
reflected the effects upon foreign taxes of lower crude oil and
product prices.
Income Taxes were essentially equal to 1993, as the effects of
lower pretax income this year were offset by prior year benefits
from the effects of foreign tax rate reductions and settlements.
Income taxes increased 23% in 1993 due to higher pre-tax earnings,
partly offset by the previously mentioned benefits from the effects
of foreign tax rate changes and settlements.
Commentary on Consolidated Statement of Changes in Shareholders'
Equity
Total Shareholders' Equity decreased $91 million in 1994. Excluding
the $680 million charge for the lower of cost or market accounting
change (see Note 2 on page 37), Earnings Retained in the Business
increased $348 million as income exceeded common and preferred
stock dividends. The cost of Common Stock Held in Treasury
increased by $263 million in 1994, as 3,198,000 shares were
purchased on the open market to offset the dilutive effects of
incentive stock options. The Cumulative Foreign Exchange Transla
tion Adjustment Account (CTA) increased Shareholders' Equity $403
million in 1994 reflecting the strengthening of foreign currencies.
Excluding the effects of the changes in accounting principle(s) in
1992 and 1994, return on average shareholders' equity in 1994 was
10.4%, compared with 12.3% in 1993 and 7.8% in 1992.
Common stock dividends paid were $3.20 per share, $3.25 per
share and $3.40 per share in 1992, 1993 and 1994, respectively.
Preferred stock dividends issued in the Employee Stock Ownership
Plan (ESOP) were $60 million, $59 million and $58 million in 1992,
1993 and 1994, respectively.
<GRAPH APPEARS HERE>
Revenues and expenses rose reflecting higher volumes. Expenses were
also higher due to charges for restructuring and asset review
programs.
<GRAPH APPEARS HERE>
Return on Average Shareholders' Equity declined with lower
earnings, reflecting the impact of restructuring and asset review
programs.
Mobil 28
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Income
Year ended December 31
(In millions, except per-share amounts) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Revenues
Sales and services(1) $63,564 $63,474 $66,757
Income from equity investments, asset sales,
interest and other 892 501 626
- -----------------------------------------------------------------------------------------
Total Revenues 64,456 63,975 67,383
- -----------------------------------------------------------------------------------------
Costs and Expenses
Crude oil, products and operating supplies
and expenses 36,639 35,622 36,665
Exploration expenses 507 405 516
Selling and general expenses 5,324 5,483 5,453
Depreciation, depletion and amortization 2,780 2,629 3,098
Interest and debt discount expense 612 324 461
Taxes other than income taxes(1) 15,719 15,497 17,512
Income taxes 1,567 1,931 1,919
- -----------------------------------------------------------------------------------------
Total Costs and Expenses 63,148 61,891 65,624
- -----------------------------------------------------------------------------------------
Income Before Change in Accounting Principle(s) 1,308 2,084 1,759
Cumulative Effect of Change in Accounting Principle(s) (446) - (680)
- -----------------------------------------------------------------------------------------
Net Income $ 862 $ 2,084 $ 1,079
- -----------------------------------------------------------------------------------------
Income (Loss) per Common Share
Income before change in accounting principle(s) $ 3.13 $ 5.07 $ 4.28
Cumulative effect of change in accounting principle(s) (1.12) - (1.71)
- -----------------------------------------------------------------------------------------
Net income $ 2.01 $ 5.07 $ 2.57
- -----------------------------------------------------------------------------------------
(1) Includes excise and state gasoline taxes: 1992-$6,687; 1993-$6,898; 1994- $7,762.
Consolidated Statement of Changes in Shareholders' Equity
Year ended December 31 (In millions) 1992 1993 1994
- -----------------------------------------------------------------------------------------
Preferred Stock (ESOP-related)
-Beginning of year $ 794 $ 779 $ 763
-End of year, after redemptions $ 779 $ 763 $ 745
- -----------------------------------------------------------------------------------------
Unearned Employee Compensation (ESOP-related)
-Beginning of year $ (682) $ (613) $ (543)
-End of year, after amortization $ (613) $ (543) $ (472)
- -----------------------------------------------------------------------------------------
Common Stock
-Beginning of year $878 $880 $883
-End of year, after issuance of shares $880 $883 $885
- -----------------------------------------------------------------------------------------
Capital Surplus
-Beginning of year $ 1,195 $ 1,220 $ 1,279
-End of year, after issuance of common shares $ 1,220 $ 1,279 $ 1,325
- -----------------------------------------------------------------------------------------
Earnings Retained in the Business
-Beginning of year $16,938 $16,464 $17,191
-Net income 862 2,084 1,079
-Common stock dividends (1,276) (1,298) (1,353)
-Preferred stock dividends (ESOP-related) (60) (59) (58)
- -----------------------------------------------------------------------------------------
-End of year $16,464 $17,191 $16,859
- -----------------------------------------------------------------------------------------
Cumulative Foreign Exchange Translation Adjustment
-Beginning of year $ 51 $ (534) $ (526)
-End of year, after adjustments $ (534) $ (526) $ (123)
- -----------------------------------------------------------------------------------------
Common Stock Held in Treasury, at Cost
-Beginning of year $(1,640) $(1,656) $(1,810)
-End of year, after purchases $(1,656) $(1,810) $(2,073)
- -----------------------------------------------------------------------------------------
Total Shareholders' Equity $16,540 $17,237 $17,146
- -----------------------------------------------------------------------------------------
See Notes to Financial Statements on pages 36-48.
Mobil 29
MANAGEMENT DISCUSSION AND ANALYSIS
Commentary on Consolidated Balance Sheet
Total Current Assets were essentially unchanged in 1994, as currency
translation effects and an increase in Accounts and Notes Receivable
were offset by a reduction in both the non-U.S. inventory book value
resulting from the lower of cost or market (LCM) accounting change
(see Note 2 on page 37) and Cash and Cash Equivalents.
Cash and Cash Equivalents decreased $296 million from the
previous year. The movements that contributed to this decrease are
more fully presented in the Consolidated Statement of Cash Flows on
page 33.
Accounts and Notes Receivable increased $978 million due to the
impact of higher year-end worldwide crude oil and refined product
prices and volumes and chemical sales prices and volumes, together
with currency translation effects.
Inventories declined by $854 million primarily due to the LCM
accounting change mentioned above.
Net Properties, Plants and Equipment rose slightly in 1994, as
capital expenditures for exploration and producing programs and
refinery upgrades, along with currency translation effects, were
largely offset by property write-downs and asset sales.
Total Current Liabilities increased $1,067 million during 1994.
Items contributing to this increase include currency translation
effects and higher Accounts Payable balances associated mainly with
higher year-end crude oil and product prices.
Short-Term Debt at year-end 1994 was essentially unchanged from
last year. An increase in commercial paper borrowings was offset by
a lower amount of long-term debt maturing within one year and lower
bank borrowings.
At year-end 1994, the Total Debt of Mobil and its consolidated
subsidiaries was $7,727 million, a decrease of $300 million from the
prior year. During 1994, Mobil raised over $300 million in the
global capital markets. We refinanced regularly scheduled maturities
of long-term debt and prepaid debt to take advantage of favorable
interest rate opportunities. Mobil's year-end debt-to-capitalization
ratio was 31%, down from 32% in 1993, reflecting lower debt levels.
Mobil continues to have ready access to global financial markets,
providing flexibility to take advantage of low borrowing costs.
At year-end 1994, Mobil had effective shelf registrations on
file with the Securities and Exchange Commission (SEC) that would
permit the offer and sale of an aggregate of $1,840 million of debt
securities pursuant to Rule 415 of the Securities Act of 1933. In
1994, a Euro-Medium-Term Note program was established to facilitate
the offering and sale outside the U.S. of an additional $1,000
million of debt securities in 1995 or later years, and a facility
allowing the issuance in Japan of bonds having a principal amount of
30 billion Japanese yen was also put into place. The ESOP Trust had
an effective shelf registration on file with the SEC at year-end
1994 that would permit the offer and sale of $260 million of debt
securities, guaranteed by Mobil, pursuant to Rule 415. Subsequent to
year-end, the ESOP Trust agreed to issue, on February 28, 1995, $30
million principal amount of fixed rate notes. The proceeds will be
used to fund a portion of the scheduled principal and interest
payments on its existing indebtedness.
Total Shareholders' Equity decreased $91 million (see
Commentary on Consolidated Statement of Changes in Shareholders'
Equity on page 28).
Mobil's capital and exploration expenditures totaled $3,825
million in 1994, an increase of $169 million from the previous year.
At year-end 1994, the unspent balance of total appropriations for
capital expenditures was $4.1 billion. We are not contractually
committed to spend all of this amount but generally expect to do so
over the next several years.
Excluding the cumulative effect of the accounting changes,
Return on Average Capital Employed was 8.4% in 1994 versus 9.7% in
1993 and 6.8% in 1992.
<GRAPH APPEARS HERE>
With access to global financial markets, Mobil can borrow either in
the U.S. or in other countries to minimize overall financing costs.
<GRAPH APPEARS HERE>
Return on Average Capital Employed declined with earnings in
1994, reflecting the impact of restructuring and asset review
programs.
Mobil 30
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
- ------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994
- ------------------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 827 $ 531
Accounts and notes receivable 5,557 6,535
Inventories 4,156 3,302
Prepaid expenses and other current assets 529 618
Deferred income taxes(1) 148 195
- ------------------------------------------------------------------------------------------
Total Current Assets(1) 11,217 11,181
- ------------------------------------------------------------------------------------------
Investments and Long-Term Receivables 3,446 3,802
Net Properties, Plants and Equipment 25,037 25,503
Deferred Charges and Other Assets 1,033 1,056
- ------------------------------------------------------------------------------------------
Total Assets(1) $ 40,733 $41,542
- ------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 3,000 $ 3,013
Accounts payable 4,028 4,968
Accrued liabilities 2,396 2,659
Income, excise, state gasoline and other taxes payable 2,311 2,531
Deferred income taxes(1) 616 247
- ------------------------------------------------------------------------------------------
Total Current Liabilities(1) 12,351 13,418
- ------------------------------------------------------------------------------------------
Long-Term Debt 5,027 4,714
Reserves for Employee Benefits 1,378 1,520
Accrued Restoration, Removal and Environmental Costs 1,214 1,191
Deferred Credits and Other Noncurrent Obligations 766 841
Deferred Income Taxes 2,691 2,639
Minority Interest in Subsidiary Companies 69 73
- ------------------------------------------------------------------------------------------
Total Liabilities(1) 23,496 24,396
- ------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock (ESOP-related)-shares issued and outstanding:
1993-98,073; 1994-95,778 763 745
Unearned employee compensation (ESOP-related) (543) (472)
Common stock-shares issued:
1993-441,319,241; 1994-442,336,317 883 885
Capital surplus 1,279 1,325
Earnings retained in the business 17,191 16,859
Cumulative foreign exchange translation adjustment (526) (123)
Common stock held in treasury, at cost-shares:
1993-43,151,300; 1994-46,349,300 (1,810) (2,073)
- ------------------------------------------------------------------------------------------
Total Shareholders' Equity 17,237 17,146
- ------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity(1) $ 40,733 $ 41,542
- ------------------------------------------------------------------------------------------
(1) 1993 data reclassified to conform with current year presentation.
See Notes to Financial Statements on pages 36-48.
Mobil 31
MANAGEMENT DISCUSSION AND ANALYSIS
Commentary on Consolidated Statement of Cash Flows
The Statement of Cash Flows reports movements in cash balances from
year to year and summarizes the cash provided and used during the
year for operating, investing and financing activities. The impact
of changes in foreign currency translation rates has been removed
from the amounts reported in this statement. Therefore, except for
Cash and Cash Equivalents, these amounts do not agree with the
differences that would be derived from the changes in Balance Sheet
amounts.
During 1994, Net Cash from Operating Activities exceeded outlays
associated with investing activities and dividends by $394 million.
This surplus, together with the decrease in Cash and Cash
Equivalents, was used to reduce debt levels and to purchase common
stock for the treasury.
Cash Requirements-Operating Activities Over Investing
- ------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994
- ------------------------------------------------------------------------------------------
Net cash from operating activities $ 4,117 $ 5,620 $ 5,362
Net cash used in investing activities (3,771) (3,203) (3,557)
Cash dividends (1,336) (1,357) (1,411)
- ------------------------------------------------------------------------------------------
(Shortfall) excess of cash requirements $ (990) $ 1,060 $ 394
- ------------------------------------------------------------------------------------------
Net Cash from Operating Activities decreased by $258 million
from 1993. Net Cash from Operating Activities is derived by
adjusting reported Net Income for charges or credits that have no
cash effect (primarily Depreciation, Depletion and Amortization,
Deferred Income Taxes and the Cumulative Effect of Change in
Accounting Principle(s)) and cash items reported elsewhere in this
Statement (primarily Exploration Expenses).
Net Cash Used in Investing Activities increased $354 million
from 1993, due to a higher level of Capital and Exploration
Expenditures (refer to table below), and lower Proceeds from Sales
of Properties, Plants and Equipment and Other Assets.
In 1995, capital and exploration expenditures are expected to be
$4.1 billion, up 7% from 1994. International capital expenditures
are expected to account for about 65% of Mobil's total expenditures,
up from about 60% in 1994, reflecting the continued shift toward
international areas where opportunities to find and develop
resources are greater and product demand growth is higher.
Proceeds from Sales of Properties, Plants and Equipment (PP&E)
and Other Assets have provided partial funding for investing and
financing activities. Proceeds from the Sales of PP&E and Other
Assets in both 1993 and 1994 were primarily generated from the sale
of nonstrategic producing fields in the U.S. and Canada.
Net Cash Used in Financing Activities in 1994 was $262 million
higher than in 1993, primarily reflecting the use of excess cash
generated by operations to reduce debt levels.
Capital and Exploration Expenditures
- ------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994
- ------------------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing - U.S. $ 341 $ 427 $ 486
- International 1,181 1,133 1,156
Marketing & Refining - U.S. 1,007 575 572
- International 968 687 725
Chemical - U.S. 153 151 159
- International 218 161 53
Corporate and Other 95 117 158
- ------------------------------------------------------------------------------------------
Total Capital Expenditures $ 3,963 $ 3,251 $ 3,309
- ------------------------------------------------------------------------------------------
Exploration Expenses - U.S. 112 65 115
- International 395 340 401
- ------------------------------------------------------------------------------------------
Total Exploration Expenses 507 405 516
- ------------------------------------------------------------------------------------------
Total Capital and Exploration Expenditures $ 4,470 $ 3,656 $ 3,825
- ------------------------------------------------------------------------------------------
<GRAPH APPEARS HERE>
We continued to review all our assets and to sell those that are
marginal or worth more to someone else.
<GRAPH APPEARS HERE>
Capital spending was slightly higher in 1994 as we continued to
focus on growth opportunities in all our businesses.
Mobil 32
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Cash Flows
Year ended December 31 (In millions) 1992 1993 1994
- ------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income $ 862 $ 2,084 $ 1,079
Adjustments to reconcile to
net cash from operating activities
Depreciation, depletion and amortization 2,780 2,629 3,098
Deferred income taxes (503) (260) (210)
Earnings (greater) less than dividends from
equity affiliates 36 265 (40)
Exploration expenses (includes noncash charges:
1992-$57; 1993-$51; 1994-$33) 507 405 516
Gain on sales of properties, plants and equipment
and other assets (380) (145) (68)
Decrease in working capital items (detailed below) 200 409 346
Other, net 169 233 (39)
Cumulative effect of change
in accounting principle(s) 446 - 680
- ------------------------------------------------------------------------------------------
Net Cash from Operating Activities 4,117 5,620 5,362
- ------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Capital and exploration expenditures (4,470) (3,656) (3,825)
Proceeds from sales of properties, plants
and equipment and other assets 952 606 349
Payments attributable to investments and
long-term receivables (253) (153) (81)
- ------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (3,771) (3,203) (3,557)
- ------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Cash dividends (1,336) (1,357) (1,411)
Proceeds from borrowings having original terms
greater than three months 2,622 1,926 1,018
Repayments of borrowings having original terms
greater than three months (2,633) (1,787) (2,076)
Increase (decrease) in other borrowings 453 (570) 542
Proceeds from issuance of common stock 27 62 48
Purchase of common stock for treasury (16) (154) (263)
- ------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (883) (1,880) (2,142)
- ------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents(1) (30) (13) 41
- ------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents $ (567) $ 524 $ (296)
Cash and Cash Equivalents-Beginning of Year 870 303 827
- ------------------------------------------------------------------------------------------
Cash and Cash Equivalents-End of Year $ 303 $ 827 $ 531
- ------------------------------------------------------------------------------------------
(1) Cash equivalents are liquid investments convertible to cash and have original
maturities of three months or less.
Changes in Working Capital Items
- ------------------------------------------------------------------------------------------
Accounts and notes receivable $ 129 $ 152 $ (810)
Inventories 66 121 29
Prepaid expenses and other current assets 20 (11) (14)
Accounts payable (57) (49) 813
Accrued liabilities 82 (29) 195
Income, excise, state gasoline and other taxes payable (40) 225 133
- ------------------------------------------------------------------------------------------
Decrease in Working Capital Items $ 200 $ 409 $ 346
- ------------------------------------------------------------------------------------------
Memo Items
- ------------------------------------------------------------------------------------------
Cash income taxes paid $ 1,960 $ 2,136 $ 1,948
Cash interest paid $ 622 $ 545 $ 522
- ------------------------------------------------------------------------------------------
See Notes to Financial Statements on pages 36-48.
Mobil 33
CONSOLIDATED FINANCIAL STATEMENTS
Segment and Geographic Information
Year ended December 31 (In millions) 1992 1993 1994
- ------------------------------------------------------------------------------------------
Revenues by Segment
Petroleum Operations
Exploration & Producing - Third Party $ 6,303 $ 6,437 $ 6,374
- Intersegment 4,296 4,012 3,819
Marketing & Refining - Third Party 53,921 53,511 56,230
- Intersegment 483 439 631
Chemical - Third Party 3,821 3,533 4,195
- Intersegment 173 187 268
Corporate and Other 411 494 584
Intersegment Elimination (4,952) (4,638) (4,718)
- ------------------------------------------------------------------------------------------
Total Revenues $64,456 $63,975 $67,383
- ------------------------------------------------------------------------------------------
Revenues by Geographic Area
United States - Third Party $20,732 $21,011 $22,388
- Intergeographic 255 599 405
Europe - Third Party 22,362 20,562 21,094
- Intergeographic 1,075 455 663
Pacific Rim - Third Party 13,604 14,131 15,411
- Intergeographic 720 479 537
Other Areas(1) - Third Party 7,347 7,777 7,906
- Intergeographic 5,279 5,201 5,378
Corporate and Other 411 494 584
Intergeographic Elimination (7,329) (6,734) (6,983)
- ------------------------------------------------------------------------------------------
Total Revenues $64,456 $63,975 $67,383
- ------------------------------------------------------------------------------------------
At December 31 (In millions)
- ------------------------------------------------------------------------------------------
Identifiable Assets by Segment
Petroleum Operations
Exploration & Producing $14,938 $14,334 $14,116
Marketing & Refining 20,651 20,914 21,767
Chemical 3,397 3,451 3,672
Corporate and Other(2) 1,987 2,421 2,380
Adjustments (412) (387) (393)
- ------------------------------------------------------------------------------------------
Total Assets(2) $40,561 $40,733 $41,542
- ------------------------------------------------------------------------------------------
Identifiable Assets by Geographic Area
United States $16,550 $15,726 $15,316
Europe 9,120 9,026 9,150
Pacific Rim 7,572 7,877 8,674
Other Areas(1) 5,944 6,244 6,604
Corporate and Other(2) 1,987 2,421 2,380
Adjustments (612) (561) (582)
- ------------------------------------------------------------------------------------------
Total Assets(2) $40,561 $40,733 $41,542
- ------------------------------------------------------------------------------------------
(1) Includes principally Nigeria, Saudi Arabia and Canada.
(2) 1993 data reclassified to conform with current year presentation.
The distribution of Mobil's operations by business segment and
geographic area is presented above. Petroleum Operations consist of
exploration, producing, marketing and refining. Exploration &
Producing explores for, develops and produces crude oil and natural
gas, and extracts natural gas liquids, sulfur and carbon dioxide.
Marketing & Refining is responsible for petroleum refining
operations and the marketing of all refined petroleum products.
Chemical manufactures and sells various petroleum-based chemical
products. Corporate and Other includes the operations of Real Estate
and Mining and Minerals, administrative expense and other
corporate items.
Mobil 34
CONSOLIDATED FINANCIAL STATEMENTS
Segment and Geographic Information
Pacific Rim earnings
benefited from the
Singapore refinery/
aromatics complex,
streamed early in 1994.
Segment and Geographic Information (continued)
Year ended December 31 (In millions) 1992 1993 1994
- ------------------------------------------------------------------------------------------
Earnings by Segment
Pre-tax Operating Profits
Petroleum Operations
Exploration & Producing $3,284 $3,452 $2,737
Marketing & Refining 242 1,128 1,359
Chemical 142 25 82
- ------------------------------------------------------------------------------------------
Total Pre-tax Operating Profits 3,668 4,605 4,178
Income Taxes (1,958) (2,204) (2,112)
- ------------------------------------------------------------------------------------------
Segment Earnings 1,710 2,401 2,066
Corporate and Other (Net of income taxes) (86) (190) (98)
Net Financing Expense (Net of income taxes) (316) (127) (209)
Cumulative Effect of Change in Accounting
Principle(s) (Net of income taxes) (446) - (680)
- ------------------------------------------------------------------------------------------
Net Income $ 862 $2,084 $1,079
- ------------------------------------------------------------------------------------------
Earnings by Geographic Area (Net of income taxes)
United States $ 228 $ 484 $ 302
Europe 246 485 380
Pacific Rim 988 891(1) 1,029
Other Areas(2) 248 541 355
Geographic Earnings 1,710 2,401 2,066
Corporate and Other (86) (190) (98)
Net Financing Expense (316) (127) (209)
Cumulative Effect of Change
in Accounting Principle(s) (446) - (680)
- ------------------------------------------------------------------------------------------
Net Income $ 862 $2,084 $1,079
- ------------------------------------------------------------------------------------------
Capital Expenditures by Segment
Petroleum Operations
Exploration & Producing $1,522 $1,560 $1,642
Marketing & Refining 1,975 1,262 1,297
Chemical 371 312 212
- ------------------------------------------------------------------------------------------
Segment Capital Expenditures 3,868 3,134 3,151
Corporate and Other 95 117 158
- ------------------------------------------------------------------------------------------
Total Capital Expenditures $3,963 $3,251 $3,309
- ------------------------------------------------------------------------------------------
Depreciation, Depletion and Amortization by Segment
Petroleum Operations
Exploration & Producing $1,834 $1,626 $1,907
Marketing & Refining 745 791 923
Chemical 163 162 226
- ------------------------------------------------------------------------------------------
Segment Depreciation, Depletion and Amortization 2,742 2,579 3,056
Corporate and Other 38 50 42
- ------------------------------------------------------------------------------------------
Total Depreciation, Depletion and Amortization $2,780 $2,629 $3,098
- ------------------------------------------------------------------------------------------
(1) After a $250 million charge for the excess of local currency LIFO inventory values
over market value at December 31, 1993.
(2) Includes principally Nigeria, Saudi Arabia and Canada.
The distribution of Mobil's operations by business segment and
geographic area is presented above. Petroleum Operations consist of
exploration, producing, marketing and refining. Exploration &
Producing explores for, develops and produces crude oil and natural
gas, and extracts natural gas liquids, sulfur and carbon dioxide.
Marketing & Refining is responsible for petroleum refining
operations and the marketing of all refined petroleum products.
Chemical manufactures and sells various petroleum-based chemical
products. Corporate and Other includes the operations of Real Estate
and Mining and Minerals, residual corporate administration and other
corporate items.
Significant investments in companies owned 50% or less are accounted
for on the equity method. Mobil's share of the net income of such
companies is included in Revenues. Information on these affiliates
is presented in Note 10 on page 43.
Intersegment and intergeographic revenues are sales to other
business or geographic segments within Mobil and are at estimated
market prices. These intercompany transactions are eliminated for
consolidation purposes. Income taxes are allocated to segments and
geographic areas on the basis of operating results.
Mobil 35
NOTES TO FINANCIAL STATEMENTS
1. Major Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of all subsidiaries owned more than 50%. Significant
investments in affiliated companies owned 50% or less are
accounted for on the equity method. Investments in other
companies in which Mobil owns less than a majority interest
are stated at cost less applicable reserves. Intercompany
transactions are eliminated.
Inventories
Substantially all crude oil and product inventories are
valued at cost under the last-in, first-out (LIFO) method.
Other inventories, primarily materials and supplies, are
valued generally at average cost.
Oil and Gas Accounting Method
Mobil follows the successful efforts method of accounting
prescribed by FAS 19-Financial Accounting and Reporting by
Oil and Gas Producing Companies.
Exploration and Mineral Rights (Leases)
Direct acquisition costs of unproved mineral rights are
capitalized and then amortized in the manner described
below. Payments made in lieu of drilling on nonproducing
leaseholds are charged to expense currently.
Geological, Geophysical and Intangible Drilling Costs
Geological and geophysical costs are charged to expense as
incurred. Intangible drilling costs of all development
wells and of exploratory wells that result in additions to
proved reserves are capitalized.
Depreciation, Depletion and Amortization
Annual charges to income for depreciation are computed on a
straight-line basis over the useful lives of the assets.
Costs of producing properties are generally accumulated by
field. Depletion of these costs and amortization of
capitalized intangible drilling costs are calculated on a
unit-of-production basis.
Capitalized acquisition costs of significant unproved
mineral rights and unamortized costs of significant
developed properties are assessed periodically on a
property-by-property basis to determine whether their
values have been impaired; where impairment is indicated, a
loss is recognized.
Capitalized acquisition costs of other unproved mineral
rights are amortized over the expected holding period. When
a mineral right is surrendered, any unamortized cost is
charged to expense. When a property is determined to
contain proved reserves, the mineral right then becomes
subject to depletion on a unit-of-production basis. When
assets that are part of a composite group are retired,
sold, abandoned or otherwise disposed of, the cost is
charged against accumulated depreciation, depletion and
amortization. Where reserves are accumulated for specific
properties, gains or losses on disposal are included in
income currently.
Restoration, Removal and Environmental Liabilities
The estimated costs of restoration and removal of major
producing facilities are accrued on a unit-of-production
basis over the life of the property. The estimated future
costs for known environmental remediation requirements are
accrued when it is probable that a liability has been
incurred and the amount of remediation costs can be
reasonably estimated. These amounts are the undiscounted,
future estimated costs under existing regulatory
requirements and using existing technology.
Derivative Financial Instruments
Mobil utilizes derivative financial instruments for
purposes of hedging its exposure to fluctuations in
interest rates, foreign currency exchange rates and oil and
gas prices. Gains and losses on these instruments are
included in the measurement of the items being hedged and
recognized concurrent with the recognition of the
underlying exposures.
Foreign Currency Translation
The functional currency for most foreign operations is the
local currency. The cumulative effects of translating the
balance sheet accounts from the functional currency into
the U.S. dollar at current exchange rates are included in
Cumulative Foreign Exchange Translation Adjustment in
Shareholders' Equity. The U.S. dollar is used as the
functional currency for operations in highly inflationary
foreign economies and for exploration and producing
operations in Indonesia, Nigeria and Australia. For all
operations, gains or losses from remeasuring foreign
currency transactions into the functional currency are
included in income.
Mobil 36
NOTES TO FINANCIAL STATEMENTS
2. Accounting Changes
Effective January 1, 1994, Mobil changed the method of
accounting it uses to apply the lower of cost or market
(LCM) test for its crude oil and product inventories. The
LCM test is now measured, and the results are recognized
separately, on a country-by-country basis, and any
resulting writedowns to market are recorded as permanent
adjustments to the last-in, first-out (LIFO) cost of
inventory in accordance with Accounting Research Bulletin
No. 43, Chapter 4, "Inventory Pricing". Previously, Mobil
aggregated its worldwide inventories into one pool for the
determination of the LCM measurement. The $680 million
after-tax charge to 1994 first quarter net income
represents the cumulative effect of this accounting change
as of January 1, 1994. The new method of applying the LCM
test to the book value of inventories is preferable because
Mobil's financial statements will better reflect local
market conditions and exchange rates in the countries in
which Mobil operates.
If Mobil had not changed its accounting method, it
would have been required to restore to income the $250
million after-tax LCM charge taken in 1993 as local
currency crude oil and product prices rose above year-end
1993 levels. If this change had been adopted prior to 1992,
there would have been no change to 1992 net income and 1993
net income would only have been charged approximately $60
million, and would therefore have been about $190 million
higher.
Effective January 1, 1992, Mobil adopted FAS
106-Employers' Accounting for Postretirement Benefits Other
Than Pensions, which resulted in a $446 million after-tax
charge to income in 1992. Also effective January 1, 1992,
Mobil adopted FAS 109-Accounting for Income Taxes. The
provisions of FAS 109 did not have a significant impact on
Mobil.
3. Inventories
Inventories valued at cost under the LIFO method
represented about 70% of Mobil's worldwide consolidated
inventories at December 31, 1993, and 57% at December 31,
1994. At December 31, 1993, the book value of worldwide
inventories valued under the LIFO method of accounting
approximated their market value.
Inventories
- ---------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994
- ---------------------------------------------------------------------------------------------
Crude oil and petroleum products $2,963 $2,303
Chemical products 411 326
Other, mainly materials and supplies 782 673
- ---------------------------------------------------------------------------------------------
Total $4,156 $3,302
- ---------------------------------------------------------------------------------------------
If the new method of calculating LCM had been in effect in
1993, the market value of inventories valued under the LIFO
method located in the U.S. would have exceeded the book
value by $775 million, and the market value of inventories
located outside the U.S. would have approximated book
value. At December 31, 1994, the worldwide excess of market
over book value of inventories valued under the LIFO method
was $1,174 million ($1,086 million-U.S.; $49
million-Europe; $11 million-Pacific Rim; and $28
million-Other Areas).
4. Properties, Plants and Equipment
Properties, plants and equipment are stated at cost, less
accumulated depreciation, depletion and amortization of
$26,040 million at December 31, 1993, and $28,285 million
at December 31, 1994.
- ---------------------------------------------------------------------------------------------
Properties, plants and equipment 1993 1994
- ---------------------------------------------------------------------------------------------
At December 31 (In millions) Net Gross Net Gross
- ---------------------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing $11,759 $28,825 $11,506 $29,632
Marketing 4,558 6,618 4,809 7,275
Refining 4,822 8,494 5,183 9,397
Other Marketing & Refining Activities 1,268 2,770 1,308 2,845
Chemical 1,895 3,305 1,921 3,514
Corporate and Other 735 1,065 776 1,125
- ---------------------------------------------------------------------------------------------
Total $25,037 $51,077 $25,503 $53,788
- ---------------------------------------------------------------------------------------------
Mobil 37
NOTES TO FINANCIAL STATEMENTS
5. Leases
Mobil leases real estate, service stations, pipelines,
tankers and other equipment through noncancelable capital
and operating leases.
- ---------------------------------------------------------------------------------------------
Rental expense
- ---------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994
- ---------------------------------------------------------------------------------------------
Minimum rentals $ 958 $1,035 $1,121
Contingent rentals 87 95 71
- ---------------------------------------------------------------------------------------------
Total 1,045 1,130 1,192
Less: sublease rental income 90 111 172
- ---------------------------------------------------------------------------------------------
Net rental expense $ 955 $1,019 $1,020
- ---------------------------------------------------------------------------------------------
Contingent lease rentals for operating and capital leases
are determined generally by volumetric measurement or sales
revenue. Some rental agreements contain escalation
provisions that may require higher future rent payments.
Mobil does not expect that such rent increases, if any,
will have a material effect on future earnings.
Future minimum lease payments under noncancelable leases
- ---------------------------------------------------------------------------------------------
At December 31, 1994 (In millions) Operating Leases Capital Lease Obligations
- ---------------------------------------------------------------------------------------------
1995 $ 332 $ 51
1996 268 49
1997 206 52
1998 156 55
1999 118 65
Later years 756 25
- ---------------------------------------------------------------------------------------------
Future minimum lease payments $1,836 $ 297
- ---------------------------------------------------------------------------------------------
Less: executory costs 1
interest 94
- ---------------------------------------------------------------------------------------------
Total capital lease obligations $ 202
Less: short-term portion of capital lease obligations 32
- ---------------------------------------------------------------------------------------------
Long-term portion of capital lease obligations $ 170
- ---------------------------------------------------------------------------------------------
Future minimum lease payments have not been reduced by
future minimum sublease rentals of $117 million under
operating leases. Capital leases included in Net
Properties, Plants and Equipment were $234 million at
December 31, 1993, and $222 million at December 31, 1994.
6. Short-Term Debt
At December 31, 1994, Mobil had $800 million of unused
short-term lines of credit supporting commercial paper
borrowing arrangements. A total of $485 million of the
unused short-term lines are subject to annual commitment
fees. Interest on borrowings under these lines is based on
the London Interbank Offered Rate, the Domestic Certificate
of Deposit Rate or a specified prime rate, as selected from
time to time by Mobil.
- ---------------------------------------------------------------------------------------------
Short-term debt 1993 1994
- ---------------------------------------------------------------------------------------------
At December 31 (In millions) Amount Interest Rate(1) Amount Interest Rate(1)
- ---------------------------------------------------------------------------------------------
Notes and loans payable
Commercial paper $1,045 4 1/8% $1,935 6 1/8%
Banks and Other 1,113 6 3/8% 657 6 5/8%
- ---------------------------------------------------------------------------------------------
Total notes and loans payable 2,158 2,592
- ---------------------------------------------------------------------------------------------
Long-term debt
maturing within one year 842 421
- ---------------------------------------------------------------------------------------------
Total short-term debt $3,000 $3,013
- ---------------------------------------------------------------------------------------------
(1) Percentages shown in the table are weighted average interest rates at the end of the year.
Mobil 38
NOTES TO FINANCIAL STATEMENTS
Our Debt-to-
Capitalization Ratio
declined to 31%, the
lowest level since 1990.
7. Long-Term Debt
The table below summarizes Mobil's consolidated Long-Term
Debt. A significant portion of this debt is issued by
subsidiaries and is guaranteed by Mobil.
At year-end 1994, Mobil had shelf registrations on
file with the SEC that would permit the offer and sale of
$1,840 million of debt securities. Additionally, at
December 31, 1994, the ESOP Trust had a shelf registration
on file with the SEC permitting the offer and sale of $260
million of debt securities, guaranteed by Mobil. Subsequent
to year-end, the ESOP Trust agreed to issue $30 million
principal amount of fixed rate notes with the proceeds to
be used to fund a portion of the scheduled principal and
interest payments on its existing indebtedness.The proceeds
of any additional debt securities issued by the ESOP Trust
would similarly be used to fund its existing indebtedness.
During 1994, shelf registrations allowing the issuance of
U.S. $1,000 million of Euro-Medium-Term Notes and bonds
having a principal amount of 30 billion Japanese yen were
put into place, allowing flexibility to finance our
operations at a lower cost.
- ---------------------------------------------------------------------------------------------
Long-term debt
- ---------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994
- ---------------------------------------------------------------------------------------------
6 1/2% notes due 1996 $ 200 $ 164(1)
6 1/2% notes due 1997 200 151(1)
6 3/4% notes due 1995 200 200
7 1/4% notes due 1999 200 185(1)
7 5/8% debentures due 2033 250 250
8% debentures due 2032 250 250
8 1/8% Canadian dollar Eurobonds due 1998 113 107
8 3/8% notes due 2001 200 200
8 5/8% debentures due 2021 250 250
9% Canadian dollar Eurobonds due 1997 113 107
9% European Currency Unit Eurobonds due 1997 139 154
9 5/8% U.K. sterling Eurobonds due 1999 163 173
Variable rate notes due 1997 (6.4%)(2) 154 127
Variable rate revolving credit due 1997 (6.5%)(2) 130 50
Japanese Yen loans due 2003 (3.0%)(2) 250 281
ESOP Trust debentures/notes due 2000-2002 (9.0%)(2) 657 628
Medium-term notes due 1994-2054 (6.5%)(2) 200 90
Variable rate project financing due 1998 (6.9%)(2) 262 209
Industrial revenue bonds due 1998-2028 (5.3%)(2) 273 273
Other foreign currencies due 1994-2030 (7.5%)(2) 877 931
Other due 1994-2008 (7.6%)(2) 563 153
Capital lease obligations 225 202
- ---------------------------------------------------------------------------------------------
Total 5,869 5,135
Less: long-term debt maturing within one year 842 421
- ---------------------------------------------------------------------------------------------
Total long-term debt $5,027 $4,714
- ---------------------------------------------------------------------------------------------
(1) Net of repurchases.
(2) The percentages shown in parentheses in the table are weighted average interest rates at
December 31, 1994.
Long-term debt that becomes due during the next five years
is: 1995-$421 million; 1996-$579 million; 1997-$912
million; 1998-$678 million; and 1999-$756 million.
Mobil 39
NOTES TO FINANCIAL STATEMENTS
8. Financial Instruments and Risk Management
Mobil uses derivative financial instruments to manage
market risks resulting from fluctuations in underlying
interest rates, foreign exchange rates and oil and gas
prices. Because Mobil operates internationally and finances
large capital projects, it has significant exposure to
these risks, which can increase the costs of investing,
financing and operating. Derivative instruments are
effective in minimizing these risks by creating offsetting
market exposures. If Mobil did not use derivative
instruments, its exposure to market risk would be higher.
In addition to creating market risks that offset the
risks associated with the underlying business exposures,
derivative instruments also give rise to credit risks due
to possible nonperformance by counter-parties. However,
through its ongoing control procedures, Mobil closely
monitors the creditworthiness of its counter-parties and
considers its exposure to this risk to be minimal.
Summarized below are the carrying values and fair
values of Mobil's financial instruments at December 31,
1993 and 1994. Fair values are based either on quoted
market values, where available, or discounted cash flow
analyses (principally long-term debt).
- -----------------------------------------------------------------------------------------------------------
Financial Instruments 1993 1994
- -----------------------------------------------------------------------------------------------------------
Carrying Fair Implicit Carrying Fair Implicit
At December 31 (In millions) Value Value Gain/(Loss) Value Value Gain/(Loss)
- -----------------------------------------------------------------------------------------------------------
Short- and long-term debt $(7,755) $(8,175) $(420) $(7,461) $(7,401) $ 60
Debt-related derivative instruments
Closed contract deferrals (26) - 26 (22) - 22
Open contracts in asset position 21 61 40 10 47 37
Open contracts in
liability position (76) (112) (36) (89) (139) (50)
- -----------------------------------------------------------------------------------------------------------
Net debt (7,836) (8,226) (390) (7,562) (7,493) 69
- -----------------------------------------------------------------------------------------------------------
Nondebt-related
derivative instruments
Open contracts in asset position
Currencies 46 63 17 84 87 3
Commodities 2 10 8 4 17 13
Open contracts in
liability position
Currencies (51) (50) 1 (101) (105) (4)
Commodities (3) (9) (6) (5) (42) (37)
- -----------------------------------------------------------------------------------------------------------
Net nondebt (6) 14 20 (18) (43) (25)
- -----------------------------------------------------------------------------------------------------------
Total net debt and nondebt $(7,842) $(8,212) $(370) $(7,580) $(7,536) $ 44
- -----------------------------------------------------------------------------------------------------------
The carrying values in the above table are those
amounts that are recorded on the Consolidated Balance Sheet
at year-end. The fair values reflect the cash that would be
received or paid if the instruments were settled at
year-end. The difference between the carrying values and
the fair values represents the net gain or loss that would
be incurred if the debt and both the debt and
nondebt-related derivative instruments were settled at each
year-end. The net position for both the debt and nondebt
categories was an implicit loss of $370 million at December
31, 1993, and an implicit gain of $44 million at December
31, 1994. The fair value of other financial instruments not
shown in the above table approximates the carrying value.
Debt-related Derivative Instruments - Mobil has
entered into various interest rate swaps, cross currency
interest rate swaps and forward exchange contracts related
to debt. These financial instruments have the effect of
changing the interest rate and currency of the original
borrowings with the objective of minimizing Mobil's
borrowing costs. Most of these instruments are integrated
as part of structured debt transactions, are entered into
at the time of the borrowings, and have the same maturity
as the underlying debt. The notional principal amounts of
these derivative instruments were $4,058 million and $3,608
million at December 31, 1993 and 1994, respectively.
Mobil 40
NOTES TO FINANCIAL STATEMENTS
8. Financial Instruments and Risk Management (continued)
Interest differentials paid or received under interest rate
swaps and cross currency interest rate swaps are recognized
over the life of the contracts as adjustments to the
effective yields of the underlying debt. Average
fixed/floating rates on contracts receiving fixed rates and
paying floating rates were 5.57%/7.33% at December 31,
1994. Average floating/fixed rates on contracts receiving
floating rates and paying fixed rates were 6.25%/5.55% at
December 31, 1994. Floating rates are based on the forward
yield curves for the relevant currencies at the balance
sheet date and fixed rates are equal to the coupon rates in
the relevant currencies. Gains and losses on closed
interest rate swaps are deferred and amortized over the
original life of the contract. At December 31, 1993 and
1994, gains in the amount of $26 million and $22 million,
respectively, were deferred.
Forward exchange contracts are valued at current exchange
rates. When these contracts relate to recorded debt and
current period interest, the gains and losses resulting
from changes in these rates are recognized currently in
income. Some forward exchange contracts relate to future
period interest payments on outstanding debt. Foreign
exchange gains and losses on those contracts are deferred
and recognized in income in the period to which they
relate.
Nondebt-related Derivative Instruments - Mobil has entered
into forward exchange contracts and currency options to
hedge the market risk associated with nondebt-related
foreign currency exchange rate volatility. Changes in their
value are expected to offset the foreign exchange gains and
losses of the transactions they are hedging. The notional
principal amounts outstanding for these nondebt-related
currency instruments were $6,867 million and $6,950 million
at December 31, 1993 and 1994, respectively, and
substantially all of them have maturities of less than one
year.
The foreign currency exposures that are being hedged with
these derivative instruments are principally payables for
purchases by foreign affiliates of crude oil and petroleum
products denominated in U.S. dollars. Foreign currency
exposures also include firm commitments for capital
projects and the cash from net investments in foreign
affiliates to be remitted within the upcoming year.
Mobil has also entered into commodity swap, option and
futures agreements that can only be settled in cash and are
therefore defined as financial instruments. The notional
amounts outstanding for these contracts were $1,006 million
and $1,294 million at December 31, 1993 and 1994,
respectively, and have maturities that primarily are less
than one year. These contracts are hedging the commodity
price risk of underlying crude oil, natural gas and
petroleum product positions.
Risk Based Measurements - In its risk management
activities, Mobil measures its value at risk using
simulation techniques that project probability of expected
changes in values from market movements on financial
exposures that vary from management's defined benchmarks.
These benchmarks are standards that have been established
by management and represent the risk profile of the
environment in which Mobil operates and the assets that are
being financed. Value at risk is defined as the maximum
potential gain or loss from a one-day market movement in
interest and currency rates that would cover 99.7% of all
such movements measured against the benchmarks. At December
31, 1994, the value at risk in Mobil's debt and currency
portfolio, as measured against these defined benchmarks,
was $6 million.
Mobil 41
NOTES TO FINANCIAL STATEMENTS
9. Taxes
- ---------------------------------------------------------------------------------------------------------------------
Total taxes 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------
Year ended December 31 (In millions) U.S. Foreign Total U.S. Foreign Total U.S. Foreign Total
- ---------------------------------------------------------------------------------------------------------------------
Excise and state gasoline $2,612 $4,075 $6,687 $2,963 $3,935 $6,898 $3,669 $4,093 $7,762
Import duties - 8,297 8,297 - 7,897 7,897 - 9,067 9,067
Property, production, payroll
and other 468 267 735 464 238 702 442 241 683
- ---------------------------------------------------------------------------------------------------------------------
Total other than income taxes 3,080 12,639 15,719 3,427 12,070 15,497 4,111 13,401 17,512
- ---------------------------------------------------------------------------------------------------------------------
Income taxes(1)
U.S. state and local 27 - 27 67 - 67 63 - 63
U.S. federal and foreign
-current 67 1,976 2,043 75 2,049 2,124 125 1,941 2,066
-deferred (245) (258) (503) (123) (137) (260) (184) (26) (210)
- --------------------------------------------------------------------------------------------------------------------
Total income taxes (151) 1,718 1,567 19 1,912 1,931 4 1,915 1,919
- ---------------------------------------------------------------------------------------------------------------------
Total taxes $2,929 $14,357 $17,286 $3,446 $13,982 $17,428 $4,115 $15,316 $19,431
- ---------------------------------------------------------------------------------------------------------------------
(1) Excludes tax benefits of $191 million and $358 million related to the cumulative effect of change in accounting
principle(s) in 1992 and 1994, respectively.
Income from U.S. operations before income taxes was $359
million in 1992, $770 million in 1993 and $481 million in
1994. Income from foreign operations before income taxes
for the same three years was $3,309 million, $3,835 million
and $3,697 million, respectively. The loss from Corporate
and Other and Net Financing Expense before income taxes for
the same three years was $793 million, $590 million and
$500 million, respectively.
Deferred income taxes are provided for the temporary
differences between the financial statement and tax bases
of Mobil's assets and liabilities, and relate primarily to
depreciation, intangible drilling costs, and provisions for
restoration, removal and environmental costs, and employee
benefits. Mobil does not provide deferred taxes for amounts
that could result from the remittance of undistributed
earnings of foreign affiliates since it is generally
Mobil's intention to continue reinvesting these earnings
indefinitely. Mobil's share of the undistributed earnings
of consolidated subsidiaries and equity method affiliates,
which could be subject to additional income taxes if
remitted, was approximately $3.0 billion at December 31,
1994. If such dividends were to be remitted, foreign tax
credits available under present law would reduce the amount
of U.S. taxes payable.
- ---------------------------------------------------------------------------------------------
Deferred taxes
- ---------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994
- ---------------------------------------------------------------------------------------------
Deferred tax liabilities
Depreciation and amortization $3,925 $3,961
Other 986 640
- ---------------------------------------------------------------------------------------------
Total deferred tax liabilities 4,911 4,601
- ---------------------------------------------------------------------------------------------
Deferred tax assets
Book reserves 1,293 1,284
Tax credits available for carryforward
(primarily without expiration) 630 1,005
- ---------------------------------------------------------------------------------------------
Total deferred tax assets 1,923 2,289
- ---------------------------------------------------------------------------------------------
Valuation allowance (171) (379)
- ---------------------------------------------------------------------------------------------
Net deferred tax liabilities $3,159 $2,691
- ---------------------------------------------------------------------------------------------
Mobil 42
NOTES TO FINANCIAL STATEMENTS
9. Taxes (continued)
- ----------------------------------------------------------------------------------------------
Reconciliation of U.S. statutory
rate to actual tax rate 1992 1993 1994
- ----------------------------------------------------------------------------------------------
Year ended December 31 (In millions) Amount % Amount % Amount %
- ----------------------------------------------------------------------------------------------
Income before taxes and change in
accounting principle(s) $2,875 100.0 $4,015 100.0 $3,678 100.0
- ----------------------------------------------------------------------------------------------
Theoretical tax at U.S. rate 978 34.0 1,405 35.0 1,287 35.0
Foreign taxes in excess of
U.S. statutory rate 709 24.7 685 17.1 661 18.0
Other items, net (120) (4.2) (159) (4.0) (29) (0.8)
- ----------------------------------------------------------------------------------------------
Total income taxes $1,567 54.5 $1,931 48.1 $1,919 52.2
- ----------------------------------------------------------------------------------------------
10. Summary Financial Information of Unconsolidated Equity
Affiliates
Summary financial information for affiliated companies
(owned 50% or less) accounted for on the equity method is
shown in the table below. Mobil's investment in these
companies is included in Investments and Long-Term
Receivables. The equity affiliates are primarily engaged in
producing, refining and marketing in Germany, the Middle
East, Japan and elsewhere in the Pacific Rim, and
petrochemical and lube manufacturing in the Middle East.
Also included are interests in several pipeline ventures.
The 1993 combined net income of equity method
affiliates shown in the table below is after deducting a
$250 million charge ($500 million pre-tax), in the Mobil
share column, for the excess of local currency LIFO
inventory values over market value at December 31, 1993.
Undistributed earnings of the equity affiliates
included in Earnings Retained in the Business were $774
million at December 31, 1994. Dividends received from these
companies were $225 million in 1992, $276 million in 1993
and $203 million in 1994.
Accounts and Notes Receivable in the Consolidated
Balance Sheet include $218 million and $171 million at
December 31, 1993 and 1994, respectively, of amounts due
from equity affiliates. Accounts Payable include $404
million and $459 million at December 31, 1993 and 1994,
respectively, of amounts due to equity affiliates.
- --------------------------------------------------------------------------------------------------------
Equity method affiliates 1992 1993 1994
- --------------------------------------------------------------------------------------------------------
(In millions) Total Mobil Share Total Mobil Share Total Mobil Share
- --------------------------------------------------------------------------------------------------------
Current assets $ 9,114 $ 2,886 $ 9,565 $ 2,954 $ 8,559 $ 2,639
Noncurrent assets 9,175 3,129 9,449 3,121 11,366 3,637
Current liabilities (6,678) (2,155) (7,437) (2,373) (7,865) (2,493)
Long-term debt (2,455) (920) (2,179) (791) (2,271) (822)
Other liabilities (2,091) (564) (1,909) (518) (2,101) (576)
- --------------------------------------------------------------------------------------------------------
Net assets $ 7,065 $ 2,376 $ 7,489 $ 2,393 $ 7,688 $ 2,385
- --------------------------------------------------------------------------------------------------------
Gross revenues $26,020 $ 8,249 $25,766 $ 8,125 $27,600 $ 8,696
Income before taxes $ 1,017 $ 278 $ 1,370 $ (105) $ 1,175 $ 349
Net income 655 189 857 11 578 187(1)
- --------------------------------------------------------------------------------------------------------
Capital expenditures $ 632 $ 205 $ 824 $ 238 $ 1,711 $ 421
- --------------------------------------------------------------------------------------------------------
(1) Includes $56 million charge related to the LCM change in accounting principle
(see Note 2 on page 37).
Mobil 43
NOTES TO FINANCIAL STATEMENTS
11. Employee Benefits
Employee benefits that Mobil provides in the U.S. are
contributory and noncontributory medical and dental plans,
pension plans, group life insurance, savings plans, an
employee stock ownership plan, disability plans for
sickness and accidents, and termination plans. Mobil's
international affiliates also provide various pension and
other employee benefit plans. Mobil makes contributions to
funded plans and provides book reserves for unfunded plans.
Mobil also provides certain postretirement health care
and life insurance benefits for most U.S. retirees, if they
are working for the company when they become eligible for
retirement. Premium costs are shared on a plan-by-plan
basis between Mobil and the participants. Postretirement
health care benefits are provided both before and after
eligibility for Medicare. The life insurance plans provide
for a single lump sum payment to a designated beneficiary.
The amount of the lump sum payment varies depending on
employment date, age and years since retirement. There is
no material obligation for Mobil to provide postretirement
benefits for international retirees because they are
covered primarily by local government programs.
The U.S. charge to Mobil's income for postretirement
health care and life insurance plans was $71 million in
1992, $70 million in 1993 and $67 million in 1994.
The components of Mobil's net postretirement benefit
expense for U.S. plans and the status of Mobil's U.S.
postretirement benefit plans and the amounts recognized in
the Consolidated Balance Sheet are detailed below:
- --------------------------------------------------------------------------------------------------------
Postretirement benefit expense,
excluding pensions Health Care Life Insurance
- --------------------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994
- --------------------------------------------------------------------------------------------------------
Benefits earned by employees during the year $ 11 $ 10 $ 11 $ 2 $ 2 $ 2
Interest cost on accumulated
postretirement benefit obligation 35 33 29 26 27 27
Actual (earnings) on assets - - - (3) (2) (1)
Amortization of unrecognized amounts - - (1) - - -
- --------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 46 $ 43 $ 39 $ 25 $ 27 $ 28
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Status of postretirement benefit plans Health Care Life Insurance
- --------------------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994 1993 1994
- --------------------------------------------------------------------------------------------------------
Actuarial present value of accumulated
postretirement benefit obligation
Retirees $232 $206 $296 $280
Other fully eligible plan participants 57 47 60 45
Other active plan participants 132 88 28 19
- --------------------------------------------------------------------------------------------------------
Total actuarial present value of
accumulated postretirement
benefit obligation $421 $341 $384 $344
Assets and book reserves
Plan assets - - 20 -
Book reserves 429 445 322 343
- --------------------------------------------------------------------------------------------------------
Total assets and book reserves 429 445 342 343
- --------------------------------------------------------------------------------------------------------
Assets and book reserves greater (less) than
accumulated postretirement benefit obligation $ 8 $104 $(42) $ (1)
- --------------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized net gain(loss) $ 8 $ 93 $(42) $ (1)
Unrecognized prior service costs - 11 - -
- --------------------------------------------------------------------------------------------------------
At December 31, 1994, the health care cost trend used to calculate the
accumulated postretirement benefit obligations is 10.3% for 1995 and
is assumed to decrease gradually over 10 years to 5.5%. At December 31, 1993,
the health care cost trend rate was assumed to be 10.8% for 1994, declining
gradually to 5.5% after 11 years. A 1% increase in the assumed health care
cost trend rate for each year would increase the 1994 net postretirement
benefit expense and the accumulated postretirement benefit obligation as of
December 31, 1994, by approximately $6 million and $34 million, respectively.
The discount rate used in determining the postretirement benefit
obligation was 8.5% in 1994 and 7.0% in 1993.
Mobil 44
NOTES TO FINANCIAL STATEMENTS
11. Employee Benefits (continued)
The majority of full-time U.S. employees are covered by
funded noncontributory pension plans. These plans are
primarily final average pay plans. Mobil's funding for
these plans is based on the projected unit credit actuarial
cost method.
Mobil's international employees are covered by pension
and similar plans. Coverage and benefits vary from country
to country. Mobil's funding policy also varies, in line
with local commercial, actuarial and taxation practices.
The worldwide charge to Mobil's income for pension
plans was $170 million in 1992, $202 million in 1993 and
$214 million in 1994.
The components of net pension expense for Mobil's
plans and the status of Mobil's pension plans and the
amounts recognized in the Consolidated Balance Sheet are
detailed below:
- ------------------------------------------------------------------------------------------------------------------------
Pension expense U.S. Plans International Plans
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------
Benefits earned by employees during the year $ 101 $ 98 $ 107 $ 74 $ 83 $ 91
Interest cost on projected benefit obligation 199 201 194 124 115 117
Actual (earnings) loss on assets (136) (379) (4) (66) (159) 30
Deferral of actual earnings on assets
(less) greater than expected returns (98) 151 (224) (17) 89 (103)
Net amortization of unrecognized amounts (14) (14) (12) 3 17 18
- ------------------------------------------------------------------------------------------------------------------------
Net pension expense $ 52 $ 57 $ 61 $ 118 $ 145 $ 153
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Status of pension plans U.S. Plans International Plans
- ------------------------------------------------------------------------------------------------------------------------
At December 31 (In millions) 1993 1994 1993 1994
- ------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations
Vested $1,986 $1,818 $1,273 $1,398
Nonvested 240 137 126 136
- ------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 2,226 1,955 1,399 1,534
Additional amounts related to projected pay increases 624 410 412 428
- ------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 2,850 2,365 1,811 1,962
- ------------------------------------------------------------------------------------------------------------------------
Assets and book reserves
Plan assets at fair value, primarily in equity
and fixed income securities 2,834 2,590 944 960
Book reserves 45 92 746 901
- ------------------------------------------------------------------------------------------------------------------------
Total assets and book reserves 2,879 2,682 1,690 1,861
- ------------------------------------------------------------------------------------------------------------------------
Assets and book reserves greater (less)
than projected benefit obligation $ 29 $ 317 $ (121) $(101)
- ------------------------------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized net asset (liability) at date of
initial application of FAS 87 $ 242 $ 211 $ (72) $ (68)
Unrecognized prior service cost (163) (191) (57) (56)
Unrecognized net (loss) gain (130) 209 (163) (202)
Minimum liability and prefunded expenses 80 88 171 225
- ------------------------------------------------------------------------------------------------------------------------
Assets and book reserves greater (less) than
projected benefit obligation $ 29 $ 317 $ (121) $(101)
- ------------------------------------------------------------------------------------------------------------------------
Weighted average rates used in determining
the actuarial present value of the
projected benefit obligation (percent)
Discount rate 7.0 8.5 6.9 7.5
Rate of increase in future compensation levels 4.5 4.0 5.8 5.6
- ------------------------------------------------------------------------------------------------------------------------
Expected long-term rate of return on plan assets
used in determining current year expense (percent) 9.0 8.5 9.2 8.2
- ------------------------------------------------------------------------------------------------------------------------
Memo: assets and book reserves greater than
accumulated benefit obligation $ 653 $ 727 $ 291 $ 327
- ------------------------------------------------------------------------------------------------------------------------
Mobil 45
NOTES TO FINANCIAL STATEMENTS
12. Stock Option Plans
Under the 1991 Mobil Incentive Compensation and Stock
Option Plan approved by shareholders, options may be
granted to key employees to purchase a maximum of 0.6% of
the total common shares outstanding at the end of each year
of its five-year life, cumulative from the effective date
of the plan. "Incentive Stock Options" are limited to not
more than 2,406,476 shares per year. No additional options
may be granted under earlier plans. "Nonqualified" options
and "Incentive Stock Options" having a maximum life of 10
years are granted at 100% of the fair market value of Mobil
common stock at the time of the award and may be exercised
for stock after vesting requirements have been met. Stock
appreciation rights, where applicable, permit the holder to
receive stock, cash or a combination thereof equal to the
amount by which the fair market value at the time of
relinquishment of the option exceeds the option price.
At December 31, 1993, there were 882,501 shares
available for option grants. Shares available for option
grants at December 31, 1994, were 1,163,634. Based on the
1991 Plan formula an additional 2,375,922 shares became
available for option grants on January 1, 1995.
- --------------------------------------------------------------------------------------------------------
Stock option transactions 1981 Plan 1986 Plan 1991 Plan
- --------------------------------------------------------------------------------------------------------
January 1, 1994-shares under option 370,635 5,298,517 6,006,817
- --------------------------------------------------------------------------------------------------------
Changes during 1994
Options granted at $80.69 - - 2,143,100
Options granted at $86.06 - - 1,121,000
Options expired or canceled (3,700) - (27,818)
Options exercised at prices
ranging from $28.78 to $64.25 (210,019) (553,849) (309,696)
SARs(1) exercised at prices
ranging from $29.72 to $64.25 (27,646) (267,702) (73,047)
- --------------------------------------------------------------------------------------------------------
December 31, 1994-shares under option 129,270 4,476,966 8,860,356
Years of grant 1985 1986-1991 1991-1994
Average option price per share $29.81 $52.88 $70.10
- --------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1994 129,270 4,476,966 5,125,425
At an average price of $29.81 $52.88 $63.22
- --------------------------------------------------------------------------------------------------------
(1) Stock appreciation rights.
13. Employee Stock Ownership Plan (ESOP)
Mobil Oil's Employees Savings Plan includes an ESOP
covering most U.S. employees. In 1989 the ESOP Trust,
supported by Mobil guarantees, borrowed $800 million. The
ESOP Trust used the proceeds of the loan to purchase
102,894 shares of Series B ESOP Convertible Preferred Stock
from Mobil. Each preferred share has a liquidation value
of $7,775, is convertible into 100 shares of common stock
and is entitled to 100 votes. Dividends on the preferred
stock are cumulative and payable at an annual rate of $600
per share. The ESOP Trust uses the preferred dividends not
allocated to employees to make principal and interest
payments on the notes. As debt service exceeds the
dividends, Mobil is required to fund the excess. In 1992,
1993 and 1994, this excess was $48 million, $58 million and
$29 million, respectively.
The guaranteed ESOP borrowing is included in Mobil's
debt. The future compensation to be earned by employees is
classified in Shareholders' Equity. These amounts are
reduced and expense is recognized as the debt is repaid and
shares are earned by employees. In 1992, 1993 and 1994,
total ESOP-related expenses were $48 million, $61 million
and $32 million, respectively.
Interest incurred on ESOP debt in 1992, 1993 and 1994 was
$66 million, $62 million and $58 million, respectively.
Mobil 46
NOTES TO FINANCIAL STATEMENTS
14. Capital Stock
At December 31, 1994, 600,000,000 shares of $2.00 par value
common stock were authorized and 442,336,317 shares were
issued, including 46,349,300 shares held in the treasury.
At December 31, 1994, 30,000,000 shares of $1.00 par value
preferred stock were authorized, of which 6,000,000 shares
of Series A Junior Participating Preferred Stock were
authorized for issuance upon exercise of certain preferred
stock purchase rights (no shares issued or outstanding) and
102,894 shares of Series B ESOP Convertible Preferred Stock
were authorized for issuance. At December 31, 1993 and
1994, respectively, 98,073 and 95,778 shares of Series B
ESOP Convertible Preferred Stock were outstanding. During
1993 and 1994, 2,125 and 2,295 of such shares,
respectively, were redeemed.
- --------------------------------------------------------------------------------------------------------
Changes in shares of common stock outstanding
- --------------------------------------------------------------------------------------------------------
Year ended December 31 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------
Common shares outstanding-beginning of year 398,301,121 398,816,293 398,167,941
Purchase of common stock for treasury (258,000) (1,962,000) (3,198,000)
Exercise of stock options and
stock appreciation rights 768,983 1,313,002 1,014,245
Incentive compensation awards 4,189 646 2,831
- --------------------------------------------------------------------------------------------------------
Common shares outstanding-end of year 398,816,293 398,167,941 395,987,017
- --------------------------------------------------------------------------------------------------------
15. Foreign Currency
Foreign exchange transaction gains of $6 million in 1992,
losses of $29 million in 1993 and gains of $70 million in
1994 were included in income. These include amounts
applicable to companies accounted for on the equity method.
The effect of foreign currency translation on Mobil's
balance sheet accounts is summarized in the following
table.
- ---------------------------------------------------------------------------------------------------------
Cumulative foreign exchange translation adjustment
- ---------------------------------------------------------------------------------------------------------
At December 31 (In millions) 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------
Properties, plants and equipment, net $(602) $(838) $(273)
Deferred income taxes (184) (104) (199)
Working capital, debt and other items, net 252 416 349
- --------------------------------------------------------------------------------------------------------
Total $(534) $(526) $(123)
- --------------------------------------------------------------------------------------------------------
16. Restoration, Removal and Environmental Liabilities
Exploration and producing properties must generally be
restored to their original condition when the oil or gas
reserves are depleted and/or operations cease. At December
31, 1993 and 1994, $732 million and $790 million,
respectively, had been accrued for restoration and removal
costs, mainly related to offshore producing facilities.
Mobil accrues for its best estimate of the future costs
associated with known environmental remediation
requirements at its service stations, marketing terminals,
refineries and plants, and at certain Superfund sites. At
December 31, 1993 and 1994, the accumulated reserve for
environmental remediation costs was $622 million and $551
million, respectively. Of these amounts, $140 million and
$150 million were included in current accrued liabilities
in the consolidated balance sheet. Accrued remediation
costs for the company's U.S. service stations reflect
amounts recoverable from certain states under existing
programs established to assist companies in cleanup
efforts. The expected recoverable costs were $91 million
and $68 million at December 31, 1993 and 1994,
respectively. Amounts accrued with respect to Superfund
waste disposal sites, which are not material, are based on
the company's best estimate of its portion of the costs of
remediating such sites.
Mobil 47
NOTES TO FINANCIAL STATEMENTS
17. Commitments and Contingent Liabilities
Substantial commitments are made in the normal course of
business for the purchase of crude oil and petroleum
products, and the acquisition or construction of
properties, plants and equipment (including tankers for
time charter to Mobil).
Mobil has guaranteed $146 million of the obligations
of others, excluding $253 million of certain
cross-guarantees, primarily foreign customs duties, made
with other responsible companies in the ordinary course of
business. In addition, Mobil has guaranteed specified
revenues from crude oil, product and carbon dioxide
shipments under agreements with pipeline companies in which
it holds stock interests. If these companies are unable to
meet certain obligations, Mobil may be required to advance
funds against future transportation charges. No material
loss is anticipated under these guarantees.
The Internal Revenue Service (IRS) has investigated
the pricing of Saudi Arabian crude oil by Mobil and the
other Arabian American Oil Co. (Aramco) shareholder
companies during the period 1979-1984. In January 1992, the
IRS assessed a tax deficiency against Mobil of about $300
million on this so-called "Aramco Advantage" issue for tax
years 1980 and 1981. In April 1992, Mobil filed a petition
in the U.S. Tax Court challenging the IRS deficiency
notice. If the IRS were ultimately to prevail, tax
deductible interest in excess of $1 billion would also be
due. Mobil is presently negotiating with the IRS to resolve
the "Aramco Advantage" and certain other tax issues. It is
not possible to predict whether these negotiations will be
successful. If a court trial is required, final resolution
could be several years away. In December 1993, the U.S. Tax
Court held that the IRS had exceeded its authority in
making large adjustments to increase the taxable income of
Exxon Corporation and Texaco Inc. (former Aramco
shareholders) on the "Aramco Advantage" issue. It is
anticipated that the IRS will appeal this decision.
Mobil and its subsidiaries are engaged in various
litigations and have a number of unresolved claims pending.
The amounts claimed are substantial and the ultimate
liability in respect of such litigations and claims cannot
be determined at this time. Mobil has provided in its
accounts for these items based on management's best
judgment. Mobil is of the opinion that such liability, to
the extent not provided for through insurance or otherwise,
is not likely to be of material importance in relation to
its accounts.
Mobil 48
REPORTS
Report of Management
The management of Mobil Corporation has the responsibility
for preparing the accompanying financial statements and for
their integrity and objectivity. The statements, which
include amounts that are based, in part, on management's
best estimates and judgments, were prepared in conformity
with generally accepted accounting principles.
Mobil maintains a system of internal accounting
controls and a program of internal auditing that we believe
provide us with reasonable assurance that Mobil's assets
are protected and that published financial statements are
reliable and free of material misstatement.
The Audit Committee of the Board of Directors,
composed solely of directors who are not officers or
employees, meets regularly with Mobil's financial
management and counsel, with Mobil's General Auditor, and
with the independent auditors. These meetings include
discussion of internal accounting controls and the quality
of financial reporting. The independent auditors and the
General Auditor have free and independent access to the
Audit Committee to discuss the results of their audits or
any other matters relating to Mobil's financial affairs.
The accompanying consolidated financial statements
have been audited by Ernst & Young LLP, independent
auditors, whose appointment was approved by the
shareholders. Ernst & Young's audit report follows.
/S/LUCIO A. NOTO /S/THOMAS C. DELOACH, JR.
- ---------------- -------------------------
Lucio A. Noto Thomas C. DeLoach, Jr.
Chairman and Chief Senior Vice President and
Executive Officer Chief Financial Officer
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Mobil Corporation
We have audited the accompanying consolidated balance
sheets of Mobil Corporation as of December 31, 1993 and
1994, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1994,
appearing on pages 29, 31, and 33 through 48. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Mobil Corporation at
December 31, 1993 and 1994, and the consolidated results of
its operations and its cash flows for each of the three
years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, in
1994, Mobil Corporation changed the method of accounting it
uses to value its crude oil and product inventories at the
lower of cost or market. In 1992, the Company changed its
method of accounting for income taxes and postretirement
benefits other than pensions.
/S/ERNST & YOUNG LLP
- --------------------
Fairfax, Virginia
February 24, 1995
Mobil 49
SUPPLEMENTARY INFORMATION
Oil and Gas Producing Activities (unaudited)
The accompanying tables set forth information concerning
Mobil's oil and gas producing activities at December 31,
1992, 1993 and 1994, and for the years then ended, as
required by Financial Accounting Standard (FAS) 69,
Disclosures about Oil and Gas Producing Activities.
- -----------------------------------------------------------------------------------------------------------------------
Table 1: Estimated Quantities of Net Proved Oil and Natural Gas Liquids Reserves
- -----------------------------------------------------------------------------------------------------------------------
United States Canada Europe
Year ended December 31
(Millions of barrels) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 1,232 1,168 1,116 259 244 249 376 353 357
Revisions 17 (13) (3) 10 2 (8) - (4) 5
Improved recovery 14 59 49 2 27 7 36 56 101
Purchases 1 18 2 - 6 5 - - -
Sales (18) (8) (9) (6) (9) (2) - - -
Extensions, discoveries
and other additions 36 3 7 1 - 19 - 10 1
Production (114) (111) (110) (22) (21) (21) (59) (58) (63)
- -----------------------------------------------------------------------------------------------------------------------
End of year 1,168 1,116 1,052 244 249 249 353 357 401
- -----------------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year - - - - - - 5 3 2
Revisions - - - - - - - (1) -
Sales - - - - - - (2) - -
Extensions, discoveries
and other additions - - - - - - - - -
Production - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
End of year - - - - - - 3 2 2
- -----------------------------------------------------------------------------------------------------------------------
Total net proved reserves 1,168 1,116 1,052 244 249 249 356 359 403
- -----------------------------------------------------------------------------------------------------------------------
Net proved developed
reserves of fully
consolidated companies:
Beginning of year 934 879 871 218 203 203 196 168 196
End of year 879 871 826 203 203 190 168 196 215
- -----------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Areas Total
- --------------------------------------------------------------------------------
Year ended December 31
(Millions of barrels) 1992 1993 1994 1992 1993 1994
- --------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 1,025 1,066 1,087 2,892 2,831 2,809
Revisions 84 30 76 111 15 70
Improved recovery - - 123 52 142 280
Purchases - - 2 1 24 9
Sales - - - (24) (17) (11)
Extensions, discoveries
and other additions 40 86 30 77 99 57
Production (83) (95) (101) (278) (285) (295)
- --------------------------------------------------------------------------------
End of year 1,066 1,087 1,217 2,831 2,809 2,919
- --------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year 564 538 532 569 541 534
Revisions (5) (1) - (5) (2) -
Sales - - - (2) - -
Extensions, discoveries
and other additions - 15 8 - 15 8
Production (21) (20) (17) (21) (20) (17)
- --------------------------------------------------------------------------------
End of year 538 532 523 541 534 525
- --------------------------------------------------------------------------------
Total net proved reserves 1,604 1,619 1,740 3,372 3,343 3,444
- --------------------------------------------------------------------------------
Net proved developed
reserves of fully
consolidated companies:
Beginning of year 697 811 783 2,045 2,061 2,053
End of year 811 783 784 2,061 2,053 2,015
- --------------------------------------------------------------------------------
(1) Represents Mobil's share of net proved reserves of investees accounted for
on the equity method.
Mobil's estimated net proved reserves and changes thereto
for the years 1992, 1993 and 1994 are presented in Tables 1
and 2. The estimates represent only those volumes
considered to be proved reserves and include fields where
additional investment may be required to recover these
reserves.
Definitions used in developing these data are in accordance
with the SEC guidelines, which state: "Proved oil and gas
reserves are the estimated quantities of crude oil, natural
gas and natural gas liquids which geological and
engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under
existing economic and operating conditions, i.e., prices
and costs as of the date the estimate is made." Proved
developed reserves are recoverable from existing wells with
existing equipment and operating methods. These reserve
estimates are subject to revisions over time as more
information becomes available. In the past, some revisions
have been significant. The company's net proved reserves
exclude royalties and interests owned by others and natural
gas liquids volumes received under natural gas processing
contracts.
Mobil 50
SUPPLEMENTARY INFORMATION
Oil and Gas Producing Activities (unaudited) (continued)
- ------------------------------------------------------------------------------------------------------------------------
Table 2: Estimated Quantities of Net Proved Natural Gas Reserves
United States Canada Europe
Year ended December 31
(Billions of cubic feet) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 6,237 5,971 5,372 1,912 1,823 1,507 3,462 3,508 4,021
Revisions 391 (33) 164 116 (24) 9 165 377 234
Improved recovery - 11 30 17 43 5 124 56 -
Purchases 2 27 8 10 13 32 24 - 20
Sales (97) (119) (64) (54) (169) (51) (80) - -
Extensions, discoveries
and other additions 38 73 117 9 - 410 89 403 322
Production (600) (558) (572) (187) (179) (168) (276) (323) (346)
- ------------------------------------------------------------------------------------------------------------------------
End of year 5,971 5,372 5,055 1,823 1,507 1,744 3,508 4,021 4,251
- ---------------------------------------------------------------------------------------------------------------------- --
Net proved reserves of
equity companies:(1)
Beginning of year - - - - - - 66 33 33
Revisions - - - - - - 4 3 2
Sales - - - - - - (33) - -
Extensions, discoveries
and other additions - - - - - - 1 2 2
Production - - - - - - (5) (5) (4)
- ------------------------------------------------------------------------------------------------------------------------
End of year - - - - - - 33 33 33
- ------------------------------------------------------------------------------------------------------------------------
Total net proved reserves 5,971 5,372 5,055 1,823 1,507 1,744 3,541 4,054 4,284
- ------------------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
Beginning of year 5,098 4,530 4,158 1,694 1,489 1,306 2,556 2,536 2,932
End of year 4,530 4,158 3,902 1,489 1,306 1,223 2,536 2,932 3,081
- ------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Table 2: Estimated Quantities of Net Proved Natural Gas Reserves
Other Areas Total
Year ended December 31
(Billions of cubic feet) 1992 1993 1994 1992 1993 1994
- ----------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 6,952 6,401 6,059 18,563 17,703 16,959
Revisions 54 22 51 726 342 458
Improved recovery - - - 141 110 35
Purchases - - 34 36 40 94
Sales - - - (231) (288) (115)
Extensions, discoveries
and other additions - 241 71 136 717 920
Production (605) (605) (608) (1,668) (1,665) (1,694)
- ----------------------------------------------------------------------------------------
End of year 6,401 6,059 5,607 17,703 16,959 16,657
- ----------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year 127 70 691 193 103 724
Revisions (45) 38 4 (41) 41 6
Sales - - - (33) - -
Extensions, discoveries
and other additions - 594 297 1 596 299
Production (12) (11) (7) (17) (16) (11)
- ----------------------------------------------------------------------------------------
End of year 70 691 985 103 724 1,018
- ----------------------------------------------------------------------------------------
Total net proved reserves 6,471 6,750 6,592 17,806 17,683 17,675
Net proved developed reserves
of fully consolidated companies:
Beginning of year 5,530 4,955 4,326 14,878 13,510 12,722
- ----------------------------------------------------------------------------------------
End of year 4,955 4,326 3,810 13,510 12,722 12,016
- ----------------------------------------------------------------------------------------
(1) Represents Mobil's share of net proved reserves of investees accounted for
on the equity method.
- -----------------------------------------------------------------------------------------------------------------
Table 3: Capitalized Costs Related to Oil and Gas Producing Activities
- -----------------------------------------------------------------------------------------------------------------
United States Canada Europe
At December 31 (In millions) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------
Capitalized costs:
Unproved properties $ 160 $ 134 $ 54 $ 117 $ 115 $ 113 $ 18 $ 16 $ 11
Proved properties, wells,
plants and other equipment 17,045 16,441 15,988 3,084 3,110 3,186 5,931 6,051 6,929
- -----------------------------------------------------------------------------------------------------------------
Total capitalized costs 17,205 16,575 16,042 3,201 3,225 3,299 5,949 6,067 6,940
Accumulated depreciation,
depletion and amortization 10,775 10,793 10,833 1,426 1,467 1,528 3,183 3,319 3,993
- -----------------------------------------------------------------------------------------------------------------
Net capitalized costs 6,430 5,782 5,209 1,775 1,758 1,771 2,766 2,748 2,947
Net capitalized costs of
equity companies(1) - - - - - - 19 21 28
- -----------------------------------------------------------------------------------------------------------------
Total $ 6,430 $ 5,782 $ 5,209 $1,775 $1,758 $1,771 $2,785 $2,769 $2,975
- -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Table 3: Capitalized Costs Related to Oil and Gas Producing Activities
- ------------------------------------------------------------------------------------------
Other Areas Total
At December 31 (In millions) 1992 1993 1994 1992 1993 1994
- ------------------------------------------------------------------------------------------
Capitalized costs:
Unproved properties $ 12 $ 11 $ 9 $ 307 $ 276 $ 187
Proved properties, wells,
plants and other equipment 2,573 2,947 3,342 28,633 28,549 29,445
- ------------------------------------------------------------------------------------------
Total capitalized costs 2,585 2,958 3,351 28,940 28,825 29,632
Accumulated depreciation,
depletion and amortization 1,290 1,487 1,772 16,674 17,066 18,126
- ------------------------------------------------------------------------------------------
Net capitalized costs 1,295 1,471 1,579 12,266 11,759 11,506
- ------------------------------------------------------------------------------------------
Net capitalized costs of
equity companies(1) 81 119 198 100 140 226
- ------------------------------------------------------------------------------------------
Total $1,376 $1,590 $1,777 $12,366 $11,899 $11,732
- ------------------------------------------------------------------------------------------
(1) Represents Mobil's share of net proved reserves of investees
accounted for on the equity method.
Table 3 summarizes the aggregate amount of capitalized
costs related to oil and gas producing activities and
related accumulated depreciation, depletion and
amortization at December 31, 1992, 1993 and 1994.
Capitalized costs include (1) mineral interests in
properties; (2) wells, plants
and related equipment and facilities; and (3) support
equipment and facilities used in oil and gas producing
activities.
Mobil 51
SUPPLEMENTARY INFORMATION
Oil and Gas Producing Activities (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
Table 4: Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities
- -----------------------------------------------------------------------------------------------------------------
United States Canada Europe
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------
Property acquisition costs:
Unproved properties $ 4 $ 4 $ 17 $ 5 $ 5 $ 11 $ 8 $ 1 $ -
Proved properties 11 9 8 - 9 - 10 3 10
- -----------------------------------------------------------------------------------------------------------------
Total acquisition costs 15 13 25 5 14 11 18 4 10
Exploration costs 75 124 199 27 22 49 219 221 174
Development costs 349 331 365 150 264 354 639 399 319
- -----------------------------------------------------------------------------------------------------------------
Total expenditures 439 468 589 182 300 414 876 624 503
- -----------------------------------------------------------------------------------------------------------------
Property acquisition,exploration and
development costs of equity companies (1) - - - - - - 8 9 12
- -----------------------------------------------------------------------------------------------------------------
Total $439 $468 $589 $182 $300 $414 $884 $633 $515
- -----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Table 4: Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities
- -------------------------------------------------------------------------------------------------
Other Areas Total
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994
- -------------------------------------------------------------------------------------------------
Property acquisition costs:
Unproved properties $ 1 $ 16 $ 4 $ 18 $ 26 $ 32
Proved properties 5 - 4 26 21 22
- -------------------------------------------------------------------------------------------------
Total acquisition costs 6 16 8 44 47 54
Exploration costs 198 127 226 519 494 648
Development costs 280 392 385 1,418 1,386 1,423
- -------------------------------------------------------------------------------------------------
Total expenditures 484 535 619 1,981 1,927 2,125
- -------------------------------------------------------------------------------------------------
Property acquisition,exploration and
development costs of
equity companies(1) 30 60 86 38 69 98
- -------------------------------------------------------------------------------------------------
Total $514 $595 $705 $2,019 $1,996 $2,223
- -------------------------------------------------------------------------------------------------
(1) Represents Mobil's share of property acquisition,
exploration and development costs of investees accounted
for on the equity method.
The table above sets forth certain costs incurred, both
capitalized and expensed, in oil and gas producing
activities. Property acquisition costs represent costs
incurred to purchase or lease oil and gas properties.
Exploration costs include costs of geological and
geophysical activities and drilling of exploratory wells.
Expenditures to drill and equip development wells and
construct production facilities to extract, treat and store
oil and gas are included in development costs. Exploration
and development costs also include depreciation of support
equipment and facilities used in these activities rather
than the acquisition costs for support equipment.
- ------------------------------------------------------------------------------------------------------------------------
Table 5: Results of Operations for Oil and Gas Producing Activities
- -------------------------------------------------------------------------------------------------------------------------
United States Canada Europe
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Results of Operations
Revenues:
Trade sales $ 926 $1,054 $ 890 $ 502 $ 533 $ 489 $ 1,043 $1,089 $1,486
Intercompany sales 1,742 1,421 1,331 43 18 13 987 850 456
- -------------------------------------------------------------------------------------------------------------------------
Total revenues(1) 2,668 2,475 2,221 545 551 502 2,030 1,939 1,942
Production (lifting) costs (1,019) (976) (946) (253) (218) (203) (749) (679) (660)
Exploration expenses (112) (65) (115) (27) (19) (43) (184) (192) (145)
Depreciation, depletion
and amortization (848) (844) (949) (325) (170) (217) (464) (369) (428)
Other operating revenues
and (expenses) (179) (43) (31) (6) 14 8 138 60 66
Income tax expense (162) (184) (55) 37 (13) 10 (469) (369) (459)
- -------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities 348 363 125 (29) 145 57 302 390 316
- -------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities of
equity companies(2) - - - - - - 41 1 2
- -------------------------------------------------------------------------------------------------------------------------
Total $ 348 $ 363 $ 125 $ (29) $ 145 $ 57 $ 343 $ 391 $ 318
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Table 5: Results of Operations for Oil and Gas Producing Activities
- -------------------------------------------------------------------------------------------------------------------------
Other Areas Total
Year ended December 31 (In millions) 1992 1993 1994 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Results of Operations
Revenues:
Trade sales $ 1,546 $ 1,450 $ 1,372 $ 4,017 $ 4,126 $ 4,237
Intercompany sales 1,215 1,305 1,340 3,987 3,594 3,140
- -------------------------------------------------------------------------------------------------------------------------
Total revenues(1) 2,761 2,755 2,712 8,004 7,720 7,377
Production (lifting) costs (572) (592) (565) (2,593) (2,465) (2,374)
Exploration expenses (184) (129) (213) (507) (405) (516)
Depreciation, depletion
and amortization (197) (243) (313) (1,834) (1,626) (1,907)
Other operating revenues
and (expenses) 185 166 96 138 197 139
Income tax expense (1,300) (1,234) (1,157) (1,894) (1,800) (1,661)
- -------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities 693 723 560 1,314 1,621 1,058
- -------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities of
equity companies(2) 35 30 16 76 31 18
- -------------------------------------------------------------------------------------------------------------------------
Total $ 728 $ 753 $ 576 $ 1,390 $ 1,652 $ 1,076
- -------------------------------------------------------------------------------------------------------------------------
(1) Revenues in this table will not agree with Exploration
& Producing Segment Revenues (pages 20 and 34) because
revenues from operations that are ancillary to oil and gas
producing activities have been classified as Other
Operating Revenues and Expenses for this presentation.
(2) Represents Mobil's share of results of operations for
producing activities of investees accounted for on the
equity method.
Mobil's results of operations for producing activities for
the years ended December 31, 1992, 1993 and 1994 are shown
above. Revenues include sales to unaffiliated parties and
sales or transfers (essentially at third-party sales
prices) to Mobil's other operations. All revenues reported
in this table are net of royalty interests of others.
Production (lifting) costs and exploration expenses are
determined as defined by accounting standards.
Mobil 52
SUPPLEMENTARY INFORMATION
Oil and Gas Producing Activities (unaudited) (continued)
FAS 69 requires disclosure with respect to future net cash
flows from future production of net proved, developed and
undeveloped reserves. Future cash inflows are computed by
applying year-end prices to estimated future production of
net proved reserves. Future price changes are considered
only to the extent they are covered by contractual
agreements in existence at year-end. Development and
production costs are based on year-end estimated future
expenditures incurred in developing and producing net
proved reserves, assuming continuation of existing economic
conditions. Future income taxes are calculated using
year-end statutory tax rates. Discounted future net cash
flows are computed using a discount factor of 10%.
The standardized measure data are not intended to
replace the historical cost-based financial data included
in the audited financial statements. As such, many of the
data disclosed in this section represent estimates,
assumptions and computations that are subject to continual
change as the future unfolds. For example, significant
changes in year-end prices from 1993 to 1994 contributed to
the higher discounted future net cash flow amount for 1994.
Accordingly, Mobil cautions investors and analysts that the
data are of questionable utility for decision making.
Tables 6 and 7 below set forth the standardized
measure of discounted future net cash flows relating to
proved oil and gas reserves, and quantify the causes of the
changes in the standardized measure of the cash flows
relating to those reserves. Since the estimates reflect
proved reserves only, they exclude revenues that could
result from unproved reserves that could become productive
in later years.
- -------------------------------------------------------------------------------------------------------------------------
Table 6: Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
- -------------------------------------------------------------------------------------------------------------------------
United States Canada Europe
At December 31 (In millions) 1992 1993 1994 1992 1993 1994 1992 1993 1994
- --------------------------------------------------------------------------------------------------------------------------
Future cash inflows $ 29,226 $ 23,067 $22,051 $5,567 $4,960 $ 4,419 $14,392 $14,211 $16,415
Future production costs (10,842) (10,386) (9,329) (2,437) (2,148) (1,987) (5,454) (4,893) (5,214)
Future development costs (1,921) (1,887) (1,775) (345) (292) (259) (1,112) (976) (1,131)
Future income tax expenses (4,819) (3,019) (3,120) (1,227) (1,081) (919) (4,163) (3,769) (4,883)
- -------------------------------------------------------------------------------------------------------------------------
Future net cash flows 11,644 7,775 7,827 1,558 1,439 1,254 3,663 4,573 5,187
10% annual discount
for estimated timing
of cash flows (5,532) (3,276) (3,266) (725) (639) (586) (1,268) (1,558) (1,732)
- --------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 6,112 4,499 4,561 833 800 668 2,395 3,015 3,455
- --------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) - - - - - - 20 15 21
- --------------------------------------------------------------------------------------------------------------------------
Total $ 6,112 $ 4,499 $ 4,561 $ 833 $ 800 $ 668 $ 2,415 $ 3,030 $ 3,476
- --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Table 6: Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
- -------------------------------------------------------------------------------------------------------------------------
Other Areas Total
At December 31 (In millions) 1992 1993 1994 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Future cash inflows $ 32,376 $24,759 $29,196 $ 81,561 $ 66,997 $ 72,081
Future production costs (8,761) (7,648) (8,287) (27,494) (25,075) (24,817)
Future development costs (1,684) (1,982) (1,909) (5,062) (5,137) (5,074)
Future income tax expenses (13,670) (8,641) (10,921) (23,879) (16,510) (19,843)
- --------------------------------------------------------------------------------------------------------------------------
Future net cash flows 8,261 6,488 8,079 25,126 20,275 22,347
10% annual discount
for estimated timing
of cash flows (3,454) (2,861) (3,868) (10,979) (8,334) (9,452)
- --------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 4,807 3,627 4,211 14,147 11,941 12,895
- --------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) 252 258 455 272 273 476
- --------------------------------------------------------------------------------------------------------------------------
Total $ 5,059 $ 3,885 $ 4,666 $ 14,419 $ 12,214 $ 13,371
- --------------------------------------------------------------------------------------------------------------------------
(1) Represents Mobil's share of standardized measure of
discounted future net cash flows of investees accounted for
on the equity method.
- ----------------------------------------------------------------------------------------------------
Table 7: Changes in Standardized Measure of Discounted Future Net Cash Flows
- ----------------------------------------------------------------------------------------------------
Year ended December 31 (In millions) 1992 1993 1994
- ----------------------------------------------------------------------------------------------------
Beginning of year $13,838 $14,419 $12,214
Changes resulting from:
Sales and transfers of production,
net of production costs (5,411) (5,255) (5,003)
Net changes in prices and in development and production costs 242 (7,217) 559
Extensions, discoveries, additions and
purchases, less related costs 288 993 864
Development costs incurred during the period 1,418 1,386 1,423
Revisions of previous quantity estimates 1,569 1,065 2,204
Accretion of discount 2,640 2,806 2,184
Net change in income taxes (135) 4,016 (1,276)
Other (30) 1 202
- ----------------------------------------------------------------------------------------------------
End of year $14,419 $12,214 $13,371
- ----------------------------------------------------------------------------------------------------
Mobil 53
SUPPLEMENTARY INFORMATION
Five-Year Operating Highlights (unaudited)
1990 1991 1992 1993 1994
- ----------------------------------------------------------------------------------------------------
Net Production of Crude Oil and NGL(1)
(thousands of barrels daily)
United States 324 332 311 305 300
Canada 66 65 59 58 57
Indonesia 97 97 94 90 77
Nigeria 95 109 132 169 175
Norway 89 95 102 95 95
United Kingdom 48 45 50 58 70
Other fully consolidated areas 12 11 11 9 33
Equity companies(2) 48 60 57 54 47
- ----------------------------------------------------------------------------------------------------
Worldwide 779 814 816 838 854
- ----------------------------------------------------------------------------------------------------
Net Production of Natural Gas
(millions of cubic feet daily)
United States 1,616 1,703 1,641 1,529 1,568
Canada 451 494 510 492 461
Germany 391 346 351 362 368
Indonesia 1,529 1,598 1,654 1,658 1,654
United Kingdom 227 261 260 390 470
Other fully consolidated areas 151 161 143 135 120
Equity companies(2) 60 61 45 44 29
- ----------------------------------------------------------------------------------------------------
Worldwide 4,425 4,624 4,604 4,610 4,670
Barrels of oil equivalent
(thousands of barrels daily)(3) 786 822 818 819 830
- ----------------------------------------------------------------------------------------------------
Total Production (thousands of barrels daily)(3) 1,565 1,636 1,634 1,657 1,684
- ----------------------------------------------------------------------------------------------------
Net Reserves of Crude Oil and NGL
(millions of barrels)
United States 1,207 1,232 1,168 1,116 1,052
Canada 247 259 244 249 249
Europe 368 376 353 357 401
Other fully consolidated areas 959 1,025 1,066 1,087 1,217
Equity companies(2) 547 569 541 534 525
- ----------------------------------------------------------------------------------------------------
Worldwide 3,328 3,461 3,372 3,343 3,444
- ----------------------------------------------------------------------------------------------------
Net Reserves of Natural Gas
(billions of cubic feet)
United States 7,149 6,237 5,971 5,372 5,055
Canada 1,995 1,912 1,823 1,507 1,744
Europe 3,378 3,462 3,508 4,021 4,251
Other fully consolidated areas 6,621 6,952 6,401 6,059 5,607
Equity companies(2) 207 193 103 724 1,018
- ----------------------------------------------------------------------------------------------------
Worldwide 19,350 18,756 17,806 17,683 17,675
Barrels of oil equivalent
(millions of barrels)(3) 3,439 3,334 3,165 3,143 3,142
- ----------------------------------------------------------------------------------------------------
Total Reserves
(millions of barrels of oil equivalent) 6,767 6,795 6,537 6,486 6,586
- ----------------------------------------------------------------------------------------------------
Reserves Replacement Percentage(4) 105% 105% 57% 92% 116%
- ----------------------------------------------------------------------------------------------------
Average U.S. Sales Price/Transfer Value(5)
Crude Oil (per barrel) $ 20.11 $ 16.42 $ 15.73 $ 13.54 $ 12.91
NGL (per barrel) 12.71 12.19 11.84 11.25 10.37
Natural Gas (per thousand cubic feet) 1.85 1.61 1.86 2.22 1.90
- ----------------------------------------------------------------------------------------------------
Average International Sales Price/
Transfer Value(5)
Crude Oil (per barrel) $ 22.74 $ 19.92 $ 19.11 $ 16.99 $ 15.66
Natural Gas (per thousand cubic feet) 2.97 2.90 2.74 2.62 2.44
- ----------------------------------------------------------------------------------------------------
(1) Natural Gas Liquids.
(2) Represents Mobil's share of investees accounted for on
the equity method.
(3) Natural gas volumes have been converted to oil
equivalent barrels on a BTU basis, with 5,626 cubic feet of
gas per barrel.
(4) Reserves replacement percentage is calculated by
dividing the net adjustments to reserves for the year plus
the annual production by the annual production.
(5) Transfer values are essentially equal to third-party
sales.
<GRAPH APPEARS HERE>
Liquids reserves increased over 100 million barrels in
1994, primarily in Europe and Africa.
<GRAPH APPEARS HERE>
Natural gas reserves were about the same as in 1993, with
increases in Europe offsetting a decline in Indonesia.
Mobil 54
SUPPLEMENTARY INFORMATION
Five-Year Operating Highlights (unaudited) (continued)
1990 1991 1992 1993 1994
- ----------------------------------------------------------------------------------------------------
Petroleum Product Sales
(thousands of barrels daily)
United States 903 922 999 1,080 1,172
Europe 775 751 790 810 810
Pacific Rim(1) 593 656 645 730 777
Other Areas 257 292 310 314 316
- ----------------------------------------------------------------------------------------------------
Worldwide 2,528 2,621 2,744 2,934 3,075
- ----------------------------------------------------------------------------------------------------
Petroleum Product Sales (millions of dollars)
United States $10,646 $ 9,694 $10,070 $10,181 $10,492
Europe 15,937 14,871 15,685 14,555 14,395
Pacific Rim(1) 9,028 10,111 9,770 10,619 11,466
Other Areas 3,246 3,336 3,551 3,382 3,707
- ----------------------------------------------------------------------------------------------------
Worldwide $38,857 $38,012 $39,076 $38,737 $40,060
- ----------------------------------------------------------------------------------------------------
Average United States Product Price
(per gallon)(2) 76.9 68.6 65.6 61.5 58.4
- ----------------------------------------------------------------------------------------------------
Refinery Runs (thousands of barrels daily)
United States 729 764 796 836 857
Europe 435 408 403 446 420
Pacific Rim(3) 453 522 529 607 622
Other Areas 150 155 158 163 163
- ----------------------------------------------------------------------------------------------------
Runs for Mobil by Mobil 1,767 1,849 1,886 2,052 2,062
Runs for Mobil by Others 40 28 37 20 20
- ----------------------------------------------------------------------------------------------------
Total Runs for Mobil 1,807 1,877 1,923 2,072 2,082
Mobil Refinery Runs for Others 96 86 66 28 12
- ----------------------------------------------------------------------------------------------------
Worldwide 1,903 1,963 1,989 2,100 2,094
- ----------------------------------------------------------------------------------------------------
Chemical Sales by Product Category
(millions of dollars)
Petrochemicals $ 1,989 $ 1,870 $ 1,733 $ 1,608 $ 2,088
Plastics 1,849 1,839 1,781 1,719 1,846
Other 35 46 59 81 101
- ----------------------------------------------------------------------------------------------------
Net sales to trade $ 3,873 $ 3,755 $ 3,573 $ 3,408 $ 4,035
- ----------------------------------------------------------------------------------------------------
Number of Employees (year-end)(4)
Petroleum Operations -United States 25,300 24,600 22,200 21,600 20,300
-International 25,500 26,300 25,800 25,200 25,200
Chemical -United States 10,700 10,900 10,200 9,700 8,100
-International 1,700 1,800 1,900 2,100 1,800
Other -United States 3,600 3,400 3,100 2,800 2,700
-International 500 500 500 500 400
- ----------------------------------------------------------------------------------------------------
Total 67,300 67,500 63,700 61,900 58,500
- ----------------------------------------------------------------------------------------------------
(1) Includes primarily Australia, China, Hong Kong, Japan, Malaysia, New Zealand and Singapore.
(2) Represents the average amount Mobil charges dealers,
service stations, etc. for petroleum products, including
gasoline. Excise taxes and other items included in the
"pump" price consumers pay for gasoline are not reflected
in this amount.
(3) Includes Australia, Japan, New Zealand and Singapore.
(4) Prior year data reclassified to conform with current
year presentation.
Mobil markets autogasoline through about 19,500 retail
outlets in over 50 countries. Petroleum product sales have
increased 22% based on daily volume since 1990.
Mobil has 5 refineries in the U.S. that represent about 40%
of its worldwide capacity. Outside the U.S., we have
operating interests in 16 crude oil refineries.
Mobil operates 43 chemical facilities in 10 countries, and
chemical sales extend to more than 100 countries. We are a
50% partner in a complex in Saudi Arabia that produces
polyethylene and ethylene glycol.
<GRAPH APPEARS HERE>
Refinery runs were marginally higher in 1994. Petroleum
product sales volumes were up 5%.
<GRAPH APPEARS HERE>
Continuous improvement initiatives led to a further 5%
reduction in the number of employees in 1994.
Mobil 55
SUPPLEMENTARY INFORMATION
Eleven-Year Financial Summary
(In millions, except for per-share amounts) 1984 1985 1986 1987
- -----------------------------------------------------------------------------------------------------
Revenues $53,363 $54,606 $44,936 $51,678
- -----------------------------------------------------------------------------------------------------
Income, Excluding the Effects of Significant U.S.
and Foreign Income Tax Rate Changes and
Change in Accounting Principle(s) $1,268 $ 1,040 $ 1,612(1) $ 1,448
- -----------------------------------------------------------------------------------------------------
Segment Earnings:
Petroleum Operations
Exploration & Producing -United States $ 780 $ 701 $ 71 $ 462
-International 942 1,074 871 1,065
- -----------------------------------------------------------------------------------------------------
Total Exploration & Producing 1,722 1,775 942 1,527
- -----------------------------------------------------------------------------------------------------
Marketing & Refining -United States (23) 138 346 97
-International 13 151 972 76
- -----------------------------------------------------------------------------------------------------
Total Marketing & Refining (10) 289 1,318 173
- -----------------------------------------------------------------------------------------------------
Total Petroleum Operations 1,712 2,064 2,260 1,700
Chemical 24 41 130 285
- -----------------------------------------------------------------------------------------------------
Segment Earnings 1,736 2,105 2,390 1,985
Corporate and Other (59) 53 (147) (75)
Net Financing Expense (462) (652) (587) (592)
Loss on Sale of Container Corporation of America - - (150) -
Effect of Significant U.S. and
Foreign Income Tax Rate Changes - - 552 (100)
- -----------------------------------------------------------------------------------------------------
Income Before Discontinued Operations and
Change in Accounting Principle(s) 1,215 1,506 2,058 1,218
Discontinued Operations -Montgomery Ward 53 (466) 106 130
Cumulative Effect of Change in Accounting Principle(s)(2) - - (2,518) -
- -----------------------------------------------------------------------------------------------------
Net Income $1,268 $1,040 $(354) $1,348
- -----------------------------------------------------------------------------------------------------
Income per Common Share
(based on average shares outstanding)
Income Before Discontinued Operations and
Change in Accounting Principle(s) $2.98 $3.69 $5.04 $2.96
Net Income $3.11 $2.55 $(0.87) $3.28
- -----------------------------------------------------------------------------------------------------
Net Income as Percent of
Average shareholders' equity 9.2% 7.5% 17.3%(1) 9.5%
Average capital employed(3) 7.7% 6.8% 12.1%(1) 8.5%
Revenues 2.4% 1.9% 4.8%(1) 2.6%
- -----------------------------------------------------------------------------------------------------
Capital and Exploration Expenditures $9,136 $3,330 $2,890 $2,798
- -----------------------------------------------------------------------------------------------------
Balance Sheet Position at Year-End
Current assets $11,998 $12,193 $10,193 $11,097
Net properties, plants and equipment 24,115 24,533 23,439 24,071
Total assets 40,732 40,668 38,173 40,272
Current liabilities 11,553 11,911 10,075 10,730
Long-term debt 11,011 9,323 7,939 7,143
Shareholders' equity 13,624 14,089 13,430 15,000
Per common share(4) $33.42 $34.50 $32.86 $36.46
- -----------------------------------------------------------------------------------------------------
Debt-to-Capitalization Ratio(5) 49% 45% 41% 37%
- -----------------------------------------------------------------------------------------------------
Average Common Shares Outstanding(thousands of shares) 407,412 408,071 408,142 410,688
- -----------------------------------------------------------------------------------------------------
Common Shares Outstanding(thousands of shares, year-end) 407,704 408,351 408,732 411,359
- -----------------------------------------------------------------------------------------------------
Shareholders of Common Stock (year-end) 270,400 268,600 260,800 246,800
- -----------------------------------------------------------------------------------------------------
Common Stock Dividends $896 $898 $898 $903
As percent of net income less preferred dividends 71% 86% 41%(1) 67%
Per share $2.20 $2.20 $2.20 $2.20
- -----------------------------------------------------------------------------------------------------
Year-End Market Price per Common Share $27 1/8 $30 1/4 $40 1/8 $39 1/8
- -----------------------------------------------------------------------------------------------------
(1) Excludes cumulative effect of adopting FAS 96 ($2,518
million) in 1986; FAS 106 and 109 ($446 million) in 1992;
LCM ($680 million) in 1994.
(2) Accounting changes: FAS 96 in 1986; FAS 106 and 109 in
1992; LCM in 1994.
(3) Net income plus income applicable to minority interests
plus interest expense, net of tax, divided by the sum of
average shareholders' equity, minority interests and debt.
<GRAPH APPEARS HERE>
Dividend payments increased for the seventh consecutive
year, to $3.40 per share.
<GRAPH APPEARS HERE>
Our debt-to-capitalization ratio of 31% reflects
considerable financial flexibility.
Mobil 56
SUPPLEMENTARY INFORMATION
1988 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------
$54,740 $56,388 $64,774 $63,311 $64,456 $63,975 $67,383
- -----------------------------------------------------------------------------------------
$ 1,893 $ 1,809 $ 1,929 $ 1,920 $ 1,308(1) $ 2,084 $ 1,759(1)
- -----------------------------------------------------------------------------------------
$ 76 $ 117 $ 189 $ 189 $ 348 $ 363 $ 125
780 955 1,403 1,094 1,042 1,289 951
- -----------------------------------------------------------------------------------------
856 1,072 1,592 1,283 1,390 1,652 1,076
- -----------------------------------------------------------------------------------------
524 319 91 116 (145) 151 241
414 336 542 819 329 554 647
- -----------------------------------------------------------------------------------------
938 655 633 935 184 705 888
- -----------------------------------------------------------------------------------------
1,794 1,727 2,225 2,218 1,574 2,357 1,964
597 558 322 217 136 44 102
- -----------------------------------------------------------------------------------------
2,391 2,285 2,547 2,435 1,710 2,401 2,066
(94) (69) (282) (130) (86) (190) (98)
(460) (407) (336) (385) (316) (127) (209)
- - - - - - -
194 - - - - - -
- -----------------------------------------------------------------------------------------
2,031 1,809 1,929 1,920 1,308 2,084 1,759
56 - - - - - -
- - - - (446) - (680)
- -----------------------------------------------------------------------------------------
$ 2,087 $ 1,809 $ 1,929 $ 1,920 $ 862 $ 2,084 $ 1,079
- -----------------------------------------------------------------------------------------
$ 4.93 $ 4.40 $ 4.60 $ 4.65 $ 3.13 $ 5.07 $ 4.28
$ 5.07 $ 4.40 $ 4.60 $ 4.65 $ 2.01 $ 5.07 $ 2.57
- -----------------------------------------------------------------------------------------
13.6% 11.3% 11.6% 11.1% 7.8%(1) 12.3% 10.4%(1)
11.4% 10.0% 10.1% 9.6% 6.8%(1) 9.7% 8.4%(1)
3.8% 3.2% 3.0% 3.0% 2.0%(1) 3.3% 2.6%(1)
- -----------------------------------------------------------------------------------------
3,915 $ 3,393 $ 4,374 $ 5,053 $ 4,470 $ 3,656 $ 3,825
- -----------------------------------------------------------------------------------------
$11,178 $11,920 $13,231 $12,401 $10,956 $11,217(6) $11,181
23,848 23,446 24,481 25,464 25,075 25,037 25,503
38,820 39,080 41,665 42,187 40,561 40,733(6) 41,542
10,255 11,216 13,653 13,602 12,629 12,351(6) 13,418
6,498 5,317 4,298 4,715 5,042 5,027 4,714
15,686 16,274 17,072 17,534 16,540 17,237 17,146
$ 38.19 $ 39.84 $ 42.44 $ 43.74 $ 41.06 $ 42.74 $ 42.61
- -----------------------------------------------------------------------------------------
32% 30% 30% 32% 34% 32% 31%
- -----------------------------------------------------------------------------------------
411,670 409,767 405,936 399,636 398,517 399,154 397,955
- -----------------------------------------------------------------------------------------
410,730 408,515 401,079 398,301 398,816 398,168 395,987
- -----------------------------------------------------------------------------------------
237,600 227,100 218,300 211,100 208,800 200,100 193,900
- -----------------------------------------------------------------------------------------
$ 968 $ 1,045 $ 1,147 $ 1,249 $ 1,276 $ 1,298 $ 1,353
46% 58% 61% 67% 102%(1) 64% 80%(1)
$ 2.35 $ 2.55 $ 2.825 $ 3.125 $ 3.20 $ 3.25 $ 3.40
- -----------------------------------------------------------------------------------------
$45 1/2 $62 5/8 $ 58 $67 7/8 $63 1/8 $79 1/8 $84 1/4
- -----------------------------------------------------------------------------------------
(4) Shareholders' equity less the effect of the
ESOP-related accounts (preferred stock and unearned
employee compensation), divided by the number of common
shares outstanding at year-end.
(5) Total debt divided by the sum of total debt,
shareholders' equity and minority interests.
(6) 1993 data reclassified to conform with current year
presentation.
<GRAPH APPEARS HERE>
Over the past 10 years, the stock price has increased at an
annualized rate of 12%.
Mobil 57
SHAREHOLDER INFORMATION
The ticker symbol for Mobil on the New York Stock
Exchange is MOB.
The 1995 annual meeting for shareholders will be held
Thursday, May 11, at 10 a.m. in the Grand Ballroom, Hyatt
Regency Reston, Reston, Virginia.
Dividend payments on common stock are paid quarterly
following declaration by the Board of Directors. The next
four tentative payment dates are: June 12, 1995; September
11, 1995; December 11, 1995, and March 11, 1996.
Mobil's Stock Purchase and Dividend Reinvestment Plan
allows new investors to buy Mobil common stock for as
little as $250 and existing shareholders to automatically
reinvest dividends-both without paying commissions or
service fees. Once enrolled, you can make additional stock
purchases through monthly cash deposits ranging from $10 to
$7,500. For more information, request a prospectus on
Mobil's Stock Purchase and Dividend Reinvestment Plan from
Mellon Securities Trust Company, Dividend Reinvestment
Services, P.O.Box 750, Pittsburgh, Pennsylvania 15230.
Telephone 1-800-648-9291.
Questions about dividend checks, electronic payment of
dividends, stock certificates, address changes, account
consolidation, transfer procedures and year-end tax
information? Write to: Mellon Securities Trust Company,
Shareholder Relations, P.O.Box 590, Ridgefield Park, New
Jersey 07660. Telephone 1-800-648-9291 (Telecommunications
Device for the Deaf 1-800-231-5469).
Shareholders or others wanting general information or
having questions should write to Secretary's Department,
Room 2D915, Mobil Corporation, 3225 Gallows Road, Fairfax,
Virginia 22037- 0001. Telephone 1-703-846-3898.
Publications available to shareholders: Additional
information relating to Mobil is contained in Mobil's
annual report on Form 10-K, filed with the Securities and
Exchange Commission.
Information dealing with various Mobil benefit plans
for employees is contained in plan descriptions, annual
reports and other materials regularly furnished to
employees under the Employee Retirement Income Security Act
of 1974. A statement of charitable contributions made by
Mobil Foundation Inc. is prepared annually.
Also available are:
1994 Mobil Fact Book, a supplement to the annual
report with additional financial and operating data.
Mobil's Commitment to Diversity, a 1993 booklet
describing the company's policies on diversity in the work
force.
Mobil Exploration & Producing: an experienced
partner, describing the strengths Mobil offers to upstream
ventures worldwide.
For copies of any of the foregoing, write to:
Secretary's Department, Room 2D920, Mobil Corporation, 3225
Gallows Road, Fairfax, Virginia 22037-0001. Telephone
1-703-846-3896.
Analysts and institutional investors wanting
information about Mobil should write to: Investor
Relations, Room 2D804, Mobil Corporation, 3225 Gallows
Road, Fairfax, Virginia 22037-0001. Telephone
1-703-846-3955.
Auditors: Ernst & Young LLP, Fairfax Square-Tower II,
8075 Leesburg Pike, Vienna, Virginia 22182-2709.
Transfer Agent and Registrar in the U.S.: Mellon
Securities Trust Company, 120 Broadway, 33rd Floor, New
York, New York 10271. Telephone 1-800-648-9291
(Telecommunications Device for the Deaf 1-800-231-5469).
Transfer Agent and Registrar in Canada: Montreal Trust
Company of Canada, 151 Front Street West, 8th Floor,
Toronto, Ontario M5J 2N1, Canada. Telephone 1-416-981-9500.
Montreal Trust Company of Canada, 411 8th Avenue, S.W.,
Calgary, Alberta T2P 1E7, Canada. Telephone 1-403-267-6800.
Duplicate mailings of this
annual report to the same
address are costly to Mobil
and may be inconvenient to
many shareholders. The
Securities and Exchange
Commission rules allow for
the elimination of duplicate
reports provided such requests
are in writing. Eliminating these
duplicate mailings will not
affect your dividend, proxy
statement and proxy card
mailings. All requests should be
sent to: Mellon Securities Trust
Company, Shareholder Relations,
P.O. Box 590, Ridgefield Park,
New Jersey 07660.
Mobil 58
MOBIL CORPORATION DIRECTORS
<PHOTO APPEARS HERE>
col. 1
Lewis M. Branscomb Elected 1978, Director, Science,
Technology and Public Policy, John F. Kennedy School of
Government, Harvard Univ. Committees: Audit (Chmn.),
Directors and Board Affairs
Donald V. Fites Elected 1990
Chairman and Chief Executive Officer, Caterpillar Inc.
Committees: Audit, Public Issues
Paul J. Hoenmans Elected 1985 Executive Vice President,
Mobil Oil Corporation, Joined Mobil 1954 Committee:
Executive
col. 2
Allen F. Jacobson Elected 1988
Former Chairman of the Board and Chief Executive Officer,
3M
Committees: Audit, Management Compensation and Organization
Samuel C. Johnson Elected 1981, Chairman of the Board,
S. C. Johnson & Son, Inc. Committees: Management
Compensation and Organization, Public Issues (Chmn.)
Helene L. Kaplan Elected 1989
Of Counsel, Skadden, Arps, Slate, Meagher & Flom
Committees: Audit, Directors and Board Affairs
col. 3
William J. Kennedy III Elected 1979, Chairman of the
Board, North Carolina Mutual Life Insurance Co.,
Committees: Management Compensation and Organization,
Directors and Board Affairs (Chmn.), Public Issues
J. Richard Munro Elected 1989
Former Co-Chairman of the Board and Co-Chief Executive
Officer, Time Warner Inc. Committees: Audit, Management
Compensation and Organization
Lucio A. Noto Elected 1988
Chairman of the Board, President and Chief Executive
Officer, Joined Mobil 1962
Committees: Executive (Chmn.),
Public Issues
col. 4
Aulana L. Peters Elected 1992
Partner, Gibson, Dunn & Crutcher
Committees: Directors and Board Affairs, Public Issues
Eugene A. Renna Elected 1986
Executive Vice President, Mobil Oil Corporation, Joined
Mobil 1968, Committee: Executive
Charles S. Sanford, Jr. Elected 1990, Chairman, Bankers
Trust New York Corporation and
its principal subsidiary
Bankers Trust Company
Committees: Directors and Board Affairs, Management
Compensation and Organization
col. 5
Robert G. Schwartz Elected 1987, Former Chairman of the
Board, President and Chief Executive Officer, Metropolitan
Life Insurance Co., Committees: Audit, Management Compensation
and Organization (Chmn.)
Robert O. Swanson Elected 1991, Senior Vice President,
Joined Mobil 1958
Committee: Executive
Mobil Corporation Officers
Lucio A. Noto,
Chairman of the Board, President and Chief Executive
Officer
Thomas C.DeLoach,Jr.,
Senior Vice President
Robert O. Swanson,
Senior Vice President
Rex D. Adams,
Vice President
Walter R. Arnheim,
Vice President
James T. Mann,
Vice President
Caroline M. Devine,
Secretary
Samuel H. Gillespie III,
General Counsel
R. Hartwell Gardner,
Treasurer
Robert C. Musser,
Controller
_1995 Mobil Corporation
Mobil 59
GRAPHIC APPENDIX LIST
Front cover - Drawing of head and upper portion of Mobil Pegasus
in red fills most of the page. Centered above the
Pegasus' head are the words, "Mobil Annual Report
1994".
Inside front One Graph.
cover - Dividends paid per share of common stock for years
1984 through 1994.
Page 1 - Photo.
Right side, mid-page: Lucio A. Noto, Chairman,
President and Chief Executive Officer.
Page 4 - Enlarged letters, "VMV" in the upper right with
smaller words, "Vision, Mission, Values" centered
toward the upper half of the enlarged letters.
On lower left, drawing of Mobil "Red O" with a
world map overlay.
Page 5 - Photo.
Full-page: Lower section of the Hibernia
production platform when it was towed from dry-
dock to its deep-water construction site offshore
Newfoundland.
Page 6 - Photo.
Left side, mid-page: Drilling rig -- In Germany,
Mobil combined horizontal drilling with a
technique called "hydraulic fracturing" to recover
gas economically from an extremely tight sandstone
reservoir.
Page 7 - Photo.
Right side, mid-page: Offshore platform -- Ras
Laffan LNG venture drilled its first appraisal
well early in 1994.
Page 9 - Photo.
Full-page: "On-the-Run" store at Mobil service
station.
Page 10 - Photo.
Left side, mid-page: Worker at the new wax-
emulsion and grease plant on the outskirts of
Mexico City.
Page 11 - Photo.
Right side, mid-page: Tugboat clears path through
the icy Hudson River in New York State.
Page 13 - Photo.
Full-page: Team of three workers checks on
construction of Amsterdam plant that will make
ester base stocks for synthetic lubricants.
Page 14 - Photo.
Left side, mid-page: New aromatics complex in
Singapore which supplies key feedstocks to meet
the Asia-Pacific region's demand for nylon and
polyester.
Page 15 - Photo.
Right side, mid-page: Computer visualization of
high-octane molecule passing through zeolite
catalyst.
Page 16 - One Graph.
EPA's voluntary "33/50" project progress from 1988
through 1995's goal.
Page 17 - One Graph.
Total return to shareholders (per $100 invested on
12/31/89), S&P 500 and Mobil--share price
appreciation plus reinvested dividends--for years
1990 through 1994.
Page 18 - Two Bar Graphs:
Top
Income of Mobil (millions of dollars) for years
1990 through 1994 (excludes the cumulative effect
of adopting FAS 106 and 109 in 1992, and LCM
accounting method change in 1994).
Bottom
U.S. and international capital and exploration
expenditures (millions of dollars) for the years
1990 through 1994.
Page 19 - Pie Charts
Earnings by segment (millions of dollars) from
Mobil's major businesses are presented for the
years ended 1992, 1993 and 1994.
Page 20 - Two Bar Graphs:
Top
U.S. and international Upstream earnings of Mobil
(millions of dollars) for years 1992 through 1994.
Bottom
U.S. and international net production of oil and
gas (thousands of barrels daily of oil equivalent)
for the years 1992 through 1994.
Page 21 - Two Bar Graphs
Top
U.S. and international average crude oil sales
prices of Mobil (dollars per barrel) for years
1992 through 1994.
Bottom
U.S. and international average natural gas sales
prices of Mobil (dollars per thousand cubic feet)
for years 1992 through 1994.
Page 22 - Two Bar Graphs
Top
U.S. and international Downstream earnings of
Mobil (millions of dollars) for years 1992 through
1994.
Bottom
U.S. and international refinery runs for Mobil
(thousands of barrels daily) for the years 1992
through 1994.
Page 23 - Two Bar Graphs:
Top
U.S. and international Downstream petroleum
product sales volumes for Mobil (thousands of
barrels daily) for years 1992 through 1994.
Bottom
U.S. and international Downstream petroleum
product sales revenue for Mobil (millions of
dollars) for years 1992 through 1994.
Page 24 - Two Bar Graphs:
Top
Chemical segment earnings (Petrochemicals and
Plastics and Other in millions of dollars) are
presented for years 1992 through 1994.
Bottom
Chemical segment net sales to trade
(Petrochemicals and Plastics and Other in millions
of dollars) are presented for years 1992 through 1994.
Page 28 - Two Bar Graphs:
Top
Total Revenues and Total Costs and Expenses for
Mobil (millions of dollars), for years 1992
through 1994.
Bottom
Mobil's return on average shareholders' equity (in
percent) for years 1992 through 1994 (excludes
the cumulative effect of adopting FAS 106 and 109
in 1992, and LCM accounting method change in
1994).
Page 30 - Two Bar Graphs:
Top
Total Debt of Mobil, U.S. and International
(millions of dollars), for years 1992 through
1994.
Bottom
Mobil's return on average capital employed (in
percent) for years 1992 through 1994. (excludes
the cumulative effect of adopting FAS 106 and 109
in 1992, and LCM accounting method change in
1994).
Page 32 - Bar Graph - Top
Proceeds from sales of assets (millions of
dollars) for years 1992 through 1994.
Mountain Graph - Bottom
Mobil capital and exploration expenditures
(millions of dollars) for years 1992 through 1994.
Page 54 - Two Bar Graphs:
Top
Net crude oil and natural gas liquids proved
reserves of Mobil (millions of barrels) for years
1990 through 1994.
Bottom
Net natural gas reserves of Mobil (billions of
cubic feet) for years 1990 through 1994.
Page 55 - Bar Graph - Top
Refinery Runs vs. Petroleum Product Sales
(thousands of barrels daily) for years 1990
through 1994.
Mountain Graph - Bottom
Number of Employees (At year-end) for Mobil for
years 1990 through 1994, split between Petroleum
Operations segment, Chemical segment and Other.
Page 56 - Two Mountain Graphs:
Top
Annual dividends per share of common stock
(dollars) for years 1984 through 1994.
Bottom
Debt-to-capitalization ratio (in percent) for
years 1984 through 1994.
Page 57 - Mountain Graph
Year-end market price per share of common stock
(dollars) for years 1984 through 1994.
Page 59 - Photo
(Inside Back Fourteen-member group photo of Mobil's Board of
Cover) Directors.
Back cover - Drawing of the wings of Mobil Pegasus
in red fills most of the page. Centered above the
Pegasus' wings are the words, "Mobil Corporation,"
the address and the telephone number.