1997
______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
-----------------
Commission File No. 1-7555
------
MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2850309
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3225 GALLOWS ROAD, FAIRFAX, VIRGINIA 22037-0001
TELEPHONE: (703) 846-3000
-----------------------------------------------------------
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------------------- -----------------------
Common Stock, $1.00 Par Value New York Stock Exchange
7 5/8% Debentures due 2033 New York Stock Exchange
8% Debentures Due 2032 New York Stock Exchange
8 3/8% Notes Due 2001 New York Stock Exchange
8 5/8% Debentures Due 2021 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Guarantee, Mobil Oil Corporation Employee Stock Ownership Plan (ESOP) Trust
9.17% Sinking Fund Debentures Due 2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
---
The number of voting securities of the registrant outstanding on February 27,
1998, the latest practicable date, was (i) 781,760,429 shares of common stock,
all of which comprise a single class with a $1.00 par value, and each being
entitled to one vote and (ii) 170,029 shares of Series B ESOP Convertible
Preferred Stock, $1.00 par value per share, and each being entitled to 100 votes
for a total of 17,002,900 votes. As of the same date, the aggregate market value
of voting stock held by non-affiliates of the registrant was $56,436,828,571,
based on a closing price of $72.25 per share. The approximate number of common
equity security holders as of the same date was 185,419.
Parts I and II incorporate information by reference to the Annual Report to
Shareholders for the year ended December 31, 1997. Part III contains information
incorporated by reference to the registrant's definitive proxy statement, which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1997.
______________________________________________________________________________
MOBIL CORPORATION
Form 10-K
December 31, 1997
TABLE OF CONTENTS
PAGE(S)
--------------------------
1997 1997
Annual Annual
Report on Report to
Form 10-K Shareholders
--------- ---------------
PART I
Item 1. Business......................................... 1 -
(a) General.................................... 1 -
(b) Environmental Matters...................... 1 30,49
(c) Segment and Geographic Information......... 2 38,39
(d) Business Description and Properties........ 2 55,56,62
Petroleum Operations..................... 2 -
Upstream............................... 3 -
Downstream............................. 16 -
Chemical Operations...................... 17 -
Other Operations......................... 18 -
Item 2. Properties....................................... 19 -
Item 3. Legal Proceedings................................ 19 -
Item 4. Submission of Matters to a Vote
of Security Holders............................ 20 -
PART II
Item 5. Market for Registrant's Common Stock
and Related Stockholder Matters................ 21 31
Item 6. Selected Financial Data.......................... 21 63
Item 7. Management's Discussion and Analysis
of Results of Operations and
Financial Condition............................ 21 19-32,34,36
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.............................. 21 28
Item 8. Financial Statements and
Supplementary Data............................. 21 31,33,35,37-59
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure........................... 21 -
PART III
Item 10. Directors and Executive Officers
of the Registrant.............................. 21 -
Item 11. Executive Compensation........................... 21 -
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................... 21 -
Item 13. Certain Relationships and
Related Transactions........................... 21 -
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................ 23 -
Supplemental Financial Information............... 25 -
Financial Statement Schedule................... 25 -
Signatures....................................... 26 -
Exhibit Index.................................... 27 -
Exhibits......................................... 28 -
PART I
ITEM 1. BUSINESS.
(A) GENERAL
MOBIL CORPORATION (Mobil) was incorporated in March 1976 in the state of
Delaware. Mobil's principal business, which is conducted primarily through
wholly-owned subsidiaries, is in the petroleum industry. Mobil is also a
manufacturer and marketer of petrochemicals, packaging films and specialty
chemical products. Through its subsidiaries, Mobil had business interests in
about 140 countries and employed approximately 42,700 people worldwide at
December 31, 1997.
Through its subsidiaries, Mobil operates a worldwide oil and gas exploration
and producing business, a global marketing and refining complex, a network of
pipelines and tankers linking these worldwide oil and gas businesses, a world
scale chemical business and a highly sophisticated research and engineering
operation.
A list of Mobil's most significant subsidiaries is contained on pages 30
through 32 of this Annual Report on Form 10-K. In this Report, except as
otherwise indicated by the context, the term "Mobil" refers to the parent
corporation and all of its subsidiaries and affiliates and their operating
divisions collectively, and sometimes to one or more of them.
Mobil makes no representations as to the future trend of its business and
earnings, or as to future events and developments that could affect the oil
industry in particular and that may affect other businesses in which Mobil is
directly or indirectly engaged. These include such matters as the divestiture of
certain operations, environmental quality control standards, oil imports, new
discoveries of hydrocarbons and the demand for petroleum products. Furthermore,
Mobil's business could be affected by future price changes or controls, material
and labor costs, legislation, taxes, labor conditions, transportation
regulations, tariffs, litigation, embargoes, foreign currency exchange
restrictions and changes in foreign currency exchange rates. Mobil has direct
and indirect investments and interests in many enterprises worldwide and makes
no representation as to future developments, which may have a profound effect on
its business enterprises throughout the world. Mobil also recognizes that such
enterprises are subject to political uncertainties in many of the countries in
which it operates. Countries in addition to the U.S. which currently are, and
are expected to continue to be, significant contributors to Mobil's operating
earnings are Australia, Canada, Germany, Indonesia, Nigeria, Norway, Saudi
Arabia and the United Kingdom (U.K.).
(B) ENVIRONMENTAL MATTERS
The discussions of Environmental Matters on pages 30 and 49 of Mobil's 1997
Annual Report to Shareholders are incorporated herein by reference.
Mobil and certain of its subsidiaries and affiliates are parties to numerous
proceedings instituted by governmental authorities and others under provisions
of applicable laws or regulations relating to the discharge of materials into
the environment. Such environmental proceedings are further discussed herein on
page 19 under Item 3. Legal Proceedings.
Mobil -1-
(C) SEGMENT AND GEOGRAPHIC INFORMATION
Segment and Geographic information for 1995, 1996 and 1997 on pages 38 and 39
of Mobil's 1997 Annual Report to Shareholders is incorporated herein by
reference.
(D) BUSINESS DESCRIPTION AND PROPERTIES
In addition to the business description and properties contained herein, the
following data included in Mobil's 1997 Annual Report to Shareholders are
incorporated herein by reference:
1997 Annual
Report to
Shareholders
Description Page
----------------------------------------------- ------------
Estimated Quantities of Net Proved Oil and
Natural Gas Liquids Reserves (Table 1).... 55
Estimated Quantities of Net Proved Natural
Gas Reserves (Table 2).................... 56
Petroleum Product Sales..................... 62
Refinery Runs............................... 62
Chemical Sales by Product Category.......... 62
PETROLEUM OPERATIONS
Mobil is one of the largest oil companies in the world, with petroleum product
sales of 3.3 million barrels a day. In 1997 Mobil produced the oil equivalent of
about 1.8 million barrels daily of crude oil, natural gas liquids and natural
gas and had refinery runs of 2.2 million barrels per day. Petroleum net sales in
1997 were $54,183 million, down 7% from 1995 and 19% from 1996. The decrease in
1997 from 1996 was principally due to the effects of equity accounting for the
Mobil-BP European downstream alliance.
- --------------------------------------------------------------------
PETROLEUM SALES (a) 1995 1996 1997
(Millions of dollars)
- --------------------------------------------------------------------
Automotive gasoline..................... $21,697 $23,193 $17,180
Distillate and jet fuels................ 14,710 17,842 12,096
Other refined petroleum products........ 7,318 8,193 6,686
------- ------- -------
Total refined petroleum products 43,725 49,228 35,962
Crude oil............................... 8,268 11,206 12,564
Natural gas............................. 5,282 5,369 4,653
Other products.......................... 846 906 1,004
------- ------- -------
Net Sales of Petroleum.................. $58,121 $66,709 $54,183
======= ======= =======
(a) Excludes excise and state gasoline
taxes of.......................... $ 8,646 $ 9,236 $ 5,928
- --------------------------------------------------------------------
Prices for crude oil have experienced dramatic fluctuations during the past
several years in response to both political and market factors, making it
difficult to forecast future trends in prices or margins in Petroleum
Operations. During 1997 average worldwide crude oil prices decreased about $1.50
per barrel, reflecting increased supplies, slower demand growth in Asia and
milder weather.
Mobil's Petroleum Operations are divided into two primary business activities
- -- Upstream, which refers to exploration and producing; and Downstream, which
refers to marketing, refining, supply and transportation.
Mobil -2-
PETROLEUM OPERATIONS -- UPSTREAM
EXPLORATION AND PRODUCING
SIGNIFICANT DEVELOPMENTS IN 1997 IN MOBIL'S EXPLORATION AND PRODUCING
OPERATIONS INCLUDED THE FOLLOWING:
WORLDWIDE
In 1997, Mobil conducted exploration and producing activities in 38 countries.
Net production of liquids (crude oil and natural gas liquids) averaged 927
thousand barrels a day (TBD) in 1997, an increase of 73 TBD from 854 TBD in
1996. Net natural gas production of 4,556 million cubic feet a day (MMCFD) in
1997 was 31 MMCFD lower than 1996. International total production was up 10%,
primarily due to continued development of resources in Nigeria, new production
in Equatorial Guinea and the 1996 acquisitions of Ampolex Ltd. of Australia and
a 25% interest in the Tengiz field in Kazakhstan. Worldwide natural gas sales in
1997 were 4,575 MMCFD, a decrease of 900 MMCFD, as less third-party natural gas
was purchased for resale due to the full-year impact of the natural gas
marketing joint venture with Duke Energy (formerly PanEnergy). Proved liquids
and natural gas reserve additions replaced 146% of 1997 production on a barrel
of oil equivalent (BOE) basis, including purchases and sales. The following
table summarizes net production of crude oil and natural gas liquids (NGL) and
of natural gas for 1995 through 1997.
- --------------------------------------------------------------------------------
CRUDE OIL & NGL(TBD) NATURAL GAS(MMCFD)
NET PRODUCTION 1995 1996 1997 1995 1996 1997
- --------------------------------------------------------------------------------
Fully consolidated companies
United States................. 282 262 186 1,439 1,333 1,141
Europe........................ 173 153 158 1,098 1,187 1,233
Asia-Pacific.................. 97 106 97 1,554 1,581 1,596
Other Areas................... 213 271 348 432 446 474
--- --- --- ----- ----- -----
Total Consolidated............ 765 792 789 4,523 4,547 4,444
--- --- --- ----- ----- -----
Mobil's share of production of
equity companies.............. 45 62 138 31 40 112
--- --- --- ----- ----- -----
Total Production................ 810 854 927 4,554 4,587 4,556
=== === === ===== ===== =====
This table presents Mobil's net production from properties in which it has a
working or royalty interest and its share of production of investees accounted
for on the equity method. Net production excludes royalties and quantities due
others when produced, whether taken in kind or settled in cash.
- --------------------------------------------------------------------------------
UNITED STATES
Including the production from Mobil's joint venture with Shell in California,
Mobil's production in the United States was 1,161 MMCFD of natural gas and 244
TBD of liquids, or a total of 454 thousand barrels a day of oil equivalent
(TBDOE) during 1997. Compared with 1996, total production decreased 10% as a
result of natural declines of maturing fields and asset divestments offset
somewhat by increases from additional capital investment.
In CALIFORNIA, Mobil's heavy oil operations were joined with Shell's
CalResources operation in the spring of 1997 creating a separate entity, Aera
Energy LLC, which became the largest crude producer in California at about 250
TBDOE. In 1997, California contributed 105 TBDOE to Mobil's U.S. production.
The Gulf of Mexico continental shelf operation continued to be a significant
contributor for Mobil, accounting for approximately 25% of total U.S.
production. In Mobile Bay, offshore Alabama, activity levels remained high in
1997 with the streaming of the Aloe Bay well, and the successful bidding of four
more offshore
Mobil -3-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
blocks. Drilling is currently in progress at Mobile 823-A5 and in Block 914,
immediately to the south of the Mobile Bay operation. Both wells are expected to
be on stream in the spring of 1998.
In DEEPWATER Gulf of Mexico, Mobil increased its presence by successfully
bidding on over 20 additional blocks in 1997, and now holds working interests in
over 240 blocks of deepwater acreage. Mobil signed a contract to secure a
deepwater drillship for a three-year period commencing in the fourth quarter of
1998.
EUROPE
In the frontier Atlantic Margin basins of northwest Europe, Mobil was
successful in acquiring several blocks of high potential acreage. In the United
Kingdom, Mobil was awarded nine of the twelve tranches of blocks it bid for in
the 17th license round and the Irish Rockall license round, increasing its net
acreage position from 235,000 acres to over 900,000 acres. The first exploration
well is planned to be drilled on Tranche 61 in 1998. Mobil was awarded three
licenses with one operatorship in the Barents Sea, adding 523,000 net acres to
its exploration inventory. Five wildcat wells are planned for 1998.
Mobil was active in progressing the developing integrated European natural gas
marketing business. The first throughput contract for the U.K.-Belgium
Interconnector was finalized and the first contract for a direct sale of United
Kingdom natural gas to a continental consumer was completed. With an improved
domestic reserve position in Germany and the prospect of increased natural gas
volumes from Norway and the Netherlands, Mobil has the ability to conclude
additional natural gas sales.
Mobil produced 75 TBD of liquids and 668 MMCFD of natural gas in the UNITED
KINGDOM (U.K.) during 1997, records for both natural gas and total production on
a BOE basis. Liquid volumes were up 15% from 1996 levels, primarily due to full-
year production from the Nevis and Telford fields and start-up of the Katrine
field. Natural gas production increased 8%, reflecting operating efficiencies
and added flexibility gained from Mobil's re-negotiation of its North Sea
natural gas contracts with British Gas in late 1996.
In 1997, Mobil's share of Beryl area fields production totaled 48 TBD of
liquids and 120 MMCFD of natural gas. This included better than anticipated oil
and natural gas production rates from Nevis, a field that started production in
late 1996 and accounted for 8 TBDOE in 1997. Both the Beryl A and the Beryl B
facilities broke operational records in 1997 for continuous production.
Mobil, together with the Beryl partners, acquired Conoco's UKCS Quadrant 9
assets in the vicinity of the Beryl infrastructure. As operator for the assets,
Mobil contracted for a drilling rig to develop the Buckland and Sorby fields
(Mobil shares, 35% and 38.2%, respectively). Start-up for Buckland is scheduled
for 1999, followed by Sorby in 2000.
All Mobil-equity and third-party natural gas from the Beryl and Scott areas is
delivered for sale through the Mobil-operated 210-mile Scottish Area Gas
Evacuation (SAGE) pipeline and onshore processing plant at St. Fergus, Scotland.
Milestones for the SAGE natural gas plant in 1997 included the processing of its
one trillionth cubic foot of natural gas as well as handling a record peak
natural gas volume in excess of one billion cubic feet per day. The facility
upgrade to accommodate processing of third-party natural gas from the Britannia
field is on target for start-up in 1998.
Mobil -4-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
Field development approvals were obtained from the U.K. government for the
Malory and Shearwater fields. Malory, a 1997 wildcat discovery (Mobil share,
76%) expects initial natural gas production in October, 1998, just 21 months
from the date of discovery. In the Shearwater field (Mobil share, 16.5%)
drilling has begun, and first deliveries of natural gas are planned for 2000.
Mobil produced 79 TBD of liquids and 50 MMCFD of natural gas in NORWAY during
1997, primarily from two of Europe's largest fields, Statfjord and Oseberg. The
successful start-up of the Njord field also contributed 2 TBD in 1997, which is
expected to increase to 11 TBD in 1998. Replacement of production with proved
reserves was 125% in 1997 and has averaged a significant 199% over the past five
years.
New developments in the core Statfjord/Oseberg area are expected to increase
future production. Development of the Statfjord North Flank was approved in 1997
with an additional 40 TBD (Mobil share, 5 TBD) of production planned for 1999.
Implementation of a major natural gas injection project to increase oil recovery
is planned for 1998. Oseberg East is scheduled for production in late 1998,
followed by Oseberg South in 2000 (Mobil share, 9 TBD).
The "Plan for Development and Operation for the Fram Field" in Block 35/11
will be submitted to the Norwegian government in 1998. The development scenario
for this project was improved by a significant exploration discovery in 1996,
the 35/11-8S well. Mobil, with a 25% interest, expects to have 19 TBD at peak
production. Initial production is scheduled for 2001.
The Halten Terrace area is emerging as Mobil's new core area in Norway. This
area includes the Njord, Aasgard and Halten South developments. The Njord field,
in which Mobil acquired a 20% interest in 1995, is being developed using subsea
completions and floating production facilities. First production of this field
began in September 1997. Mobil's share of production at peak rate is expected to
be 13 TBD. In 1998, the first liquids production of 204 TBD (Mobil share, 15
TBD) is expected at Aasgard, the world's largest subsea development. Aasgard's
natural gas production is expected to stream two years later at over 800 MMCFD
(Mobil share, 60 MMCFD). The Halten South project will develop two of the
three largest Norwegian discoveries in the last ten years: Kristin (1997) and
Lavrans (1995) together with two earlier discoveries, Tyrihans and Trestakk.
Production for Halten South is planned for 2002.
Mobil produced 455 MMCFD of natural gas and 4 TBD of crude oil, totaling 86
TBDOE in GERMANY. Natural gas sales were 549 MMCFD. Germany increased proved
reserves of natural gas by 65 BCF, replacing 139% of natural gas production, as
a result of a successful appraisal drilling program and enhanced reservoir
performance.
Mobil is positioned to grow its natural gas storage business through the
ownership of several depleted reservoirs that can be converted to storage
operations. The Albaching and the Buchhortst storage projects have been
technically evaluated and have progressed such that projects with third party
users can be considered over the next several years.
ASIA-PACIFIC
In INDONESIA, Mobil's share of production volumes averaged 1,571 MMCFD of
liquefied natural gas (LNG), 27 TBD of condensate and 19 TBD of liquefied
petroleum gas (LPG). LNG and LPG were delivered to customers in Japan and Korea,
and condensate was sold to customers in Singapore, Korea, Japan and Australia.
Mobil -5-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
Additional discovered fields in North Sumatra are being developed to
supplement declining Arun production. The Pase field began production in January
1998. Development activities are under way for the North Sumatra Offshore "A"
field, with start-up expected in 1999.
Additionally, in 1996 Mobil obtained a 26% participating interest in the
production sharing contract (PSC) for the Natuna D-Alpha field which is located
in the South China Sea northeast of Singapore. Joint efforts to commercialize
the project are under way as a supply source for LNG and/or pipeline natural
gas.
Outside northern Sumatra, Mobil has a 68.6% interest in the Madura Block,
located offshore East Java. Madura natural gas production is planned to provide
fuel for an electrical power generation plant. Development of the Madura field
has been delayed pending approval by the Indonesian government of the power
plant project.
Mobil acquired a 49% interest in the Cepu exploration block in East Java as
part of the Ampolex acquisition and will begin drilling operations in the first
quarter of 1998.
Following the completion of the Ampolex Ltd. acquisition, Mobil is building
its position in AUSTRALIA and PAPUA NEW GUINEA by utilizing strengths and assets
from both companies. In 1997, Mobil's production in Australia and Papua New
Guinea increased to 56 TBDOE.
Over 60% of the oil production was from two offshore fields located in
AUSTRALIA'S North West Shelf: Wandoo (Mobil share, 60% and Mobil-operated) and
Griffin (Mobil share, 35%). The Wandoo "B" platform came on stream in March 1997
with peak production of 50 TBD (Mobil share, 30 TBD). At the Griffin field, all
production was curtailed in mid-November 1997 as the result of an equipment
failure onboard the floating production, storage, and off-loading vessel (FPSO).
Mobil and the operator are actively working to bring the field safely back
online in 1998.
Future growth on the North West Shelf will be provided by developing the
Gorgon field (Mobil share, 14.28%). This large natural gas development
opportunity is operated by the Western Australia Petroleum Company on behalf of
Mobil and its partners. Negotiations are under way with potential LNG buyers for
deliveries as early as 2002-2003. Mobil's two new exploration permits adjacent
to the Gorgon field together with this year's Athena natural gas discovery
provide the potential to increase reserves.
Exploration began in 1997 and will continue in 1998 on Australian acreage,
including that acquired with the 1996 Ampolex acquisition. There have been four
discoveries--three of them commercial. Two oil discoveries in the Carnarvon
Basin, Woolybutt and Pitcairn, will be further appraised in 1998.
In PAPUA NEW GUINEA (PNG), Mobil holds a 14.5% interest in the Kutubu oil
project. Kutubu, PNG's first commercial oil development, produced an average 83
TBD (Mobil share, 12 TBD) in 1997. PNG production will be maintained in 1998
with the streaming of Gobe Main (Mobil share, 14.5%) and SE Gobe fields (Mobil
share, 8%),
Mobil -6-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
replacing declining production from Kutubu. The Moran oil field, the most recent
discovery in PNG, was brought on production in January 1998 at a rate of 3 TBD
(Mobil share, 14.518%) through an extended well test. Production is expected to
reach about 10 TBD, gross.
OTHER
In 1997, production in CANADA averaged 49 TBD of liquids and 397 MMCFD of gas.
Liquids production remained flat, with higher heavy oil volumes offsetting the
effects of natural field declines. Natural gas production was down 5% from 1996
mainly due to the sale of non-strategic assets. Ongoing development in western
Canada and first oil from Hibernia resulted in Mobil's share of year-end
production rates of 56 TBD of liquids and 425 MMCFD of natural gas.
At Hibernia (Mobil share, 33.125%), the first oil was produced in mid-
November, one month ahead of schedule. The first well produced at a sustained
rate of 45 TBD, a new record for a Canadian oil well. The first cargo of
Hibernia crude was shipped in December. At year end, Hibernia was producing a
combined 70 TBD from two wells, while drilling proceeded on two others. The
Hibernia operator, Hibernia Management Development Company, is investigating
means to increase the peak production capacity of the platform from 135 TBD to
180 TBD (Mobil share, 60 TBD).
Regulatory approvals were received to proceed with a 24-well development of
Terra Nova (Mobil share, 22%), located 25 miles southeast of Hibernia. The wells
will be produced using a floating vessel for the production, processing and
storage of the crude oil. With the partners' management approval obtained in
February 1998, first oil is expected by year-end 2000. Peak production of 115
TBD (Mobil share, 25 TBD) is expected from this field. Future potential in the
area was enhanced in late 1997, when Mobil and its partners (Mobil share, 25%)
successfully acquired key exploration licenses around Hibernia and Terra Nova.
Newfoundland Transshipment Ltd. (Mobil share, 30%) began construction of a
regional transshipment terminal at Whiffenhead, Newfoundland. This facility is
being built to serve the needs of Hibernia with the potential to accommodate
regional expansion, including the Terra Nova project. Completion of the
transshipment terminal is targeted for late 1998.
The Sable Offshore Energy Project (SOEP) received all necessary government and
regulatory approvals and construction has begun. Mobil is the lead partner with
a 50.8% interest. The SOEP consists of six fields, located 125 miles off the
coast of Nova Scotia. Production is expected to commence by late 1999 and
average 460 MMCFD of natural gas and 20 TBD of natural gas liquids by 2000
(Mobil share, 254 MMCFD and 10 TBD, respectively). Natural gas from SOEP will be
transported to markets in the Canadian Maritimes and the U.S. Northeast via the
Maritimes & Northeast Pipeline project (Mobil share, 25%).
Increased capital investment in western Canada targeted natural gas and heavy
oil opportunities. New natural gas volumes were added from southern Alberta, and
heavy oil production, primarily from Celtic and Cold Lake, doubled to 9 TBD.
Based on encouraging technical results from the pilot program, Mobil is
progressing efforts to commercialize steam assisted gravity drainage technology
that is applicable to its large heavy oil resources.
Mobil -7-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
The Athabasca heavy oil sands of Alberta represent a future opportunity for
Mobil in one of the world's largest oil deposits. The Kearl project proposes to
surface mine and separate a thick sand-oil mixture using conventional proven
technology. An ongoing technical evaluation and business review will continue
through 1998. The project could potentially contribute 100 TBD of production
(Mobil share, 100%).
Mobil holds a 40% interest in a joint venture with the Nigerian National
Petroleum Corporation (NNPC) covering about 800,000 acres in shallow water
offshore southeastern NIGERIA. Mobil also operates two deepwater blocks under
Production Sharing Contracts: OPL 221, a 565,000 acre block in the southeast
with a 50% interest, and OPL 215, a 641,800 acre block in the western Niger
delta with a 20% interest.
Mobil's 1997 equity production in Nigeria was 253 TBD, 21% more than 1996, and
reserve replacement was 125% of production. Highlights included the start-up of
the Edop Gas Injection and Ekpe Gas Compression projects and the Usari field
development. The natural gas projects will facilitate injection into the major
Edop and Asabo fields for enhanced oil recovery and natural gas conservation.
Mobil's share of production is expected to grow to over 370 TBD by 2002.
Projects initiated to support this production growth include the Usari field
development, further development of the Oso field, and infill drilling in other
fields. The Oso NGL project (Mobil share, 51%) which will extract natural gas
liquids from the Oso field at a rate of 51 TBD (Mobil share, 26 TBD) is near
completion, with the first NGL shipment expected about May 1998.
An oil spill occurred on January 12, 1998 in Nigeria. The spill resulted from
a rupture in the pipeline running from the Idoho production platform to the Qua
Iboe terminal in southeastern Nigeria. There are indications that approximately
500 barrels of oil, just over one percent of the total spilled (estimated at
40,000 barrels of light crude oil), impacted the shoreline in intermittent
patches along the coastline west of Bonny. A response plan was developed and
implemented with the full cooperation of the authorities, industry partners,
Clean Nigeria Associates, and experts from abroad. Clean up and repairs have
been completed and production came back on stream February 10, 1998. A large
portion of deferred production, approximately 100,000 barrels per day (Mobil
share, 40%) is expected to be made up over the remainder of the year.
Mobil is the operator of the Zafiro field located within the 547,000 acre
Block B concession, 50 miles offshore of EQUATORIAL GUINEA. In March 1998,
Mobil, United Meridan Corp. (UMC) and Equatorial Guinea agreed to a revised PSC
for the offshore Block B project. Under the new agreement, Mobil's interest
changes from 75% to 71.25%, with UMC holding 23.75% and the remaining 5% held by
Equitorial Guinea. The initial phase of the Zafiro field development was
delivering 30 TBD (Mobil share, 21 TBD) from six subsea wells by year-end 1996.
During 1997, 9 additional wells were completed and production averaged 56 TBD
(Mobil share, 37 TBD). Alternatives, including a platform utilizing extended
reach drilling, are being considered for development of reserves added by 1997
wildcat discoveries at Serpentina, QIB, and Opalo East.
In January 1997, within a year of drilling the first well, production began
from the KF field in the Ebome Marine concession of CAMEROON, awarded in 1996,
at 10 TBD (Mobil share, 4 TBD).
Mobil -8-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
Mobil, a subsidiary of Petroleos de Venezuela, SA (PDVSA) and an affiliate of
Veba AG signed an Association Agreement in 1997, outlining the terms of a 35-
year contract involving the production and upgrading of 120 TBD of extra-heavy
crude oil from VENEZUELA'S Orinoco Tar Belt. When the facilities in Venezuela
are completed, most of the crude will be sold to Chalmette Refining, L.L.C. for
processing at its refinery in Louisiana.
In 1997, Mobil drilled the first in a series of wells to test and develop
western Venezuela's La Ceiba, a 445,000 acre exploration block located on the
southeastern shore of Lake Maracaibo near several large producing fields. Mobil,
the designated operator, spudded a second well in January 1998 to further define
the potential of the block.
In eastern Venezuela, drilling began in the fourth quarter of 1997 to explore
new leads on the Quiamare-La Ceiba block acquired though the 1996 acquisition of
Ampolex. This block is already in production, and Mobil and its partners
continue to apply advanced technology to increase current production rates and
target new prospects.
In QATAR, the Qatargas project, in which Mobil has a 10% interest, completed
its first full year of LNG deliveries in 1997. The LNG was delivered to Japan's
Chubu Electric Power Company as part of a 25-year supply agreement. The second
liquefaction train was streamed in early 1997, with a third scheduled for
commissioning and start-up in 1998. Gross peak production volumes of 1,200 MMCFD
of natural gas and 40 TBD of condensate will be reached soon thereafter.
Development of Mobil's second LNG project in Qatar, Ras Laffan Liquefied
Natural Gas Company, Ltd. (Ras Laffan), continues to progress. Ras Laffan
reached agreement with Korea Gas Corporation early in 1997 to double the
existing 25-year sales contract to 4.8 million MMTA of LNG. This agreement
launched the construction of the second liquefaction train. Plant construction
and field development are moving ahead, on schedule for streaming in 1999. With
the finalized participation of Itochu Corporation and Nissho Iwai Corporation as
shareholders in Ras Laffan in May 1997 and the eventual participation of Korean
entities as part of the amended sales contract, Mobil will ultimately have a 25%
equity stake in these two trains.
Mobil has a 4.75% interest in an onshore oil concession operated by ADCO, the
ABU DHABI Company for Onshore Oil Operations. In 1997, Mobil's net production
from ADCO was 42 TBD of oil. An expansion program is well under way and is
expected to increase Mobil's capacity to nearly 60 TBD by 2001.
NEW BUSINESS DEVELOPMENT
Mobil continued to take advantage of new business opportunities during 1997.
SOUTH AMERICA
- -------------
- PERU: Mobil is a partner with Shell (operator) in three license blocks,
collectively known as Camisea, believed to be the largest natural gas field
in
Mobil -9-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
South America. The scope of the Camisea project involves field development,
construction of natural gas and NGL pipelines through the Andes Mountains to
the Pacific coast, coastal facilities for fractionation and dispatching, an
option on an independent power plant (IPP), and development of local markets
and exports of natural gas and liquids. Terms of the Camisea license
agreement require a shareholders' commitment in mid-1998 to develop the field
with first production by 2002. Extensive work toward the goal of making this
commitment took place in 1997.
In addition to the work on the Camisea project, license agreements for Blocks
77 and 78 (the Tambopata area in the Madre de Dios basin of southern Peru)
were signed by Mobil, Elf, and Esso, with each company holding a one-third
interest. Seismic programs are nearing completion, and drilling is expected
to begin in 1998 on the Candamo prospect.
- ARGENTINA: Mobil is active in two hydrocarbon basins, the Neuquen basin in
central Argentina and the Noroeste basin in northwest Argentina. With a 51%
share in Sierra Chata, which is in the Neuquen basin, Mobil became one of the
first companies to sell natural gas to Chile through the Gas Andes Pipeline.
Sierra Chata's production is currently 147 MMCFD (Mobil share, 80 MMCFD).
Mobil's 23% interest in the Aguarague block in the Noroeste Basin currently
supplies natural gas to Buenos Aires and allows Mobil to capture natural gas
sales in the growing Brazilian market. This market could also potentially be
supplied with natural gas from the Camisea field in Peru. Mobil's share of
current production from the Aguarague bock is 50 MMCFD of natural gas and 2
TBD of natural gas liquids.
EUROPE
- ------
- ITALY: Mobil and its partners drilled the fifth successful wildcat well in
the Tempa Rossa area. The well was successfully completed in March 1998. A
development decision is expected in late 1998.
AFRICA
- ------
- ANGOLA: A second wildcat well was drilled in the third quarter of 1997 in
deepwater Block 20 of the lightly explored Kwanza Basin. Additional seismic
is planned for 1998 to evaluate the commerciality of this block.
- ALGERIA: Mobil drilled and suspended the second wildcat well on the 2.25
million-acre Touggourt concession. Potential to the east of this location is
now being evaluated. In addition, Mobil is preparing to spud a third wildcat
well to test the southern part of the concession.
COMMONWEALTH OF INDEPENDENT STATES
- ----------------------------------
- KAZAKHSTAN: In 1997, Mobil continued to build on the upstream position it has
established over the past five years in the Republic of Kazakhstan.
Mobil -10-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
In November 1997, Mobil, along with six other major international petroleum
companies, Kazakoil (the Kazakhstani national oil company) and the Republic
of Kazakhstan, signed a Production Sharing Agreement (PSA) for exploration,
development and production of the first twelve blocks in the Kazakhstani
sector of the Caspian Sea. The Offshore Kazakhstan International Operating
Company will act as operator on behalf of the participants in the PSA, and is
the successor to the consortium, in which Mobil has participated since 1993.
Selection of the blocks was completed in 1997, and drilling of the first
exploratory well is planned for 1998.
Mobil is a 25% participant in the Tengizchevroil joint venture, which
operates the Tengiz oil field, located on the eastern shore of the Caspian
Sea. Mobil's share of crude oil and natural gas liquids production from
Tengiz averaged 36 TBD in 1997 despite facility shutdowns for construction to
increase capacity. Mobil's share of production is expected to peak at
approximately 200 TBD of crude oil and 35 TBD of natural gas liquids around
the year 2014. Mobil increased its proved reserves to 637 million barrels of
oil equivalent in 1997 as a result of a technical re-evaluation of the Tengiz
field.
Mobil is a 7.5% partner in the Caspian Pipeline Consortium (CPC) that is in
the initial stages of developing a 900-mile dedicated pipeline system from
the Tengiz field to the Russian Black Sea. Share acquisition in CPC was
completed in May 1997. Other participants include the governments of Russia,
Kazakhstan and Oman as well as seven other oil companies. The pipeline is
scheduled for completion in 2000.
Mobil (with a 25% interest) initiated the Tulpar Munai joint venture in 1995,
which includes partners Kazakhoil (50%), Shell (12.5%) and Japan Kazakhstan
Petroleum Company (12.5%), to explore and develop the 4 million acre Tulpar
block in northern Kazakhstan. Seismic interpretation and drill site selection
were completed in 1997, with the first wildcat exploratory well scheduled to
be drilled in 1998.
- AZERBAIJAN: Mobil was awarded a PSC granting a 50% interest in and the
operatorship of the Oguz block. The remaining 50% interest is held by the
State Oil Company of the Azerbaijan Republic (SOCAR). The Oguz block, east of
Baku in the Azerbaijan sector of the Caspian Sea, is adjacent to the Neft
Dashlary and Guneshli oil fields. Drilling is not expected to begin until
early 2000.
- TURKMENISTAN: As partners in a PSA with the government of Turkmenistan, Mobil
and Monument Oil and Gas plc. are developing and exploring opportunities in
the Nebit Dag license area, onshore western Turkmenistan (Mobil share, 40%).
The license contains five producing properties and additional exploration
acreage.
Mobil -11-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
RESERVES
Mobil is required to report reserve estimates to the U.S. Department of
Energy. During 1997 Mobil filed proved reserve estimates covering the year 1996
under forms EIA-23, Annual Survey of Domestic Oil and Gas Reserves, and EIA-28,
Financial Reporting System. Such estimates were consistent with reserve data
filed with the Securities and Exchange Commission (S.E.C.).
- --------------------------------------------------------------------------------
WELLS IN PROCESS OF BEING DRILLED TOTAL
AT DECEMBER 31, 1997 GROSS NET
- --------------------------------------------------------------------------------
United States...................................... 10 6
International...................................... 33 17
-- --
Worldwide.......................................... 43 23
== ==
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPROVED RECOVERY PROJECTS BEING INSTALLED IN OPERATION
AT DECEMBER 31, 1997 GROSS NET GROSS NET
- --------------------------------------------------------------------------------
United States..................... - - 188 44
International..................... 4 1 66 35
- - ----- -----
Worldwide......................... 4 1 254 79
= = ===== =====
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
------- INTERNATIONAL --------
PRODUCTIVE WELLS AT ASIA- OTHER WORLD- MULT.
DECEMBER 31, 1997 U.S. EUROPE PACIFIC AREAS TOTAL WIDE COMPL.(a)
- --------------------------------------------------------------------------------
Oil: Gross ....... 13,840 886 551 1,714 3,151 16,991 676
Net ......... 2,904 260 85 954 1,299 4,203 278
Gas: Gross ....... 4,201 472 79 959 1,510 5,711 718
Net ......... 2,739 129 79 272 480 3,219 410
(a) Multiple completions included in geographic totals.
- --------------------------------------------------------------------------------
Mobil -12-
SIGNIFICANT DEVELOPMENTS -- CONTINUED
- --------------------------------------------------------------------------------
NET EXPLORATORY AND ------- INTERNATIONAL --------
DEVELOPMENT WELLS ASIA- OTHER WORLD-
DRILLED U.S. EUROPE PACIFIC AREAS TOTAL WIDE
- --------------------------------------------------------------------------------
1995
Exploratory wells
Productive ............. 41 - - 25 25 66
Dry .................... 18 7 3 17 27 45
Development wells
Productive ............. 476 14 1 62 77 553
Dry .................... 15 - 1 1 2 17
1996
Exploratory wells
Productive ............. 21 3 1 45 49 70
Dry .................... 18 12 4 18 34 52
Development wells
Productive ............. 293 13 12 100 125 418
Dry .................... 8 - 1 1 2 10
1997
Exploratory wells
Productive ............. 13 1 1 23 25 38
Dry .................... 5 5 2 13 20 25
Development wells
Productive ............. 229 10 17 209 236 465
Dry .................... 7 - 3 20 23 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OIL AND GAS ACREAGE
AT DECEMBER 31, 1997 UNDEVELOPED ACREAGE DEVELOPED ACREAGE
(THOUSANDS OF ACRES) GROSS NET GROSS NET
- --------------------------------------------------------------------------------
UNITED STATES.......... 3,409 2,016 4,237 2,654
EUROPE................. 18,603 5,820 1,589 567
ASIA-PACIFIC........... 53,119 19,894 637 138
OTHER.................. 62,006 29,077 3,472 1,470
------- ------ ----- -----
TOTAL INTERNATIONAL.. 133,728 54,791 5,698 2,175
------- ------ ----- -----
WORLDWIDE.............. 137,137 56,807 9,935 4,829
======= ====== ===== =====
- --------------------------------------------------------------------------------
Mobil -13-
- --------------------------------------------------------------------------------
AVERAGE SALES PRICE/TRANSFER VALUE
- --------------------------------------------------------------------------------
The following table shows Mobil's average sales price/transfer value (transfer
values are essentially equal to third-party sales prices) and average production
costs in oil and natural gas producing activities in 1995, 1996 and 1997. In
calculating the "dollar per barrel" data, the divisor used is net production.
Natural gas volumes have been converted to oil equivalent barrels and restated
on a BTU (British Thermal Unit) basis, using 5,510, 5,519, and 5,519 cubic feet
of gas per barrel for 1995, 1996, and 1997, respectively. Mobil's share of
equity companies represents Mobil's share of after-tax results of operations for
producing activities of investees accounted for on the equity method. The
geographic segment "Other Areas", in this table, includes principally Canada,
Kazakhstan, and West Africa.
- --------------------------------------------------------------------------------
UNITED STATES 1995 1996 1997
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel)............................ $14.52 $17.40 $17.27
NGL (per barrel).................................. $ 9.94 $13.16 $11.96
Natural gas (per thousand cubic feet)............. $ 1.41 $ 2.17 $ 2.38
Average dollars per barrel of oil equivalent
Revenues.......................................... $10.13 $13.48 $14.13
Production (lifting) costs........................ (4.95) (5.08) (5.13)
Exploration expenses.............................. ( .36) ( .41) ( .53)
Depreciation, depletion and amortization.......... (5.86) (3.46) (3.08)
Other operating revenues/(expenses)............... .16 1.43 .73
Income tax expense................................ .34 (1.99) (2.09)
------ ------ ------
Results of operations for producing activities...... $( .54) $ 3.97 $ 4.03
====== ====== ======
Mobil's share of equity companies................... - - 5.26
====== ====== ======
Total............................................... $( .54) $ 4.00 $ 4.20
====== ====== ======
Above results include the following special items:
Asset sales....................................... ( .11) .65 .32
Restructuring provisions.......................... ( .26) ( .04) -
Asset impairment.................................. (1.85) ( .37) -
Litigation........................................ - - ( .07)
Employee performance award........................ - - ( .02)
- --------------------------------------------------------------------------------
EUROPE 1995 1996 1997
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel)............................ $17.47 $20.85 $19.32
NGL (per barrel).................................. $14.32 $17.47 $18.09
Natural gas (per thousand cubic feet)............. $ 2.70 $ 2.78 $ 2.78
Average dollars per barrel of oil equivalent
Revenues.......................................... $15.99 $17.62 $16.34
Production (lifting) costs........................ (5.29) (5.44) (4.81)
Exploration expenses.............................. ( .94) (1.17) ( .97)
Depreciation, depletion and amortization.......... (3.43) (3.49) (3.19)
Other operating revenues/(expenses)............... .91 .71 .95
Income tax expense................................ (4.06) (4.73) (4.45)
------ ------ ------
Results of operations for producing activities...... $ 3.18 $ 3.50 $ 3.87
====== ====== ======
Mobil's share of equity companies................... $ 2.79 $ 4.04 $ 7.93
====== ====== ======
Total............................................... $ 3.17 $ 3.50 $ 3.90
====== ====== ======
Above results include the following special items:
Asset sales....................................... .04 - -
Restructuring provisions.......................... (.19) - -
Tax related items................................. .19 - -
Asset impairment.................................. (.09) - -
Employee performance award........................ - - ( .01)
- --------------------------------------------------------------------------------
Mobil -14-
- -------------------------------------------------------------------------------
ASIA-PACIFIC 1995 1996 1997
- -------------------------------------------------------------------------------
Revenues
Crude oil (per barrel)............................ $15.09 $20.92 $19.78
NGL (per barrel).................................. $16.35 $18.19 $19.77
Natural gas (per thousand cubic feet)............. $ 2.15 $ 2.50 $ 2.51
Average dollars per barrel of oil equivalent
Revenues.......................................... $12.77 $15.18 $14.98
Production (lifting) costs........................ (1.73) (2.01) (2.04)
Exploration expenses.............................. ( .56) (1.09) ( .60)
Depreciation, depletion and amortization.......... (1.48) (2.12) (2.36)
Other operating revenues/(expenses)............... ( .06) .04 .18
Income tax expense................................ (5.18) (6.11) (5.84)
------ ------ ------
Results of operations for producing activities...... $ 3.76 $ 3.89 $ 4.32
====== ====== ======
Mobil's share of equity companies................... $ 1.73 * $ *
====== ====== ======
Total............................................... $ 3.74 $ 3.87 $ 4.30
====== ====== ======
Above results include the following special items:
Asset sales....................................... .12 ( .15) .29
Restructuring provisions.......................... - ( .03) -
Employee performance award........................ - - ( .01)
- -------------------------------------------------------------------------------
OTHER AREAS 1995 1996 1997
- -------------------------------------------------------------------------------
Revenues
Crude oil (per barrel)............................ $17.03 $20.67 $18.57
NGL (per barrel).................................. $14.74 $16.54 $16.05
Natural gas (per thousand cubic feet)............. $ .78 $ .89 $ 1.22
Average dollars per barrel of oil equivalent
Revenues.......................................... $13.49 $17.03 $15.94
Production (lifting) costs........................ (5.83) (5.46) (5.29)
Exploration expenses.............................. (1.41) ( .95) (1.28)
Depreciation, depletion and amortization.......... (3.75) (1.41) (2.14)
Other operating revenues/(expenses)............... .73 1.48 ( .27)
Income tax expense................................ (3.44) (8.43) (5.22)
------ ------ ------
Results of operations for producing activities...... $( .21) $ 2.26 $ 1.74
====== ====== ======
Mobil's share of equity companies................... $ .94 $ 2.02 $ 2.52
====== ====== ======
Total............................................... $( .07) $ 2.23 $ 1.88
====== ====== ======
Above results include the following special items:
Asset sales....................................... - .22 -
Restructuring provisions.......................... ( .12) - -
Asset impairment.................................. ( .89) - -
Employee performance award........................ - - ( .01)
- -------------------------------------------------------------------------------
WORLDWIDE 1995 1996 1997
- -------------------------------------------------------------------------------
Revenues
Crude oil (per barrel)............................ $16.10 $19.76 $18.59
NGL (per barrel).................................. $10.38 $15.48 $15.21
Natural gas (per thousand cubic feet)............. $ 1.87 $ 2.29 $ 2.62
Average dollars per barrel of oil equivalent
Revenues.......................................... $12.75 $15.61 $15.36
Production (lifting) costs........................ (4.42) (4.50) (4.35)
Exploration expenses.............................. ( .74) ( .87) ( .86)
Depreciation, depletion and amortization.......... (3.85) (2.70) (2.68)
Other operating revenues/(expenses)............... .39 .94 .38
Income tax expense................................ (2.70) (5.01) (4.41)
------ ------ ------
Results of operations for producing activities...... $ 1.43 $ 3.47 $ 3.44
====== ====== ======
Mobil's share of equity companies................... $ 1.15 $ 2.26 $ 3.63
====== ====== ======
Total............................................... $ 1.42 $ 3.42 $ 3.46
====== ====== ======
Above results include special items, net............ ( .93) .08 .12
- -------------------------------------------------------------------------------
* Not meaningful due to the exploratory nature of related activities.
Mobil -15-
PETROLEUM OPERATIONS -- DOWNSTREAM
REFINING
Mobil's primary product supply comes from 25 refineries. Mobil's share of
crude oil refinery capacity was 2,283 TBD, about 40% of which was located in the
United States. Worldwide utilization of Mobil's refining capacity averaged 92%
in 1995, 94% in 1996 and 94% in 1997.
SIGNIFICANT DEVELOPMENTS IN 1997 IN MOBIL'S REFINING OPERATIONS INCLUDED THE
FOLLOWING:
- At ALTONA, AUSTRALIA, construction was completed on a new 23 TBD fluid
catalytic cracking unit, which increased gasoline and distillate production
at the refinery. The unit streamed in September 1997.
- Construction was completed on a 25 TBD vacuum residual hydrocracker (Mobil
share of production, 50%) at a joint venture refinery in KAWASKI, JAPAN. The
unit, which increases production of gasoline and low-sulfur distillates and
fuel oil, came on stream in July 1997.
- Construction was completed on an 8 TBD lubricant hydroprocessing unit at the
JURONG, SINGAPORE, refinery. The unit started up in September 1997.
- At YANBU, SAUDI ARABIA, the Petromin Lubricating Oil Refining Company (Mobil
share, 30%) completed construction on a new 5.5 TBD lubricant base oil
refinery in December 1997.
- In BARBADOS, Mobil agreed with the local government to close Mobil's
refinery, completing the company's withdrawal from the Barbados market,
following the sale of marketing assets in 1996.
- At CHALMETTE, LOUISIANA, Mobil and a U.S. subsidiary of Petroleos de
Venezuela, S.A., formed a jointly owned limited liability company to own and
operate the Chalmette refinery.
- At LLANDARCY, SOUTH WALES, Mobil and The British Petroleum p.l.c. (BP)
alliance announced the closing of a standalone lubes refinery.
MARKETING
- --------------------------------------------------------------------------------
PETROLEUM SALES VOLUMES BY PRODUCT (TBD) 1995 1996 1997
- --------------------------------------------------------------------------------
Automotive gasolines.................... 1,291 1,317 1,304
Jet fuels............................... 262 273 297
Distillates............................. 954 1,026 983
Other products.......................... 715 729 759
----- ----- -----
Total*.................................. 3,222 3,345 3,343
===== ===== =====
* Includes Mobil's share of the BP alliance.
- --------------------------------------------------------------------------------
Mobil markets petroleum products extensively in the U.S. and in almost 100
other countries. Mobil has over 15,000 retail outlets, about 48% of which are
located in the United States. Petroleum products include automotive and aviation
gasolines, motor oils, lubricants and greases, marine fuels, jet fuels, fuel
oil, diesel oil, kerosene, asphalts, naphthas, solvents, waxes and liquefied
petroleum gas.
The principal brand names identifying Mobil's products are "Mobil(R)
Unleaded", "Mobil Super+(R) ", "Mobil(R) Special", "Mobil(R) Regular", and
"Mobil(R) Premium" gasolines, and "Mobiloil(R)", "Mobilheat(TM)",
"Mobilgrease(R)", "Mobil 1(R)", "Delvac 1(R)", and "Mobil(R)" industrial and
marine lubricants and process products.
Mobil -16-
MARKETING -- CONTINUED
The alliance of Mobil and BP in Europe was successfully implemented in
substantially all countries in 1997, and the initial benefits contributed to
improved earnings.
In the United States, major initiatives included the completion of
construction of over seventy On The Run(R) convenience stores and the successful
rollout of the Speedpass(TM) program.
In China, construction of a lube oil blend plant in Taicang was completed mid-
year 1997. This is Mobil's third lube oil blend plant in China in support of the
growing lubes business.
In Africa, Mobil successfully integrated the acquisition of Exxon's marketing
business in Kenya, acquired in late 1996, into the downstream operations and
initiated a re-entry into the South African lubes business.
TANKERS
At December 31, 1997, Mobil owned 23 ocean-going tankers with an aggregate of
3,080 thousand deadweight tons. An additional 12 tankers, aggregating 1,079
thousand deadweight tons, were under term charter and operated by Mobil,
including Mobil's double hulled, very large crude carriers (VLCCs), the RAVEN
and the EAGLE. In September 1997, Mobil took delivery of the newly built
petroleum products tanker AMERICAN PROGRESS from Newport News Shipbuilding. The
AMERICAN PROGRESS, with a capacity of 45 thousand deadweight tons and registered
in the United States, is the first vessel built in a U.S. shipyard to standards
required in the U.S. Oil Pollution Act of 1990 (OPA-90). OPA-90 requires all
ships carrying petroleum products in U.S. coastal waters to be of double-hull
construction by 2015. The AMERICAN PROGRESS is operated by Mobil under a term
charter arrangement. In November 1997, Mobil formed a joint venture company with
Qatari partners, with Mobil holding a 50% interest. The purpose of the company
is to acquire two double-hull tankers with a combined capacity of 160 thousand
deadweight tons. The vessels are to be built by Hyundai Heavy Industries and
will be operated and controlled by Mobil under a term charter agreement. The
first of the newly contracted ships is scheduled for delivery in 1999 and the
second in 2000. Also in November, Mobil formed a joint venture LNG shipping
company with partners Qatar Shipping Company and Osprey Maritime for the primary
purpose of providing marine transportation of LNG exports from Qatar. Mobil
holds a 25% interest in this venture.
PIPELINES
At December 31, 1997, Mobil's U.S. pipeline system, including partly-owned
facilities, consisted of 12,277 miles of crude oil, natural gas liquids, natural
gas, and carbon dioxide trunk and gathering lines, and 7,993 miles of product
lines. Also at that date, Mobil's pipeline system outside the U.S., including
partly-owned facilities, consisted of 10,038 miles of crude oil, natural gas
liquids, and natural gas trunk and gathering lines, and 2,754 miles of product
lines.
CHEMICAL OPERATIONS
Mobil Chemical, with manufacturing operations in 11 countries, is a large
producer of petrochemicals, packaging films and specialty chemical products.
Mobil -17-
CHEMICAL OPERATIONS -- CONTINUED
- --------------------------------------------------------------------------------
MOBIL CHEMICAL FACILITIES United Inter- World-
AT DECEMBER 31, 1997 States national (a) wide
- --------------------------------------------------------------------------------
Petrochemicals..................... 6 7 13
OPP Films.......................... 3 5 8
Additives and Synthetics........... 3 2 5
Research and Development........... 3 - 3
-- -- --
Total Chemical facilities.......... 15 14 29
== == ==
(a) Includes eight partly-owned facilities.
- --------------------------------------------------------------------------------
Principal chemical products include basic petrochemicals (ethylene, propylene,
benzene, paraxylene), intermediates (ethylene glycol) and a key derivative
(polyethylene). Other products include synthetic lubricant base stocks and lube
additives, and plastic films for packaging and industrial applications.
SIGNIFICANT DEVELOPMENTS IN 1997 IN MOBIL'S CHEMICAL OPERATIONS INCLUDED THE
FOLLOWING:
- Mobil Yanbu Petrochemical Company and Saudi Basic Industries Corporation are
expanding their 50-50 joint venture petrochemicals complex in YANBU, SAUDI
ARABIA by the addition of a second ethylene production facility and
facilities to produce additional polyethylene and ethylene glycol as well as
polypropylene. Plant start-up is scheduled for mid-2000.
- Mobil and Pequiven, the Venezuelan state-owned petrochemical company, are
evaluating the feasibility of developing a new olefins complex at an existing
petrochemicals site at JOSE, VENEZUELA. The facility will include an ethylene
cracker and related facilities to produce polyethylene and ethylene glycol.
- A modernization and expansion of the BEAUMONT, TEXAS olefins plant is well
under way, with completion scheduled later in 1998.
In March 1998, Mobil and Hoechst AG signed a letter of intent to enter into a
50-50 joint venture combining their global oriented polypropylene (OPP) films
businesses. Completion of the joint venture is expected in the third quarter of
1998.
OTHER OPERATIONS
RESEARCH
Mobil engages in research and development, principally in the U.S., Australia,
France, Germany, Japan, Norway and the United Kingdom. Activities include the
development of technologies and services which improve Mobil's competitiveness
in core business areas -- finding oil and gas, and converting them to fuels,
lubricants and chemicals while meeting environmental, health and safety
standards. Annual research expense was $252 million in 1995, $206 million in
1996, and $234 million in 1997.
Mobil -18-
ITEM 2. PROPERTIES.
Mobil and its subsidiaries own, lease or have interests in extensive
production, manufacturing, marketing, transportation and other facilities
worldwide. Information on these properties has been incorporated into Item 1.
Business.
ITEM 3. LEGAL PROCEEDINGS.
Environmental Litigation
Mobil periodically receives notices from the Environmental Protection Agency
(EPA) or equivalent agencies at the state level that Mobil is a "potentially
responsible party" under Superfund or equivalent state legislation with respect
to various waste disposal sites. The majority of these sites are either still
under investigation by the EPA or the state agencies concerned, or under
remediation, or both. In certain instances, Mobil and other potentially
responsible parties have been named in court or administrative proceedings by
federal or state agencies seeking the cleanup of these sites. Mobil has also
been named as a defendant in various suits brought by private parties alleging
injury from disposal of wastes at these sites. The ultimate impact of these
proceedings on the business or accounts of Mobil cannot be predicted at this
time due to the large number of other potentially responsible parties and the
speculative nature of clean-up cost estimates, but based on our long experience
in managing environmental matters, we do not anticipate that the aggregate level
of future remediation costs will increase above recent levels so as to
materially and adversely affect our consolidated financial position or
liquidity.
In a letter to Mobil Oil Corporation dated November 17, 1997, the U.S.
Department of Justice, on its own behalf and on behalf of the U.S. Environmental
Protection Agency, alleged that the operations of the McElmo Creek and
Rutherford production units, which are operated by Mobil Oil Corporation and in
which Mobil Oil Corporation has an interest, had violated the Clean Water Act by
reason of discharges of produced water into navigable waters of the U.S. and had
also violated Spill Prevention Control and Countermeasures Regulations
promulgated under the Clean Water Act, and indicated that, inter alia, a penalty
----- ----
of $2.3 million was sought. Settlement negotiations are in process.
In a letter to Mobil Oil Corporation dated September 11, 1997, the U.S.
Department of Justice and the U.S. Environmental Protection Agency advised Mobil
Oil Corporation that they are contemplating legal proceedings against Mobil Oil
Corporation in which it would be alleged that the operations of Mobil Oil
Corporation's Torrance, California refinery have violated provisions of the
Clean Air Act, the Clean Water Act, the Emergency Planning and Community Right
to Know Act, and the Comprehensive Environmental Response, Compensation and
Liability Act, and that a penalty would be sought. Mobil Oil Corporation
anticipates that the amount of the penalty that would be sought will be between
$1 million and $2 million. No proceeding has yet been brought.
Mobil -19-
ITEM 3. LEGAL PROCEEDINGS -- CONTINUED
The matters described in the preceding paragraphs are not of material
importance in relation to Mobil's accounts and are described in compliance with
SEC rules regarding disclosure of such matters although not material.
Other Than Environmental Litigation
Mobil and its subsidiaries are engaged in various litigations and have a
number of unresolved claims pending. While the amounts claimed are substantial
and the ultimate liability in respect of such litigations and claims cannot be
determined at this time, Mobil is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not likely to be of
material importance in relation to its accounts.
Mobil has provided in its accounts for items and issues not yet resolved based
on management's best judgement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None submitted.
Mobil -20-
PART II
The information required by Items 5 through 7A is incorporated herein by
reference to Mobil's 1997 Annual Report to Shareholders. The charts, graphs and
associated captions appearing on pages 18 through 36 of Mobil's 1997 Annual
Report to Shareholders are not incorporated into this Annual Report on Form
10-K. Below is an index to the incorporated information.
1997 Annual Report
To Shareholders
ITEM Description Page(s)
- ---- ---------------------------------------------------- ------------------
5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS............................... 31
6. SELECTED FINANCIAL DATA............................. 63
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION ................. 19-32,34,36
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ........................................ 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See page 23 for a list of the financial statements and supplementary data
including those incorporated herein by reference to Mobil's 1997 Annual Report
to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For Item 10, the names and ages of the Executive Officers of Mobil as of
March 1, 1998, and the position(s) each of them has held during the past five
years, are provided on page 22 of this Annual Report on Form 10-K. The other
information called for by Item 10, and the information called for by Items 11,
12 and 13, is incorporated by reference to the Registrant's definitive proxy
statement for its Annual Meeting of Shareholders, to be held on May 14, 1998,
which will be filed with the SEC within 120 days after December 31, 1997.
Information required by Item 10 of this report related to the names and ages of
the Executive Officers of Mobil Corporation as of March 1, 1998 and the
position(s) each of them has held during the past five years, is provided on the
following page.
Mobil -21-
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
Name (Age) Position(s) Held During Past Five Years Years Held
- ----------------- ---------------------------------------------------- -------------
Robert F. Vice President, Administration ............................ 1996-Present
Amrhein (55) Manager, Human Resources, Mobil Business
Resources Corporation ................................... 1995-1996
Manager, Employee Relations, Exploration and
Producing Division, Mobil Oil Corporation................ 1992-1995
Peter J. Principal Accounting Officer .............................. 1997-Present
Antico (55) Manager, Business Unit Controllers, Mobil Corporation ..... 1997-Present
Manager, Global Accounting Center of Expertise,
Mobil Business Resources Corporation .................... 1996-1997
Assistant Controller, Mobil Corporation ................... 1996-Present
Deputy Controller, Marketing and Refining
Division, Mobil Oil Corporation ......................... 1992-1996
Walter R. Treasurer ................................................. 1995-Present
Arnheim (53) Vice President, Planning and Economics .................... 1991-1995
Harold R. Executive Vice President, Chief Financial
Cramer (47) Officer - Elect ......................................... April 1, 1998
President, Mobil Europe and Central Asia Limited .......... 1996-April 1, 1998
President, Mobil Europe Limited ........................... 1996-1996
President, Mobil South, Inc. .............................. 1993-1996
Steven L. Controller ................................................ 1998-Present
Davis (44) Assistant Treasurer, Chevron Corporation .................. 1997-1998
Comptroller, Chevron Products Company ..................... 1996-1997
Vice President - Finance, Chevron International
Oil Company.............................................. 1991-1996
Thomas C. Senior Vice President, Chief Financial Officer ............ 1994-Present
DeLoach, Jr. Executive Vice President - International, Marketing
(50) and Refining Division, Mobil Oil Corporation ............ 1993-1994
Samuel H. Senior Vice President - Elect ............................. April 1, 1998
Gillespie III Vice President ............................................ 1996-Present
(55) General Counsel ........................................... 1995-Present
Associate General Counsel ................................. 1994-1995
General Counsel, Exploration and Producing
Division, Mobil Oil Corporation ......................... 1990-1994
Aldis V. Vice President, Planning and Economics .................... 1995-Present
Liventals (55) Vice President, Middle East and Marine Transportation
Marketing and Refining Division, Mobil Oil
Corporation ............................................. 1993-1995
Lucio A. Chairman of the Board and Chief Executive Officer ......... 1994-Present
Noto (59) President and Chief Operating Officer ..................... 1993-March 1,1998
Chief Financial Officer ................................... 1989-1993
Vice President, Finance ................................... 1988-1993
Eugene A. President and Chief Operating Officer ..................... March 1,1998-Present
Renna (53)
Executive Vice President, responsible for: the
North America Marketing and Refining, Europe/Former
Soviet Union, South America and Supply, Trading
and Transportation Business Groups ...................... 1996-March 1,1998
Executive Vice President, Marketing and Refining
Division, Mobil Oil Corporation ......................... 1986-1996
Robert O. Executive Vice President .................................. March 1,1998-Present
Swanson (61)
Executive Vice President, responsible for: the Africa
and Middle East Asia Pacific, Worldwide Chemical
and Technology Business Groups, and the office
of Diversity and Inclusion .............................. 1996-March 1,1998
Senior Vice President, responsible for: Mobil
Chemical Company; Mobil Mining and Minerals
Company; Mobil Land Development Corporation; and
Mobil Technology Corporation .............................. 1993-1996
- --------------------------------------------------------------------------------
Mobil -22-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
Mobil's consolidated financial statements, together with the report thereon of
Ernst & Young LLP, independent auditors, dated February 27, 1998, and
Supplementary Information appearing in Mobil's 1997 Annual Report to
Shareholders on the pages indicated below, are incorporated herein by reference.
With the exception of the aforementioned information, no other data appearing in
Mobil's 1997 Annual Report to Shareholders are deemed to be filed as part of
this Annual Report under Items 8 and 14. Any chart, graph and/or associated
caption appearing in the consolidated financial statements from pages 33 through
53 of Mobil's 1997 Annual Report to Shareholders are not incorporated into this
Annual Report on Form 10-K.
Financial Statement Schedules: Page(s)
-------------------------
1997 Annual 1997 Annual
Report on Report to
Form 10-K Shareholders
----------- ------------
(a)1. Financial Statements.
Consolidated Statement of Income.......... - 33
Consolidated Statement of Changes in
Shareholders' Equity..................... - 33
Consolidated Balance Sheet................ - 35
Consolidated Statement of Cash Flows...... - 37
Segment and Geographic Information........ - 38,39
Notes to Financial Statements............. - 40-53
Report of Ernst & Young LLP, Independent
Auditors................................. - 54
Supplementary Information................. - 31,55-59
(a)2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying
Accounts................................. 25 -
Schedules not included above have been omitted because they are not
applicable, not material, or the required information is given in the financial
statements or notes thereto or combined with the information presented in other
schedules.
Mobil -23-
(a)3. Exhibits
An index to exhibits filed as part of this Annual Report on Form 10-K is
included on page 27.
(b) Reports on Form 8-K.
Date of 8-K Description of 8-K
----------------- -----------------------------------------------------
December 12, 1997 Submitted documents relating to "Pass Through
Certificates", Series 1997-C, guaranteed by Mobil
Corporation.
January 28, 1998 Submitted a copy of the Mobil Corporation News Release
dated January 28, 1998 reporting estimated earnings
for the fourth quarter and full year of 1997.
February 4, 1998 Submitted a copy of the Mobil Corporation News Release
dated February 4, 1998 reporting Eugene A. Renna had
been elected President and Chief Operating Officer of
Mobil Corporation effective March 1, 1998.
Mobil -24-
(c) Supplemental Financial Information.
FINANCIAL STATEMENT SCHEDULE
- --------------------------------------------------------------------------------
MOBIL CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1996 and 1997
(Millions of dollars)
- --------------------------------------------------------------------------------
Balance Balance
Beginning End of
Description of Period Additions Deductions Period
- ------------------------------- --------- --------- ---------- --------
For the year ended
December 31, 1995:
Reserves deducted in the
balance sheet from the
assets to which they apply:
For doubtful accounts (a).... $122 $ 58 $74 $106
For investments and
long-term receivables...... 35 5 - 40
For deferred tax assets (b).. 430 15 77 368
For the year ended
December 31, 1996:
Reserves deducted in the
balance sheet from the
assets to which they apply:
For doubtful accounts (a).... $106 $ 61 $51 $116
For investments and
long-term receivables...... 40 17 2 55
For deferred tax assets (b).. 368 62 12 418
For the year ended
DECEMBER 31, 1997:
Reserves deducted in the
balance sheet from the
assets to which they apply:
For doubtful accounts (a).... $116 $130 $99 $147
For investments and
long-term receivables...... 55 9 14 50
For deferred tax assets (b).. 418 237 28 627
(a) Deductions include accounts written off.
(b) Deductions reflect utilization of tax credit carryforwards.
- --------------------------------------------------------------------------------
Mobil -25-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant, Mobil Corporation, has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT MOBIL CORPORATION
By: /s/ P. J. Antico
----------------------------
(P. J. Antico, Principal
Accounting Officer)
Date: March 19, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on March 19, 1998 on
behalf of the registrant and in the capacities indicated.
Signature Title
--------- -----
Lucio A. Noto* Director, Chairman of the Board and
- -------------------------- Chief Executive Officer
(Lucio A. Noto)
Thomas C. DeLoach, Jr.* Principal Financial Officer
- --------------------------
(Thomas C. DeLoach, Jr.)
P. J. Antico* Principal Accounting Officer
- --------------------------
(P. J. Antico)
DIRECTORS
Lewis M. Branscomb*
Donald V. Fites*
Charles A. Heimbold, Jr.*
Allen F. Jacobson*
Samuel C. Johnson*
Helene L. Kaplan*
J. Richard Munro*
Aulana L. Peters*
Eugene A. Renna*
Charles S. Sanford, Jr.*
Robert G. Schwartz*
Robert O. Swanson*
Iain D. T. Vallance*
*By: /s/ Gordon G. Garney
--------------------------------------
(Gordon G. Garney, Attorney-in-fact)
Date: March 19, 1998
Mobil -26-
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
- -------------------------------------- -------------------------------------
3(I).1 Certificate of Incorporation Incorporated by reference to Exhibit
of Mobil Corporation, as amended, 3(I).1 filed on Form 8-K,July 11, 1997.
in effect May 20, 1997.
3(I).2 Certificate of Designation, Incorporated by reference to Exhibit
Preferences and Rights of Series 3-a(ii) to the Registration Statement
A Junior Participating Preferred on Form S-3 (S.E.C. File No.
Stock of Mobil Corporation dated 33-32651), filed under Form SE dated
April 25, 1986. December 14, 1989.
3(I).3 Certificate of Designation, Incorporated by reference to Exhibit
Preferences and Rights of Series 3(I).2 filed on Form 8-K, July 11, 1997.
B ESOP Convertible Preferred
Stock of Mobil Corporation, as
amended, in effect May 20, 1997.
3(ii).4 By-laws of Mobil Corporation, Incorporated by reference to Exhibit
as amended to June 14, 1995. 3.4 filed on Form 8-K dated July 6, 1995.
10.1 1995 Mobil Incentive Compensation Incorporated by reference to
and Stock Ownership Plan. Definitive Proxy Statement filed
March 20, 1995.
10.2 1991 Mobil Incentive Compensation Incorporated by reference to Exhibit
and Stock Option Plan. 15 to the Registration Statement on
Form S-8 (S.E.C. File No. 33-48887)
filed August 10, 1992.
10.3 1986 Mobil Incentive Compensation Incorporated by reference to Exhibit
and Stock Option Plan. 15 to the Registration Statement on
Form S-8 (S.E.C. File No. 33-5797)
filed May 20, 1986.
11. Computation of Earnings per Electronic
Common Share. (Page 28)
12. Computation of Ratio of Earnings Electronic
to Fixed Charges. (Page 29)
13. Mobil Corporation 1997 Annual Electronic
Report to Shareholders.
21. Subsidiaries of the Registrant. Electronic
(Pages 30-32)
23. Consent of Ernst & Young LLP, Electronic
Independent Auditors, dated
March 12, 1998. (Page 33)
24.1 Power of attorney dated as of Electronic
February 27, 1998, executed by
the Board of Directors of Mobil
Corporation authorizing execution
of Annual Report on Form 10-K.
24.2 Certified copy of Board of Electronic
Directors' Resolutions adopted
February 27, 1998, authorizing
signature by officers pursuant
to power of attorney.
27. Financial Data Schedule. Electronic
Mobil -27-