01—Abstract
Summary
Summary of the 10-K filed March 10, 1995. Cited figures are marked; the original filing is the authoritative source.
Exxon Corporation's 10-K for fiscal 1994 shows a company that remained highly profitable but saw earnings decline as weaker crude prices and refining margins offset a strong chemicals recovery.
Net income was $5.1 billiona ($4.07 per share) versus $5.28 billion ($4.21 per share) in 1993, on revenue of $113.9 billion. Results were flattered by $489 million of asset sales and tax-related credits, down from $676 million of such credits in 1993. Average crude realizations fell more than $1.30 per barrel, while worldwide liquids production rose to 1,709 kbd and natural gas output reached 5,978 mcfd, helped by record North Sea production.
Balance sheet and cash flow remained conservative. Shareholders' equity rose $2.6 billion to $37.4 billionb, debt to capital fell to 24.3%, and operating cash flow was $9.9 billion, covering dividends of $3.7 billion (a 71% payout). Capital and exploration spending was $7.8 billion, with management signaling higher spending in 1995.
Dividends per common share increased modestly to $2.91c, and the company has a long record of steady payouts. The principal risk flagged for investors is litigation over the 1989 Exxon Valdez grounding. A federal jury awarded $5 billion in punitive damages in September 1994, which management is appealing and calls unjustified.
No charge was taken in 1994 because the ultimate impact cannot be estimated. Management also disclosed a $1.9 billiond annual environmental spending outlook for 1995-1996 and a Baton Rouge refinery enforcement matter that may lead to penalties.
02—Key points
Key Highlights
- Net income of $5.1 billion in 1994, down 3% from $5.28 billion in 1993; EPS of $4.07 versus $4.21
- Total revenue of $113.9 billion, up 2% year over year; dividends per share raised to $2.91 from $2.88
- Chemicals earnings more than doubled to $954 million, while refining and marketing earnings fell to $1.39 billion from $2.02 billion
- Shareholders' equity rose to $37.4 billion; debt-to-capital ratio improved to 24.3% from 25.3%
- Operating cash flow of $9.9 billion funded $6.6 billion in capital additions and $3.7 billion in dividends
- Exxon Valdez exposure: a $5 billion punitive damages verdict (September 1994) is under appeal, with no 1994 charge recorded
- Proved reserves of approximately 6.6 billion barrels of oil equivalent at year-end 1994, with 1994 production of 1.7 million barrels per day of liquids
03—Questions
Frequently Asked Questions
Did Exxon's earnings improve or decline in 1994?
Earnings declined modestly. Net income was $5.10 billion, or $4.07 per share, compared with $5.28 billion, or $4.21 per share, in 1993. Lower crude prices and weaker refining margins were partly offset by a sharp recovery in chemicals, and results also benefited from $489 million of asset sale and tax-related credits.
How significant is the Exxon Valdez litigation for investors?
It is the largest identified legal risk. A federal jury awarded $5 billion in punitive damages in September 1994, and the company plans to appeal, arguing the verdict should be set aside or substantially reduced. Compensatory claims remain pending with an amount that cannot yet be estimated, so no 1994 charge was taken, and the eventual earnings impact is uncertain.
Is the dividend secure?
The dividend appears well covered. Common dividends were raised to $2.91 per share, totaling about $3.7 billion, equal to a 71% payout of 1994 net income. Operating cash flow of $9.9 billion and internally generated funds cover the majority of financial requirements, and the company retains a $6.5 billion pool of unused short-term credit lines.
What drove the balance sheet and capital spending plans?
Shareholders' equity grew $2.6 billion to $37.4 billion, and debt to capital declined to 24.3%. Capital and exploration spending was $7.8 billion in 1994, with exploration and production at $4.0 billion. Management expects 1995 capital and exploration spending to exceed the 1994 level, with firm project commitments of about $2.4 billion at year-end.
What are the main operational trends in the business?
Production volumes rose, with liquids output up to 1,709 kbd and natural gas up to 5,978 mcfd, and record North Sea production contributed. Petroleum product sales grew to 5,028 kbd, and chemical sales volumes reached a record 13.2 million metric tons. Offsetting these were lower average crude realizations, down more than $1.30 per barrel, and weaker refining margins.
04—Continue