MOBIL ANNUAL REPORT 1995
[Mobil Pegasus Logo]
MOBIL AT A GLANCE
WHAT WE DO
MOBIL CORPORATION stands among the world's leading oil, gas and petrochemical
companies. We cover the length of the energy chain, with businesses in explora-
tion, producing, supply, transportation, manufacturing and marketing. Serving
more than 125 countries, we take pride in our partnerships all over the globe.
EXPLORATION & PRODUCING searches for and produces crude oil and natural gas
around the world. We're also a major processor and marketer of gas products
like liquefied natural gas. Established operations continue in North America,
the North Sea, Nigeria, Indonesia and elsewhere, while activity grows in coun-
tries with emerging potential.
MARKETING & REFINING processes crude oil into high-quality fuels, lubricants,
petrochemical feedstocks and more at 20 refineries. Thousands of products have
gained the trust of retail, commercial and industrial customers. "Mobil" brands
nearly 19,000 service stations worldwide. Supply, trading and transportation
activities optimize operations.
MOBIL CHEMICAL makes and markets basic petrochemicals that are the building
blocks of thousands of products. We're market leaders in oriented polypropylene
film, an innovative food-packaging product. We also make base stocks for high-
performance synthetic lubes, fuel and lube additives, and catalysts for refining
and chemical processes.
MAJOR STRENGTHS
Mobil's reputation is solid on many accounts: a talented and diverse work force,
customer focus, valuable assets, quality products, financial flexibility, inno-
vative technology, environmental performance and effective management of large
ventures. This reputation has helped Mobil steadily build shareholder returns.
Financial resources, technology, project management skills and environmental
performance are major assets that help us enter oil and gas ventures around the
world. In recent years, they've helped Mobil capture attractive new opportuni-
ties in South America, Africa, the former Soviet Union and the Middle East.
Operations are strong across the high-growth Asia-Pacific region. In the U.S.,
our refineries are among the best at processing lower-cost crude oils into high-
margin products. Worldwide, we're among the industry leaders in lubricants. Ope-
rating costs have been cut sharply, even as we've upgraded facilities and grown
the business.
Advanced technologies and low-cost manufacturing facilities give us competitive
positions in growing markets. A streamlined organization has reduced operating
costs to competitive levels. With recent divestitures, our asset base is more
sharply focused on business segments where we can achieve superior returns.
TABLE OF CONTENTS
MOBIL AT A GLANCE THIS PAGE
LETTER TO SHAREHOLDERS 2
EXPLORATION & PRODUCING 4
MARKETING & REFINING 8
CHEMICAL AND OTHER BUSINESSES 12
ENVIRONMENT 16
FINANCIAL SECTION
KEY FINANCIAL INDICATORS 17
MANAGEMENT DISCUSSION AND ANALYSIS 17
CONSOLIDATED FINANCIAL STATEMENTS 29
NOTES TO FINANCIAL STATEMENTS 36
REPORT OF MANAGEMENT AND
INDEPENDENT AUDITORS 49
SUPPLEMENTARY INFORMATION 50
SHAREHOLDER INFORMATION 58
DIRECTORS AND OFFICERS 59
[Financial Highlights - inside front cover & page 1]
FINANCIAL HIGHLIGHTS
1994 1995 %Change
- - - - ---------------------------------------------------------------------------------------------------------------------------
Income before change in accounting principle (millions) $ 1,759 $ 2,376 35
Per common share (based on average shares outstanding) 4.28 5.87 37
- - - - ---------------------------------------------------------------------------------------------------------------------------
Net income (millions) $ 1,079(1) $ 2,376 N/M(3)
Per common share (based on average shares outstanding) 2.57(1) 5.87 N/M(3)
- - - - ---------------------------------------------------------------------------------------------------------------------------
Return on average shareholders' equity 10.4%(2) 13.5% --
Return on average capital employed 8.4%(2) 10.9% --
Income per dollar of revenue 2.6 Cents (2) 3.2 Cents 23
Petroleum earnings per gallon sold 3.1 Cents 2.3 Cnets (26)
- - - - ---------------------------------------------------------------------------------------------------------------------------
Revenues (millions) $ 67,383 $ 75,370 12
Total assets, year-end (millions) 41,542 42,138 1
Capital and exploration expenditures (millions) 3,825 4,268 12
Shareholders' equity, year-end (millions) 17,146 17,951 5
Per common share (based on shares outstanding at year-end) 42.61 44.71 5
- - - - ---------------------------------------------------------------------------------------------------------------------------
Common shares outstanding, year-end (thousands) 395,987 394,560 --
Shareholders of common stock, year-end 193,900 188,800 (3)
Number of employees, year-end 58,500 50,400 (14)
- - - - ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1) After charge of $680 million for change in accounting principle.
(2) Based on income before change in accounting principle.
(3) Not meaningful.
AT A GLANCE
HOW WE DID IN '95
Operating earnings went up $615 million -- a hefty 28% -- to a record $2.8 bi-
llion. We had no net help from business conditions. Higher oil prices and petro-
chemical margins were offset by weak North American and U.K. gas prices and
worldwide refining margins. We benefited from strong operating performance, in-
creased sales and cost reductions.
Operating earnings were up $73 million to $1.4 billion. At year-end, daily pro-
duction records were set in Nigeria and the U.K., not quite offsetting natural
declines in North America. We replaced 106% of production with new reserves,
excluding purchases and sales. Exploration yielded significant discoveries in
Equatorial Guinea, Nigeria and Norway.
Operating earnings rose to a nine-year high -- $1.14 billion, or 18% over 1994
- - - - --despite lower worldwide refining margins. U.S. operating income, $330 million,
was among the highest in the industry. We also profited from continued operating
improvements in Europe and our competitive strength in the Asia-Pacific region.
Operating earnings tripled to a record-high $679 million. Industrywide petroche-
mical margins improved, and our slimmed-down organization boosted productivity
and cut costs. We took strong steps to focus on core segments. We sold plastics
businesses for over $1.2 billion.
WHAT'S AHEAD
We'll pursue a balanced effort to boost competitiveness. Effective cost mana-
gement and sales of assets that don't meet our performance criteria will remain
strategic practices. We'll also seize opportunities to grow core businesses. Ex-
pect asset acquisitions, higher sales and further expansions in high-growth bu-
sinesses and geographic markets.
Capital spending on large, new ventures will grow, increasing reserves and pro-
duction into the next century. Natural gas projects in Qatar will soon start de-
liveries to Asia. West African oil production will grow. We'll also create new
natural gas markets as we pursue power plant projects in key geographic areas.
We'll stay focused on serving customers, improving efficiency and cutting expen-
ses. Expansions and increased product sales will continue, mainly in the Asia-
Pacific region, Latin America and Africa. We intend to become the worldwide lea-
der in lubes. Refinery upgrades in Japan, Australia and Singapore will yield
quality, cost-competitive products.
We're expanding our businesses to meet growing customer demands. New paraxylene
plant capacity will go into service on the U.S. Gulf Coast in early 1997. In
1998, ethylene production at Beaumont, Texas, will increase significantly. Pro-
duction capacity for oriented polypropylene will expand.
[Bar Chart - Page 1]
AVERAGE ANNUAL RETURNS TO SHAREHOLDERS
Mobil share-price appreciation plus reinvested dividends, %
As of year-end 1995
Mobil 1
LETTER TO SHAREHOLDERS
I'M PLEASED TO REPORT THAT MOBIL'S FINANCIAL RESULTS FOR 1995 WERE STRONG.
Earnings from operations hit an all-time high of $2.8 billion -- 28% over 1994
results. On balance, Mobil had no help from industry commodity prices and mar-
gins -- higher oil prices and petrochemical margins were offset by weaknesses in
natural gas prices in North America and the United Kingdom and slimmer refining
margins worldwide.
How did we do so well? Mobil people around the world achieved this excellent
performance, and we are grateful to all of them. We cut controllable cash opera-
ting costs by more than $300 million before taxes. In fact, we've reduced these
expenses by over $1.1 billion since 1991, despite an estimated $1.5 billion in
higher costs from inflation and volume growth. Higher petroleum product and pe-
trochemical volumes also helped in 1995.
Reserve replacement remained strong. We replaced 106% of 1995 oil and gas
production with new reserves, excluding purchases and sales. One major contribu-
tor was the addition of the first gas reserves that will be processed by our Ras
Laffan liquefied natural gas venture in Qatar. We were disappointed in our total
oil and gas production -- down 4% -- after ranking among the industry's best in
production volume gains over the previous five years. Temporary operating pro-
blems hurt us in Nigeria along with natural declines in the U.S. Our goal is to
profitably grow production, and we are confident we can achieve this.
SHAREHOLDERS HAVE ALREADY GAINED FROM OUR 1995 IMPROVEMENTS. In the second quar-
ter, we raised Mobil's dividend 9%, marking eight straight years of higher divi-
dends. For 1995, the total return to shareholders -- dividends and stock-price
appreciation combined -- was 38% versus a 29% average for our major competitors.
More important, Mobil's annual return over the past five years averaged 19% --
best among competition and better than the 17% average for the Standard & Poor's
500.
You might recall that in our 1994 report I described two goals we aimed to
reach by 1998: first, to increase operating earnings by $1 billion to reach $3.2
billion, even without significant help from higher oil prices; and second, to
increase our operating return on capital employed (ROCE) to at least 12%. I'm
very encouraged by our progress toward those goals in 1995. Income was up rough-
ly $600 million from 1994. Operating ROCE rose to 12.8% from 10.3% in 1994, not
counting changes in accounting principles and special items. But there are more
challenges ahead in meeting our goals.
Mobil has a two-pronged plan.
It calls for...
SQUEEZING MORE OUT OF OUR ASSETS. We'll keep reducing costs. Restructuring is
now a way of life in our industry and many others. Many of our markets have ma-
tured. Customers are more value-driven. Margins are thinner in today's global
marketplace. And new technologies keep creating opportunities to be more effi-
cient. We continue to dispose of assets that are outside our core businesses or
worth more to others. In 1995, we sold most of our plastics and phosphate busi-
nesses. Proceeds from these and other asset sales were about $2 billion for the
year. We also closed our Woerth refinery in Germany -- it no longer fit our cri-
teria for long-term competitiveness.
In 1995, we announced a worldwide realignment and restructuring of staff
functions that support our core operations. We also announced further restructu-
rings in U.S. Exploration & Producing and in Marketing & Refining in the U.S.
and Europe. Combined, these restructurings will reduce annual expenses by more
than a billion dollars, before taxes, when they're completed by year-end 1996.
None of these restructuring decisions has been easy, and the process has been
long and stressful for our people. But Mobil will emerge in a better position to
offer our people a more satisfying work experience with greater opportunities
for development. And we'll have an organization and culture that will improve
competitiveness and facilitate...
[Photograph of Lucio A. Noto]
2 Mobil
GROWTH. That's the second prong. We plan to invest in additional assets that fit
our strategy. Opportunities are highly promising in selected areas -- areas
where Mobil is already strong:
Liquefied natural gas (LNG). Our LNG reputation is opening new opportunities.
We're readying two LNG projects in Qatar for deliveries to customers in Asia in
1997 and 1999. And worldwide, we're looking for more opportunities.
Lubricants. Customers the world over have shown confidence in our lubes for
more than 125 years. In 1995, our earnings from lubes alone were about $300 mi-
llion, a new record. Our goal is to become the No.1 lubes company. Marketing and
promotional ties with the McLaren Formula 1 racing team, Mercedes-Benz, the
Penske organization and now Porsche will help us get there. New base-stock refi-
neries and blending plants are under construction.
Aromatics. Our Singapore plant, which started up in 1994, has already excee-
ded expectations with 1995 earnings of $175 million. Worldwide, we're doubling
production capacity for paraxylene, a feedstock for polyester. Mobil will be
among the world's largest makers and merchant marketers of this high-margin pro-
duct.
Asia-Pacific. Mobil enjoys a great position in this important region. We are
more leveraged to this region in refining capacity than any of our international
competitors, and much of our growth is focused here. Recently, we made a tender
offer for Ampolex, an Australian exploration and producing company.
Latin America. Privatization and government reforms are opening new markets
for us. In the past year, we began selling retail fuels in Peru and Ecuador and
lubes in Venezuela. Also in Venezuela, we recently won exploration rights on the
highly attractive La Ceiba block. And we are looking at more opportunities to
add reserves and production in Latin America. Changes in this region won't be
uniform or smooth. Yet they still offer real growth opportunities.
Europe. We are creating a new platform for growth across Europe with our re-
cently announced downstream joint venture with BP, which is pending approval by
European authorities.
Africa. We're the second-largest oil producer in Nigeria -- and growing. We
were pleased with a commercial oil discovery offshore Equatorial Guinea in 1995
and recently started new exploration offshore Angola. We aim to grow our strong
fuels and lubes marketing businesses.
Former Soviet Union. We have excellent exploration acreage in Kazakstan.
We're looking at prospects in Azerbaijan. And Russia's Sakhalin Island may have
potential down the road.
Middle East. Besides our Qatar LNG ventures, we're building a new lubes refi-
nery in Saudi Arabia and moving to expand our petrochemicals partnership there.
THESE GROWTH OPPORTUNITIES REQUIRE A STRONG CAPITAL PROGRAM, and we have one. In
1995, capital and exploration spending was $4.3 billion, up from $3.8 billion in
1994. In 1996, we'll spend more -- probably around $4.6 billion. In addition,
cash investment in equity companies will increase from $260 million in 1995 to
$600 million in 1996. More of our spending will be in exploration and producing
to increase production into the 21st century. We'll invest more outside the
U.S., where opportunities are more favorable to our industry. We also can't grow
without Mobil's high-quality work force. Although restructuring is reducing
staff, it's also making us more efficient. Mobil people are drawing upon their
entrepreneurial skills to enter new ventures, explore new geographic areas,
strengthen our partnerships, grow our business and keep improving shareholder
returns.
In July 1995, Mobil's Board of Directors elected and welcomed new director
Charles A. Heimbold, Jr., chairman and chief executive officer of Bristol-Myers
Squibb Company. On a regretful note, we were saddened by the death this January
of Bill Tavoulareas. "Tav" was a former director and vice chairman of Mobil's
Executive Committee and served as the company's president and chief operating
officer. He retired as president in 1984 and as director in 1988. Tav's leader-
ship and long-term vision were instrumental in making Mobil the strong company
it is today.
As we move forward, we will build on our strengths and grow. At Mobil, we ha-
ve a vision: to be a great, global company. That's exactly what our shareholders
can expect us to be.
/S/ LUCIO A. NOTO
- - - - -----------------
Lucio A. Noto
Chairman, President and Chief Executive Officer
March 1, 1996
Mobil 3
EXPLORATION & PRODUCING
1995 WAS A VERY GOOD YEAR FOR EXPLORATION & PRODUCING. Operating earnings rose
$73 million to reach $1.4 billion. Although new daily production records were
achieved by year-end in the United Kingdom (U.K.) and Nigeria, worldwide oil and
gas production was down slightly from 1994. The decrease was due largely to na-
tural declines in North America. New discoveries were achieved in Equatorial
Guinea, Nigeria and Norway. Along with natural gas for the first phase of deve-
lopment of the Ras Laffan joint venture in Qatar, these discoveries helped re-
place 106% of Mobil's worldwide production with new reserves, excluding purcha-
ses and sales. Building for the future, capital and exploration expenditures we-
re up $500 million from 1994, reaching $2.7 billion.
"THE ZAFIRO OIL DISCOVERY IN EQUATORIAL
GUINEA HAS BEEN DECLARED COMMERCIAL"
"NEW VENTURE" ACTIVITIES DID EXTREMELY WELL. As we continue to pursue interna-
tional growth, our strategy is two-fold: We're exploring in areas with high po-
tential for commercial discoveries. We're also pursuing joint ventures to deve-
lop large, existing fields in countries that can benefit from our skills in pro-
ject management, financing and technology.
In Equatorial Guinea, we discovered oil in the Zafiro prospect of a 547,000-
acre offshore exploration concession. Based on successful appraisals and a se-
cond nearby discovery, Opalo, the Zafiro field has been declared "commercial."
A floating production system will enable the project to start up at 40,000 ba-
rrels a day in the second half of 1996, less than two years after discovery.
Additional exploration drilling is planned for 1996. Mobil holds a 75% interest
in the concession. In Algeria, the first wildcat well drilled on our 3.2 mi-
llion-acre Touggourt Concession tested oil. A second well is planned for 1996.
Offshore Angola, Mobil participated in two exploratory wells with encouraging
results. A third well will be drilled in 1996. Also in Angola, Mobil and Sonan-
gol, the national oil company, agreed in late 1995 on a production-sharing con-
tract for a deepwater block. Mobil will operate it and hold a 50% interest. In
Egypt, we await government approval for three production-sharing ventures in the
Western Desert.
In the former Soviet Union, Mobil entered its second joint venture in Kazaks-
tan. We will explore and develop the 4 million-acre Tulpar block near the coun-
try's large Karachaganak and Orenburg fields. Seismic surveys have already be-
gun, and drilling on the first exploration well may start by early 1997. In
addition, Mobil is the only U.S.-based member of the Caspian Sea Consortium of
seven companies, formed in 1993, to conduct a comprehensive seismic survey of
the sea's 25 million-acre Kazak sector. After surveys are completed at the end
of
[Photograph - Page 4]
KAZAKSTAN: In Almaty, a Mobil Oil Tulpar team reviews seismic survey plans for
an exploration project in the northwest part of the country. It's our second
joint venture in Kazakstan, a nation building its strength as an energy produ-
cer.
4 Mobil
1996, Mobil and other consortium members have the right to obtain exploration
blocks. In neighboring Azerbaijan, Mobil completed a Work Study Agreement with
the state oil company to obtain advanced technical data on prospective areas of
the Caspian Sea's southern sector. Technical and commercial evaluations are in
progress. Two liquefied natural gas (LNG) joint ventures -- Qatargas and Ras
Laffan LNG Company -- continue on schedule in Qatar. Construction of the pro-
cessing facility for Qatargas (Mobil share 10%) is well under way. In early
1997, the first cargo of LNG will be delivered to customers in Japan. Ultimate-
ly, Qatargas production will peak at 1.2 billion cubic feet of natural gas and
40,000 barrels of condensate a day. The Ras Laffan joint venture (Mobil 30%)
agreed to supply Korea Gas Corporation with 2.4 million tons of LNG annually
for 25 years, beginning in 1999. Site preparations for Ras Laffan construction
began this past December. We're negotiating additional sales to other countries.
Our South American activities are gaining momentum. Mobil and partners recen-
tly won a license to explore the attractive La Ceiba block on the eastern shore
of Lake Maracaibo in western Venezuela. It was among the first round of explora-
tory licenses awarded by Venezuela to international companies in some 20 years.
We're also studying a heavy oil project in the country. In Peru, negotiations
continue for development of the huge Camisea gas field and for exploration
rights on additional acreage. Other projects are under consideration in Argenti-
na, Bolivia and Ecuador.
Exploration continues offshore Vietnam. Mobil holds acreage in the Nam Con
Son offshore basin, where we're drilling on the Blue Dragon prospect. With our
partners, we acquired Blue Dragon and two other exploration blocks in 1994,
following the lifting of the U.S. embargo. Drilling on another prospect in the
Cuu Long basin is planned for mid-1996.
IN OUR PROFITABLE, ESTABLISHED LOCATIONS, 1995 WAS A YEAR OF INVESTMENT FOR THE
FUTURE. We have a large inventory of oil and gas reserves that are ready for
development. Production from these fields will begin over the next decade while
we find and develop new oil and gas sources to replace them.
In the U.K., Mobil's share of oil and gas production reached an all-time high
- - - - -- 178,000 barrels of oil equivalent a day. Several new North Sea gas fields
began producing during the year. We also benefited from the first full-year's
operation of the Excalibur field. These developments helped raise our share of
U.K. gas production 23%. Growing gas production also spawned record gas sales.
In December, Mobil Gas Marketing in the U.K. sold over a billion cubic feet of
gas a day.
In the Norwegian North Sea, we acquired additional interest in the Njord oil
field in early 1995. Production will likely begin in early 1997. Mobil also
plans to develop the Aasgard field
[Photograph - Page 5]
UNITED KINGDOM: Gas production began in 1995 from the North Sea's Galahad field
offshore the United Kingdom. Project engineers check Galahad's innovative, cost-
effective monopod drilling platform prior to installation.
Mobil 5
for recovery of natural gas liquids, beginning in 1998, and natural gas, in
2000. Meanwhile, the Statfjord and Oseberg fields continue to be strong income
contributors. Our discovery to the south of Aasgard in 1995 makes the sea's
Haltenbanken area a new core area of development. We won additional North Sea
exploration licenses, both in Norway and the U.K. In 1997, we plan to drill a
deepwater well in the U.K.'s promising West of Shetlands area. We also were
awarded rights to explore for the first time in the North Sea's Danish sector.
Production will keep growing in Nigeria as development continues in several
fields. Total crude and condensate production operated by Mobil is expected to
climb roughly 50% to 600,000 barrels a day or more by the end of 1997. Mobil has
a 40% interest in its joint venture with the Nigerian National Petroleum Corpo-
ration. In 1995, a project to extract natural gas liquids from the Oso field was
approved by our partners. We have a 51% interest. In 1998, this project will be-
gin to increase total liquids production by 51,000 barrels a day. Exploration
success continues in the country. Yet another significant offshore oil discove-
ry, Kpono West, tested with outstanding results. Kpono West follows two late-
1994 oil discoveries -- Ufan and Inanga. Inanga is already on production.
In Indonesia, development of two gas fields in the onshore South Lhok Sukon
area began in 1995. They're expected to start production in 1998. Development
is also scheduled to begin in 1996 on a gas field offshore North Sumatra. Pro-
duction will start in 1999. These fields will help maintain gas deliveries to
the Arun LNG-processing plant.
Construction of the massive Hibernia platform is on schedule offshore New-
foundland, Canada. Production from this 615 million-barrel oil field (Mobil sha-
re 33.1%) will begin in late 1997. By 2000, total output will reach a peak rate
of 135,000 barrels a day. On the Terra Nova field, 25 miles southeast of Hiber-
nia, preliminary engineering and cost studies are under way. We await our part-
ners' agreement on the development plan. And for the Sable gas field offshore
Nova Scotia (Mobil share 40%), we've begun planning development and transporta-
tion strategies with our partners. Sable gas will eventually reach customers in
both Canada and the northeastern U.S.
While exploration has slowed in many traditional producing areas in the U.S.,
the Gulf of Mexico still offers opportunities, mainly in promising deepwater
frontiers. We recently acquired 40% interests in two deepwater developments
- - - - -- the Cooper field in Garden Banks and the Green Canyon area's Allegheny field.
Using advanced subsea technology, Cooper began producing in late 1995. Appraisal
continues on Allegheny, which holds an estimated 120 million barrels of recover-
able reserves. The Cooper and Allegheny projects give us the infrastructure
[Photograph - Page 6]
QATAR: At Ras Laffan, construction is on schedule for liquefied natural gas
(LNG) processing facilities for Qatargas. It's one of our two LNG joint ventu-
res harnessing Qatar's rich gas reserves to help meet growing demand in Asia.
Qatargas deliveries will begin in 1997.
6 Mobil
we need to expand exploration and development to adjacent deepwater areas.
Mobile Bay, offshore Alabama, is the area of our largest ongoing development
in the Gulf. Gas production rose 13% in 1995. Further development will increase
production significantly by the end of 1997.
"WE HAVE A LARGE INVENTORY OF RESERVES
THAT ARE READY FOR DEVELOPMENT"
Mobil is negotiating the sale of the U.S. gas-processing and pipeline assets
associated with Mobil Natural Gas Inc. (MNGI) to PanEnergy Corporation. Mobil
will retain gas reserves and producing operations; PanEnergy will process Mo-
bil's produced gas. MNGI and Pan-Energy are also negotiating to form a gas-mar-
keting joint venture. It will be the third largest gas marketing operation in
North America, with sales of more than 7 billion cubic feet a day. Mobil will
hold a 40% interest. Together, these two moves will help us maximize the value
of our North American gas assets while reducing operating and overhead costs.
EXPLORATION & PRODUCING IS MOVING FURTHER DOWNSTREAM into transportation, stora-
ge and infrastructure projects to create new markets for our natural gas, gas
liquids and LNG. Mobil Power Inc. was established in 1995 to pursue opportuni-
ties around the world in electric power generation. Mobil Power complements our
existing businesses and takes advantage of our capabilities in project manage-
ment and technology. It also enhances Mobil's strength as an integrated company
that can competitively serve world markets with booming energy demands.
COST-CUTTING INITIATIVES ARE IMPROVING THE BOTTOM LINE. Exploration & Producing
has continued to reduce field-operating expenses, renegotiate supplier contracts
and sell low-performing assets, mainly in the U.S. Costs will come down even
further. We'll continue to sell or trade producing assets that have little po-
tential for future growth. We've also made the tough decision to realign and
downsize our U.S. Exploration & Producing organization during the first quarter
of 1996. These initiatives are expected to trim about $100 million from Explora-
tion & Producing's annual pretax controllable cash operating costs. In addition,
Mobil's companywide redesign of support functions is lowering staff levels and
costs in this segment worldwide.
The savings will be used to upgrade our asset base and accelerate the deve-
lopment of core resources. It fits well with Mobil's goal of balancing effective
cost-management with carefully planned and managed growth.
[Photograph - Page 7]
U.S.: Deepwater areas of the Gulf of Mexico are promising frontiers. In a new
partnership with Enserch, we're producing oil and gas at one site and
appraising another. Modern, floating production platforms offer low-cost
installation and opportunities to develop adjacent areas.
Mobil 7
MARKETING & REFINING
MARKETING & REFINING HAD A VERY SUCCESSFUL YEAR. Improvement initiatives of the
past few years showed up strongly in our earnings. We well outpaced the indus-
try. We also launched new initiatives in 1995, aimed at building a business that
will continue to grow, prosper and gain competitive strength.
Business conditions were difficult. The year started off with a relatively
warm winter that severely depressed industry profitability in the U.S. and Euro-
pe. Some recovery occurred during a strong summer driving season in the U.S.
However, industry margins for the year were off from 1994. As a result, our ma-
jor competitors reported lower 1995 operating earnings, mostly in the range of
20% to 40%.
"WE'RE ALIGNING OUR ASSET BASE MORE
CLOSELY TO OUR LONG-TERM INTERESTS"
Mobil, by contrast, had an excellent year. Operating income in this segment
increased 18% to $1,135 million -- our highest earnings since 1986. In the U.S.,
we were among the most profitable "downstream" companies in the industry, with
operating earnings of $330 million. Supporting our overall results were lower
expenses, higher sales volumes, good operating performance and improved income
in our lubricants business.
The initiatives that contributed to this performance came from our continued
focus on two primary objectives:
maximizing the value of our businesses with efficient and effective operating
practices and ongoing restructuring, and
investing in growth opportunities and innovations that offer long-term compe-
titive advantages and attractive financial returns.
As we continue to meet these objectives, we'll delight our customers with su-
perior products and innovative services. We'll also continue to generate finan-
cial returns that are among the best in the industry.
MAKING THE MOST OF WHAT WE ALREADY HAVE HAS BECOME A WAY OF LIFE. It's most
evident in the progress we continue to make to improve the way we run our busi-
ness and reduce expenses. For example, at the Beaumont, Texas, refinery -- Mo-
bil's largest -- pretax controllable cash operating expenses were reduced by $40
million in 1995. Worldwide, Marketing & Refining reduced these expenses by over
$280 million for the year, even as we grew the business. By finding ways to run
our business more efficiently, we surpassed 1994 cost reductions by $120
million.
Restructuring was especially prominent in Europe. In 1995, we completed a
multiyear effort to transform operations there and make them more efficient. We
made major changes
[Photograph - Page 8]
PEOPLE'S REPUBLIC OF CHINA: Steel goes up for a new lubricant blending plant
in Tianjin. Slated to start up in 1996, it will supply customers in the high-
demand Beijing area. Construction will soon begin for a second plant near Shan-
ghai. Mobil is the leading international supplier of lubes to the country.
8 Mobil
in the refining system. In September 1995, we closed the 104,000 barrel-a-day
refinery at Woerth in southern Germany. It no longer met our long-term criteria
for competitiveness. We're also significantly reducing expenses at two other re-
fineries -- Coryton in the United Kingdom and Gravenchon in France. With a simi-
lar aim, we plan to restructure European lube-blending operations. A $40 million
modernization program is near completion at the Gravenchon blending plant. This
upgrade will allow us to downsize blending plants in Austria, Germany and the
U.K.
In line with our goal of continuous improvement across Europe, we recently
announced a joint venture with BP. Pending approvals, the venture would combine
our companies' European operations in the refining and marketing of fuels and
lubes. This action will vault the combined businesses into the top tier of Euro-
pean marketers, while creating a solid foundation for future growth.
We also continue to restructure operations in the U.S. to bring down expense
levels. Together, the U.S. and European restructurings announced in 1995 will
cut pretax controllable cash operating expenses by more than $400 million annua-
lly. The European joint venture would allow us to realize even greater savings.
We made other moves in 1995 to align our worldwide asset base more closely to
our long-term interests. We sold our retail businesses in Switzerland and made
an agreement to sell our service stations in Barbados. We added service stations
to strengthen existing networks in the Netherlands, Guam and the Canary Islands.
We also reentered the western Australia market with the acquisition of an inde-
pendent retail fuels operation.
OPERATING PERFORMANCE WAS ONE OF OUR 1995 PRIORITIES, contributing to new pro-
duction records at many of our refineries. We made capital investments to
improve our facilities to keep them in the top tier of competition. Where
demand is on the rise, we also expanded facilities to keep output in pace with
the market.
At our Coryton refinery in the U.K., a new gas-turbine generator installed
last year will further improve reliability and reduce operating expenses. In
Australia, a new fluid catalytic-cracking unit is under construction at our Al-
tona refinery, and lube base-stock capacity is being expanded at our refinery
in Adelaide. At our joint-venture Kawasaki refinery in Japan, a new fuel-oil
upgrader will boost output of gasoline, distillate fuels and low-sulfur fuel oil
when it's completed in 1997.
MOBIL'S POSITION IN THE ASIA-PACIFIC REGION HAS BEEN A COMPETITIVE STRENGTH FOR
A LONG TIME. Among major oil companies, we're the second-largest marketer in the
region. A third of our refining capacity is there -- the highest ratio among our
international competitors.
[Photograph - Page 9]
U.S.: Motorists in Florida, Texas, California, New Jersey and Arizona now
find Friendly Serve (SM) services at selected Mobil stations. Customer service
is delivered at self-serve prices, helping Mobil stations add market share.
Mobil 9
The Singapore refinery has become our hub for supplying petroleum products
throughout Asia. In recent years, we've invested more than $800 million to
expand and upgrade this complex. It serves our rapidly growing marketing
operations in Malaysia, Thailand, China and elsewhere. Major recent expansions
have enabled Singapore to produce low sulfur diesel fuel, boost output of gaso-
line and manufacture aromatics for sale by Mobil Chemical (see p.12). Enginee-
ring is under way for a new lube base-stock manufacturing unit. It will be built
using proprietary Mobil technology that will result in lower capital and opera-
ting costs and higher yields. The new unit is expected to start up in late 1997.
"OPPORTUNITIES IN LATIN AMERICA
ARE HIGH ON OUR LIST"
Two state-of-the-art lube blending plants are under construction in China.
They're strategically located in Tianjin, near Beijing, and in Taicang, near
Shanghai. They're among $120 million worth of capital investments Mobil has
committed in the past two years to make in China. Along with the added cost-
competitive supply of base stock from Singapore and Adelaide, the Chinese blen-
ding plants will help us reach our goal to be No. 1 in profitability in the
lubes industry in Asia and worldwide.
IN OTHER WORLD MARKETS:
Mobil is among the leading international petroleum marketers in Africa. We sell
a full range of petroleum products in 41 countries. In 1995, we launched an
aggressive program to boost earnings sharply by upgrading existing businesses
and investing in new opportunities.
Our sales of lubricants are growing in eastern Europe and Russia. Mobil is
a leading supplier to automobile dealers in Poland and in Russia's Moscow and
St. Petersburg areas. In 1995, we opened Russia's first Mobil Express Lube (R)*
center in Moscow.
Attractive long-term opportunities in Latin America are high on our list as
well. In Argentina, the lubes marketing partnership we entered in late 1994 is
performing well. We entered the newly liberalized lubes market in Venezuela in
1995. We're also expanding rapidly in retail fuels -- in just one year, we've
developed an affiliated network of 90 service stations in Peru and 45 service
stations in Ecuador. We've captured a 20% market share in both countries. We al-
so opened our first Latin American On the Run (SM) convenience store in Nuevo
Laredo, Mexico, in late 1995. This new, expanded format goes beyond what custo-
mers normally expect in a convenience store. It offers customers faster and
easier service
* (R) Registered mark.
[Photograph - Page 10]
PERU: A Mobil tanker passes the Santisima Cruz de Barranco Church in Lima's his-
toric district. Mobil is the first private company to enter Peru's retail fuels
market. In a year, we've opened about 90 stations. We're also expanding our re-
tail presence elsewhere in Latin America.
10 Mobil
and a wider variety of products. Twenty additional On the Run stores are likely
to open in Mexico by the end of 1996.
In Saudi Arabia, our Luberef joint venture is building the country's second
lube base-stock refinery. We also built the first, in 1978. "Luberef II" will
meet growing Saudi demands and provide exports to surrounding areas. Building
on this strong base, we recently established lube blending and marketing opera-
tions in Syria and Yemen. In Lebanon, we're re-establishing marketing operations
that had been disrupted by that country's long civil war.
In the mature, highly competitive markets of the U.S. and Europe, our growth
depends on a keener ability to identify what customers want and deliver it cost-
efficiently. Innovative service and product introductions for 1995 include:
Friendly Serve (SM), launched in Orlando, Florida. The goal: to provide cus-
tomers with the best buying experience in the industry. Friendly Serve atten-
dants at selected stations provide old-fashioned customer service at self-serve
prices. Customers responded. In 1995, Mobil's retail fuel sales in the Orlando
area grew about 10% faster than those of our major competitors. Friendly Serve
amenities have since been launched in Texas, California, New Jersey and Arizona.
By midyear 1996, it will be nationwide.
the Mobil GO Card (SM), the first prepaid transaction card in the petroleum
industry. Customers use it to purchase gasoline, services and merchandise at any
of Mobil's 7,700 U.S. service stations.
the Arctic (R)* series of lubricants, developed for use with today's ozone-
safe refrigerants. It's part of our EAL (R)* -- Environment Awareness Lubri-
cant -- product line. Customer acceptance has been excellent in the U.S. and
Europe. Half of all industrial refrigeration compressors in the U.S. now use
these new lubes.
premium winterized diesel fuel. It has a double dose of a winterization addi-
tive package developed by Index Industries, a leader in diesel additives. This
co-branded product is available from 14 Mobil fuels terminals in the midwestern
U.S.
This January, we entered a promising, long-term partnership with Porsche. All
new Porsche automobiles will be lubricated with our top-quality Mobil 1 (R)*
synthetic motor oil. Porsche will also exclusively recommend this high-perfor-
mance lubricant to its worldwide dealer network. And Mobil will sponsor Porsche
entries in the Le Mans 24-hour race and other motor sport activities.
We've worked hard and successfully to instill more competitiveness in our
downstream businesses. Results for 1995 show that we're heading in the right di-
rection. Our leaner, more flexible organization will respond more rapidly to the
changing marketplace, improve our asset base, introduce more innovative products
and services, and keep serving our customers well.
* (R) Registered mark.
[Photograph - Page 11]
SAUDI ARABIA: A new lubricant base-stock refinery rises in Yanbu. When it starts
up in 1997, it will serve Saudi demand as well as export markets. Mobil and
Saudi Arabia are partners in this lube refinery as well as the country's first,
built in 1978.
Mobil 11
CHEMICAL & OTHER BUSINESSES
MOBIL CHEMICAL HAD A RECORD YEAR, AS OPERATING EARNINGS TRIPLED TO $679 MILLION.
Results benefited from strong margins for petrochemicals like polyethylene resin
and aromatics. Also, our sales were up, capitalizing on the first full year of
output from the aromatics plant in Singapore and expanded plant capacity in Eu-
rope for polypropylene films. Results also reflected the leaner organization
created by Chemical's streamlining initiatives. Further cost reductions are ex-
pected in 1996 from continued streamlining and benefits from the companywide
staff redesign project.
"MOBIL WILL BE ONE OF THE LOWEST-COST
PRODUCERS IN THE INDUSTRY"
We've learned that the best chemical companies don't try to "do it all." Rather,
companies with just a handful of leading businesses often outperform more highly
diversified companies with an abundance of product lines competing in a wide va-
riety of unrelated markets. So we adopted a new strategy:
FOCUS ON A HANDFUL OF MARKET-LEADING BUSINESSES -- businesses that are global,
growing and able to provide superior returns. They include:
Aromatic chemicals. We're rapidly expanding our capacity of paraxylene, a
basic building block of polyester fibers and resins. Demand is growing at a
healthy 6% a year worldwide. In Asia, it's growing 10% to 12%. During 1995, we
launched an expansion of our paraxylene business that will position Mobil among
the world's leading merchant suppliers. We've already made low-cost process im-
provements to our Singapore plant, which started up in 1994. They've increased
the plant's paraxylene capacity to 370,000 metric tons a year, an increase of
over 30% from its original design capacity.
We've also made paraxylene capacity investments at Mobil's refineries in
Beaumont, Texas, and Chalmette, Louisiana. After the new units start up in
early 1997, our worldwide paraxylene capacity will exceed 800,000 metric tons.
Zeolite catalysis, the Mobil technology that revolutionized the refining in-
dustry half a century ago, is behind a proprietary new process that produces pa-
raxylene at lower cost. This technology will be reserved for our own new plants
and selected joint ventures. Our Beaumont and Chalmette plants are being desig-
ned to use the new process. And we're evaluating further expansion in Singapore.
Together, our refinery feedstocks and our proprietary technology will make
Mobil one of the lowest-cost paraxylene producers in the industry.
[Photograph - Page 12]
NETHERLANDS: Mobil is the market leader in oriented polypropylene film, an
innovative food-packaging material. By 1998, our plant capacities will grow
31% over 1995 levels. At our Kerkrade plant, an operator performs an optical
quality check on a 28-foot roll of film.
12 Mobil
Olefin and polyolefin petrochemicals. In the U.S., we intend to boost the
cost competitiveness of ethylene, a basic petrochemical building block. We'll
do it by upgrading our Gulf Coast process units.
In Saudi Arabia, we're planning a project with our long-time partner, Saudi
Basic Industries Corporation. The project will more than double the size of our
olefins complex at Yanbu. The Yanbu expansion will further enhance the competi-
tiveness of the complex, already one of the world's lowest-cost producers. We're
also evaluating other low-cost olefins opportunities to maintain our global
growth momentum.
We will improve our domestic market position in polyethylene resins -- the
plastic "pellets" our customers turn into bags, bottles and other end products.
Our goal is to increase margins and put our returns above the industry average.
We will intensify our focus on market segments that value flexible and
innovative resins. Our successful development of metallocene and other new
catalysts is a key component of this strategy. These catalysts are capable of
producing a broader spectrum of high-quality resins.
Additives and synthetics. Sales volumes for these fuel and lube ingredients
rose 7% in 1995, following a 13% hike in 1994. Mobil is the world leader in
polyalphaolefins (PAOs), a fast-growing synthetic lubricant used in demanding
applications. Higher-performing engines, demands for energy efficiency and the
growing need for lubricants in environmentally sensitive applications drive the
market for these premium products. Rapidly developing economies, particularly in
the Asia-Pacific region, are spurring demand growth as customers upgrade their
lubricants.
Our additives and synthetics segment will grow as we expand our product line
using innovative technology. In 1995, we started up a new ester lubricant plant
in Amsterdam, the Netherlands. The esters go into the making of lubes mainly for
use in environmentally sensitive areas and refrigeration applications. And in
Beaumont, Texas, we're upgrading our reactor train for PAO base stocks. From
these base stocks come leading synthetics like industrial lubes for specialty
applications and Mobil 1 (R)*, a high-performance motor oil.
Oriented polypropylene (OPP) films. Sales of this innovative food-packaging
material are growing steadily. Customers value our OPP films because they speed
packaging processes, improve appearance and extend product shelf life. Market
growth will likely continue at 6% to 7% a year, and our own sales growth will
keep pace. We are already the world leader in OPP packaging films, with leading
positions in North America and Europe. Now we'll extend our market reach in
support of our multinational customers entering
* (R) Registered mark.
[Photograph - Page 13]
U.S.: Our metallocene catalyst creates a polyethylene resin that will help our
customers make grocery sacks and other products lighter, thinner and clearer
with no loss of durability. Technicians monitor a blow-molding test at a Mobil
research laboratory in Edison, New Jersey.
Mobil 13
eastern Europe, Asia and Latin America. It's been less than three years since
we started up our plant in Kerkrade, the Netherlands, yet we just doubled capa-
city there. We also recently gained a new partner -- Thai Film -- to develop
plant capacity in Rayong, Thailand.
Other expansions are also under way. They'll increase our worldwide OPP capa-
city by a third, to 575 million pounds a year by 1998.
Operations, markets and competitors for OPP are different from those for our
other businesses. OPP requires a higher level of innovation, adaptability to
changing environments and entrepreneurial behavior. We have given this segment
the freedom it needs to compete most effectively.
THOSE BUSINESSES ARE THE ONES THAT FIT OUR STRATEGIC FRAMEWORK. The ones that
don't fit have been or will be sold to fund new investment. In 1995, we divested
most of our noncore businesses in plastics fabrication. As other parts of Mobil
Chemical have grown global, our plastics segment remained a largely U.S. busi-
ness with slower-growing markets. It proved a better strategic fit for the bu-
yer, Tenneco, since packaging is one of their core businesses. The sale was clo-
sed in November for $1.27 billion.
We also sold H. Muehlstein and Co., our Connecticut-based brokers of plastic
resins, to company management. We acquired Muehlstein in 1980 to help market re-
sins from our new joint-venture petrochemical complex in Saudi Arabia. Since
then, we've developed
[Photograph - Page 14]
SINGAPORE: Worldwide demand is growing for paraxylene, a building block for
polyester and other products. Mobil's production capacities and market strength
are growing, too. In the laboratory at our Jurong aromatics complex, a techni-
cian conducts a quality control test.
PARAXYLENE PRIMER
Like other petrochemicals, paraxylene is made from a by-product of petroleum
refining. Paraxylene, in turn, can be processed into polyester "intermediates"
that are converted into polyester fibers or resins. Fibers are typically woven
into textiles or used as "fill" for clothing and home furnishings. Resins are
molded into products like disposable microwaveable containers and bottles for
soft drinks, juice and water.
The market for paraxylene is among the fastest growing in the petrochemicals
industry. In 1995, paraxylene production industrywide reached nearly 22 billion
pounds. One big reason: cotton. In Asia, where textiles are a major industry,
cotton production has been unable to keep up with growing demand for fibers. The
supply of polyester, by contrast, isn't susceptible to the whims of nature.
Moreover, polyester fibers are more adaptable to changing requirements of the
factory or marketplace.
Mobil benefits from a prominent, global position in the supply of refinery
by-products that go into paraxylene. We also have the advanced, proprietary
technology to transform those by-products into high-quality paraxylene at low
cost.
14 Mobil
our own global marketing force to sell the resins we make in both Saudi Arabia
and the U.S. The support of a noncore trading organization was no longer requi-
red.
Mobil's companywide redesign of support staff functions began closely after
Mobil Chemical's own reorganization of operations. By the end of 1995, the Che-
mical work force was nearly half the size it was at year-end 1994, reflecting
the sale of our plastics-fabrication businesses and other improvement initiati-
ves. These initiatives also included more-efficient manufacturing processes and
an improved product mix. All these initiatives will help us fund new investments
in a stronger portfolio of growing, global businesses.
"WE DIVESTED MOST OF OUR NONCORE
BUSINESSES IN PLASTICS FABRICATION"
MOBIL MINING AND MINERALS
Our Mining and Minerals business produces phosphate rock from low-cost phosphate
mineral reserves in Florida. We also upgraded a portion of our production into
finished phosphate fertilizers. Our 1995 sales revenues were up 20%, to $192
million, primarily due to better prices.
However, the long-term trend is down in this industry. Increased integration
has significantly reduced the phosphate rock market, of which Mobil has only a
small share. In 1995, Mobil began implementation of a withdrawal strategy from
this noncore business.
In December, we sold our principal asset, the phosphate mine at South Fort
Meade, Florida, to Cargill, owners of an adjacent mine, for $283 million. We ex-
pect to divest our remaining phosphate mining assets in 1996.
MOBIL LAND DEVELOPMENT CORP.
Mobil Land develops commercial and residential real estate in the U.S. and holds
undeveloped property for appreciation. Mobil Land had a good year in 1995. Sales
were up 28%. We sold Colonial Place, a major commercial complex in Northern Vir-
ginia, and several other smaller properties.
[Photograph - Page 15]
NETHERLANDS: Our biodegradable esters go into today's base stocks for lubricants
used in refrigeration compressors and environmentally sensitive applications.
Mobil's new esters plant in Amsterdam is boosting output for this high-demand
product. Through a sight glass, an operator checks product cleanliness.
Mobil 15
ENVIRONMENT
In 1996, we mark the 40th anniversary of Mobil's first formal policy on envi-
ronmental protection. Over the decades, our environmental commitment has grown
only stronger. With substantial human and financial resources, we have: protec-
ted environments around exploration and producing sites, minimized emissions
from plants and other sites, developed cleaner and safer products, reduced and
recycled waste, and conserved energy. We aim to prevent problems before they
happen, even as we improve our preparedness to respond to them.
Activities promoting a clean environment have traditionally been shared by
our specialists in Environmental, Health & Safety (EHS) and the rest of our
work force. In 1995, we enhanced this cooperative approach with EHS Management
Systems. These systems give employees clear accountability for EHS performance
in their individual jobs. Management specifies what Mobil's overall environmen-
tal policies should be. Business units determine how to fulfill them, with
flexibility to adjust practices to local conditions.
Mobil North Sea Ltd. in the United Kingdom (U.K.) pioneered Mobil's implemen-
tation of EHS Management Systems in 1991. By the end of 1995, they'd been adop-
ted in more than 35 other affiliates and more than 100 facilities worldwide.
EHS Management Systems aren't driven by government regulations. Yet these sys-
tems will help Mobil continue to meet and do better than regulations in the fu-
ture.
HERE IS A BRIEF SAMPLING OF OTHER ENVIRONMENTAL INITIATIVES IN 1995:
Our U.S. refineries and chemical plants exceeded their 1995 emissions reduction
goal. They achieved a 50% reduction in the emission of 17 chemicals designated
"high priority" by the Environmental Protection Agency (EPA) a year ahead of the
EPA's timetable. In the U.K., our Birkenhead lubricant-blending plant is on its
way to reducing 50% of its waste by tailoring solutions to each waste stream.
Birkenhead's strategy has expanded to all of our blending plants in Europe. Now
it's being shared with Mobil facilities worldwide.
Mobil Shipping and Transportation (MOSAT) ordered its second double-hulled
very large crude carrier. MOSAT continues to conduct one of the industry's most
demanding ship-inspection and loss-prevention programs.
Mobil's Regional Response Teams, our global oil-spill management network,
conducted major field exercises in Greece, Guam, Malaysia, New Zealand and the
U.S. The U.S. exercise, simulating an 80,000-barrel spill in the Gulf of Mexico,
was our most comprehensive to date. It entailed the deployment of onshore and
offshore equipment and the response of nearly 100 Mobil people and more than 200
people from external organizations.
At a seminar hosted by Mobil Oil Nigeria (MON), our award-winning strategies
for conserving energy and recycling office waste were shared with representati-
ves of 14 Nigerian companies and five Mobil affiliates in Africa. In 1995, recy-
cling paper and plastic enabled MON to reduce its waste stream 20%. Office
energy consumption dropped by more than a half million killowatt-hours.
In 1995, Mobil organizations around the world continued to receive awards and
commendations for strong environmental performance. Over the next 40 years and
beyond, we aim to make our performance even stronger.
16 Mobil
FINANCIAL
MANAGEMENT DISCUSSION AND ANALYSIS
KEY FINANCIAL INDICATORS
(In millions, except per-share and ratio amounts) 1991 1992 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Income, Excluding the Effects of Special Items
and Change in Accounting Principle(s)* $ 1,894 $ 1,488* $ 2,224 $ 2,231* $ 2,846
Special Items 26 (180) (140) (472) (470)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Income, Excluding the Effects of Change in
Accounting Principle(s)* $ 1,920 $ 1,308* $ 2,084 $ 1,759* $ 2,376
Per common share 4.65 3.13 5.07 4.28 5.87
Common Stock Dividends Per Share 3.125 3.20 3.25 3.40 3.625
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Capital and Exploration Expenditures $ 5,053 $ 4,470 $ 3,656 $ 3,825 $ 4,268
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Debt-to-capitalization Ratio 32% 34% 32% 31% 27%
Total Debt $ 8,229 $ 8,520 $ 8,027 $ 7,727 $ 6,756
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity $17,534 $16,540 $17,237 $17,146 $17,951
Per common share 43.74 41.06 42.74 42.61 44.71
- - - - ----------------------------------------------------------------------------------------------------------------------------------
OUTLOOK
WHILE 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 PLANNING OUR FUTURE OPERATIONS.
THE ENERGY BUSINESS WILL REMAIN HIGHLY COMPETITIVE, REQUIRING CONTINUING,
LARGE CAPITAL INVESTMENTS TO SUPPORT FUTURE OPERATIONS AND GROWTH WHICH WILL,
BECAUSE OF OPPORTUNITIES, PREDOMINANTLY BE IN INTERNATIONAL AREAS. 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
well into the next century. Near term, we foresee continued volatility in prices
and related profitability, reflecting market forces, political uncertainties and
host-country regulation. Over the longer term, prices are expected to rise gra-
dually, in line with inflation, as supplies appear adequate to meet demand
growth.
We believe the industry will continue to grow in the international upstream
sector where investment opportunities are abundant. We look to these areas to
replace our hydrocarbon reserves inventory and provide continuing production and
earnings growth. Our program reflects a strategy to assess and manage political,
economic and geologic risks. This is achieved through a geographically diverse
portfolio of existing assets and new projects, maximum use of nonrecourse finan-
cing, staged development, joint ventures and managing cash exposure. We will
continue to de-emphasize our exploration program in the U.S., where economic
opportunities remain limited.
The U.S. marketing and refining industry will continue to face competitive
market pressures. Margins should show gradual improvement as moderate industry
demand growth is partly offset by modest increases in capacity at existing
refineries. Refining will also continue to require expenditures to meet
environmental regulations, including those pertaining to introduction of Phase
II reformulated gasolines later in the decade. Mobil's U.S. refining system is
among the best in the industry and is generally well positioned to meet these
requirements.
Refining margins in the Asia-Pacific region are expected to benefit from ro-
bust economic growth and associated product demand, partly offset by new refi-
ning capacity additions in the near term. In Europe, the highly competitive en-
vironment and a forecast of modest growth in product demand could restrain im-
provements in refining margins. International marketing margins are, on average,
expected to remain at about the level experienced in 1995, although some areas
could see competitive pressures.
HIGHLIGHTS
RECORD OPERATING EARNINGS OF $2.8 BILLION SURPASSED THE PREVIOUS RECORD SET IN
1980 WHEN CRUDE PRICES WERE TWICE THEIR CURRENT LEVEL
M&R OPERATING EARNINGS WERE AT A NINE-YEAR HIGH, REFLECTING EXCELLENT REFINERY
PERFORMANCE, HIGHER SALES VOLUMES AND BENEFITS FROM BUSINESS INITIATIVES
CHEMICAL'S RECORD OPERATING EARNINGS REFLECTED IMPROVED INDUSTRY FUNDAMENTALS
AND BENEFITS FROM BUSINESS INITIATIVES
E&P'S RAS LAFFAN LNG JOINT VENTURE HELPED REPLACE 106% OF WORLDWIDE PRODUCTION,
EXCLUDING PURCHASES AND SALES, WITH NEW PROVED RESERVES
CONTROLLABLE CASH OPERATING EXPENSES, IN CURRENT DOLLARS, WERE REDUCED BY MORE
THAN $300 MILLION BEFORE TAX VERSUS 1994, AND HAVE BEEN REDUCED BY OVER $1.1
BILLION SINCE 1991
Mobil 17
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 18]
INCOME
(Millions of dollars)
* Excludes cumulative effect of change in accounting principle(s).
HIGHER INCOME CAME FROM STRONG OPERATING PERFORMANCE, BUSINESS INITIATIVES
AND HIGHER SALES VOLUMES.
TOTAL RETURN TO SHAREHOLDERS
(Per $100 invested on December 31, 1990)*
* Mobil share price appreciation plus reinvested dividends returned 19.2%
annually -- 2.7 percentage points above the S&P 500.
OUTLOOK (concluded)
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 mar-
kets 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 phy-
sical 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.
The worldwide petrochemical business continues to be cyclical. Polyethylene
margins are expected to be somewhat lower in 1996, after a very strong 1995.
However, paraxylene margins remain strong. We believe that continued demand
growth, particularly in the Asia-Pacific region, will be strong enough to
support attractive margins.
Mobil's planned 1996 capital and exploration expenditure program is $4.6
billion (U.S. -- 25%; International -- 75%), plus an additional $0.6 billion for
cash investments in equity companies. 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 debt-to-capital ratio
fell from 31% to 27% in 1995 as debt was reduced by proceeds from asset sales.
We do not plan to remain at this low level as we expect investment spending to
increase, including potential acquisitions. 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 for our shareholders.
RESTRUCTURINGS
Since May 1, 1995, Mobil has initiated five major restructuring programs affec-
ting worldwide staff support services, U.S. upstream and downstream businesses,
and European refining and lubricant blending operations. These programs build
upon our previous initiatives that were started in the early 1990s and are in
response to the highly competitive environment and difficult business conditions
in many areas of the world. In addition to improving the way we work, these
changes will strengthen our businesses by reducing costs and will, more impor-
tantly, position us to respond to the many opportunities available to us for
growth. They also provide our employees with the opportunity to grow and utilize
their abilities to the maximum. We expect to continue to restructure our opera-
tions as business conditions warrant.
The implementation of these programs will result in the elimination of
approximately 6,000 positions and the closure of certain facilities, and should
be essentially completed by year-end 1996. In 1995, we recorded restructuring
provisions of $590 million after tax, to cover severance benefits related to
work force reductions and for property writedowns. Cash outlays associated with
these provisions will be made throughout 1996 and will be completed, for the
most part, by midyear 1997. In addition to these cash outlays, implementation
costs in the amount of approximately $150 million after tax will be incurred.
Projected annualized benefits from these programs are expected to be over $1
billion before tax.
Delivery of WORLDWIDE STAFF SUPPORT SERVICES was redesigned to provide opera-
ting units with cost-competitive services. This will be accomplished through or-
ganizational and operational changes that include establishing regional shared
service groups, outsourcing of some services and providing the business opera-
ting units with the opportunity to control and direct the level of services they
receive.
In the U.S., restructuring of the UPSTREAM BUSINESS will result in invest-
ments being redirected to focus on fields that have the greatest potential. The
remaining fields will be depleted, traded or sold.
In the U.S. DOWNSTREAM BUSINESS, initiatives are being implemented to achieve
top-tier competitive performance at our U.S. refineries, reengineer fuels and
lubes order fulfillment processes and further reduce operating costs.
In EUROPE, REFINING INITIATIVES included closing the Woerth refinery in
Germany and more closely integrating the operations in Mobil's refineries at
Gravenchon, France, and Coryton, United Kingdom.
The restructuring of our EUROPEAN LUBRICANT BLENDING PLANT NETWORK will in-
clude downsizing of operations in Austria, Germany and the United Kingdom.
These changes were made possible by an upgrading and expansion project at the
Gravenchon blending plant in northwest France.
See Note 2 to Financial Statements on page 37 for further details of these
restructuring programs.
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 COMMENTARY, AND TO
PAGES 50-57 FOR SUPPLEMENTARY INFORMATION.
CONSOLIDATED RESULTS
- - - - -------------------------------------------------------------------------------
CONSOLIDATED EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions, except per-share amounts) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing $1,652 $1,076 $ 845
Marketing & Refining 705 888 673
- - - - -------------------------------------------------------------------------------
Total Petroleum 2,357 1,964 1,518
Chemical 44 102 1,164
- - - - -------------------------------------------------------------------------------
Segment Earnings 2,401 2,066 2,682
Corporate and Other (190) (98) (11)
Net Financing Expense (127) (209) (295)
- - - - -------------------------------------------------------------------------------
Income Before Change in Accounting Principle 2,084 1,759 2,376
Cumulative Effect of Change in Accounting Principle -- (680) --
- - - - -------------------------------------------------------------------------------
Net Income $2,084 $1,079 $2,376
Per common share $ 5.07 $ 2.57 $ 5.87
- - - - -------------------------------------------------------------------------------
OUR GOAL IS TO ACHIEVE OPERATING EARNINGS OF $3.2 BILLION BY THE END OF 1998
WHILE MAINTAINING AT LEAST A 12% RETURN ON CAPITAL EMPLOYED, A STRONG FINANCIAL
POSITION AND A BASE OF ASSETS, HYDROCARBON RESERVES AND HUMAN RESOURCES TO
ENSURE GROWTH IN THE YEARS AHEAD. Mobil's strong 1995 results reflected
excellent operating performance and initiatives throughout the company that
reduced costs and increased sales volumes.
Operating earnings, which exclude special items and the effect of any change
in accounting principle, were a record $2,846 million in 1995, compared with
$2,231 million in 1994 and $2,224 million in 1993, and reflected continuing
improvement in our core businesses. Special items (not separately identified
in the table above) decreased earnings in 1995 by $470 million, compared with
decreases of $472 million in 1994 and $140 million in 1993. Special items repre-
sent the earnings effects from events not attributable to current operations and
are more fully described in the business segment discussions that follow.
Consolidated net income in 1995 was $2,376 million, $617 million higher than
1994, excluding a $680 million noncash charge for a change in accounting princi-
ple. The earnings improvement was achieved without any net help from industry
fundamentals. The impact of higher crude oil prices and petrochemical margins
was offset by weakness in North American natural gas prices and worldwide refi-
ning margins. Net income included net special charges of $470 million, primarily
for worldwide restructuring initiatives and the adoption of FAS 121, the new
accounting standard for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (see Note 6 to Financial Statements on page 38), partly
offset by benefits from sales of certain Chemical and Mining assets and a
favorable litigation settlement. In 1994, net special charges were $472 million.
In Exploration & Producing, higher crude oil and Indonesian LNG prices, lower
exploration expenses and lower capital recovery charges were partly offset by
lower North American natural gas prices and lower production volumes. The decli-
ne in earnings was primarily due to charges for asset impairments resulting from
adopting FAS 121. In Marketing & Refining, benefits from business initiatives,
including lower expenses, higher sales volumes and excellent refinery
performance were partly offset by weaker worldwide refinery margins. Earnings
declined overall due to higher restructuring charges. Chemical's record income
reflected higher worldwide polyethylene and paraxylene margins and the sale of
our Plastics Division.
Consolidated net income in 1994 of $1,759 million, excluding a noncash charge
of $680 million for a change in accounting principle, was $325 million lower
than in 1993. The lower income reflected higher special charges of $472 million
in 1994, compared with special charges of $140 million in 1993.
[Bar Chart - Page 18]
ANNUAL DIVIDENDS
(Per share of common stock, in dollars)
DIVIDEND PAYMENTS INCREASED FOR THE EIGHTH CONSECUTIVE YEAR.
Graphs, charts and associated captions on pages 17 - 48 are not a part of the
Consolidated Financial Statements and Notes thereto.
Mobil 19
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 20]
UPSTREAM EARNINGS
(Millions of dollars)
UPSTREAM EARNINGS WERE REDUCED BY ADOPTING A NEW ACCOUNTING
STANDARD AND BY RESTRUCTURING CHARGES.
NET PRODUCTION
(Thousands of barrels daily
of oil equivalent)
LOWER PRODUCTION IN THE U.S. REFLECTED NATURAL FIELD DECLINES AND ASSET
SALES. GROWTH IN INTERNATIONAL VOLUMES WAS INTERRUPTED BY TEMPORARY OPERATING
PROBLEMS, PRIMARILY IN NIGERIA.
PETROLEUM OPERATIONS
UPSTREAM -- EXPLORATION & PRODUCING
- - - - -----------------------------------------------------------------------------
EXPLORATION & PRODUCING SEGMENT FINANCIAL INDICATORS
- - - - -----------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -----------------------------------------------------------------------------
U.S. Earnings (Loss) $ 363 $ 125 $ (107)
International Earnings 1,289 951 952
- - - - -----------------------------------------------------------------------------
Total Earnings $ 1,652 $ 1,076 $ 845
- - - - -----------------------------------------------------------------------------
Revenues(1) $10,449 $10,193 $11,081
- - - - -----------------------------------------------------------------------------
Assets $14,334 $14,116 $14,393
- - - - -----------------------------------------------------------------------------
Capital Expenditures $ 1,560 $ 1,642 $ 2,247
Exploration Expenses 405 516 427
- - - - -----------------------------------------------------------------------------
Total Capital and Exploration Expenditures $ 1,965 $ 2,158 $ 2,674
- - - - -----------------------------------------------------------------------------
(1) Includes intersegment revenues.
OUR PRIMARY UPSTREAM GOALS ARE TO SUSTAIN LONG-TERM PRODUCTION AND EARNINGS
GROWTH WHILE ENHANCING OUR CORE ASSET BASE THROUGH EFFICIENT DEPLETION, DIVESTI-
TURE AND ACQUISITIONS. Results in 1995 were impacted by charges for impairment
of assets (FAS121) and further restructuring initiatives. The favorable impact
of stronger crude oil and LNG prices, lower exploration expenses and reduced
capital recovery charges was partly offset by weak natural gas prices in North
America and the United Kingdom and by lower production.
UPSTREAM net income of $845 million was $231 million lower than in 1994.
Operating earnings of $1,397 million (U.S., $332 million; International, $1,065
million: refer to tables on page 21) increased $73 million, or 6%, due to higher
worldwide crude oil prices, lower capital recovery charges and lower exploration
expenses, partly offset by lower natural gas prices and production volumes.
Operating expenses were essentially unchanged even though additional costs were
incurred in developing new business opportunities.
In 1995, Mobil produced 810,000 barrels per day of liquids and 4,554 million
cubic feet per day of natural gas. Worldwide production decreased somewhat from
1994 due to natural field declines and asset sales in North America, as well as
from temporary operational disruptions overseas. Mobil replaced 106% of its pro-
duction with new reserves, excluding purchases and sales, compared with 117% in
1994.
In 1994, earnings totaled $1,076 million, down $576 million from 1993.
Operating earnings of $1,324 million decreased $206 million due to lower
worldwide crude oil and natural gas prices and higher exploration expenses.
Revenues in 1995 were up 9% as higher crude oil prices and higher natural gas
sales volumes were only partially offset by lower crude oil sales volumes and
lower natural gas prices in North America and the United Kingdom. In 1994, reve-
nues were down slightly from 1993 as lower crude oil and natural gas prices were
partially offset by higher sales volumes. These revenues included sales to other
segments of the company, which were eliminated in consolidated financial infor-
mation.
Capital and exploration expenditures in 1995 were $2,674 million, up 24% from
1994. Planned capital and exploration expenditures for 1996 are $2.8 billion,
up 5% from 1995, and are directed predominantly to international areas.
Development of the Zafiro offshore complex in Equatorial Guinea began, with
first production scheduled for third quarter 1996. In Qatar, work continued on
development of the giant North field and the Qatargas LNG plant, where LNG deli-
veries will begin in 1997. The first sales contract for Ras Laffan LNG was
signed in 1995 with first gas deliveries scheduled in 1999. Work continued in
Canada on the Hibernia gravity base structure and on the topside modules with
production start-up scheduled for late 1997. In Nigeria, the Oso NGL project
commenced with streaming expected in 1998. In addition, development is under way
on new gas and oil fields in the North Sea, Nigeria and the Gulf of Mexico.
In 1995, Mobil drilled 38 wildcat exploration wells, resulting in 14
discoveries. Exploration activities in frontier areas, including Kazakstan,
Vietnam, West Africa and South America continue, along with efforts to replace
reserves in established areas through participation in new producing ventures
and acquisitions.
20 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
PETROLEUM OPERATIONS (continued)
- - - - -------------------------------------------------------------------------------
U.S. EXPLORATION & PRODUCING EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Earnings (Loss) $ 363 $ 125 $ (107)
Special Items in Earnings
Restructuring provisions (10) -- (51)
Asset sales and write-downs (13) (181) (22)
Tax rate change (23) -- --
Inventory/supplies adjustments (19) -- --
Environmental provision (4) -- --
Asset impairment (FAS 121) -- -- (366)
- - - - -------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 432 $ 306 $ 332
- - - - -------------------------------------------------------------------------------
U.S. UPSTREAM operating earnings of $332 million in 1995 were $26 million higher
than 1994 mainly due to higher crude oil prices, lower exploration expenses and
reduced capital recovery charges, largely offset by lower natural gas prices and
lower production volumes. Operating earnings decreased $126 million in 1994 from
1993 mainly due to significantly lower natural gas prices. Lower crude oil pri-
ces and higher exploration expenses were largely offset by lower operating ex-
penses.
Our average U.S. crude oil price per barrel of $14.52 increased $1.61 from
the 1994 level of $12.91. The price in 1993 was $13.54 per barrel. In 1995,
average natural gas prices per thousand cubic feet fell $.32, to $1.58, from
$1.90 in 1994. In 1993, natural gas prices averaged $2.22 per thousand cubic
feet.
U.S. production decreased primarily due to the effect of natural field
declines in our mature areas, asset sales and weather disruptions in the Gulf
of Mexico.
Special items in 1995 included charges for major restructuring initiatives,
losses on asset sales and FAS 121 impairments. Earnings in 1994 included charges
for property write-downs and losses on asset sales. Earnings in 1993 were re-
duced by charges for restructuring, losses on asset sales, an adjustment to de-
ferred taxes, inventory/supplies adjustments and a provision for environmental
remediation.
- - - - -------------------------------------------------------------------------------
INTERNATIONAL EXPLORATION & PRODUCING EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Earnings $1,289 $ 951 $ 952
Special Items in Earnings
Restructuring provisions -- (9) (41)
Tax rate changes and other items 176 -- 26
Asset sales and write-downs 15 (58) 23
Asset impairment (FAS 121) -- -- (121)
- - - - -------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $1,098 $1,018 $1,065
- - - - -------------------------------------------------------------------------------
INTERNATIONAL UPSTREAM operating earnings of $1,065 million in 1995, up $47
million from 1994, reflected higher prices for liquids and Indonesian LNG, which
more than offset higher operating expenses in new growth areas, lower production
volumes and lower natural gas prices in the U.K. and Canada. Also, exploration
expenses were lower with improved drilling success and the timing of well com-
pletions. Operating earnings in 1994 were 7% lower than 1993, reflecting lower
crude oil and natural gas prices and higher exploration expenses, partly offset
by higher production volumes and LNG sales.
Our average international crude oil price per barrel rose $1.28 to $16.94 in
1995, after dropping $1.33 during 1994. In 1993, crude oil prices averaged
$16.99 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 decreased in 1995 primarily due to temporary operational
interruptions in Nigeria and Australia, natural field declines in Canada and
expiration of short-term sales contracts in Indonesia, partly offset by
production from new fields in the U.K. and Germany.
Special items in 1995 included charges for restructuring initiatives, FAS 121
impairments (mainly in Canada) and benefits from tax adjustments and asset sa-
les. Earnings in 1994 included charges for restructuring and property write-
downs. Earnings in 1993 included net benefits from favorable tax rate changes,
tax settlements and gains on asset sales.
[Bar Charts - Page 21]
CRUDE OIL
AVERAGE SALES PRICE
(Dollars per barrel)
WORLDWIDE CRUDE PRICES INCREASED NEARLY $1.50 PER BARREL IN 1995, PRIMARILY
DUE TO HIGHER DEMAND IN THE ASIA-PACIFIC REGION AND SUPPLY DISRUPTIONS CAUSED
BY HURRICANES IN THE GULF OF MEXICO.
NATURAL GAS
AVERAGE SALES PRICE
(Dollars per thousand cubic feet)
U.S. NATURAL GAS PRICES FELL AGAIN IN 1995, REFLECTING INCREASED SUPPLY FROM
NEW CAPACITY IN CANADA AND THE GULF OF MEXICO, AS WELL AS LOWER SUMMER COOLING
DEMAND.
Mobil 21
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 22]
DOWNSTREAM EARNINGS
(Millions of dollars)
BENEFITS FROM BUSINESS INITIATIVES, LOWER EXPENSES AND HIGHER SALES VOLUMES
WERE MORE THAN OFFSET BY THIS YEAR'S RESTRUCTURING CHARGES.
REFINERY RUNS FOR MOBIL
(Thousands of barrels daily)
REFINERY RUNS INCREASED IN THE U.S. AND IN THE ASIA-PACIFIC REGION, PARTLY
OFFSET BY THE SHUTDOWN OF THE WOERTH REFINERY IN EUROPE AND A TURNAROUND IN
SAUDI ARABIA.
PETROLEUM OPERATIONS (continued)
DOWNSTREAM -- MARKETING & REFINING
- - - - -------------------------------------------------------------------------------
MARKETING & REFINING SEGMENT FINANCIAL INDICATORS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
U.S. Earnings $ 151 $ 241 $ 226
International Earnings 554 647 447
- - - - -------------------------------------------------------------------------------
Total Earnings $ 705 $ 888 $ 673
- - - - -------------------------------------------------------------------------------
Revenues(1) $53,950 $56,861 $62,362
- - - - -------------------------------------------------------------------------------
Assets $20,914 $21,767 $22,463
- - - - -------------------------------------------------------------------------------
Capital Expenditures $ 1,262 $ 1,297 $ 1,292
- - - - -------------------------------------------------------------------------------
(1) Includes intersegment revenues.
OUR PRIMARY DOWNSTREAM GOAL IS TO RAISE OUR RETURN ON CAPITAL EMPLOYED TO A TOP
COMPETITIVE LEVEL BY IMPROVING THE QUALITY OF A GOOD ASSET BASE, STREAMLINING
OPERATIONS, PURSUING ATTRACTIVE GROWTH OPPORTUNITIES, AND SATISFYING OUR CUS-
TOMERS' NEEDS WHILE KEEPING PACE WITH ENVIRONMENTAL DEMANDS. Operating results
in 1995 were very strong despite weaker industry refining margins. However,
earnings were adversely affected by restructuring and other special charges.
DOWNSTREAM earnings of $673 million in 1995 were $215 lower than in 1994.
Excluding special items (refer to tables on page 23), operating earnings of
$1,135 million (U.S., $330 million; International, $805 million) increased $171
million. Business initiatives contributed to lower expenses, higher volumes,
better refinery performance and higher lube income, which more than offset lower
worldwide industry refining margins.
We recorded restructuring provisions of $420 million, primarily to cover
severance benefits related to work force reductions. Continued implementation of
cost reduction programs in all downstream businesses is expected to favorably
impact 1996 results. To strengthen our competitive position, we are continuing
to look closely at all of our assets and will further restructure operations or
divest assets to maximize our long-term returns.
Earnings in 1994 totaled $888 million, up $183 million from 1993. Operating
earnings in 1994 decreased $124 million as a result of lower refining margins,
reflecting ample supplies of product due to additional capacity in the U.S.,
new grassroots industry capacity in the Asia-Pacific region and weak distillate
prices in the face of warmer-than-normal weather in first quarter 1994.
Downstream revenues increased 10% in 1995 due to higher product sales volumes
and prices. Revenues were higher in 1994 versus 1993 due to higher product sales
volumes.
Overall, capital expenditures were essentially unchanged in 1995, with
increased focus on the growing international arena. Planned expenditures for
1996 are $1.4 billion, up 8% from 1995, with approximately 30% in the U.S. and
70% directed to international areas.
We continue to strengthen our position in areas with growth potential, parti-
cularly in the Asia-Pacific region and Latin America. A lubricant blending plant
in Tianjin, China (near Beijing), the first 100% foreign-owned oil industry fa-
cility in China, is under construction. A second lube blending plant in Taicang,
China (near Shanghai), has been approved and is scheduled to be streamed in
1997. Our joint venture refinery in Kawasaki, Japan, is scheduled to complete a
project to upgrade lower-value residual fuels to higher-value products in 1997.
Construction began in 1995 on a new cracking unit at our Altona, Australia, re-
finery and is on schedule to be streamed in late 1996. At Adelaide, Australia,
a project is under way to expand lube base-stock capacity with a scheduled
start-up in 1996. A new lube base-stock unit is being progressed at the Jurong,
Singapore, refinery. In Yanbu, Saudi Arabia, the Petromin Lubricating Oil Refi-
ning Company, in which Mobil owns a 30% interest, is progressing the construc-
tion of a new, two-million-barrel-per-year lubricant base-stock refinery with
completion scheduled in early 1997. Our Coryton, United Kingdom, refinery has
installed a gas turbine generator that will decrease costs and improve operating
reliability. In Latin America, we have entered the retail fuels market in Peru
and Ecuador. While we are investing in various growth areas, we also continue to
divest assets that do not meet long-term profitability criteria, as evidenced by
closure of our Woerth, Germany, refinery.
22 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
PETROLEUM OPERATIONS (CONCLUDED)
- - - - -------------------------------------------------------------------------------
U.S. MARKETING & REFINING EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Earnings $ 151 $ 241 $ 226
Special Items in Earnings
Restructuring provisions (23) (11) (104)
Asset write-downs -- (35) --
LIFO/other inventory adjustments 22 14 --
Environmental provisions (144) -- --
- - - - -------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 296 $ 273 $ 330
- - - - -------------------------------------------------------------------------------
U.S. DOWNSTREAM operating earnings were $330 million, $57 million higher than in
1994. Benefits from business initiatives, including lower expenses, higher sales
volumes, improved lube income and excellent refinery performance offset weaker
business conditions.
The 1994 operating income of $273 million was 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 cost reductions and
other business initiatives, as well as increased petroleum product sales and
production and higher lube income.
Special items reduced earnings in each year. In 1995, special items were for
restructuring provisions ($65 million for staff services redesign and $39
million for further operational restructuring). Included in 1994 earnings were a
restructuring provision, property write-downs and favorable LIFO/inventory
adjustments. In 1993, special items were a provision for environmental remedia-
tion (mainly for service stations), a charge for restructuring and the favora-
ble impact of a LIFO liquidation.
- - - - -------------------------------------------------------------------------------
INTERNATIONAL MARKETING & REFINING EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Earnings $ 554 $ 647 $ 447
Special Items in Earnings
Restructuring provisions (43) (44) (316)
Asset sales and write-downs 35 -- (29)
LIFO/other inventory adjustments (250) -- (13)
Tax rate changes 20 -- --
- - - - -------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 792 $ 691 $ 805
- - - - -------------------------------------------------------------------------------
INTERNATIONAL DOWNSTREAM operating earnings were $805 million in 1995, $114
million higher than in 1994. More than offsetting generally weak industry refi-
ning margins and lower marketing margins in Japan were lower expenses in Europe
and Australia, benefits from ongoing business initiatives, higher sales volumes
(particularly in the rapidly growing Asia-Pacific region), higher lube income,
and the benefit of the Singapore refinery upgrade.
Operating earnings of $691 million in 1994 were $101 million lower than in
1993, reflecting very weak worldwide refining margins. These were partially off-
set by higher marketing margins and benefits derived from ongoing business ini-
tiatives, which contributed to higher trade sales volumes, particularly in the
Asia-Pacific region, and expense savings, particularly in Europe.
Special items in 1995 included restructuring provisions ($88 million for
staff services redesign and $228 million for European refining and lubricant
blending), property writedowns and a LIFO adjustment. In 1994, earnings included
restructuring provisions primarily for work force reductions in Europe. Special
items in 1993 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.
[Bar Charts - Page 23]
DOWNSTREAM PETROLEUM PRODUCT
SALES VOLUMES
(Thousands of barrels daily)
SALES VOLUMES INCREASED FOR THE FIFTH CONSECUTIVE YEAR.
DOWNSTREAM PETROLEUM PRODUCT
SALES REVENUES
(Millions of dollars)
DOWNSTREAM PETROLEUM PRODUCT SALES REVENUES WERE UP, DRIVEN BY THIS YEAR'S
HIGHER SALES VOLUMES AND PRICES.
Mobil 23
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 24]
CHEMICAL EARNINGS
(Millions of dollars)
CHEMICAL'S RECORD EARNINGS INCLUDE A MAJOR ASSET SALE AND ALSO REFLECT
IMPROVED INDUSTRY FUNDAMENTALS AND BUSINESS INITIATIVES.
CHEMICAL NET SALES TO TRADE
(Millions of dollars)
HIGHER REVENUES RESULTED FROM BOTH HIGHER PRICES AND VOLUMES. SALES IN
1995 REFLECT APPROXIMATELY 11 MONTHS OF PLASTICS DIVISION OPERATIONS.
CHEMICAL
- - - - -------------------------------------------------------------------------------
CHEMICAL SEGMENT FINANCIAL INDICATORS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Petrochemicals Earnings $ 19 $ 129 $ 544
Plastics and Other Earnings 25 88 636
Restructuring Provisions -- (115) (16)
- - - - -------------------------------------------------------------------------------
Total Earnings $ 44 $ 102 $1,164
- - - - -------------------------------------------------------------------------------
Revenues(1) $3,720 $4,463 $6,390
- - - - -------------------------------------------------------------------------------
Assets $3,451 $3,672 $3,212
- - - - -------------------------------------------------------------------------------
Capital Expenditures $ 312 $ 212 $ 220
- - - - -------------------------------------------------------------------------------
(1) Includes intersegment revenues.
- - - - -------------------------------------------------------------------------------
CHEMICAL EARNINGS
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Earnings $ 44 $ 102 $1,164
Special Items in Earnings
Asset sale -- -- 501
Restructuring provisions -- (115) (16)
Environmental provision -- (7) --
- - - - -------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 44 $ 224 $ 679
- - - - -------------------------------------------------------------------------------
OUR PRIMARY CHEMICAL GOALS ARE TO INCREASE OUR RETURN ON CAPITAL EMPLOYED
THROUGH PRODUCTIVITY IMPROVEMENTS AND COST REDUCTIONS, TO CAPITALIZE ON OPERA-
TING SYNERGIES WITH OTHER MOBIL UNITS AND TO EXPLOIT GROWTH OPPORTUNITIES WHERE
WE HAVE A COMPETITIVE ADVANTAGE. Record earnings in 1995 reflected strong indus-
try fundamentals, results of cost reduction programs and a one-time benefit from
the sale of the Plastics Division.
CHEMICAL operating earnings of $679 million in 1995 were $455 million higher
than in 1994 as a result of improved petrochemical prices, notably polyethylene
and paraxylene. Ethylene supply and demand balances were tight through the first
half of 1995 due to the lingering effects of 1994 industry operating problems.
Paraxylene demand, especially in the Asia-Pacific region, coupled with tight
supply, drove prices to record highs. Operating income also benefited from our
joint venture in Saudi Arabia, in the final year of its tax holiday, and from
ongoing business initiatives.
Operating earnings were $224 million in 1994, an increase of $180 million
over 1993 due to improved industry fundamentals. Margins for integrated
polyethylene resin operations improved on strong worldwide demand and tight
industry ethylene capacity.
Trade sales revenues increased 23% in 1995 due to higher prices and volumes.
The increase in volumes, up 7%, reflected a full year of operations at the
Singapore aromatics complex. Somewhat offsetting these increases were slightly
lower U.S. volumes for polyethylene and fabricated products. In 1994, sales
revenues increased due to higher prices and volumes.
As part of a program to more than double our worldwide paraxylene capacity, we
have begun construction on a grassroots facility in Beaumont, Texas, and a major
expansion at Chalmette, Louisiana. The projects are expected to stream by early
1997. Our new oriented polypropylene (OPP) plant at Kerkrade, the Netherlands,
doubled its capacity to over 60 million pounds when a second orienter was
streamed in March 1995. We have also announced plans to expand our worldwide OPP
capacity by one-third by year-end 1998. A new ester manufacturing facility was
streamed in November 1995 at Amsterdam, the Netherlands, to support growth in
our synthetic lubricants businesses.
The Plastics Division was sold in late 1995 for $1.27 billion, producing over
$500 million of net income. The sale is part of our strategy to enhance share-
holder value by focusing on our core businesses of oil, natural gas and petro-
chemicals and selling those noncore businesses that are worth more to others.
See Note 3 to Financial Statements on page 37 for further discussion of the
sale.
Capital expenditures were $220 million in 1995. Planned capital expenditures
for 1996 are $400 million, primarily related to worldwide capacity expansions
and productivity improvements.
24 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
CORPORATE AND OTHER
- - - - -------------------------------------------------------------------------------
CORPORATE AND OTHER EXPENSE
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Corporate and Other Expense $ (190) $ (98) $ (11)
Special Items included:
Asset sale and write-downs -- (46) 74
Litigation settlement -- -- 71
Restructuring provisions (32) 20 (62)
Other items (19) -- (24)
- - - - -------------------------------------------------------------------------------
Operating Expense (Excludes Special Items) $ (139) $ (72) $ (70)
- - - - -------------------------------------------------------------------------------
CORPORATE AND OTHER expense decreased $87 million in 1995 to $11 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 $70 million were $2 million lower than last
year. Increased real estate income and lower expenses were offset by implemen-
tation costs associated with the restructuring of staff support services.
Special items in 1995 included benefits from a $74 million gain on the sale
of our South Fort Meade phosphate mine and $71 million from a favorable litiga-
tion settlement as well as charges of $62 million for restructuring and a $24
million environmental provision related to mining operations. In 1994, earnings
included charges for 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 special charges, principally
for corporate-wide restructuring.
Excluding special items from both periods, expenses decreased $67 million in
1994 from 1993. Phosphate and real estate operations improved, and expenses were
lower as a result of the absence of costs incurred in 1993 for solar energy
operations prior to discontinuation of the business.
NET FINANCING EXPENSE
- - - - -------------------------------------------------------------------------------
NET FINANCING EXPENSE
- - - - -------------------------------------------------------------------------------
(In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Net Financing Expense $ (127) $ (209) $ (295)
Special Items in Expense
Tax adjustments 159 -- --
Foreign exchange adjustment 13 -- --
- - - - -------------------------------------------------------------------------------
Operating Expense (Excludes Special Items) $ (299) $ (209) $ (295)
- - - - -------------------------------------------------------------------------------
NET FINANCING EXPENSE is primarily the interest Mobil pays on third-party
borrowings, net of earned interest income. Net Financing Expense of $295 million
was $86 million higher than in 1994, mainly reflecting higher average effective
interest rates in 1995 and the absence of certain favorable nonrecurring items
in 1994. Excluding special items, Net Financing Expense of $209 million in 1994
improved $90 million from 1993, 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 BILLION TO SAFEGUARD THE ENVIRONMENT.
ENVIRONMENTAL MATTERS
- - - - -----------------------------------------------------------------------------------------------------
ENVIRONMENTAL EXPENDITURES U.S. INTERNATIONAL
- - - - -----------------------------------------------------------------------------------------------------
(In millions) 1993 1994 1995 1993 1994 1995
- - - - -----------------------------------------------------------------------------------------------------
Capital $ 326 $ 279 $ 172 $ 182 $ 174 $ 135
Protection and Compliance
Ongoing operations 359 303 238 148 191 184
Remediation 108 91 67 24 22 24
- - - - -----------------------------------------------------------------------------------------------------
Total Environmental Expenditures $ 793 $ 673 $ 477 $ 354 $ 387 $ 343
- - - - -----------------------------------------------------------------------------------------------------
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, innova-
tive technologies, extensive training and constant attention to environmental
matters in our day-to-day operations. Environmental expenditures are a signifi-
cant 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 and to manufacture
products. 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. These capital expenditures were incurred in 1993,
1994 and to a lesser extent in 1995, and related mainly to manufacture of
reformulated gasoline/clean fuels. As required in 1995, Mobil began selling
clean-burning reformulated gasoline in those metropolitan areas designated by
the Environmental Protection Agency (EPA) where Mobil markets gasoline products.
Additional emission reductions are mandated by the year 2000.
Internationally, capital expenditures were made in response to increasing
government requirements aimed at protecting against ground and surface water
contamination and at reducing air emissions. Worldwide capital expenditures for
environmental matters in 1996 are expected to be 12% lower than in 1995.
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. The decline in
U.S. expenditures reflects corrective action taken in prior years to meet
compliance requirements, the use of improved remediation technology and resource
utilization, and a government/industry trend toward utilizing a risk-based
corrective action approach to remediating subsurface contamination.
Like many other companies, Mobil periodically receives notices from the EPA,
or equivalent state agencies, that it has been designated as a potentially res-
ponsible party (PRP) for remediation of hazardous-waste sites. The majority of
these sites are still under investigation by the EPA or the state agencies con-
cerned. 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, 1995,
Mobil had been successful in resolving its involvement in 106 of the 251 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 lia-
bilities 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 liqui-
dity. See also Note 18 to Financial Statements on page 47 for further discussion
of environmental liabilities.
26 Mobil
MANAGEMENT DISCUSSION AND ANALYSIS
QUARTERLY FINANCIAL DATA (unaudited)
1994
--------------------------------------------------------------
First Second Third Fourth Full
(In millions, except per-share amounts) Quarter Quarter Quarter Quarter Year
- - - - --------------------------------------------------------------------------------------------------------------------------
REVENUES
Sales and services $ 14,948 $ 16,047 $ 16,739 $ 19,023 $ 66,757
Income from equity investments, asset
sales, interest and other 170 168 147 141 626
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Revenues 15,118 16,215 16,886 19,164 67,383
- - - - --------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Crude oil, products and operating
supplies and expenses 8,095 8,839 9,137 10,594 36,665
Exploration expenses 82 108 152 174 516
Selling and general expenses 1,249 1,344 1,355 1,505 5,453
Depreciation, depletion
and amortization 668 1,034 673 723 3,098
Interest and debt discount expense 120 135 101 105 461
Taxes other than income taxes 3,827 4,155 4,404 5,126 17,512
Income taxes 542 402 561 414 1,919
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 14,583 16,017 16,383 18,641 65,624
- - - - --------------------------------------------------------------------------------------------------------------------------
Income Before Change in
Accounting Principle 535 198 503 523 1,759
Cumulative Effect of Change in
Accounting Principle (680) -- -- -- (680)
- - - - --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (145) $ 198 $ 503 $ 523 $ 1,079
- - - - --------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income Before Change in
Accounting Principle $ 1.31 $ 0.46 $ 1.23 $ 1.28 $ 4.28
Net Income (Loss) $ (0.40) $ 0.46 $ 1.23 $ 1.28 $ 2.57
Dividends $ 0.85 $ 0.85 $ 0.85 $ 0.85 $ 3.40
- - - - --------------------------------------------------------------------------------------------------------------------------
SPECIAL ITEMS INCLUDED IN NET INCOME
Restructuring provisions -- $ (95) $ (9) $ (55) $ (159)
Asset sale gains/(losses) -- -- -- (21) (21)
Litigation settlement -- -- -- -- --
Asset write-downs -- (220) (16) (63) (299)
Tax related issues -- -- -- -- --
Environmental provisions -- -- -- (7) (7)
Inventory adjustments -- -- -- 14 14
Asset impairment (FAS 121) -- -- -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Special Items -- (315) (25) (132) (472)
Cumulative Effect of Change in
Accounting Principle (680) -- -- -- (680)
- - - - --------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS(1) $ 535 $ 513 $ 528 $ 655 $ 2,231
- - - - --------------------------------------------------------------------------------------------------------------------------
Sales Price per Common Share(2)
High $ 82 3/4 $ 85 1/4 $ 86 1/8 $ 87 1/8 $ 87 1/8
Low $ 74 1/8 $ 72 $ 76 5/8 $ 77 1/2 $ 72
- - - - --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes special items and the cumulative effect of change in accounting principle.
(2) 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.
QUARTERLY FINANCIAL DATA (unaudited) (continued)
1995
--------------------------------------------------------------
First Second Third Fourth Full
(In millions, except per-share amounts) Quarter Quarter Quarter Quarter Year
- - - - --------------------------------------------------------------------------------------------------------------------------
REVENUES
Sales and services $ 17,402 $ 18,700 $ 18,267 $ 19,044 $ 73,413
Income from equity investments, asset
sales, interest and other 225 149 370 1,213 1,957
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Revenues 17,627 18,849 18,637 20,257 75,370
- - - - --------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Crude oil, products and operating
supplies and expenses 10,003 10,598 10,172 10,857 41,630
Exploration expenses 95 79 102 151 427
Selling and general expenses 1,256 1,868 1,274 1,290 5,688
Depreciation, depletion
and amortization 669 868 688 1,523 3,748
Interest and debt discount expense 115 117 119 116 467
Taxes other than income taxes 4,259 4,739 4,880 5,141 19,019
Income taxes 594 401 616 404 2,015
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 16,991 18,670 17,851 19,482 72,994
- - - - --------------------------------------------------------------------------------------------------------------------------
Income Before Change in
Accounting Principle 636 179 786 775 2,376
Cumulative Effect of Change in
Accounting Principle -- -- -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 636 $ 179 $ 786 $ 775 $ 2,376
- - - - --------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income Before Change in
Accounting Principle $ 1.57 $ 0.42 $ 1.95 $ 1.93 $ 5.87
Net Income (Loss) $ 1.57 $ 0.42 $ 1.95 $ 1.93 $ 5.87
Dividends $ 0.85 $ 0.925 $ 0.925 $ 0.925 $ 3.625
- - - - --------------------------------------------------------------------------------------------------------------------------
SPECIAL ITEMS INCLUDED IN NET INCOME
Restructuring provisions -- $ (505) $ -- $ (85) $ (590)
Asset sale gains/(losses) -- (22) -- 598 576
Litigation settlement -- -- 71 -- 71
Asset write-downs -- -- (29) -- (29)
Tax related issues -- -- -- 26 26
Environmental provisions -- -- -- (24) (24)
Inventory adjustments -- -- -- (13) (13)
Asset impairment (FAS 121) -- -- -- (487) (487)
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Special Items -- (527) 42 15 (470)
Cumulative Effect of Change in
Accounting Principle -- -- -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS(1) $ 636 $ 706 $ 744 $ 760 $ 2,846
- - - - --------------------------------------------------------------------------------------------------------------------------
Sales Price per Common Share(2)
High $ 93 1/2 $ 102 $ 103 5/8 $ 116 5/8 $ 116 5/8
Low $ 82 3/4 $ 88 1/4 $ 93 1/2 $ 98 1/2 $ 82 3/4
- - - - --------------------------------------------------------------------------------------------------------------------------
Mobil 27
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 28]
TOTAL REVENUES VS.
COSTS AND EXPENSES
(Millions of dollars)
REVENUES ROSE REFLECTING ASSET SALES AND HIGHER SALES VOLUMES. HIGHER EXPENSES
ARE DUE TO HIGHER SALES VOLUMES AND SPECIAL CHARGES.
RETURN ON AVERAGE
SHAREHOLDERS' EQUITY
(In percent)
* Excludes cumulative effect of change in accounting principle.
RETURN ON AVERAGE SHAREHOLDERS' EQUITY INCREASED TO 13.5% THIS YEAR, THE
HIGHEST LEVEL SINCE 1988.
COMMENTARY ON CONSOLIDATED STATEMENT OF INCOME
REVENUES from Sales and Services increased nearly $6.7 billion from 1994 due to
higher sales volumes, higher crude oil and chemical prices and increased excise
and state gasoline taxes, partly offset by lower natural gas prices and lower
crude oil production volumes. Additionally, favorable foreign currency move-
ments, driven by a declining dollar, resulted in higher revenues. The increase
in 1994 from 1993 resulted from higher sales volumes, higher chemical sales
prices, increased excise and state gasoline taxes, and currency translation
effects, partly offset by lower crude oil, natural gas and product sales prices.
Income from Equity Investments, Asset Sales, Interest and Other increased due to
gains from sales of certain Chemical and Mining assets and from higher equity
income at our joint venture chemical operation in Saudi Arabia. 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 in 1994 due to decreased gains from asset sales.
Total COSTS AND EXPENSES increased about $7.4 billion from 1994 primarily due
to increases in volume-related expenses and increased charges to Depreciation,
Depletion and Amortization, primarily for FAS 121 asset impairments. The
increase from 1993 to 1994 was primarily due to increases in volume-related ex-
penses, currency translation effects and increased charges to Depreciation,
Depletion and Amortization for asset write-downs.
Crude Oil, Products and Operating Supplies and Expenses increased 14% in 1995
compared with 1994 due to increased crude oil and product-related prices and
higher volumes to support increased sales, mainly in the U.S. The increase from
1993 to 1994 reflected the effects of higher volumes, which were only partly
offset by lower crude oil and natural gas prices and lower operating expenses.
Included in this expense category are research costs of $301 million in 1993,
$275 million in 1994 and $252 million in 1995.
Exploration Expenses decreased in 1995, reflecting reduced dry well expenses
resulting from greater drilling success this year and timing of well comple-
tions. Expenses in 1994 were higher than in 1993 mainly due to an expanded
drilling program.
Selling and General Expenses increased in 1995 primarily due to special
charges for restructuring.
Depreciation, Depletion and Amortization Expenses increased in 1995 primarily
due to the $774 million charge resulting from the adoption of FAS 121 (see Note
6 on page 38), more than offsetting the prior year's asset write-downs. Expenses
in 1994 were higher than in 1993 primarily due to higher asset write-downs in
1994.
Taxes Other than Income Taxes increased $1.5 billion in 1995 due to higher
U.S. sales volumes, currency translation effects and higher foreign excise tax
rates. The increase from 1993 to 1994 primarily reflected higher production and
sales volumes and higher U.S. excise tax rates.
Income Taxes increased in 1995 due to higher U.S. pretax income. In 1994
Income Taxes were essentially equal to 1993, as the effects of lower 1994 pretax
income were offset by 1993 benefits from the effects of foreign tax rate reduc-
tions and settlements.
COMMENTARY ON CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Total SHAREHOLDERS' EQUITY rose $805 million in 1995. Earnings Retained in the
Business increased $886 million in 1995, as income exceeded common and preferred
stock dividends. The cost of Common Stock Held in Treasury increased by $289
million in 1995, as 2,996,350 shares were purchased on the open market to offset
the dilutive effects of stock options. The Cumulative Foreign Exchange Transla-
tion Adjustment account (CTA) increased $96 million in 1995, reflecting the net
strengthening of certain foreign currencies. Return on average shareholders'
equity was 12.3% in 1993, 10.4% in 1994 (excluding the effect of the change in
accounting principle) and 13.5% in 1995.
Common stock dividends paid were $3.25 per share, $3.40 per share and $3.625
per share in 1993, 1994 and 1995, respectively. Preferred stock dividends issued
in the Employee Stock Ownership Plan were $59 million, $58 million and $56
million in 1993, 1994 and 1995, respectively.
28 Mobil
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31 (In millions, except per-share amounts) 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------------------
REVENUES
Sales and services(1) $ 63,474 $ 66,757 $ 73,413
Income from equity investments, asset sales,
interest and other 501 626 1,957
- - - - --------------------------------------------------------------------------------------------------------------
Total Revenues 63,975 67,383 75,370
- - - - --------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Crude oil, products and operating supplies
and expenses 35,622 36,665 41,630
Exploration expenses 405 516 427
Selling and general expenses 5,483 5,453 5,688
Depreciation, depletion and amortization 2,629 3,098 3,748
Interest and debt discount expense 324 461 467
Taxes other than income taxes(1) 15,497 17,512 19,019
Income taxes 1,931 1,919 2,015
- - - - --------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 61,891 65,624 72,994
- - - - --------------------------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle 2,084 1,759 2,376
Cumulative Effect of Change in Accounting Principle -- (680) --
- - - - --------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,084 $ 1,079 $ 2,376
- - - - --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
Income before change in accounting principle $ 5.07 $ 4.28 $ 5.87
Cumulative effect of change in accounting principle -- (1.71) --
- - - - --------------------------------------------------------------------------------------------------------------
Net income $ 5.07 $ 2.57 $ 5.87
- - - - --------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes excise and state gasoline taxes: 1993 -- $6,898 million; 1994 -- $7,762 million; 1995 -- $8,646 million.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended December 31 (In millions) 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------------------
PREFERRED STOCK (ESOP-related)
-Beginning of year $ 779 $ 763 $ 745
-End of year, after redemptions $ 763 $ 745 $ 722
- - - - --------------------------------------------------------------------------------------------------------------
UNEARNED EMPLOYEE COMPENSATION (ESOP-related)
-Beginning of year $ (613) $ (543) $ (472)
-End of year, after amortization $ (543) $ (472) $ (411)
- - - - --------------------------------------------------------------------------------------------------------------
COMMON STOCK
-Beginning of year $ 880 $ 883 $ 885
-End of year, after issuance of shares $ 883 $ 885 $ 888
- - - - --------------------------------------------------------------------------------------------------------------
CAPITAL SURPLUS
-Beginning of year $ 1,220 $ 1,279 $ 1,325
-End of year, after issuance of common shares $ 1,279 $ 1,325 $ 1,396
- - - - --------------------------------------------------------------------------------------------------------------
EARNINGS RETAINED IN THE BUSINESS
-Beginning of year $16,464 $17,191 $16,859
-Net income 2,084 1,079 2,376
-Common stock dividends (1,298) (1,353) (1,434)
-Preferred stock dividends (ESOP-related) (59) (58) (56)
- - - - --------------------------------------------------------------------------------------------------------------
-End of year $17,191 $16,859 $17,745
- - - - --------------------------------------------------------------------------------------------------------------
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
-Beginning of year $ (534) $ (526) $ (123)
-End of year, after adjustments $ (526) $ (123) $ (27)
- - - - --------------------------------------------------------------------------------------------------------------
COMMON STOCK HELD IN TREASURY, AT COST
-Beginning of year $(1,656) $(1,810) $(2,073)
-End of year, after purchases $(1,810) $(2,073) $(2,362)
- - - - --------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $17,237 $17,146 $17,951
- - - - --------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Financial Statements on pages 36-48.
Mobil 29
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 30]
TOTAL DEBT
(Millions of dollars)
DEBT IS DOWN ALMOST $1 BILLION, PRIMARILY REFLECTING USE OF PROCEEDS FROM
ASSET SALES.
RETURN ON AVERAGE
CAPITAL EMPLOYED
(In percent)
* Excludes cumulative effect of change in accounting principle.
RETURN ON AVERAGE CAPITAL EMPLOYED IMPROVED SUBSTANTIALLY AS WE CONTINUE
TO STRIVE TO GET THE MOST FROM OUR ASSET BASE.
COMMENTARY ON CONSOLIDATED BALANCE SHEET
Total Current Assets increased $875 million, primarily the result of an increase
in Accounts and Notes Receivable.
Cash and Cash Equivalents decreased $33 million from the previous year. The
movements that contributed to this decrease are presented in the Consolidated
Statement of Cash Flows on page 33.
Accounts and Notes Receivable increased $781 million due to the impact of
higher worldwide crude oil prices and refined product and chemical sales prices
and volumes.
Inventories decreased slightly, reflecting reductions in materials and
supplies due to business initiatives and the sale of the Plastics Division,
largely offset by increases in crude oil and petroleum products.
Investments and Long-term Receivables increased $382 million primarily due to
continuing investment in Qatar LNG projects and investment in Kazakstan.
Net Properties, Plants and Equipment decreased somewhat in 1995, as depre-
ciation, asset sales and impairments (resulting from the adoption of FAS 121)
were largely offset by capital expenditures.
Total CURRENT LIABILITIES decreased $364 million during 1995 as a decrease in
Short-term Debt was partly offset by higher Accounts Payable balances associated
with higher year-end crude oil and product prices.
Short-term Debt at year-end 1995 was lower than the prior year-end, as cash
from the sales of noncore businesses was used to reduce commercial paper borrow-
ings.
At year-end 1995, the TOTAL DEBT of Mobil and its consolidated subsidiaries
was $6,756 million, a decrease of $971 million from the prior year. Mobil's year
end debt-to-capitalization ratio was 27%, down from 31% in 1994, reflecting
lower debt levels primarily due to the use of proceeds from the sale of our
Plastics Division in the fourth quarter. We also prepaid debt to take advantage
of favorable interest rate opportunities. Mobil continues to have ready access
to global financial markets, providing flexibility to take advantage of growth
opportunities and low borrowing costs.
At year-end 1995, 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 $1,815 million of debt securities pursuant to Rule 415 of the
Securities Act of 1933. Also in place were a Euro-Medium-Term Note program to
facilitate the offering and sale outside the U.S. of an additional $811 million
of debt securities in 1996 or later years and a facility allowing the issuance
in Japan of bonds having a principal amount of 30 billion Japanese yen. The ESOP
Trust had an effective shelf registration on file with the SEC at year-end 1995
that would permit the offer and sale of $230 million of debt securities, guaran-
teed by Mobil, pursuant to Rule 415. The proceeds of any debt securities issued
by the ESOP Trust are used to refund its existing indebtedness.
Total SHAREHOLDERS' EQUITY rose $805 million (see Commentary on Consolidated
Statement of Changes in Shareholders' Equity on page 28).
Mobil's capital and exploration expenditures totaled $4,268 million, an
increase of $443 million from the previous year. At year-end 1995, the unspent
balance of total appropriations for capital expenditures was $4.4 billion. We
are not contractually committed to spend all of this amount but generally expect
to do so over the next several years.
Return on Average Capital Employed was 9.7% in 1993 versus 8.4% in 1994
(excluding the cumulative effect of the change in accounting principle) and
10.9% in 1995.
30 Mobil
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
At December 31 (In millions) 1994 1995
- - - - -------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 531 $ 498
Accounts and notes receivable 6,535 7,316
Inventories 3,302 3,287
Prepaid expenses and other current assets 618 642
Deferred income taxes 195 313
- - - - -------------------------------------------------------------------------------
Total Current Assets 11,181 12,056
- - - - -------------------------------------------------------------------------------
Investments and Long-term Receivables 3,802 4,184
Net Properties, Plants and Equipment 25,503 24,850
Deferred Charges and Other Assets 1,056 1,048
- - - - -------------------------------------------------------------------------------
TOTAL ASSETS $41,542 $42,138
- - - - -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 3,013 $ 2,127
Accounts payable 4,968 5,358
Accrued liabilities 2,659 2,703
Income, excise, state gasoline and other taxes payable 2,531 2,676
Deferred income taxes 247 190
- - - - -------------------------------------------------------------------------------
Total Current Liabilities 13,418 13,054
- - - - -------------------------------------------------------------------------------
Long-term Debt 4,714 4,629
Reserves for Employee Benefits 1,520 1,624
Accrued Restoration, Removal and Environmental Costs 1,191 1,254
Deferred Credits and Other Noncurrent Obligations 841 884
Deferred Income Taxes 2,639 2,647
Minority Interest in Subsidiary Companies 73 95
- - - - -------------------------------------------------------------------------------
Total Liabilities 24,396 24,187
- - - - -------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock (ESOP-related)-shares issued and
outstanding: 1994-95,778; 1995-92,864 745 722
Unearned employee compensation (ESOP-related) (472) (411)
Common stock-shares issued:
1994-442,336,317; 1995-443,905,531 885 888
Capital surplus 1,325 1,396
Earnings retained in the business 16,859 17,745
Cumulative foreign exchange translation adjustment (123) (27)
Common stock held in treasury, at cost-shares:
1994-46,349,300; 1995-49,345,650 (2,073) (2,362)
- - - - -------------------------------------------------------------------------------
Total Shareholders' Equity 17,146 17,951
- - - - -------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $41,542 $42,138
- - - - -------------------------------------------------------------------------------
See Notes to Financial Statements on pages 36-48.
Mobil 31
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Charts - Page 32]
ASSET SALES PROCEEDS
(Millions of dollars)
PROCEEDS OF OVER $2 BILLION FROM SALES OF NONCORE ASSETS HAVE
REDUCED DEBT AND INCREASED OUR OVERALL FINANCIAL FLEXIBILITY.
CAPITAL AND EXPLORATION EXPENDITURES
(Millions of dollars)
CAPITAL SPENDING WAS HIGHER IN 1995 AS WE CONTINUED TO FOCUS ON GROWTH
OPPORTUNITIES IN ALL OUR CORE BUSINESSES.
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 1995, Net Cash from Operating Activities exceeded outlays associated
with investing activities and dividends by $1,072 million. This surplus 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) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Net cash from operating activities $ 5,620 $ 5,362 $ 5,024
Net cash used in investing activities (3,203) (3,557) (2,462)
Cash dividends (1,357) (1,411) (1,490)
- - - - -------------------------------------------------------------------------------
Excess of cash requirements $ 1,060 $ 394 $ 1,072
- - - - -------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES decreased by $338 million from 1994. Net Cash
from Operating Activities is derived by adjusting reported Net Income for char-
ges or credits that have no cash effect (primarily Depreciation, Depletion and
Amortization, Deferred Income Taxes and the Cumulative Effect of Change in
Accounting Principle) and cash items reported elsewhere in this Statement
(primarily Exploration Expenses).
NET CASH USED IN INVESTING ACTIVITIES decreased $1,095 million from 1994 due
to higher Proceeds from Sales of Properties, Plants and Equipment and Other
Assets.
In 1996, capital and exploration expenditures are expected to be $4.6
billion, up 8% from 1995. International capital expenditures are expected to
account for about 75% of Mobil's total expenditures, up from about 65% in 1995,
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 1995 were primarily genera-
ted from the sale of noncore Chemical and Mining assets, virtually all in the
U.S., while 1994 proceeds were primarily from the sale of nonstrategic producing
fields in the U.S. and Canada.
NET CASH USED IN FINANCING ACTIVITIES in 1995 was $409 million higher than in
1994, primarily reflecting the use of excess cash generated by operations and
asset sales to reduce debt levels.
- - - - -------------------------------------------------------------------------------
CAPITAL AND EXPLORATION EXPENDITURES
- - - - -------------------------------------------------------------------------------
Year ended December 31 (In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing -- U.S. $ 427 $ 486 $ 758
-- International 1,133 1,156 1,489
Marketing & Refining -- U.S. 575 572 484
-- International 687 725 808
Chemical -- U.S. 151 159 165
-- International 161 53 55
Corporate and Other 117 158 82
- - - - -------------------------------------------------------------------------------
Total Capital Expenditures $3,251 $3,309 $3,841
- - - - -------------------------------------------------------------------------------
Exploration Expenses -- U.S. 65 115 72
-- International 340 401 355
- - - - -------------------------------------------------------------------------------
Total Exploration Expenses 405 516 427
- - - - -------------------------------------------------------------------------------
Total Capital and Exploration Expenditures $3,656 $3,825 $4,268
- - - - -------------------------------------------------------------------------------
32 Mobil
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31 (In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income $ 2,084 $ 1,079 $ 2,376
Adjustments to reconcile to net cash from
operating activities
Depreciation, depletion and amortization 2,629 3,098 3,748
Deferred income taxes (260) (210) (233)
Earnings less (greater) than dividends from
equity affiliates 265 (40) (51)
Exploration expenses (includes noncash charges:
1993-$51; 1994-$33; 1995-$26) 405 516 427
Gain on sales of properties, plants and equipment
and other assets (145) (68) (1,041)
Decrease (increase) in working capital items
(detailed below) 409 346 (388)
Other, net 233 (39) 186
Cumulative effect of change in accounting
principle -- 680 --
- - - - -------------------------------------------------------------------------------
Net Cash from Operating Activities 5,620 5,362 5,024
- - - - -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital and exploration expenditures (3,656) (3,825) (4,268)
Proceeds from sales of properties, plants and
equipment and other assets 606 349 2,034
Payments attributable to investments and
long-term receivables (153) (81) (228)
- - - - -------------------------------------------------------------------------------
Net Cash Used in Investing Activities (3,203) (3,557) (2,462)
- - - - -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (1,357) (1,411) (1,490)
Proceeds from borrowings having original terms
greater than three months 1,926 1,018 1,739
Repayments of borrowings having original terms
greater than three months (1,787) (2,076) (1,594)
(Decrease) increase in other borrowings (570) 542 (991)
Proceeds from issuance of common stock 62 48 74
Purchase of common stock for treasury (154) (263) (289)
- - - - -------------------------------------------------------------------------------
Net Cash Used in Financing Activities (1,880) (2,142) (2,551)
- - - - -------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents(1) (13) 41 (44)
- - - - -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 524 $ (296) $ (33)
Cash and Cash Equivalents-Beginning of Year 303 827 531
- - - - -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS-END OF YEAR $ 827 $ 531 $ 498
- - - - -------------------------------------------------------------------------------
(1) Cash equivalents are liquid investments convertible to cash and have
original maturities of three months or less.
- - - - -------------------------------------------------------------------------------
CHANGES IN WORKING CAPITAL ITEMS Decrease (Increase)
- - - - -------------------------------------------------------------------------------
Accounts and notes receivable $ 152 $ (810) $ (994)
Inventories 121 29 (66)
Prepaid expenses and other current assets (11) (14) (22)
Accounts payable (49) 813 477
Accrued liabilities (29) 195 83
Income, excise, state gasoline and other taxes
payable 225 133 134
- - - - -------------------------------------------------------------------------------
Decrease (Increase) in Working Capital Items $ 409 $ 346 $ (388)
- - - - -------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
MEMO ITEMS
- - - - -------------------------------------------------------------------------------
Cash income taxes paid $ 2,136 $ 1,948 $ 2,091
Cash interest paid 545 522 556
- - - - -------------------------------------------------------------------------------
See Notes to Financial Statements on pages 36-48.
Mobil 33
CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT AND GEOGRAPHIC INFORMATION
Year ended December 31 (In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
REVENUES BY SEGMENT
Petroleum Operations
Exploration & Producing -- Third Party $ 6,437 $ 6,374 $ 7,028
-- Intersegment 4,012 3,819 4,053
Marketing & Refining -- Third Party 53,511 56,230 61,376
-- Intersegment 439 631 986
Chemical -- Third Party 3,533 4,195 6,155
-- Intersegment 187 268 235
Corporate and Other 494 584 811
Intersegment Elimination (4,638) (4,718) (5,274)
- - - - -------------------------------------------------------------------------------
Total Revenues $63,975 $67,383 $75,370
- - - - -------------------------------------------------------------------------------
REVENUES BY GEOGRAPHIC AREA
United States -- Third Party $21,011 $22,388 $25,598
-- Intergeographic 599 405 537
Europe -- Third Party 20,562 21,094 23,676
-- Intergeographic 455 663 899
Asia-Pacific -- Third Party 14,131 15,411 17,160
-- Intergeographic 479 537 796
Other Areas(1) -- Third Party 7,777 7,906 8,125
-- Intergeographic 5,201 5,378 5,574
Corporate and Other 494 584 811
Intergeographic Elimination (6,734) (6,983) (7,806)
- - - - -------------------------------------------------------------------------------
Total Revenues $63,975 $67,383 $75,370
- - - - -------------------------------------------------------------------------------
At December 31 (In millions)
- - - - -------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY SEGMENT
Petroleum Operations
Exploration & Producing $14,334 $14,116 $14,393
Marketing & Refining 20,914 21,767 22,463
Chemical 3,451 3,672 3,212
Corporate and Other 2,421 2,380 2,510
Adjustments (387) (393) (440)
- - - - -------------------------------------------------------------------------------
Total Assets $40,733 $41,542 $42,138
- - - - -------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY GEOGRAPHIC AREA
United States $15,726 $15,316 $14,268
Europe 9,026 9,150 9,920
Asia-Pacific 7,877 8,674 8,778
Other Areas(1) 6,244 6,604 7,312
Corporate and Other 2,421 2,380 2,510
Adjustments (561) (582) (650)
- - - - -------------------------------------------------------------------------------
Total Assets $40,733 $41,542 $42,138
- - - - -------------------------------------------------------------------------------
(1) 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,
administrative expenses and other corporate items.
34 Mobil
CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT AND GEOGRAPHIC INFORMATION (concluded)
Year ended December 31 (In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
EARNINGS BY SEGMENT
Pretax Operating Profits
Petroleum Operations
Exploration & Producing $ 3,452 $ 2,737 $ 2,410
Marketing & Refining 1,128 1,359 894
Chemical 25 82 1,551
- - - - -------------------------------------------------------------------------------
Total Pretax Operating Profits 4,605 4,178 4,855
Income Taxes (2,204) (2,112) (2,173)
- - - - -------------------------------------------------------------------------------
Segment Earnings 2,401 2,066 2,682
Corporate and Other (Net of income taxes) (190) (98) (11)
Net Financing Expense (Net of income taxes) (127) (209) (295)
Cumulative Effect of Change in Accounting
Principle (Net of income taxes) -- (680) --
- - - - -------------------------------------------------------------------------------
Net Income $ 2,084 $ 1,079 $ 2,376
- - - - -------------------------------------------------------------------------------
EARNINGS BY GEOGRAPHIC AREA (Net of income taxes)
United States $ 484 $ 302 $ 827
Europe 485 380 323
Asia-Pacific 891(1) 1,029 1,193
Other Areas(2) 541 355 339
- - - - -------------------------------------------------------------------------------
Geographic Earnings 2,401 2,066 2,682
Corporate and Other (190) (98) (11)
Net Financing Expense (127) (209) (295)
Cumulative Effect of Change in Accounting
Principle -- (680) --
- - - - -------------------------------------------------------------------------------
Net Income $ 2,084 $ 1,079 $ 2,376
- - - - -------------------------------------------------------------------------------
CAPITAL EXPENDITURES BY SEGMENT
Petroleum Operations
Exploration & Producing $ 1,560 $ 1,642 $ 2,247
Marketing & Refining 1,262 1,297 1,292
Chemical 312 212 220
- - - - -------------------------------------------------------------------------------
Segment Capital Expenditures 3,134 3,151 3,759
Corporate and Other 117 158 82
- - - - -------------------------------------------------------------------------------
Total Capital Expenditures $ 3,251 $ 3,309 $ 3,841
- - - - -------------------------------------------------------------------------------
DEPRECIATION, DEPLETION AND AMORTIZATION BY SEGMENT
Petroleum Operations
Exploration & Producing $ 1,626 $ 1,907 $ 2,230
Marketing & Refining 791 923 1,168
Chemical 162 226 290
- - - - -------------------------------------------------------------------------------
Segment Depreciation, Depletion and
Amortization 2,579 3,056 3,688
Corporate and Other 50 42 60
- - - - -------------------------------------------------------------------------------
Total Depreciation, Depletion and Amortization $ 2,629 $ 3,098 $ 3,748
- - - - -------------------------------------------------------------------------------
(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.
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 12 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.
HIGHER EARNINGS IN
THE U.S. PRIMARILY REFLECT
CHEMICAL'S RECORD YEAR
AND, IN THE ASIA-
PACIFIC REGION, INCLUDED
STRONG PERFORMANCE
AT OUR SINGAPORE
REFINERY.
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.
USE OF ESTIMATES
The financial statements, which are prepared in conformity with generally
accepted accounting principles, include amounts that are based, in part, on
management's best estimates and judgments.
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 as 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 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 un-
amortized 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 accumula-
ted 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 estima-
ted future costs for known environmental remediation requirements are accrued
when it is probable that a liability has been incurred and the amount of reme-
diation 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 primarily for purposes of
hedging its exposure to fluctuations in interest rates, foreign currency
exchange rates and crude oil and natural 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.
36 Mobil
NOTES TO FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES (concluded)
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 Cumula-
tive 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.
2. RESTRUCTURINGS
Since May 1, 1995, Mobil has initiated five major restructuring programs that
will result in the elimination of approximately 6,000 positions and the closure
of certain facilities. Provisions for these and other smaller programs totalled
$911 million ($590 million after tax) and were charged to income in 1995 as the
programs were announced. Following are details of each of the plans:
Staff Support Services -- This program is expected to result in work force
reductions of over 4,000 employees, and implementation will be completed in
1996. Of the total $392 million provision for this program, cash outlays are
expected to total $324 million ($234 million after tax), primarily related to
employee separation benefits. Noncash costs included the write-down to estimated
realizable value of surplus facilities and equipment in the U.S. and United
Kingdom and are estimated to total $68 million ($52 million after tax).
U.S. Upstream -- This reorganization is expected to result in work force re-
ductions of about 500 employees, and implementation will be completed by the
end of the first quarter, 1996. The total provision for this initiative of $33
million ($21 million after tax) represents expected cash outlays mainly for em-
ployee separation benefits.
U.S. Downstream -- This program is expected to result in work force reduc-
tions of about 700 employees. Implementation will be substantially completed by
the end of the first quarter of 1996. This initiative resulted in a provision of
$62 million ($39 million after tax), and represents cash outlays mainly for em-
ployee separation benefits.
European Refining Operations -- This program is expected to result in work
force reductions of about 500 employees. The Woerth refinery in Germany was
closed in late 1995, and the expense reduction programs at the Gravenchon,
France, and Coryton, United Kingdom, refineries will be implemented in stages
prior to year-end 1996. The provision for this program totalled $335 million
($180 million after tax) and will result in cash outlays of $189 million ($111
million after tax), mainly related to employee separations and shutdown expenses
Additional noncash costs for writing off the investment at Woerth total $146
million ($69 million after tax).
European Lubricant Blending Plant Operations -- This program is expected to
result in work force reductions of about 300 employees, and implementation will
be completed by year-end 1996. A provision of $57 million ($40 million after
tax) was made in 1995 of which $42 million ($33 million after tax) was for em-
ployee separation costs. Noncash costs for plant write-offs are expected to be
$15 million ($7 million after tax).
3. ASSET DISPOSITIONS
In 1995, Mobil Chemical sold its Plastics Division for $1.27 billion, generating
a gain on sale of assets in excess of $500 million after tax. The Plastics
Division was a marketer and manufacturer of plastic packaging and consumer
products in North America. The sale does not include Mobil Chemical's Films,
Petrochemicals, Chemical Products or Composite Products Divisions.
In December, 1995, Mobil sold its South Fort Meade phosphate mine for pro-
ceeds of $283 million, resulting in a gain of $74 million after tax.
Total proceeds from these and other smaller sales, including various noncore
oil and gas properties, were $2,034 million. Net pretax gains from asset sales
are included on the line "Income from equity investments, asset sales, interest
and other" on the Consolidated Income Statement (see page 29). These sales are
part of Mobil's long-term strategy of redirecting its investments to core oil,
gas and petrochemical businesses.
Mobil 37
NOTES TO FINANCIAL STATEMENTS
4. INVENTORY ACCOUNTING CHANGE
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 write-downs to
market are recorded as permanent adjustments to the last-in, first-out (LIFO)
cost of inventory. 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 1994 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.
5. INVENTORIES
Inventories valued at cost under the LIFO method represented about 57% of
Mobil's worldwide consolidated inventories, both at December 31, 1994, and at
December 31, 1995.
- - - - -------------------------------------------------------------------------
INVENTORIES (In millions)
- - - - -------------------------------------------------------------------------
At December 31 1994 1995
- - - - -------------------------------------------------------------------------
Crude oil and petroleum products $2,303 $2,371
Chemical products 326 298
Other, mainly materials and supplies 673 618
- - - - -------------------------------------------------------------------------
Total $3,302 $3,287
- - - - -------------------------------------------------------------------------
At December 31, 1994, the worldwide excess of market over book value of
inventories valued under the LIFO method was $1,174 million. At December 31,
1995, the worldwide excess of market over book value of inventories valued under
the LIFO method was $1,188 million ($1,002 million--U.S.; $105 million--Europe;
$45 million--Asia-Pacific; and $36 million--Other Areas).
6. PROPERTIES, PLANTS AND EQUIPMENT
Properties, plants and equipment are stated at cost, less accumulated deprecia-
tion, depletion and amortization of $28,285 million at December 31, 1994, and
$26,869 million at December 31, 1995.
- - - - --------------------------------------------------------------------------------
PROPERTIES, PLANTS AND EQUIPMENT (In millions) 1994 1995
- - - - --------------------------------------------------------------------------------
At December 31 Net Gross NET GROSS
- - - - --------------------------------------------------------------------------------
Petroleum Operations
Exploration & Producing $11,506 $29,632 $11,452 $27,612
Marketing 4,809 7,275 4,904 7,496
Refining 5,183 9,397 5,179 10,002
Other Marketing & Refining Activities 1,308 2,845 1,244 2,843
Chemical 1,921 3,514 1,530 2,886
Corporate and Other 776 1,125 541 880
- - - - --------------------------------------------------------------------------------
Total $25,503 $53,788 $24,850 $51,719
- - - - --------------------------------------------------------------------------------
In fourth quarter 1995, Mobil adopted FAS 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, resulting in
a before-tax, $774 million noncash charge to "Depreciation, depletion and
amortization" on the Consolidated Statement of Income ($487 million after tax).
The charge relates to impairment of upstream producing properties, primarily in
the U.S. and Canada.
FAS 121 requires that long-lived assets with book values that cannot be
recovered by estimated undiscounted future cash flows be written down to fair
value. The fair value of the impaired assets was determined by calculating the
net present value of future cash flows. Previously, the Company's policy was to
write down to breakeven significant properties determined to be permanently
impaired.
38 Mobil
NOTES TO FINANCIAL STATEMENTS
7. LEASES
Mobil leases real estate, service stations, pipelines, tankers and other
equipment through noncancelable capital and operating leases.
- - - - -----------------------------------------------------------------------------
RENTAL EXPENSE (In millions)
- - - - -----------------------------------------------------------------------------
Year ended December 31 1993 1994 1995
- - - - -----------------------------------------------------------------------------
Minimum rentals $ 1,035 $ 1,121 $ 1,195
Contingent rentals 95 71 97
- - - - -----------------------------------------------------------------------------
Total 1,130 1,192 1,292
Less: sublease rental income 111 172 187
- - - - -----------------------------------------------------------------------------
Net rental expense $ 1,019 $ 1,020 $ 1,105
- - - - -----------------------------------------------------------------------------
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 (In millions)
- - - - -------------------------------------------------------------------------------
At December 31, 1995 Operating Leases Capital Lease Obligations
- - - - -------------------------------------------------------------------------------
1996 $ 324 $ 52
1997 246 62
1998 201 64
1999 150 66
2000 112 10
Later years 941 135
- - - - -------------------------------------------------------------------------------
Future minimum lease payments $1,974 $ 389
- - - - -------------------------------------------------------------------------------
Less: executory costs 1
interest 114
- - - - -------------------------------------------------------------------------------
Total capital lease obligations $ 274
Less: short-term portion of capital lease obligations 35
- - - - -------------------------------------------------------------------------------
35 Long-term portion of capital lease obligations $ 239
- - - - -------------------------------------------------------------------------------
Future minimum lease payments have not been reduced by future minimum sub-
lease rentals of $106 million under operating leases. Capital leases included
in Net Properties, Plants and Equipment were $222 million at December 31, 1994,
and $312 million at December 31, 1995.
8. SHORT-TERM DEBT
At December 31, 1995, Mobil had $500 million of unused short-term lines of
credit supporting commercial paper borrowing arrangements. A total of $297
million of the unused short-term lines is 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 (In millions) 1994 1995
- - - - ----------------------------------------------------------------------------------------------------
At December 31 Amount Interest Rate(1) AMOUNT INTEREST RATE(1)
- - - - ----------------------------------------------------------------------------------------------------
Notes and loans payable
Commercial paper $1,935 6 1/8% $ 853 6 3/8%
Banks and Other 657 6 5/8% 766 7 %
- - - - ----------------------------------------------------------------------------------------------------
Total notes and loans payable 2,592 1,619
- - - - ----------------------------------------------------------------------------------------------------
Long-term debt maturing within one year 421 508
- - - - ----------------------------------------------------------------------------------------------------
Total short-term debt $3,013 $2,127
- - - - ----------------------------------------------------------------------------------------------------
<FN>
(1) Percentages shown in the table are weighted average interest rates at the end of the year.
Mobil 39
NOTES TO FINANCIAL STATEMENTS
OUR DEBT-TO-CAPITAL-
IZATION RATIO OF 27%
PROVIDES FINANCIAL
FLEXIBILITY TO INCREASE
INVESTMENT SPENDING,
INCLUDING POTENTIAL
ACQUISITIONS.
9. 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 1995, Mobil had shelf registrations on file with the SEC that
would permit the offer and sale of $1,815 million of debt securities.
Additionally, at December 31, 1995, the ESOP Trust had a shelf registration
on file with the SEC permitting the offer and sale of $230 million of debt
securities, guaranteed by Mobil. The proceeds of any debt securities issued
by the ESOP Trust are used to refund its existing indebtedness. Also at year-
end 1995, shelf registrations allowing the issuance of U.S. $811 million of
Euro-Medium-Term Notes and bonds having a principal amount of 30 billion
Japanese yen were in place.
- - - - -----------------------------------------------------------------------------
LONG-TERM DEBT (In millions)
- - - - -----------------------------------------------------------------------------
At December 31 1994 1995
- - - - -----------------------------------------------------------------------------
6 1/2% notes due 1996 $ 164 $ 148(1)
6 1/2% notes due 1997 151 148(1)
6 3/4% notes due 1995 200 --
7 1/4% notes due 1999 185 172(1)
7 5/8% debentures due 2033 250 250
8% debentures due 2032 250 250
8 1/8% Canadian dollar Eurobonds due 1998 111 111
(swapped into 6.8% U.S. $ debt)
8 3/8% notes due 2001 200 200
8 5/8% debentures due 2021 250 250
9% Canadian dollar Eurobonds due 1997 110 110
(swapped into 7.0% U.S. $ debt)
9% European Currency Unit Eurobonds due 1997 148 148
(swapped into 7.0% U.S. $ debt)
9 5/8% U.K. sterling Eurobonds due 1999 173 170
Variable rate notes due 1999 (6.4%)(2) 127 107
Japanese yen loans due 2003-2005 (3.4%)(2) 281 438
ESOP Trust debentures/notes due 2000-2004 (9.0%)(2) 628 578
Variable rate project financing due 1998 (6.9%)(2) 209 157
Industrial revenue bonds due 1998-2030 (5.6%)(2) 273 390
Other foreign currencies due 1996-2030 (7.7%)(2) 930 1,087
Other due 1997-2008 (6.6%)(2) 293 149
Capital lease obligations 202 274
- - - - -----------------------------------------------------------------------------
Total 5,135 5,137
Less: long-term debt maturing within one year 421 508
- - - - -----------------------------------------------------------------------------
Total long-term debt $4,714 $4,629
- - - - -----------------------------------------------------------------------------
(1) Net of repurchases.
(2) The percentages shown in parentheses in the table are weighted average
interest rates at December 31, 1995.
Long-term debt that becomes due during the next five years is: 1996-$508
million; 1997-$886 million; 1998-$550 million; 1999-$855 million; and 2000-
$232 million.
40 Mobil
NOTES TO FINANCIAL STATEMENTS
10. 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
crude oil and natural gas prices. Because Mobil operates internationally and
finances large capital projects, it has exposure to these risks, which can in-
crease the costs of investing, financing and operating. Derivative instruments
are effective in minimizing these risks by creating essentially equal and
offsetting market exposures. The derivative financial instruments held by Mobil
are not leveraged and are principally held for purposes other than trading. 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 risk 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.
Debt-related Derivative Instruments -- Mobil has entered into interest rate
swaps, cross currency interest rate swaps, futures and forward exchange con-
tracts. 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 $3,608 million and $5,797 million
at December 31, 1994 and 1995, respectively. These activities resulted in a
substantial portion of the fixed interest rate debt being swapped into floating
interest rate debt as of December 31, 1995.
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. Futures and foreign
exchange contracts are valued at current rates. Gains and losses on contracts
related to debt principal and current interest are recorded in income. Gains and
losses related to future period interest are deferred and recognized in income
in the period to which they relate.
The fair value of Mobil's debt portfolio, including the fair value of debt-
related derivative instruments, was less than its carrying value by $69 million
and greater than its carrying value by $139 million at December 31, 1994 and
1995, respectively. This change was due to the decline in long-term interest
rates in 1995.
Nondebt-related Instruments -- Mobil has entered into forward exchange con-
tracts and currency options primarily to hedge payables for purchases by foreign
affiliates of crude oil and petroleum products denominated in U.S. dollars.
These currency financial instruments are also used to hedge firm commitments for
capital projects and the cash from net investments in foreign affiliates to be
remitted within the upcoming year. Changes in the value of these financial
instruments offset the foreign exchange gains and losses of the transactions
they are hedging. The notional principal amounts of these nondebt-related
currency instruments were $6,950 million and $8,969 million at December 31,
1994 and 1995, respectively, and substantially all of them have maturities of
less than one year. The fair value of financial instruments other than debt
generally approximates carrying value.
Mobil has also entered into commodity derivative financial instruments that
can only be settled in cash. The notional amounts outstanding for these
contracts were $1,294 million and $1,653 million at December 31, 1994 and
1995, respectively. Fair value approximates carrying value.
Risk Based Measurements -- In its risk management activities, Mobil measures
its value at risk using simulation techniques that project probability of ex-
pected 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 and 1995, the value at risk
in Mobil's debt and currency portfolio, as measured against these defined
benchmarks, was $6 million and $5 million, respectively.
Mobil 41
NOTES TO FINANCIAL STATEMENTS
11. TAXES
- - - - ----------------------------------------------------------------------------------------------------------------------
TOTAL TAXES (In millions) 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------
Year ended December 31 U.S. Foreign Total U.S. Foreign Total U.S. Foreign Total
- - - - ----------------------------------------------------------------------------------------------------------------------
Excise and state gasoline $2,963 $3,935 $6,898 $3,669 $4,093 $7,762 $3,972 $4,674 $8,646
Import duties -- 7,897 7,897 -- 9,067 9,067 -- 9,657 9,657
Property, production, payroll
and other 464 238 702 442 241 683 427 289 716
- - - - ----------------------------------------------------------------------------------------------------------------------
Total other than income taxes 3,427 12,070 15,497 4,111 13,401 17,512 4,399 14,620 19,019
- - - - ----------------------------------------------------------------------------------------------------------------------
Income taxes(1)
U.S. state and local 67 -- 67 63 -- 63 113 -- 113
U.S. federal and foreign
-current 75 2,049 2,124 125 1,941 2,066 336 1,799 2,135
-deferred (123) (137) (260) (184) (26) (210) (140) (93) (233)
- - - - ----------------------------------------------------------------------------------------------------------------------
Total income taxes 19 1,912 1,931 4 1,915 1,919 309 1,706 2,015
- - - - ----------------------------------------------------------------------------------------------------------------------
Total taxes $3,446 $13,982 $17,428 $4,115 $15,316 $19,431 $4,708 $16,326 $21,034
- - - - ----------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes tax benefits of $358 million related to the cumulative effect of change in accounting principle in 1994.
Income from U.S. operations before income taxes was $770 million in 1993, $481
million in 1994 and $1,261 million in 1995. Income from foreign operations
before income taxes for the same three years was $3,835 million, $3,697 million
and $3,594 million, respectively. The loss from Corporate and Other and Net
Financing Expense before income taxes for the same three years was $590 million,
$500 million and $464 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 resto-
ration, 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 in-
tention 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, 1995. 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 (In millions)
- - - - ----------------------------------------------------------------------------
At December 31 1994 1995
- - - - ----------------------------------------------------------------------------
Deferred tax liabilities
Depreciation and amortization $3,961 $3,898
Other 640 639
- - - - ----------------------------------------------------------------------------
Total deferred tax liabilities 4,601 4,537
- - - - ----------------------------------------------------------------------------
Deferred tax assets
Book reserves 1,284 1,485
Tax credits available for carry-forward
(primarily without expiration) 1,005 839
- - - - ----------------------------------------------------------------------------
Total deferred tax assets 2,289 2,324
- - - - ----------------------------------------------------------------------------
Valuation allowance (379) (311)
- - - - ----------------------------------------------------------------------------
Net deferred tax liabilities $2,691 $2,524
- - - - ----------------------------------------------------------------------------
42 Mobil
NOTES TO FINANCIAL STATEMENTS
11. TAXES (concluded)
- - - - -------------------------------------------------------------------------------
RECONCILIATION OF U.S. STATUTORY
RATE TO ACTUAL TAX RATE (In millions) 1993 1994 1995
- - - - -------------------------------------------------------------------------------
Year ended December 31 Amount % Amount % Amount %
- - - - -------------------------------------------------------------------------------
Income before taxes and change in
accounting principle $4,015 100.0 $3,678 100.0 $4,391 100.0
- - - - -------------------------------------------------------------------------------
Theoretical tax at U.S. rate 1,405 35.0 1,287 35.0 1,537 35.0
Foreign taxes in excess of
U.S. statutory rate 685 17.1 661 18.0 611 13.9
Other items, net (159) (4.0) (29) (0.8) (133) (3.0)
- - - - -------------------------------------------------------------------------------
Total income taxes $1,931 48.1 $1,919 52.2 $2,015 45.9
- - - - -------------------------------------------------------------------------------
12. 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 invest-
ment 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 Asia-Pacific region, and
petrochemical and lube manufacturing in the Middle East. Also included are in-
terests 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 $735 million at December 31, 1995. Dividends received from
these companies were $276 million in 1993, $203 million in 1994 and $346 million
in 1995.
Accounts and Notes Receivable in the Consolidated Balance Sheet include $171
million and $227 million at December 31, 1994 and 1995, respectively, of amounts
due from equity affiliates. Accounts Payable include $459 million and $531
million at December 31, 1994 and 1995, respectively, of amounts due to equity
affiliates.
- - - - --------------------------------------------------------------------------------------------------------------------------
EQUITY METHOD AFFILIATES (In millions) 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------------------------------
Total Mobil Share Total Mobil Share Total Mobil Share
- - - - --------------------------------------------------------------------------------------------------------------------------
Current assets $ 9,565 $ 2,954 $ 8,559 $ 2,639 $ 8,345 $ 2,678
Noncurrent assets 9,449 3,121 11,366 3,637 12,220 3,735
Current liabilities (7,437) (2,373) (7,865) (2,493) (8,027) (2,643)
Long-term debt (2,179) (791) (2,271) (822) (2,520) (758)
Other liabilities (1,909) (518) (2,101) (576) (2,122) (595)
- - - - --------------------------------------------------------------------------------------------------------------------------
Net assets $ 7,489 $ 2,393 $ 7,688 $ 2,385 $ 7,896 $ 2,417
- - - - --------------------------------------------------------------------------------------------------------------------------
Gross revenues $25,766 $ 8,125 $27,600 $ 8,696 $31,324 $ 9,835
- - - - --------------------------------------------------------------------------------------------------------------------------
Income before taxes $ 1,370 $ (105) $ 1,175 $ 349 $ 1,360 $ 466
Net income 857 11 578 187(1) $ 1,088 397
- - - - --------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 824 $ 238 $ 1,711 $ 421 $ 1,650 $ 337
- - - - --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes $56 million charge related to the LCM change in accounting principle (see Note 4 on page 38).
Mobil 43
NOTES TO FINANCIAL STATEMENTS
13. EMPLOYEE BENEFITS
Employee benefits that Mobil provides in the U.S. are contributory and noncon-
tributory 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 pro-
vided 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 $70 million in 1993, $67 million in 1994 and $60 million
in 1995.
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 (In millions) Health Care Life Insurance
- - - - ------------------------------------------------------------------------------------------------------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
- - - - ------------------------------------------------------------------------------------------------------------------------
Benefits earned by employees during the year $ 10 $ 11 $ 8 $ 2 $ 2 $ 1
Interest cost on accumulated postretirement benefit obligation 33 29 28 27 27 28
Actual (earnings) on assets -- -- -- (2) (1) --
Amortization of unrecognized amounts -- (1) (5) -- -- --
- - - - ------------------------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 43 $ 39 $ 31 $ 27 $ 28 $ 29
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
STATUS OF POSTRETIREMENT BENEFIT PLANS (In millions) Health Care Life Insurance
- - - - ------------------------------------------------------------------------------------------------------------------------
At December 31 1994 1995 1994 1995
- - - - ------------------------------------------------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE OF ACCUMULATED
POSTRETIREMENT BENEFIT OBLIGATION
Retirees $206 $242 $280 $312
Other fully eligible plan participants 47 52 45 53
Other active plan participants 88 113 19 24
- - - - ------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation $341 $407 $344 $389
- - - - ------------------------------------------------------------------------------------------------------------------------
BOOK RESERVES $445 $443 $343 $353
- - - - ------------------------------------------------------------------------------------------------------------------------
BOOK RESERVES GREATER (LESS) THAN
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION $104 $ 36 $ (1) $(36)
- - - - ------------------------------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized net gain (loss) $ 93 $ 25 $ (1) $(36)
Unrecognized prior service costs 11 11 -- --
- - - - ------------------------------------------------------------------------------------------------------------------------
<FN>
At December 31, 1995, the health care cost trend used to calculate the accumulated postretirement benefit obligations is 9.7%
for 1996 and is assumed to decrease gradually over 9 years to 5.5%. At December 31, 1994, the health care cost trend rate was
assumed to be 10.3% for 1995, declining gradually to 5.5% after 10 years. A 1% increase in the assumed health care cost trend rate
for each year would increase the 1995 net postretirement benefit expense and the accumulated postretirement benefit obligation as
of December 31, 1995, by approximately $4 million and $42 million, respectively.
The discount rate used in determining the postretirement benefit obligation was 7.0% in 1995 and 8.5% in 1994.
44 Mobil
NOTES TO FINANCIAL STATEMENTS
13. EMPLOYEE BENEFITS (concluded)
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 $202 million in
1993, $214 million in 1994 and $192 million in 1995.
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 (In millions) U.S. Plans International Plans
- - - - --------------------------------------------------------------------------------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------
Benefits earned by employees during the year $ 98 $ 107 $ 76 $ 83 $ 91 $ 85
Interest cost on projected benefit obligation 201 194 190 115 117 125
Actual (earnings) loss on assets (379) (4) (638) (159) 30 (143)
Deferral of actual earnings on assets
greater (less) than expected returns 151 (224) 418 89 (103) 68
Net amortization of unrecognized amounts (14) (12) (10) 17 18 21
- - - - --------------------------------------------------------------------------------------------------
Net pension expense $ 57 $ 61 $ 36 $ 145 $ 153 $ 156
- - - - --------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------
STATUS OF PENSION PLANS (In millions) U.S. Plans International Plans
- - - - --------------------------------------------------------------------------------------------------
At December 31 1994 1995 1994 1995
- - - - --------------------------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
Vested $1,818 $2,169 $1,398 $1,602
Nonvested 137 173 136 126
- - - - --------------------------------------------------------------------------------------------------
Accumulated benefit obligation 1,955 2,342 1,534 1,728
Additional amounts related to projected pay increases 410 498 428 418
- - - - --------------------------------------------------------------------------------------------------
Projected benefit obligation $2,365 $2,840 $1,962 $2,146
- - - - --------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES
Plan assets at fair value, primarily in equity
and fixed income securities $2,590 $2,919 $ 960 $1,044
Book reserves 92 132 901 1,043
- - - - --------------------------------------------------------------------------------------------------
Total assets and book reserves $2,682 $3,051 $1,861 $2,087
- - - - --------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES GREATER (LESS)
THAN PROJECTED BENEFIT OBLIGATION $ 317 $ 211 $ (101) $ (59)
- - - - --------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized net asset (liability) at date of
initial application of FAS 87 $ 211 $ 181 $ (68) $ (52)
Unrecognized prior service cost (191) (164) (56) (66)
Unrecognized net gain (loss) 209 57 (202) (169)
Minimum liability and prefunded expenses 88 137 225 228
- - - - --------------------------------------------------------------------------------------------------
Assets and book reserves greater (less) than
projected benefit obligation $ 317 $ 211 $ (101) $ (59)
- - - - --------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE RATES USED IN DETERMINING THE
ACTUARIAL PRESENT VALUE OF THE PROJECTED BENEFIT
OBLIGATION (percent)
Discount rate 8.5 7.0 7.5 7.3
Rate of increase in future compensation levels 4.0 4.0 5.6 5.3
EXPECTED LONG-TERM RATE OF RETURN ON PLAN ASSETS
USED IN DETERMINING CURRENT YEAR EXPENSE (percent) 8.5 9.0 8.2 8.7
- - - - --------------------------------------------------------------------------------------------------
Memo: assets and book reserves greater than
accumulated benefit obligation $ 727 $ 709 $ 327 $ 359
- - - - --------------------------------------------------------------------------------------------------
PENSION PLAN ASSETS
AND BOOK RESERVES
EXCEEDED ACCUMULATED
BENEFIT OBLIGATIONS
BY $1,068 MILLION
AT THE END OF 1995.
Mobil 45
NOTES TO FINANCIAL STATEMENTS
14. STOCK OPTION PLANS
Under the 1995 Mobil Incentive Compensation and Stock Ownership Plan approved by
shareholders, options may be granted to key employees to purchase annually a
maximum of 0.9% of the total common shares outstanding at the end of the year
preceding each year of its five-year life (less the number of shares of restric-
ted stock granted and the number of equivalent share units allotted as long-term
incentive awards under the Plan), cumulative from the effective date of the
plan. No additional options may be granted under earlier plans. Stock options
have 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 to purchase
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.
Based on the December 31, 1994, number of shares outstanding, there were
3,563,883 shares or share units available for option grants and other awards
referred to above in 1995. Based on the December 31, 1995, number of shares out-
standing, there were 4,341,973 shares or share units available for option grants
and other awards referred to above in 1996.
- - - - ------------------------------------------------------------------------------------------------------------------------
STOCK OPTION TRANSACTIONS 1981 Plan 1986 Plan 1991 Plan 1995 Plan
- - - - ------------------------------------------------------------------------------------------------------------------------
January 1, 1995-shares under option 129,270 4,476,966 8,860,356 -0-
- - - - ------------------------------------------------------------------------------------------------------------------------
Changes during 1995
Options granted at $87.31 -- -- -- 2,677,350
Options granted at $100.63 -- -- -- 7,000
Options expired or canceled (1,550) -- (26,231) (12,900)
Options exercised at prices ranging from $28.78 to $87.31 (123,855) (1,000,891) (534,270) (1,220)
SARs(1) exercised at prices ranging from $28.78 to $64.25 (3,865) (121,749) (109,444) --
- - - - ------------------------------------------------------------------------------------------------------------------------
December 31, 1995-shares under option -- 3,354,326 8,190,411 2,670,230
Years of grant -- 1986-1991 1991-1994 1995
Average option price per share -- $53.87 $70.46 $87.35
- - - - ------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1995 -- 3,354,326 6,517,350 184,280
At an average price of -- $53.87 $66.96 $87.31
- - - - ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Stock appreciation rights.
15. 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 cumula-
tive 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 1993, 1994 and 1995, this excess was $58 million, $29
million and $50 million, respectively.
The guaranteed ESOP borrowing is included in Mobil's debt. The future compen-
sation 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 1993, 1994 and 1995, total ESOP-related expenses
were $61 million, $32 million and $54 million, respectively.
Interest incurred on ESOP debt in 1993, 1994 and 1995 was $62 million, $58
million and $54 million, respectively.
46 Mobil
NOTES TO FINANCIAL STATEMENTS
16. CAPITAL STOCK
At December 31, 1995, 600,000,000 shares of $2.00 par value common stock were
authorized and 443,905,531 shares were issued, including 49,345,650 shares held
in the treasury.
At December 31, 1995, 30,000,000 shares of $1.00 par value preferred stock
were authorized, of which 6,000,000 shares of Series A Junior Participating Pre-
ferred 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, 1994 and 1995, respectively, 95,778 and 92,864 shares of Series B
ESOP Convertible Preferred Stock were outstanding. During 1994 and 1995, 2,295
and 2,914 of such shares, respectively, were redeemed.
- - - - ---------------------------------------------------------------------------------------------------------
CHANGES IN SHARES OF COMMON STOCK OUTSTANDING
- - - - ---------------------------------------------------------------------------------------------------------
Year ended December 31 1993 1994 1995
- - - - ---------------------------------------------------------------------------------------------------------
Common shares outstanding -- beginning of year 398,816,293 398,167,941 395,987,017
Purchase of common stock for treasury (1,962,000) (3,198,000) (2,996,350)
Exercise of stock options and stock appreciation rights 1,313,002 1,014,245 1,554,945
Incentive compensation awards and restricted stock 646 2,831 14,269
- - - - ---------------------------------------------------------------------------------------------------------
Common shares outstanding -- end of year 398,167,941 395,987,017 394,559,881
- - - - ---------------------------------------------------------------------------------------------------------
17. FOREIGN CURRENCY
Foreign exchange transaction losses of $29 million in 1993, and gains of $70
million in 1994 and $8 million in 1995 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 (In millions)
- - - - ----------------------------------------------------------------------------
At December 31 1993 1994 1995
- - - - ----------------------------------------------------------------------------
Properties, plants and equipment, net $(838) $(273) $(124)
Deferred income taxes (104) (199) (252)
Working capital, debt and other items, net 416 349 349
- - - - ----------------------------------------------------------------------------
Total $(526) $(123) $ (27)
- - - - ----------------------------------------------------------------------------
18. 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, 1994 and 1995, $790 million and $835 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 termi-
nals, refineries and plants, and at certain Superfund sites. At December 31,
1994 and 1995, the accumulated reserve for environmental remediation costs was
$551 million and $519 million, respectively. Of these amounts, $150 million and
$100 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 establi-
shed to assist companies in clean-up efforts. The expected recoverable costs
were $68 million and $47 million at December 31, 1994 and 1995, 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
19. COMMITMENTS AND CONTINGENT LIABILITIES
Substantial commitments are made in the normal course of business for the pur-
chase 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 $130 million of the obligations of others, excluding
$320 million of certain cross-guarantees, primarily foreign customs duties, made
with other responsible companies in the ordinary course of business. In addi-
tion, 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.
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.
48 Mobil
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 share-
holders. 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 Executive Officer Senior Vice President and 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, 1994 and 1995, 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, 1995, 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, 1994 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
As discussed in Note 6 to the financial statements, in 1995, Mobil
Corporation changed its method of accounting for the impairment of long-lived
assets. As discussed in Note 4 to the financial statements, in 1994, the Company
changed the method of accounting it uses to value its crude oil and product
inventories at the lower of cost or market.
/S/ERNST & YOUNG LLP
- - - - --------------------
Ernst & Young LLP
Fairfax, Virginia
February 23, 1996
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, 1993, 1994 AND 1995, 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 (Millions of barrels)
- - - - ----------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
------------------------ ------------------------ ------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 1,168 1,116 1,052 353 357 401 227 204 175
Revisions (13) (3) (9) (4) 5 (13) (4) 6 (37)
Improved recovery 59 49 32 56 101 20 -- -- --
Purchases 18 2 11 -- -- 24 -- 2 --
Sales (8) (9) (6) -- -- -- -- -- --
Extensions, discoveries
and other additions 3 7 9 10 1 5 14 -- --
Production (111) (110) (103) (58) (63) (64) (33) (37) (35)
- - - - ----------------------------------------------------------------------------------------------------------
End of year 1,116 1,052 986 357 401 373 204 175 103
- - - - ----------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year -- -- -- 3 2 2 13 8 7
Revisions -- -- -- (1) -- -- (1) -- 1
Sales -- -- -- -- -- -- -- -- (7)
Extensions, discoveries
and other additions -- -- -- -- -- -- -- -- --
Production -- -- -- -- -- -- (4) (1) (1)
- - - - ----------------------------------------------------------------------------------------------------------
End of year -- -- -- 2 2 2 8 7 --
- - - - ----------------------------------------------------------------------------------------------------------
Total net proved reserves 1,116 1,052 986 359 403 375 212 182 103
- - - - ----------------------------------------------------------------------------------------------------------
Net proved developed
reserves of fully
consolidated companies:
Beginning of year 879 871 826 168 196 215 218 196 165
End of year 871 826 816 196 215 184 196 165 93
- - - - ----------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of net proved reserves of investees accounted for on the equity method.
(continued)
- - - - ---------------------------------------------------------------------------------------------------------
TABLE 1: ESTIMATED QUANTITIES OF NET PROVED OIL AND NATURAL GAS LIQUIDS RESERVES (Millions of barrels)
- - - - ---------------------------------------------------------------------------------------------------------
Other Areas Total
------------------------ ------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
- - - - ---------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 1,083 1,132 1,291 2,831 2,809 2,919
Revisions 36 62 105 15 70 46
Improved recovery 27 130 21 142 280 73
Purchases 6 5 2 24 9 37
Sales (9) (2) (4) (17) (11) (10)
Extensions, discoveries
and other additions 72 49 89 99 57 103
Production (83) (85) (78) (285) (295) (280)
- - - - ---------------------------------------------------------------------------------------------------------
End of year 1,132 1,291 1,426 2,809 2,919 2,888
- - - - ---------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year 525 524 516 541 534 525
Revisions -- -- (4) (2) -- (3)
Sales -- -- -- -- -- (7)
Extensions, discoveries
and other additions 15 8 32 15 8 32
Production (16) (16) (15) (20) (17) (16)
- - - - ---------------------------------------------------------------------------------------------------------
End of year 524 516 529 534 525 531
- - - - ---------------------------------------------------------------------------------------------------------
Total net proved reserves 1,656 1,807 1,955 3,343 3,444 3,419
- - - - ---------------------------------------------------------------------------------------------------------
Net proved developed
reserves of fully
consolidated companies:
Beginning of year 796 790 809 2,061 2,053 2,015
End of year 790 809 910 2,053 2,015 2,003
- - - - ---------------------------------------------------------------------------------------------------------
Mobil's estimated net proved reserves and changes thereto for the years 1993,
1994 and 1995 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 con-
ditions, 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.
50 Mobil
SUPPLEMENTARY INFORMATION
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (continued)
- - - - -------------------------------------------------------------------------------------------------------------
TABLE 2: ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES (Billions of cubic feet)
- - - - -------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
------------------------ ------------------------ ------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - -------------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 5,971 5,372 5,055 3,508 4,021 4,251 6,400 6,058 5,607
Revisions (33) 164 317 377 234 110 22 51 (198)
Improved recovery 11 30 51 56 -- 18 -- -- --
Purchases 27 8 42 -- 20 15 -- 34 --
Sales (119) (64) (52) -- -- (42) -- -- --
Extensions, discoveries
and other additions 73 117 173 403 322 237 241 71 54
Production (558) (572) (525) (323) (346) (401) (605) (607) (567)
- - - - -------------------------------------------------------------------------------------------------------------
End of year 5,372 5,055 5,061 4,021 4,251 4,188 6,058 5,607 4,896
- - - - -------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year -- -- -- 33 33 33 70 97 94
Revisions -- -- -- 3 2 4 38 4 --
Sales -- -- -- -- -- -- -- -- (88)
Extensions, discoveries
and other additions -- -- -- 2 2 2 -- -- --
Production -- -- -- (5) (4) (5) (11) (7) (6)
- - - - -------------------------------------------------------------------------------------------------------------
End of year -- -- -- 33 33 34 97 94 --
- - - - -------------------------------------------------------------------------------------------------------------
Total net proved reserves 5,372 5,055 5,061 4,054 4,284 4,222 6,155 5,701 4,896
- - - - -------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
Beginning of year 4,530 4,158 3,902 2,536 2,932 3,081 4,953 4,325 3,810
End of year 4,158 3,902 3,923 2,932 3,081 3,094 4,325 3,810 3,018
- - - - -------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of net proved reserves of investees accounted for on the equity method.
(continued)
- - - - ----------------------------------------------------------------------------------------------------------
TABLE 2: ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES (Billions of cubic feet)
- - - - ----------------------------------------------------------------------------------------------------------
Other Areas Total
------------------------ ------------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------
Net proved reserves of fully
consolidated companies:
Beginning of year 1,824 1,508 1,744 17,703 16,959 16,657
Revisions (24) 9 50 342 458 279
Improved recovery 43 5 61 110 35 130
Purchases 13 32 1 40 94 58
Sales (169) (51) (19) (288) (115) (113)
Extensions, discoveries
and other additions -- 410 105 717 920 569
Production (179) (169) (158) (1,665) (1,694) (1,651)
- - - - ----------------------------------------------------------------------------------------------------------
End of year 1,508 1,744 1,784 16,959 16,657 15,929
- - - - ----------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year -- 594 891 103 724 1,018
Revisions -- -- -- 41 6 4
Sales -- -- -- -- -- (88)
Extensions, discoveries
and other additions 594 297 1,114 596 299 1,116
Production -- -- -- (16) (11) (11)
- - - - ----------------------------------------------------------------------------------------------------------
End of year 594 891 2,005 724 1,018 2,039
- - - - ----------------------------------------------------------------------------------------------------------
Total net proved reserves 2,102 2,635 3,789 17,683 17,675 17,968
- - - - ----------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
Beginning of year 1,491 1,307 1,223 13,510 12,722 12,016
End of year 1,307 1,223 1,212 12,722 12,016 11,247
- - - - ----------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------
TABLE 3: CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES (In millions)
- - - - -------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
------------------------ ------------------------ ------------------------
At December 31 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - -------------------------------------------------------------------------------------------------------------
Capitalized costs:
Unproved properties $ 134 $ 54 $ 12 $ 16 $ 11 $ 11 $ 11 $ 14 $ 13
Proved properties, wells,
plants and other equipment 16,441 15,988 13,638 6,051 6,929 7,119 1,839 2,098 2,149
- - - - -------------------------------------------------------------------------------------------------------------
Total capitalized costs 16,575 16,042 13,650 6,067 6,940 7,130 1,850 2,112 2,162
Accumulated depreciation,
depletion and amortization 10,793 10,833 8,981 3,319 3,993 4,123 1,054 1,274 1,457
- - - - -------------------------------------------------------------------------------------------------------------
Net capitalized costs 5,782 5,209 4,669 2,748 2,947 3,007 796 838 705
- - - - -------------------------------------------------------------------------------------------------------------
Net capitalized costs of
equity companies(1) -- -- -- 21 28 37 33 30 1
Total $ 5,782 $ 5,209 $ 4,669 $ 2,769 $ 2,975 $ 3,044 $ 829 $ 868 $ 706
- - - - -------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of net capitalized costs of investees accounted for on the equity method.
(continued)
- - - - -------------------------------------------------------------------------------------------------------------
TABLE 3: CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES (In millions)
- - - - ----------------------------------------------------------------------------------------------------------
Other Areas Total
------------------------ ------------------------
At December 31 1993 1994 1995 1993 1994 1995
- - - - -------------------------------------------------------------------------------------------------------------
Capitalized costs:
Unproved properties $ 115 $ 108 $ 137 $ 276 $ 187 $ 173
Proved properties, wells,
plants and other equipment 4,218 4,430 4,533 28,549 29,445 27,439
- - - - -------------------------------------------------------------------------------------------------------------
Total capitalized costs 4,333 4,538 4,670 28,825 29,632 27,612
Accumulated depreciation,
depletion and amortization 1,900 2,026 1,599 17,066 18,126 16,160
- - - - -------------------------------------------------------------------------------------------------------------
Net capitalized costs 2,433 2,512 3,071 11,759 11,506 11,452
- - - - -------------------------------------------------------------------------------------------------------------
Net capitalized costs of
equity companies(1) 86 168 269 140 226 307
Total $2,519 $ 2,680 $ 3,340 $ 11,899 $ 11,732 $ 11,759
- - - - -------------------------------------------------------------------------------------------------------------
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, 1993, 1994 and 1995. 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 (In millions)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
---------------------- ---------------------- ----------------------
Year ended December 31 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Property acquisition costs:
Unproved properties $ 4 $ 17 $ 28 $ 1 $ -- $ -- $ -- $ 3 $ --
Proved properties 9 8 9 3 10 4 -- 4 --
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total acquisition costs 13 25 37 4 10 4 -- 7 --
Exploration costs 124 199 183 221 174 177 53 87 72
Development costs 331 365 593 399 319 421 255 265 78
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total expenditures 468 589 813 624 503 602 308 359 150
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Property acquisition,
exploration and
development costs of
equity companies(1) -- -- -- 9 12 11 12 2 8
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total $468 $589 $813 $633 $515 $613 $320 $361 $158
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of property acquisition, exploration and development costs of investees accounted for on the equity
method.
(continued)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 4: COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES (In millions)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Other Areas Total
---------------------- ----------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
Property acquisition costs:
Unproved properties $ 21 $ 12 $ 34 $ 26 $ 32 $ 62
Proved properties 9 -- 16 21 22 29
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total acquisition costs 30 12 50 47 54 91
Exploration costs 96 188 193 494 648 625
Development costs 401 474 833 1,386 1,423 1,925
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total expenditures 527 674 1,076 1,927 2,125 2,641
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Property acquisition,
exploration and
development costs of
equity companies(1) 48 84 57 69 98 76
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total $575 $758 $1,133 $1,996 $2,223 $2,717
- - - - ----------------------------------------------------------------------------------------------------------------------------------
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 (In millions)
- - - - --------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
---------------------- ---------------------- ----------------------
Year ended December 31 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Revenues:
Trade sales $1,054 $ 890 $ 678 $1,089 $1,486 $1,357 $1,448 $1,367 $1,429
Intercompany sales 1,421 1,331 1,330 850 456 815 241 350 339
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total revenues(1) 2,475 2,221 2,008 1,939 1,942 2,172 1,689 1,717 1,768
Production (lifting) costs (976) (946) (982) (679) (660) (719) (243) (261) (239)
Exploration expenses (65) (115) (72) (192) (145) (128) (51) (104) (77)
Depreciation, depletion
and amortization (844) (949) (1,161) (369) (428) (466) (176) (230) (205)
Other operating revenues
and (expenses) (43) (31) 32 60 66 123 7 (6) (8)
Income tax expense (184) (55) 68 (369) (459) (551) (720) (667) (717)
- - - - --------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities 363 125 (107) 390 316 431 506 449 522
- - - - --------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities of
equity companies(2) -- -- -- 1 2 3 14 1 4
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total $ 363 $ 125 $ (107) $ 391 $ 318 $ 434 $ 520 $ 450 $ 526
- - - - --------------------------------------------------------------------------------------------------------------------------------
<FN>
(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.
(continued)
- - - - --------------------------------------------------------------------------------------------------------------------------------
TABLE 5: RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (In millions)
- - - - --------------------------------------------------------------------------------------------------------------------------------
Other Areas Total
---------------------- ----------------------
Year ended December 31 1993 1994 1995 1993 1994 1995
- - - - --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Revenues:
Trade sales $ 535 $ 494 $ 411 $4,126 $4,237 $3,875
Intercompany sales 1,082 1,003 1,022 3,594 3,140 3,506
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total revenues(1) 1,617 1,497 1,433 7,720 7,377 7,381
Production (lifting) costs (567) (507) (619) (2,465) (2,374) (2,559)
Exploration expenses (97) (152) (150) (405) (516) (427)
Depreciation, depletion
and amortization (237) (300) (398) (1,626) (1,907) (2,230)
Other operating revenues
and (expenses) 173 110 77 197 139 224
Income tax expense (527) (480) (365) (1,800) (1,661) (1,565)
- - - - --------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities 362 168 (22) 1,621 1,058 824
- - - - --------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities of
equity companies(2) 16 15 14 31 18 21
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total $ 378 $ 183 $ (8) $1,652 $1,076 $ 845
- - - - --------------------------------------------------------------------------------------------------------------------------------
Mobil's results of operations for producing activities for the years ended
December 31, 1993, 1994 and 1995 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.
52 Mobil
SUPPLEMENTARY INFORMATION
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (concluded)
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 1994 to 1995 contributed
to the higher discounted future net cash flow amount for 1995. 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 (In millions)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
------------------------ ------------------------ ------------------------
At December 31 1993 1993 1994 1995 1993 1994 1995 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Future cash inflows $23,067 $22,051 $23,763 $14,211 $16,415 $16,064 $12,559 $13,409 $11,565
Future production
costs (10,386) (9,329) (9,312) (4,893) (5,214) (4,822) (3,538) (2,959) (2,026)
Future development
costs (1,887) (1,775) (1,644) (976) (1,131) (1,203) (1,465) (754) (764)
Future income
tax expenses (3,019) (3,120) (3,928) (3,769) (4,883) (5,156) (3,602) (4,541) (3,951)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 7,775 7,827 8,879 4,573 5,187 4,883 3,954 5,155 4,824
10% annual discount
for estimated timing
of cash flows (3,276) (3,266) (3,928) (1,558) (1,732) (1,534) (1,782) (2,367) (2,017)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 4,499 4,561 4,951 3,015 3,455 3,349 2,172 2,788 2,807
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) -- -- -- 15 21 23 26 21 --
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total $ 4,499 $ 4,561 $ 4,951 $ 3,030 $ 3,476 $ 3,372 $ 2,198 $ 2,809 $ 2,807
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of standardized measure of discounted future net cash flows of investees accounted for on the equity
method.
(continued)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 6: STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (In millions)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Other Areas Total
------------------------ ------------------------
At December 31 1993 1993 1994 1995 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Future cash inflows $17,160 $20,206 $24,543 $66,997 $72,081 $75,935
Future production
costs (6,258) (7,315) (8,589) (25,075) (24,817) (24,749)
Future development
costs (809) (1,414) (1,866) (5,137) (5,074) (5,477)
Future income
tax expenses (6,120) (7,299) (9,344) (16,510) (19,843) (22,379)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 3,973 4,178 4,744 20,275 22,347 23,330
10% annual discount
for estimated timing
of cash flows (1,718) (2,087) (2,252) (8,334) (9,452) (9,731)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 2,255 2,091 2,492 11,941 12,895 13,599
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) 232 434 460 273 476 483
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total $ 2,487 $ 2,525 $ 2,952 $12,214 $13,371 $14,082
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 7: CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (In millions)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Beginning of year $14,419 $12,214 $13,371
Changes resulting from:
Sales and transfers of production, net of production costs (5,255) (5,003) (4,822)
Net changes in prices and in development and production costs (7,217) 559 862
Extensions, discoveries, additions and purchases, less related costs 993 864 1,078
Development costs incurred during the period 1,386 1,423 1,925
Revisions of previous quantity estimates 1,065 2,204 731
Accretion of discount 2,806 2,184 2,406
Net change in income taxes 4,016 (1,276) (1,477)
Other 1 202 8
- - - - ----------------------------------------------------------------------------------------------------------------------------------
End of year $12,214 $13,371 $14,082
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Mobil 53
SUPPLEMENTARY INFORMATION
[Bar Charts - Page 54]
NET CRUDE OIL AND
NGL* PROVED RESERVES
(Millions of barrels)
LIQUIDS RESERVES WERE DOWN SLIGHTLY AS DECLINES IN MATURE REGIONS WERE LARGELY
OFFSET BY INCREASES, PRIMARILY IN AFRICA.
NET NATURAL GAS
PROVED RESERVES
(Billions of cubic feet)
NATURAL GAS RESERVES WERE BOOSTED BY ADDITIONS FROM OUR RAS LAFFAN LNG PROJECT
IN QATAR.
FIVE-YEAR OPERATING HIGHLIGHTS (unaudited)
1991 1992 1993 1994 1995
- - - - -------------------------------------------------------------------------------
NET PRODUCTION OF CRUDE OIL AND NGL(1)
(thousands of barrels daily)
United States 332 311 305 300 282
Canada 65 59 58 57 53
Indonesia 97 94 90 77 77
Nigeria 109 132 169 175 157
Norway 95 102 95 95 91
United Kingdom 45 50 58 70 75
Other fully consolidated areas 11 11 9 33 30
Equity companies(2) 60 57 54 47 45
- - - - -------------------------------------------------------------------------------
Worldwide 814 816 838 854 810
- - - - -------------------------------------------------------------------------------
NET PRODUCTION OF NATURAL GAS
(millions of cubic feet daily)
United States 1,703 1,641 1,529 1,568 1,439
Canada 494 510 492 461 432
Germany 346 351 362 368 404
Indonesia 1,598 1,654 1,658 1,654 1,542
United Kingdom 261 260 390 470 577
Other fully consolidated areas 161 143 135 120 129
Equity companies(2) 61 45 44 29 31
- - - - -------------------------------------------------------------------------------
Worldwide 4,624 4,604 4,610 4,670 4,554
Barrels of oil equivalent
(thousands of barrels daily)(3) 822 818 819 830 809
- - - - -------------------------------------------------------------------------------
TOTAL PRODUCTION
(thousands of barrels daily)(3) 1,636 1,634 1,657 1,684 1,619
- - - - -------------------------------------------------------------------------------
NET RESERVES OF CRUDE OIL AND NGL
(millions of barrels)
United States 1,232 1,168 1,116 1,052 986
Europe 376 353 357 401 373
Asia-Pacific 277 227 204 175 103
Other fully consolidated areas 1,007 1,083 1,132 1,291 1,426
Equity companies(2) 569 541 534 525 531
- - - - -------------------------------------------------------------------------------
Worldwide 3,461 3,372 3,343 3,444 3,419
- - - - -------------------------------------------------------------------------------
NET RESERVES OF NATURAL GAS
(billions of cubic feet)
United States 6,237 5,971 5,372 5,055 5,061
Europe 3,462 3,508 4,021 4,251 4,188
Asia-Pacific 6,951 6,400 6,058 5,607 4,896
Other fully consolidated areas 1,913 1,824 1,508 1,744 1,784
Equity companies(2) 193 103 724 1,018 2,039
- - - - -------------------------------------------------------------------------------
Worldwide 18,756 17,806 17,683 17,675 17,968
Barrels of oil equivalent
(millions of barrels)(3) 3,334 3,165 3,143 3,142 3,194
- - - - -------------------------------------------------------------------------------
TOTAL RESERVES
(millions of barrels of oil equivalent) 6,795 6,537 6,486 6,586 6,613
- - - - -------------------------------------------------------------------------------
RESERVES REPLACEMENT PERCENTAGE(4) 105% 57% 92% 116% 105%
- - - - -------------------------------------------------------------------------------
AVERAGE U.S. SALES PRICE/TRANSFER
VALUE(5)
Crude Oil (per barrel) $16.42 $15.73 $13.54 $12.91 $14.52
NGL (per barrel) 12.19 11.84 11.25 10.37 9.94
Natural Gas (per thousand cubic feet) 1.61 1.86 2.22 1.90 1.58
- - - - -------------------------------------------------------------------------------
AVERAGE INTERNATIONAL SALES PRICE/
TRANSFER VALUE(5)
Crude Oil (per barrel) $19.92 $19.11 $16.99 $15.66 $16.94
Natural Gas (per thousand cubic feet) 2.90 2.74 2.62 2.44 2.47
- - - - -------------------------------------------------------------------------------
(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 adjust-
ments to reserves for the year plus the annual production by the annual
production.
(5) Transfer values are essentially equal to third-party sales.
54 Mobil
SUPPLEMENTARY INFORMATION
FIVE-YEAR OPERATING HIGHLIGHTS (unaudited) (concluded)
1991 1992 1993 1994 1995
- - - - ------------------------------------------------------------------------------
PETROLEUM PRODUCT SALES(1)
(thousands of barrels daily)
United States 922 999 1,080 1,172 1,286
Europe 751 790 810 810 807
Asia-Pacific(2) 656 645 730 777 799
Other Areas 292 310 314 316 330
- - - - ------------------------------------------------------------------------------
Worldwide 2,621 2,744 2,934 3,075 3,222
- - - - ------------------------------------------------------------------------------
PETROLEUM PRODUCT SALES(1)
(millions of dollars)
United States $ 9,694 $10,070 $10,181 $10,492 $11,904
Europe 14,871 15,685 14,555 14,395 15,421
Asia-Pacific(2) 10,111 9,770 10,619 11,466 12,426
Other Areas 3,336 3,551 3,382 3,707 3,974
- - - - ------------------------------------------------------------------------------
Worldwide $38,012 $39,076 $38,737 $40,060 $43,725
- - - - ------------------------------------------------------------------------------
AVERAGE UNITED STATES PRODUCT PRICE
(per gallon)(3) 68.6cts 65.6cts 61.5cts 58.4cts 60.4cts
- - - - ------------------------------------------------------------------------------
REFINERY RUNS
(thousands of barrels daily)
United States 764 796 836 857 895
Europe 408 403 446 420 411
Asia-Pacific(4) 522 529 607 622 657
Other Areas 155 158 163 163 149
- - - - ------------------------------------------------------------------------------
Runs for Mobil by Mobil 1,849 1,886 2,052 2,062 2,112
Runs for Mobil by Others 28 37 20 20 9
- - - - ------------------------------------------------------------------------------
Worldwide Runs for Mobil 1,877 1,923 2,072 2,082 2,121
- - - - ------------------------------------------------------------------------------
CHEMICAL SALES BY PRODUCT CATEGORY
(millions of dollars)
Petrochemicals $ 1,870 $ 1,733 $ 1,608 $ 2,088 $ 2,914
Plastics 1,839 1,781 1,719 1,846 1,919
Other 46 59 81 101 115
- - - - ------------------------------------------------------------------------------
Net sales to trade $ 3,755 $ 3,573 $ 3,408 $ 4,035 $ 4,948
- - - - ------------------------------------------------------------------------------
NUMBER OF EMPLOYEES (year-end)
Petroleum Operations -United States 24,600 22,200 21,600 20,300 18,400
-International 26,300 25,800 25,200 25,200 24,300
Chemical -United States 10,900 10,200 9,700 8,100 3,500
-International 1,800 1,900 2,100 1,800 1,600
Other -United States 3,400 3,100 2,800 2,700 2,200
-International 500 500 500 400 400
- - - - ------------------------------------------------------------------------------
Total 67,500 63,700 61,900 58,500 50,400
- - - - ------------------------------------------------------------------------------
(1) Includes supply/other product sales.
(2) Includes primarily Australia, China, Hong Kong, Japan, Malaysia, New
Zealand and Singapore.
(3) 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.
(4) Includes Australia, Japan, New Zealand and Singapore.
Mobil markets autogasoline through nearly 19,000 retail outlets in over 50
countries. Petroleum product sales (including supply and other sales) have
increased 23% based on daily volume since 1991.
Mobil has 5 refineries in the U.S. that represent 43% of its worldwide
capacity. Outside the U.S., we have operating interests in 15 crude oil
refineries.
Mobil operates 31 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.
[Charts - Page 55]
REFINERY RUNS VS.
PETROLEUM PRODUCT SALES
(Thousands of barrels daily)
REFINERY RUNS AND PRODUCT SALES CONTINUED TO TREND UPWARD, REFLECTING
EXCELLENT OPERATING AND SALES PERFORMANCE.
NUMBER OF EMPLOYEES
(At year-end)
ONGOING RESTRUCTURING AND ASSET SALES REDUCED THE NUMBER OF EMPLOYEES 14%
THIS YEAR.
Mobil 55
SUPPLEMENTARY INFORMATION
[Charts - Page 56]
ANNUAL DIVIDENDS PER
SHARE OF COMMON STOCK
(Dollars)
DIVIDENDS PER SHARE PAYMENTS INCREASED FOR THE EIGHTH CONSECUTIVE YEAR, TO
$3.625 PER SHARE.
DEBT-TO-CAPITALIZATION RATIO
(In percent)
OUR DEBT-TO-CAPITALIZATION RATIO OF 27% IS EXPECTED TO INCREASE WITH HIGHER
INVESTMENT SPENDING.
ELEVEN-YEAR FINANCIAL SUMMARY
(In millions, except for per-share amounts) 1985 1986 1987 1988
- - - - ---------------------------------------------------------------------------------------------------------------------------------
REVENUES $ 54,606 $ 44,936 $ 51,678 $ 54,740
- - - - ---------------------------------------------------------------------------------------------------------------------------------
INCOME, EXCLUDING THE EFFECTS OF SIGNIFICANT U.S.
AND FOREIGN INCOME TAX RATE CHANGES AND
CHANGE IN ACCOUNTING PRINCIPLE(S) $ 1,040 $ 1,612(1) $ 1,448 $ 1,893
- - - - ---------------------------------------------------------------------------------------------------------------------------------
SEGMENT EARNINGS:
Petroleum Operations
Exploration & Producing -United States $ 701 $ 71 $ 462 $ 76
-International 1,074 871 1,065 780
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Total Exploration & Producing 1,775 942 1,527 856
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Marketing & Refining -United States 138 346 97 524
-International 151 972 76 414
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Total Marketing & Refining 289 1,318 173 938
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Total Petroleum Operations 2,064 2,260 1,700 1,794
Chemical 41 130 285 597
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Segment Earnings 2,105 2,390 1,985 2,391
Corporate and Other 53 (147) (75) (94)
Net Financing Expense (652) (587) (592) (460)
Loss on Sale of Container Corporation of America -- (150) -- --
Effect of Significant U.S. and Foreign Income Tax Rate Changes -- 552 (100) 194
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Income Before Discontinued Operations and
Change in Accounting Principle(s) 1,506 2,058 1,218 2,031
Discontinued Operations-Montgomery Ward (466) 106 130 56
Cumulative Effect of Change in Accounting Principle(s) -- (2,518)(2) -- --
- - - - ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,040 $ (354) $ 1,348 $ 2,087
- - - - ---------------------------------------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE (based on average shares outstanding)
Income Before Discontinued Operations and
Change in Accounting Principle(s) $ 3.69 $ 5.04 $ 2.96 $ 4.93
Net Income $ 2.55 $ (0.87) $ 3.28 $ 5.07
- - - - ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME AS PERCENT OF
Average shareholders' equity 7.5% 17.3%(1) 9.5% 13.6%
Average capital employed(3) 6.8% 12.1%(1) 8.5% 11.4%
Revenues 1.9% 4.8%(1) 2.6% 3.8%
- - - - ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL AND EXPLORATION EXPENDITURES $ 3,330 $ 2,890 $ 2,798 $ 3,915
- - - - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET POSITION AT YEAR-END
Current assets $ 12,193 $ 10,193 $ 11,097 $ 11,178
Net properties, plants and equipment 24,533 23,439 24,071 23,848
Total assets 40,668 38,173 40,272 38,820
Current liabilities 11,911 10,075 10,730 10,255
Long-term debt 9,323 7,939 7,143 6,498
Shareholders' equity 14,089 13,430 15,000 15,686
Per common share(4) $ 34.50 $ 32.86 $ 36.46 $ 38.19
- - - - ---------------------------------------------------------------------------------------------------------------------------------
DEBT-TO-CAPITALIZATION RATIO(5) 45% 41% 37% 32%
- - - - ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING (thousands of shares) 408,071 408,142 410,688 411,670
- - - - ---------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING (thousands of shares, year-end) 408,351 408,732 411,359 410,730
- - - - ---------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS OF COMMON STOCK (year-end) 268,600 260,800 246,800 237,600
- - - - ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DIVIDENDS $ 898 $ 898 $ 903 $ 968
As percent of net income less preferred dividends 86% 41%(1) 67% 46%
Per share $ 2.20 $ 2.20 $ 2.20 $ 2.35
- - - - ---------------------------------------------------------------------------------------------------------------------------------
YEAR-END MARKET PRICE PER COMMON SHARE $ 30 1/4 $ 40 1/8 $ 39 1/8 $ 45 1/2
- - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(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.
56 Mobil
SUPPLEMENTARY INFORMATION
(continued)
1989 1990 1991 1992 1993 1994 1995
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 56,388 $ 64,774 $ 63,311 $ 64,456 $ 63,975 $ 67,383 $ 75,370
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 1,809 $ 1,929 $ 1,920 $ 1,308(1) $ 2,084 $ 1,759(1) $ 2,376
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 117 $ 189 $ 189 $ 348 $ 363 $ 125 $ (107)
955 1,403 1,094 1,042 1,289 951 952
- - - - ----------------------------------------------------------------------------------------------------------------------------------
1,072 1,592 1,283 1,390 1,652 1,076 845
- - - - ----------------------------------------------------------------------------------------------------------------------------------
319 91 116 (145) 151 241 226
336 542 819 329 554 647 447
- - - - ----------------------------------------------------------------------------------------------------------------------------------
655 633 935 184 705 888 673
- - - - ----------------------------------------------------------------------------------------------------------------------------------
1,727 2,225 2,218 1,574 2,357 1,964 1,518
558 322 217 136 44 102 1,164
- - - - ----------------------------------------------------------------------------------------------------------------------------------
2,285 2,547 2,435 1,710 2,401 2,066 2,682
(69) (282) (130) (86) (190) (98) (11)
(407) (336) (385) (316) (127) (209) (295)
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- - - - ----------------------------------------------------------------------------------------------------------------------------------
1,809 1,929 1,920 1,308 2,084 1,759 2,376
-- -- -- -- -- -- --
-- -- -- (446)(2) -- (680)(2) --
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 1,809 $ 1,929 $ 1,920 $ 862 $ 2,084 $ 1,079 $ 2,376
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 4.40 $ 4.60 $ 4.65 $ 3.13 $ 5.07 $ 4.28 $ 5.87
$ 4.40 $ 4.60 $ 4.65 $ 2.01 $ 5.07 $ 2.57 $ 5.87
- - - - ----------------------------------------------------------------------------------------------------------------------------------
11.3% 11.6% 11.1% 7.8%(1) 12.3% 10.4%(1) 13.5%
10.0% 10.1% 9.6% 6.8%(1) 9.7% 8.4%(1) 10.9%
3.2% 3.0% 3.0% 2.0%(1) 3.3% 2.6%(1) 3.2%
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 3,393 $ 4,374 $ 5,053 $ 4,470 $ 3,656 $ 3,825 $ 4,268
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 11,920 $ 13,231 $ 12,401 $ 10,956 $ 11,217 $ 11,181 $ 12,056
23,446 24,481 25,464 25,075 25,037 25,503 24,850
39,080 41,665 42,187 40,561 40,733 41,542 42,138
11,216 13,653 13,602 12,629 12,351 13,418 13,054
5,317 4,298 4,715 5,042 5,027 4,714 4,629
16,274 17,072 17,534 16,540 17,237 17,146 17,951
$ 39.84 $ 42.44 $ 43.74 $ 41.06 $ 42.74 $ 42.61 $ 44.71
- - - - ----------------------------------------------------------------------------------------------------------------------------------
30% 30% 32% 34% 32% 31% 27%
- - - - ----------------------------------------------------------------------------------------------------------------------------------
409,767 405,936 399,636 398,517 399,154 397,955 395,444
- - - - ----------------------------------------------------------------------------------------------------------------------------------
408,515 401,079 398,301 398,816 398,168 395,987 394,560
- - - - ----------------------------------------------------------------------------------------------------------------------------------
227,100 218,300 211,100 208,800 200,100 193,900 188,800
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 1,045 $ 1,147 $ 1,249 $ 1,276 $ 1,298 $ 1,353 $ 1,434
58% 61% 67% 102%(1) 64% 80%(1) 62%
$ 2.55 $ 2.825 $ 3.125 $ 3.20 $ 3.25 $ 3.40 $ 3.625
- - - - ----------------------------------------------------------------------------------------------------------------------------------
$ 62 5/8 $ 58 $ 67 7/8 $ 63 1/8 $ 79 1/8 $ 84 1/4 $111 3/4
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(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.
[Chart - Page 57]
YEAR-END MARKET PRICE
PER COMMON SHARE
(Dollars)
OVER THE PAST 10 YEARS, OUR STOCK PRICE HAS INCREASED AT AN ANNUALIZED RATE OF
14%.
Mobil 57
SHAREHOLDER INFORMATION
THE TICKER SYMBOL FOR MOBIL on the New York Stock Exchange is MOB.
THE 1996 ANNUAL MEETING for shareholders will be held Thursday, May 9, 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 10,
1996; September 10, 1996; December 10, 1996, and March 10, 1997.
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 pros-
pectus on Mobil's Stock Purchase and Dividend Reinvestment Plan from: Chemical
Mellon Shareholder Services, L.L.C., 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: Chemical Mellon Shareholder Services,
L.L.C., 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:
1995 Mobil Fact Book, a supplement to the annual report with additional
financial and operating data.
Mobil's Commitment to Diversity, a 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 1215-885-7810.
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.: Chemical Mellon Shareholder
Services, L.L.C., Overpeck Centre, 85 Challenger Road, Ridgefield Park, New
Jersey 07660. Telephone 1800-648-9291 (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.
INTERNET Address: http://www.mobil.com
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: Chemical Mellon Shareholder Services, L.L.C., Shareholder Relations,
P.O. Box 590, Ridgefield Park, New Jersey 07660.
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 1995 is printed on recycled and recyclable paper.
58 Mobil
BOARD OF DIRECTORS
[Photograph of board of directors]
Heimbold, Branscomb, Fites, Schwartz, Swanson, Hoenmans, Renna, Sanford,
Jacobson, Johnson, Peters, Noto, Kaplan and Munro
LEWIS M. BRANSCOMB
Elected 1978, Director, Science, Technology and Public Policy, John F.
Kennedy School of Government, Harvard University. Committees: Audit
(Chmn.), Directors and Board Affairs
Donald V. FITES
Elected 1990, Chairman and Chief Executive Officer, Caterpillar Inc.
Committees: Audit, Public Issues, Directors and Board Affairs
CHARLES A. HEIMBOLD, JR.
Elected 1995, Chairman and Chief Executive Officer, Bristol-
Myers Squibb. Committees: Directors and Board Affairs, Public Issues
PAUL J. HOENMANS
Elected 1985, Executive Vice President, Mobil Oil Corporation, Joined Mobil
1954. Committee: Executive
ALLEN F. JACOBSON
Elected 1988, Former Chairman of the Board and Chief Executive Officer,
3M. Committees: Directors and Board Affairs (Chmn.), 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, Management Compensation and
Organization
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,
Public Issues
LUCIO A. NOTO
Elected 1988, Chairman of the Board, President and Chief Executive
Officer, Joined Mobil 1962. Committee: Executive (Chmn.)
AULANA L. PETERS
Elected 1992, Partner, Gibson, Dunn & Crutcher. Committees: Audit, 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, Public Issues
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 and
Chief Financial Officer
ROBERT O. SWANSON,
Senior Vice President
REX D. ADAMS,
Vice President
ALDIS V. LIVENTALS,
Vice President
CHARLES H. DUBOIS,
Secretary
SAMUEL H. GILLESPIE III,
Vice President and General Counsel
WALTER R. ARNHEIM,
Treasurer
GEORGE BROADHEAD,
Acting Controller
* (C) 1996 Mobil Corporation
* (C) Copyright.
MOBIL CORPORATION
3225 Gallows Road, Fairfax, Virginia 22037-0001
GRAPHIC APPENDIX LIST - 1995
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 1995".
Inside front
cover - Top. Enlarged letters, "MOBIL AT" below which are column headings.
Right side: "WHAT WE DO"; left side: "MAJOR STRENGTHS."
Page 1 - Top. Enlarged letters, "A GLANCE" below which are column headings:
Right side, "HOW WE DID IN '95"; left side, "WHAT'S AHEAD."
One Graph - lower right side.
Average annual returns to shareholders, Mobil share--price
appreciation plus reinvested dividends vs. Competitors, and
S&P 500--1 year, 5 years, 10 years.
Page 2 - Photo
Centered, upper mid-page: Lucio A. Noto, Chairman, President
and Chief Executive Officer.
Page 4 - Photo.
Lower left side: Three team members in Almaty, review seismic
survey plans for an exploration project in the northwest part of
Kazakstan.
Page 5 - Photo.
Right side, mid-page: In North Sea's Galahad field offshore the
United Kingdom, two engineers check innovative, cost-effective
monopod drilling platform prior to installation.
Page 6 - Photo
Left side, mid-page: Three construction workers at Ras Laffan
site, one of our two LNG joint ventures in Qatar.
Page 7 - Photo.
Lower right side: two modern, floating production platforms in
deepwater areas of the Gulf of Mexico.
Page 8 - Photo.
Lower left side: Two construction workers at new lubricant blend-
ing plant site in Tianjin, People's Republic of China.
Page 9 - Photo.
Lower right side: Attendant provides customer service at one of
the selected Friendly Serve stations in the U.S.
Page 10 - Photo.
Lower left side: A Mobil tanker passes the Santisima Cruz de
Barranco Church in Lima's historic district.
Page 11 - Photo.
Lower right side: Construction site of the new lubricant base-
stock refinery in Yanbu, Saudi Arabia.
Page 12 - Photo.
Lower left side: At our Kerkrade, the Netherlands, polypropylene
film plant, an operator inspects an eight-foot roll of film.
Page 13 - Photo.
Lower right side: Two technicians monitor a blow-molding test at a
Mobil research laboratory in Edison, New Jersey.
Page 14 - Photo.
Lower left side: A technician conducts a quality control test in
the laboratory at our Jurong, Singapore, aromatics complex.
Page 15 - Photo.
Lower right side: An operator checks product cleanliness through
a sight glass at Mobil's new esters plant in Amsterdam.
Page 18 - Two Bar Graphs:
Top
Income of Mobil (millions of dollars) for years 1991 through 1995
(excludes the LCM accounting method change in 1994).
Bottom
Total return to shareholders (per $100 invested on 12/31/90), S&P
500 and Mobil--share price appreciation plus reinvested dividends
--for years 1991 through 1995.
Page 19 - One Bar Graph
Annual dividends per share of common stock (dollars) for years
1988 through 1995.
Page 20 - Two Bar Graphs:
Top
U.S. and international Upstream earnings of Mobil (millions of
dollars) for years 1993 through 1995.
Bottom
U.S. and international net production of oil and gas (thousands
of barrels daily of oil equivalent) for the years 1993 through
1995.
Page 21 - Two Bar Graphs:
Top
U.S. and international average crude oil sales prices of Mobil
(dollars per barrel) for years 1993 through 1995.
Bottom
U.S. and international average natural gas sales prices of Mobil
(dollars per thousand cubic feet) for years 1993 through 1995.
Page 22 - Two Bar Graphs:
Top
U.S. and international Downstream earnings of Mobil (millions of
dollars) for years 1993 through 1995.
Bottom
U.S. and international refinery runs for Mobil (thousands of
barrels daily) for years 1993 through 1995.
Page 23 - Two Bar Graphs:
Top
U.S. and international Downstream petroleum product sales volumes
for Mobil (thousands of barrels daily) for years 1993 through
1995.
Bottom
U.S. and international Downstream petroleum product sales revenues
for Mobil (millions of dollars) for years 1993 through 1995.
Page 24 - Two Bar Graphs:
Top
Chemical segment earnings (Petrochemicals and Plastics and Other
in millions of dollars) are presented for years 1993 through 1995.
Bottom
Chemical segment net sales to trade (Petrochemicals and Plastics
and Other in millions of dollars) are presented for years 1993
through 1995.
Page 28 - Two Bar Graphs:
Top
Total Revenues and Total Costs and Expenses for Mobil (millions of
dollars) for years 1993 through 1995.
Bottom
Mobil's return on average shareholders' equity (in percent) for
years 1993 through 1995 (excludes 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 1993 through 1995.
Bottom
Mobil's return on average capital employed (in percent) for years
1993 through 1995 (excludes LCM accounting method change in 1994).
Page 32 - Bar Graph - Top
Proceeds from sales of assets (millions of dollars) for years 1993
through 1995.
Mountain Graph - Bottom
Mobil capital and exploration expenditures (millions of dollars)
for years 1993 thorugh 1995.
Page 54 - Two Bar Graphs:
Top
Net crude oil and natural gas liquids proved reserves of Mobil
(millions of barrels) for years 1991 through 1995.
Bottom
Net natural gas reserves of Mobil (billions of cubic feet) for
years 1991 through 1995.
Page 55 - Bar Graph - Top
Refinery Runs vs. Petroleum Product Sales (thousands of barrels
daily) for years 1991 through 1995.
Mountain Graph - Bottom
Number of Employees (At year-end) for Mobil for years 1991 through
1995, 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
1985 through 1995.
Bottom
Debt-to-capitalization ratio (in percent) for years 1985 through
1995.
Page 57 - One Mountain Graph
Year-end market price per share of common stock (dollars) for
years 1985 through 1995.
Page 59 - Photo
(Inside Back Fourteen-member group photo of Mobil's Board of Directors.
Cover)
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.