01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
ExxonMobil's FY2011 10-K shows a strong year: net income attributable to ExxonMobil rose to $41.1 billiona (EPS $8.43, diluted $8.42), up about 35% from $30.5 billion in 2010, with total sales and other operating revenue of $467.0 billion.
Upstream drove the gain, earning $34.4 billionb (up $10.3 billion), helped by higher crude and gas realizations (average crude and NGL price of $100.79/barrel versus $74.04 in 2010) and $2.7 billion of higher asset-sale gains. Downstream earnings rose to $4.5 billion and Chemical fell to $4.4 billion from a record $4.9 billion in 2010. Return on average capital employed was 24.2%, versus 21.7% in 2010.
Capital discipline and shareholder returns were the other major themes. Capital and exploration spending was $36.8 billionc, with management guiding to roughly $37 billion per year. Upstream spending of $33.1 billion was 70% directed at proved undeveloped projects, including Kearl in Canada.
Cash flow from operations and asset sales reached $66.5 billiond, and the company returned $9.0 billion in dividends and repurchased 278 million shares for $22.1 billion. Shares outstanding fell 4.9% to 4,734 million. The balance sheet remains conservative, with debt at 9.6% of capital and a fixed-charge coverage ratio of 53.2x.
Risks flagged include the $3.6 billion Upstream asset-sale deposit and the pending Japan restructuring, which will reduce ExxonMobil's stake in TonenGeneral to about 22%. Litigation is also material: a Maryland jury verdict of roughly $1.5 billion (including $1.0 billion in punitive damages) in the Allison case is under appeal, and the company is in disputes with Venezuela and Nigeria.
Proved reserves were 24.9 billion oil-equivalent barrels, 65% of them proved developed, and the company expects production to decline about 3% per year from existing fields without new projects. Downstream refining margins are expected to stay weak over the long term.
02—Key points
Key Highlights
- Net income attributable to ExxonMobil of $41.1B in 2011, up 35% from $30.5B; EPS $8.43 (diluted $8.42)
- Upstream earnings of $34.4B (up $10.3B) driven by oil and gas realizations of $100.79/bbl crude and $4.65/mcf gas; Downstream rose to $4.5B; Chemical eased to $4.4B from a 2010 record
- Return on average capital employed of 24.2% (2010: 21.7%); ~$37B/year capital program with Kearl (Canada) and U.S. unconventional gas as growth drivers
- Shareholder returns of $9.0B in dividends ($1.85/share, 22% payout) and $22.1B in buybacks; shares outstanding reduced 4.9% to 4,734M
- Proved reserves of 24.9 GOEB, 65% proved developed; 8.8 GOEB proved undeveloped, with $23.1B invested in 2011 to develop them
- Strong balance sheet: total debt of $17.0B, debt-to-capital of 9.6%, fixed-charge coverage of 53.2x, and no major hedging program
- Key legal and portfolio risks: a $1.5B Maryland jury verdict (Allison, under appeal), Venezuela ICSID and Cerro Negro arbitration, a $1.8B Nigeria award enforcement dispute, and the pending TonenGeneral Japan restructuring (~$3.9B)
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $467.03B$370.13B | +26.2% |
| R&D Expenses | $1.04B$1.01B | +3.2% |
| SG&A Expenses | $14.98B$14.68B | +2.0% |
| Operating Expenses | $413.17B$330.26B | +25.1% |
| Interest Expense | $247.00M$259.00M | −4.6% |
| Net Income | $41.06B$30.46B | +34.8% |
| EPS (Basic) | $8.43$6.24 | +35.1% |
| EPS (Diluted) | $8.42$6.22 | +35.4% |
| Shares Outstanding (Basic) | 4.87B— | — |
| Shares Outstanding (Diluted) | 4.88B— | — |
05—Questions
Frequently Asked Questions
How did ExxonMobil's profitability change in 2011?
Net income attributable to ExxonMobil rose to $41.1 billion from $30.5 billion, and diluted EPS rose to $8.42 from $6.22. The increase came mainly from Upstream, where higher crude and gas prices added about $10.6 billion, partly offset by $2.5 billion of volume and mix effects. Upstream earnings also included $2.7 billion of higher asset-sale gains. The company reported no special items for 2011.
How much is ExxonMobil spending on capital projects, and what does it fund?
Capital and exploration spending was $36.8 billion in 2011: $33.1 billion Upstream, $2.1 billion Downstream and $1.5 billion Chemical. Management expects roughly $37 billion per year over the next several years. Major 2011 projects included Kearl Expansion and the Horn River Pilot in Canada, the deepwater Hadrian South and Lucius projects in the U.S. Gulf, and LNG work in Qatar and Australia. About 70% of Upstream development spending went to proved undeveloped reserves.
What is the status of the major litigation and contingencies?
The Allison v. Exxon Mobil case in Baltimore County, Maryland, produced a verdict of about $497 million in compensatory damages and $1.0 billion in punitive damages, which ExxonMobil is appealing. In Venezuela, the Cerro Negro expropriation is in ICSID arbitration with a merits hearing held in February 2012, while an ICC award of about $747 million net was largely paid by PdVSA in February 2012. In Nigeria, a $1.8 billion arbitral award plus $234 million in interest is being contested in federal court. The company says none of these is expected to have a material adverse effect on its overall financial condition.
How is ExxonMobil returning cash to shareholders?
In 2011 the company paid $9.0 billion in dividends, equal to $1.85 per share (up from $1.74), and spent $22.1 billion buying back 278 million shares. The company declared a $0.47 quarterly dividend in January 2012. Buybacks reduced shares outstanding by 4.9%, and management said first-quarter 2012 repurchases would continue at a pace consistent with the roughly $5 billion spent in the fourth quarter.
What are the main long-term risks for ExxonMobil?
The 10-K highlights commodity price volatility and government and political risk, including tax increases, expropriation, and climate-related regulation. It also notes that production from existing fields is expected to decline about 3% per year without new projects, so the company depends on continued project execution. In Downstream, management expects weak long-term refining margins because of new global capacity and biofuels mandates. Finally, the pending sale of a stake in TonenGeneral in Japan, expected to close in mid-2012 for about $3.9 billion, will cut ExxonMobil's ownership of that business to about 22%.
06—Continue