Exxon Mobil Corporation 2008 10-K Summary
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2008. Exxon Mobil Corporation is a major integrated energy company engaged in the exploration, production, transportation, and sale of crude oil and natural gas (Upstream); the manufacture, transportation, and sale of petroleum products (Downstream); and the manufacture and sale of petrochemicals (Chemical). The company operates globally with significant assets in the United States, Canada, Europe, Africa, Asia Pacific, and the Russia/Caspian region.
Key Financial Metrics
| Metric | 2008 | 2007 |
|---|---|---|
| Sales and Operating Revenue | $459,579 million | $390,328 million |
| Net Income | $45,220 million | $40,610 million |
| Net Income Per Share (Diluted) | $8.69 | $7.28 |
| Cash Flow from Operations | $59,725 million | $52,002 million |
| Total Assets | $228,052 million | $242,082 million |
| Long-Term Debt | $7,025 million | $7,183 million |
| Cash and Cash Equivalents | $31,437 million | $33,981 million |
| Capital and Exploration Expenditures | $26,143 million | $20,853 million |
Segment Earnings (After Tax): Upstream earnings were $35.4 billion (up from $26.5 billion in 2007). Downstream earnings were $8.2 billion (down from $9.6 billion). Chemical earnings were $3.0 billion (down from $4.6 billion).
Material Changes vs. Prior Period
- Record Net Income: Net income increased by $4.6 billion (11%) to a record $45.2 billion, driven primarily by higher Upstream earnings due to record crude oil and natural gas realizations.
- Price Realizations: Worldwide average realized price for crude oil and NGLs increased to $89.32/barrel in 2008 from $66.02/barrel in 2007. Natural gas realizations rose to $7.54/kcf from $5.29/kcf.
- Production Volumes: Total oil-equivalent production decreased 6% to 3.9 million barrels per day, impacted by field decline, lower entitlement volumes, and the expropriation of assets in Venezuela.
- Share Repurchases: The company purchased 434 million shares of common stock for the treasury at a gross cost of $35.7 billion, reducing shares outstanding by 7.5%.
- Dividends: Cash dividends per common share increased to $1.55 from $1.37 in 2007.
Guidance, Outlook, and Risks
Outlook: Management expects capital and exploration expenditures to range from $25 billion to $30 billion annually for the next several years. Production capacity is expected to grow from 2009 to 2013, with a shift in geographic mix toward West Africa, the Caspian region, the Middle East, and Russia.
Special Items: 2008 net income included a $1.62 billion after-tax gain from the sale of a natural gas transportation business in Germany and $460 million in after-tax charges related to the Exxon Valdez litigation.
Risks and Contingencies:
- Commodity Prices: Earnings are highly sensitive to fluctuations in oil, gas, and petrochemical prices.
- Political/Legal: Risks include political instability, expropriation (notably the 2007 expropriation of the Cerro Negro project in Venezuela), and regulatory changes.
- Valdez Litigation: The U.S. Supreme Court vacated a $2.5 billion punitive damage award, remanding the case with a cap of $507.5 million. The company recorded charges reflecting this cap and estimated interest.
- Environmental: Worldwide environmental expenditures were approximately $5.2 billion in 2008.
Investor Verification Checklist
- Verify the impact of the Exxon Valdez litigation resolution on future earnings and the status of post-judgment interest.
- Review the status of the Venezuela expropriation arbitration and the estimated recovery of the $750 million net book investment.
- Assess the sustainability of Upstream earnings given the volatility of oil prices and the 6% decline in production volumes.
- Confirm the company's ability to maintain capital expenditures of $25-$30 billion annually to offset natural field decline.
- Monitor the Downstream margin environment, which saw earnings decline despite high crude prices due to weaker refining margins.