10-QPeriod: Q1 FY2006

EXXON MOBIL CORP Quarterly Report for Q1 Ended Mar 31, 2006

Filed May 4, 2006For Securities:XOM

Summary

Exxon Mobil Corporation (XOM) reported a strong first quarter for 2006, with net income increasing by 6.9% to $8.4 billion compared to the same period in 2005. This growth was driven primarily by higher crude oil and natural gas prices, which boosted upstream earnings significantly, particularly from non-U.S. operations. Despite lower chemical margins and some litigation-related charges, overall revenue increased, reflecting robust demand and improved marketing margins. The company demonstrated strong cash flow generation from operations, exceeding $14.6 billion, which supported substantial investments in capital and exploration projects, up 41% year-over-year. ExxonMobil also continued its aggressive capital return program, repurchasing approximately 99 million shares of its common stock for $6.0 billion in the quarter, alongside paying dividends, indicating a commitment to enhancing shareholder value. The company maintains a strong financial position with a low debt-to-capital ratio.

Key Highlights

  • 1Net income rose by 6.9% to $8.4 billion in Q1 2006, up from $7.86 billion in Q1 2005.
  • 2Upstream earnings increased significantly by $1.3 billion year-over-year, driven by higher oil and gas realizations.
  • 3Cash flow from operating activities was robust at $14.6 billion.
  • 4Capital and exploration expenditures increased by 41% to $4.8 billion, signaling continued investment in future growth.
  • 5The company repurchased approximately 99 million shares for $6.0 billion in Q1 2006, demonstrating a commitment to returning capital to shareholders.
  • 6Total cash and cash equivalents, including restricted cash, stood at $36.5 billion.
  • 7The effective income tax rate increased to 47.4% in Q1 2006, compared to 41.3% in Q1 2005, largely due to resolution of tax issues.

Frequently Asked Questions

The primary driver was a significant increase in upstream earnings, fueled by higher crude oil and natural gas realizations. Improved marketing margins in the downstream segment also contributed positively, although this was partially offset by lower chemical margins and certain litigation and tax-related expenses.

ExxonMobil generated strong operating cash flow of $14.6 billion. The company increased its capital and exploration spending by 41% to $4.8 billion, indicating investment in future production. Additionally, it returned substantial capital to shareholders through $2.0 billion in dividends and $6.0 billion in share repurchases.

ExxonMobil is involved in several significant legal proceedings, including ongoing appeals related to the Exxon Valdez punitive damages and a substantial royalty dispute in Alabama. While the company believes the ultimate outcome of most litigation will not have a material adverse effect, it has accrued liabilities for some cases, such as the Allapattah v. Exxon dealer overcharge case totaling $1,075 million pre-tax. Investors should monitor these developments as they could impact future financial results.

Two notable accounting changes were adopted effective January 1, 2006. First, a change in accounting for purchases and sales of inventory with the same counterparty reduced both revenue and cost of goods sold without impacting net income, primarily affecting the Downstream segment. Second, the adoption of FAS 123R regarding share-based payments did not materially change the company's existing accounting practices, as ExxonMobil was already expensing share-based payments, largely due to the nature of its long-term stock option and restricted stock awards.