10-QPeriod: Q2 FY2003

EXXON MOBIL CORP Quarterly Report for Q2 Ended Jun 30, 2003

Filed August 13, 2003For Securities:XOM

Summary

Exxon Mobil Corporation (XOM) reported a significant increase in net income for the second quarter and first six months of 2003 compared to the same periods in 2002. Net income for the second quarter rose to $4.17 billion ($0.63 per share), a substantial improvement from $2.64 billion ($0.40 per share) in the prior year. This strong performance was driven by higher crude oil and natural gas prices, leading to improved earnings across all business segments, particularly in Upstream and Downstream operations. The company also saw robust performance in its Chemicals segment, reaching its highest earnings level since 1998. For the first six months of 2003, net income more than doubled to $11.21 billion ($1.68 per share) from $4.73 billion ($0.70 per share) in the first half of 2002. This period's results were bolstered by a one-time pre-tax gain of $1.7 billion from the transfer of shares in Ruhrgas AG. Despite a flat oil-equivalent production volume, the company benefited from increased European gas demand and contributions from new projects. Exxon Mobil continued its strategic investments, with capital and exploration expenditures increasing, while also actively managing its capital structure through share repurchases and a reduction in total debt.

Key Highlights

  • 1Net income for Q2 2003 was $4.17 billion, a 58% increase from $2.64 billion in Q2 2002.
  • 2Net income for the first six months of 2003 was $11.21 billion, a 137% increase from $4.73 billion in the same period of 2002.
  • 3Upstream earnings increased significantly due to higher crude oil and natural gas realizations.
  • 4Downstream earnings showed substantial improvement driven by stronger refining and marketing margins.
  • 5Chemicals earnings reached their highest level since 1998.
  • 6Cash flow from operations was robust, providing $15.995 billion in the first six months of 2003.
  • 7The company repurchased $2.385 billion of its common stock in the first half of 2003, reducing outstanding shares.

Frequently Asked Questions

The primary drivers for the significant increase in profitability were higher crude oil and natural gas prices (realizations), which boosted Upstream earnings. Additionally, stronger worldwide refining and marketing margins contributed to improved Downstream earnings. The Chemicals segment also performed exceptionally well, reaching its highest earnings level since 1998.

The adoption of FAS 143, 'Accounting for Asset Retirement Obligations,' effective January 1, 2003, resulted in a cumulative after-tax income adjustment of $550 million (or $0.08 per share) in the first quarter. This change primarily affected the method of accruing for site restoration costs.

The Exxon Valdez punitive damage award was reduced from $5 billion to $4 billion by a District Court, and both ExxonMobil and the plaintiffs have appealed this decision. The ultimate cost to ExxonMobil from the lawsuits is still unpredictable and may take years to resolve. Other legal matters, including disputes with Alabama and a landowner in Louisiana, are ongoing or have been appealed, with outcomes not expected to have a materially adverse effect on the corporation's operations or financial condition.

Exxon Mobil generated strong cash flow from operations, totaling $15.995 billion in the first six months of 2003, an increase from the prior year. The company used $4.371 billion in investing activities, comparable to the previous year, and $6.688 billion in financing activities, which included debt reductions and share repurchases totaling $2.385 billion for the first half of the year. The company's debt-to-total capital ratio remained low at 10.6% as of June 30, 2003.