EXXON MOBIL CORPORATION
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
Earnings (Loss) (U.S. GAAP) 2020 2019 2020 2019
(millions of dollars)
Upstream
United States (1,197) 335 (1,901) 431
Non-U.S. (454) 2,926 786 5,706
Downstream
United States (101) 310 (202) 149
Non-U.S. 1,077 141 567 46
Chemical
United States 171 (6) 459 155
Non-U.S. 296 194 152 551
Corporate and financing (872) (770) (1,551) (1,558)
Net income (Loss) attributable to (1,080) 3,130 (1,690) 5,480
ExxonMobil (U.S. GAAP)
Earnings (Loss) per common share (0.26) 0.73 (0.40) 1.28
(dollars)
Earnings (Loss) per common share - assuming (0.26) 0.73 (0.40) 1.28
dilution (dollars)
References in this discussion to Corporate earnings (loss) mean net income
(loss) attributable to ExxonMobil (U.S. GAAP) from the consolidated income
statement. Unless otherwise indicated, references to earnings (loss), Upstream,
Downstream, Chemical and Corporate and financing segment earnings (loss), and
earnings (loss) per share are ExxonMobil's share after excluding amounts
attributable to noncontrolling interests.
CURRENT ECONOMIC CONDITIONS
During the first quarter of 2020, the balance of supply and demand for petroleum
and petrochemical products experienced two significant disruptive effects. On
the demand side, the COVID-19 pandemic spread rapidly through most areas of the
world resulting in substantial reductions in consumer and business activity and
significantly reduced demand for crude oil, natural gas, and petroleum products.
This reduction in demand coincided with announcements of increased production in
certain key oil- producing countries which led to sharp declines in prices for
crude oil and other petrochemical products. During the second quarter, the
effects of COVID-19 continued to affect the world's major economies, and market
conditions reflected considerable uncertainty. Consumer and business activity
exhibited some early signs of recovery, but relative to prior periods continues
to be negatively affected by the pandemic. Key oil-producing countries have
taken steps to reduce oversupply, and credit markets appear to have stabilized,
providing sufficient liquidity to credit-worthy companies.
In response to these conditions, the Corporation announced significant
reductions in 2020 capital spending and operating expenses. Capital and
exploration expenditures for 2020 are now expected to be $23 billion , down from
the previously announced $33 billion . The Corporation's near-term reduction in
capital expenditures resulted in a downward revision to estimates of proved
reserves reported in the 2019 Form 10-K of approximately 1 billion
oil-equivalent barrels, mainly related to unconventional drilling in the United
States . Consequently, unit-of-production depreciation and depletion rates for
Upstream assets increased beginning in the first quarter.
The Corporation also took actions to strengthen its liquidity including issuing
$8.5 billion of long-term U.S. debt securities in the first quarter of 2020 and
issuing a further $9.5 billion of long-term U.S. debt securities and $5.0
billion of long-term Euro-denominated debt securities in the second quarter of
2020. The Corporation had undrawn short-term committed lines of credit of $15.4
billion and an undrawn long-term committed line of credit of $0.2 billion as of
second quarter 2020. The Corporation plans to increase its 364-day facility from
$7.5 billion to $10 billion in the third quarter and terminate the supplemental
$7.0 billion facility that was established in the first quarter of 2020.
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Unless industry conditions seen thus far in 2020 improve significantly in the
latter half of the year, the Corporation expects lower realized prices for its
products to result in substantially lower earnings and operating cash flow than
in 2019. Amid such conditions, project deferrals and idling of capacity may
increase, and project cancellations could occur, resulting in lower volumes
across one or more business segments. The capital spending reductions will
result in lower near-term production volumes in the Upstream and delays in
previously anticipated volume increases in future years.
The Corporation has reviewed its near-term spending reductions and resulting
near-term production impacts to determine whether they put its long-lived assets
at risk for impairment. During the first half of 2020, and in large part due to
expectations for lower prices in the near term, the Corporation recorded
impairments for certain assets that were, in aggregate, insignificant. Despite
the challenging environment, the Corporation's view of long-term supply and
demand fundamentals has not changed significantly. However, the Corporation
continues to assess its strategic plans and longer-term price views, taking into
account current and developing industry and economic conditions, as part of its
annual planning process. Depending on the outcome of that process, including in
particular any significant future changes in the Corporation's strategic plans
or longer-term price views, a significant portion of the Corporation's
long-lived assets could be at risk for impairment. Due to interdependencies
among the many elements critical to that planning process that are still
unresolved or uncertain, it is not practicable to reasonably estimate the
existence or range of any potential future impairment charges. In addition, in
light of the current low commodity price environment, and depending on the
extent and pace of recovery, the Corporation's planned divestment program could
be adversely affected by fewer financially suitable buyers. This could result in
a slowing of the pace of divestments, certain assets being sold at a price below
current book value, or impairment charges if the likelihood of divesting certain
assets increases.
As disclosed in ExxonMobil's 2019 Form 10-K, low crude oil and natural gas
prices can impact the Corporation's estimates of proved reserves as reported
under Securities and Exchange Commission (SEC) rules. Average year-to-date crude
oil and natural gas prices have been significantly affected by the low prices
experienced since the end of the first quarter. If average prices seen thus far
in 2020 persist for the remainder of the year, under the SEC definition of
proved reserves, certain quantities of crude oil, bitumen and natural gas will
not qualify as proved reserves at year-end 2020. Proved reserves estimates are
affected by a number of factors including the level of capital spending, timing
and completion of development projects, reservoir performance, market prices and
differentials, costs, fiscal and commercial terms, government policies,
regulatory approvals and partner considerations. Based on available price
information for 2020 and the effects of expected reductions in capital spending
mentioned above, it is possible that reductions to proved reserves could amount
to approximately 20 percent of the Corporation's 22.4 billion oil-equivalent
barrels reported at year-end 2019.
The Corporation has taken steps, in line with government guidelines and
restrictions, to limit the spread of COVID-19 among employees, contractors and
the broader community, while also maintaining operations to ensure reliable
supply of products to customers. The Corporation maintains robust business
continuity plans, but should these efforts not be successful the Corporation
could experience declines in workforce productivity that exacerbate some of the
adverse operating and financial effects noted above.
REVIEW OF SECOND QUARTER 2020 RESULTS
ExxonMobil's second quarter 2020 results were a loss of$1.1 billion , or$0.26 per diluted share, compared with earnings of$3.1 billion a year earlier. The decrease in earnings was primarily the result of lower Upstream realizations, reduced Downstream margins, and decreased volumes across all business segments. These impacts were partly offset by favorable non-operational impacts, reduced maintenance activity mainly in the Downstream and Chemical, and lower expenses across all business segments. Non-operational impacts were mainly driven by an inventory adjustment, with further information provided in Note 2 to the unaudited condensed consolidated financial statements.
Results for the first six months of 2020 were a loss of
Capital and exploration expenditures were
Oil-equivalent production was 3.8 million barrels per day, down 3 percent from the prior year. Excluding entitlement effects, divestments, and government mandates, oil-equivalent production was up 1 percent.
The Corporation distributed
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Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Upstream results
United States (1,197) 335 (1,901) 431
Non-U.S. (454) 2,926 786 5,706
Total (1,651) 3,261 (1,115) 6,137
Upstream results were a loss of
· Realizations reduced earnings by
realizations of
volumes of
non-operational impacts of
tax item, and other unfavorable earnings impacts of
offset by lower expenses of
from the prior year quarter.
· Non-
from the prior year quarter. · On an oil-equivalent basis, production decreased 7 percent from the second
quarter of 2019. · Liquids production totaled 2.3 million barrels per day, down 83,000 barrels
per day, with higher entitlements, growth, and lower downtime more than
offset by lower demand, government mandates, and divestments. · Natural gas production was 8.0 billion cubic feet per day, down 1,130
million cubic feet per day, as growth was more than offset by divestments,
lower demand, and reduced entitlements.
Upstream results were a loss of
· Realizations reduced earnings by
realizations of
million for liquids and$120 million for gas. · All other items decreased earnings by$570 million , as unfavorable
non-operational impacts of
million and a prior year non-
offset by lower expenses of
effects of
of
prior year. · On an oil-equivalent basis, production decreased 3 percent from the first
six months of 2019. · Liquids production totaled 2.4 million barrels per day, up 35,000 barrels
per day, with growth, lower downtime, and higher entitlements partly offset
by lower demand, divestments, and government mandates. · Natural gas production was 8.7 billion cubic feet per day, down 827 million
cubic feet per day, as growth was more than offset by divestments and lower
demand.
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Second Quarter First Six
Months
Upstream additional information (thousands of barrels daily)
Volumes reconciliation (Oil-equivalent
production)(1)
2019 3,909 3,945
Entitlements - Net Interest (10) (10)
Entitlements - Price / Spend / Other 122 81
Government Mandates (121) (57)
Divestments (158) (168)
Growth / Other (104) 51
2020 3,638 3,842
(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.
Listed below are descriptions of
Entitlements - Net Interest are changes toExxonMobil's share of production volumes caused by non-operational changes to volume-determining factors. These factors consist of net interest changes specified in Production Sharing Contracts (PSCs) which typically occur when cumulative investment returns or production volumes achieve defined thresholds, changes in equity upon achieving pay-out in partner investment carry situations, equity redeterminations as specified in venture agreements, or as a result of the termination or expiry of a concession. Once a net interest change has occurred, it typically will not be reversed by subsequent events, such as lower crude oil prices. Entitlements - Price, Spend and Other are changes toExxonMobil's share of production volumes resulting from temporary changes to non-operational volume-determining factors. These factors include changes in oil and gas prices or spending levels from one period to another. According to the terms of contractual arrangements or government royalty regimes, price or spending variability can increase or decrease royalty burdens and/or volumes attributable toExxonMobil . For example, at higher prices, fewer barrels are required forExxonMobil to recover its costs. These effects generally vary from period to period with field spending patterns or market prices for oil and natural gas. Such factors can also include other temporary changes in net interest as dictated by specific provisions in production agreements.
Government Mandates are changes to
Divestments are reductions inExxonMobil's production arising from commercial arrangements to fully or partially reduce equity in a field or asset in exchange for financial or other economic consideration. Growth and Other factors comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable toExxonMobil . Such factors include, but are not limited to, production enhancements from project and work program activities, acquisitions including additions from asset exchanges, downtime, market demand, natural field decline, and any fiscal or commercial terms that do not affect entitlements. 23
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Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Downstream results
United States (101) 310 (202) 149
Non-U.S. 1,077 141 567 46
Total 976 451 365 195
Downstream results were
· Margins decreased earnings by
industry refining margins.
· Volume and mix effects reduced earnings by
favorable non-operational impacts associated with an inventory adjustment of
of
prior year quarter. · Petroleum product sales of 4.4 million barrels per day were 971,000 barrels
per day lower than the prior year quarter.
Downstream results were
· Margins decreased earnings by
margins were partly offset by favorable mark-to-market derivatives.
· Volume and mix effects increased earnings by
associated with impairments of
of
prior year. · Petroleum product sales of 4.9 million barrels per day were 550,000 barrels
per day lower than the prior year.
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Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Chemical results
United States 171 (6) 459 155
Non-U.S. 296 194 152 551
Total 467 188 611 706
Chemical earnings were
· Higher margins increased earnings by
expenses of
with an inventory adjustment of
in the prior year quarter.
· Non-
year quarter. · Second quarter prime product sales of 5.9 million metric tons were 754,000
metric tons lower than the prior year quarter.
Chemical earnings were
· Higher margins increased earnings by
were offset by unfavorable non-operational impacts associated with an
inventory adjustment of
year.
· Non-
prior year. · First six months prime product sales of 12.2 million metric tons were 1.3
million metric tons lower than the prior year.
Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Corporate and financing results (872) (770) (1,551) (1,558)
Corporate and financing expenses were
Corporate and financing expenses were
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--------------------------------------------------------------------------------LIQUIDITY AND CAPITAL RESOURCES
Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Net cash provided by/(used in)
Operating activities 6,274 14,285
Investing activities (11,448) (12,670)
Financing activities 15,062 (496)
Effect of exchange rate changes (401) 52
Increase/(decrease) in cash and cash 9,487 1,171
equivalents
Cash and cash equivalents (at end of 12,576 4,213
period)
Cash flow from operations and asset sales
Net cash provided by operating - 5,947 6,274 14,285 activities (U.S. GAAP) Proceeds associated with sales of subsidiaries, property, plant & equipment, and sales and 43 33 129 140 returns of investments Cash flow from operations and asset 43 5,980 6,403 14,425 sales Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider proceeds associated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities, including shareholder distributions. Cash flow from operations and asset sales in the second quarter of 2020 was$43 million , a decrease of$5.9 billion from the comparable 2019 period primarily reflecting lower earnings and unfavorable working capital impacts. Current market conditions and the ability of counterparties to secure financing may negatively affect the pace of asset sales in 2020. Cash provided by operating activities totaled$6.3 billion for the first six months of 2020,$8.0 billion lower than 2019. Net income including noncontrolling interests was a loss of$1.9 billion , a decrease of$7.7 billion from the prior year period. The adjustments for the noncash provisions were$10.7 billion for depreciation and depletion and$0.2 billion for the lower of cost or market inventory adjustment. Changes in operational working capital were a reduction of$2.4 billion , compared to a contribution of$1.0 billion in the prior year period. All other items net decreased cash flows by$0.3 billion in 2020 versus a reduction of$1.7 billion in 2019. See the Condensed Consolidated Statement of Cash Flows for additional details. Investing activities for the first six months of 2020 used net cash of$11.4 billion , a decrease of$1.2 billion compared to the prior year. Spending for additions to property, plant and equipment of$10.4 billion was$1.0 billion lower than 2019. Proceeds from asset sales of$0.1 billion were comparable to the prior year. Net investments and advances decreased$0.2 billion to$1.2 billion . During the first six months of 2020, the Corporation issued$23.2 billion of long-term debt. Net cash provided by financing activities was$15.1 billion in the first six months of 2020,$15.6 billion higher than 2019 reflecting 2020 debt issuances. Total debt at the end of the second quarter of 2020 was$69.5 billion compared to$46.9 billion at year-end 2019. The Corporation's debt to total capital ratio was 27.1 percent at the end of the second quarter of 2020 compared to 19.1 percent at year-end 2019. During the first six months of 2020,Exxon Mobil Corporation purchased 6 million shares of its common stock for the treasury at a gross cost of$0.3 billion . These purchases were made to offset shares or units settled in shares issued in conjunction with the company's benefit plans and programs. Shares outstanding decreased from 4,234 million at year-end to 4,228 million at the end of the second quarter of 2020. Purchases may be made both in the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice. The Corporation retained access to significant capacity of long-term and short-term liquidity during the period. Commercial paper continues to provide short-term liquidity and the balance of commercial paper outstanding was$19.7 billion as ofJune 30, 2020 . To provide increased liquidity and flexibility, the Corporation increased cash and cash equivalents by$1.1 billion to$12.6 billion during the second quarter of 2020. The Corporation had undrawn short-term committed lines of credit of$15.4 billion and an undrawn long-term committed line of credit of$0.2 billion as of second quarter 2020. The Corporation plans to increase its 364-day facility from$7.5 billion to$10 billion in the third quarter and terminate the supplemental$7.0 billion facility that was established in the first quarter of 2020. 26 -------------------------------------------------------------------------------- Internally generated funds are generally expected to cover financial requirements, supplemented by short-term and long-term debt as required. The Corporation has increased debt to a level management believes is appropriate to provide liquidity given market uncertainties and, based on current projections, does not plan to take on additional debt.
The Corporation distributed a total of
The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses. Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time. Key criteria for evaluating acquisitions include potential for future growth and attractive current valuations. Acquisitions may be made with cash, shares of the Corporation's common stock, or both.
Litigation and other contingencies are discussed in Note 3 to the unaudited condensed consolidated financial statements.
TAXES
Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Income taxes (471) 1,241 41 3,124
Effective income tax rate 29 % 34 % -33 % 44 %
Total other taxes and duties (1) 5,683 8,366 13,180 16,453
Total 5,212 9,607 13,221 19,577
(1) Includes "Other taxes and duties" plus taxes that are included in "Production and manufacturing expenses" and "Selling, general and administrative expenses."
Total taxes were$5.2 billion for the second quarter of 2020, a decrease of$4.4 billion from 2019. Income taxes were a credit of$0.5 billion compared to income tax expense of$1.2 billion in the prior year reflecting operating losses driven by lower commodity prices. The effective income tax rate of 29 percent compared to 34 percent in the prior year period primarily due to a change in mix of results in jurisdictions with varying tax rates. Total other taxes and duties decreased by$2.7 billion to$5.7 billion . Total taxes were$13.2 billion for the first six months of 2020, a decrease of$6.4 billion from 2019. Income tax expense decreased by$3.1 billion to$41 million reflecting lower pre-tax income. The effective income tax rate of -33 percent compared to 44 percent in the prior year period primarily due to a change in mix of results in jurisdictions with varying tax rates. Total other taxes and duties decreased by$3.3 billion to$13.2 billion . Inthe United States , the Corporation has various ongoingU.S. federal income tax positions at issue with the Internal Revenue Service (IRS) for tax years beginning in 2006. The Corporation filed a refund suit for tax years 2006-2009 inU.S. federal district court (District Court) with respect to the positions at issue for those years. OnFebruary 24, 2020 , the Corporation received an adverse ruling on this suit. Proceedings in the District Court are continuing. Unfavorable resolution of all positions at issue with theIRS would not have a materially adverse effect on the Corporation's net income or liquidity. TheIRS has asserted penalties associated with several of those positions. The Corporation has not recognized the penalties as an expense because the Corporation does not expect the penalties to be sustained under applicable law. 27
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CAPITAL AND EXPLORATION EXPENDITURES
Second Quarter First Six Months
2020 2019 2020 2019
(millions of dollars)
Upstream (including exploration expenses) 3,577 6,242 8,703 11,603
Downstream 1,053 1,113 2,287 1,942
Chemical 695 718 1,477 1,414
Other 2 6 3 10
Total 5,327 8,079 12,470 14,969
Capital and exploration expenditures in the second quarter of 2020 were
Capital and exploration expenditures in the first six months of 2020 were$12.5 billion , down 17 percent from the first six months of 2019 in response to market conditions. The Corporation anticipates an investment level of$23 billion in 2020, down from the previously announced$33 billion . Actual spending could vary depending on the progress of individual projects and property acquisitions. FORWARD-LOOKING STATEMENTS Statements related to outlooks, projections, goals, targets, descriptions of strategic plans and objectives, and other statements of future events or conditions are forward-looking statements. Actual future results, including financial and operating performance; the impact of the COVID-19 pandemic on results; planned capital and cash operating expense reductions and ability to meet announced reduction objectives; total capital expenditures and mix; earnings; cash flow; capital allocation and debt levels; dividend and shareholder returns; business and project plans, timing, costs and capacities; resource recoveries and production rates; accounting and financial reporting effects resulting from market developments andExxonMobil's responsive actions, including potential future impairment charges and proved reserve reductions; the pace and outcome of divestments; and the impact of new technologies, including to increase capital efficiency and production and to reduce greenhouse gas emissions and intensity, could differ materially due to a number of factors. These include global or regional changes in the supply and demand for oil, natural gas, petrochemicals, and feedstocks and other market conditions that impact prices and differentials; the outcome of government policies and actions, including actions taken to address COVID-19 and to maintain the functioning of national and global economies and markets; the impact of company actions to protect the health and safety of employees, vendors, customers, and communities; actions of competitors and commercial counterparties; the ability to access short- and long-term debt markets on a timely and affordable basis; the severity, length and ultimate impact of COVID-19 on people and economies including the nature and pace of economic recovery as well as the ability ofExxonMobil and its vendors and contractors to maintain operations while taking appropriate health protective measures for employees and others; reservoir performance; the outcome of exploration projects and timely completion of development and construction projects; changes in law, taxes, or regulation including environmental regulations, and timely granting of governmental permits; war, trade agreements and patterns, shipping blockades or harassment, and other political or security disturbances; opportunities for and regulatory approval of potential investments or divestments; the actions of competitors; the capture of efficiencies within and between business lines and the ability to maintain near-term cost reductions as ongoing efficiencies while maintaining future competitive positioning; unforeseen technical or operating difficulties; the development and competitiveness of alternative energy and emission reduction technologies; the results of research programs; the ability to bring new technologies to commercial scale on a cost-competitive basis, including emission reduction technologies and large-scale hydraulic fracturing projects; general economic conditions including the occurrence and duration of economic recessions; and other factors discussed under the heading Factors Affecting Future Results on the Investors page of our website at www.exxonmobil.com and in Item 1A ofExxonMobil's 2019 Form 10-K and Forms 10-Q for the quarters endedMarch 31, 2020 , andJune 30, 2020 . We assume no duty to update these statements as of any future date. The term "project" as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports. 28
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