10-QPeriod: Q1 FY2008

EXXON MOBIL CORP Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 6, 2008For Securities:XOM

Summary

ExxonMobil reported a record first quarter in 2008, with net income reaching $10.89 billion, a significant 17% increase compared to the same period in 2007. This strong performance was driven by record crude oil and natural gas prices, which boosted upstream earnings considerably. Despite robust upstream results, the company saw lower refining and chemical margins, as well as decreased production volumes, which partially offset the gains. Investors should note the company's increased share repurchase program, with $8.0 billion allocated in the first quarter of 2008 to reduce outstanding shares by 1.8%. This, coupled with a 13% increase in total distributions to shareholders (dividends and share buybacks), indicates a strong focus on returning capital to investors. However, higher operating costs and taxes, along with the ongoing impact of the Venezuela expropriation, are factors to monitor.

Key Highlights

  • 1Record first quarter net income of $10.89 billion, up 17% year-over-year.
  • 2Earnings per share increased to $2.05 ($2.03 diluted), up 25% from $1.64 ($1.62 diluted) in Q1 2007.
  • 3Upstream earnings surged by $2.74 billion to $8.79 billion, primarily due to record crude oil and natural gas prices.
  • 4Significant increase in capital expenditures to $5.5 billion, up 30% from the prior year, reflecting continued investment in future production.
  • 5Share repurchases were accelerated, with $8.0 billion spent in Q1 2008 to reduce outstanding shares by 1.8%.
  • 6Total distributions to shareholders (dividends and share buybacks) increased 13% to $9.9 billion.
  • 7Effective income tax rate increased to 49% from 44% in the prior year, influenced by higher non-U.S. upstream income.

Frequently Asked Questions

The primary driver was the surge in crude oil and natural gas prices, which significantly boosted upstream earnings. Despite this, lower refining and chemical margins, along with decreased production volumes and higher operating costs, partially offset these gains.

ExxonMobil is actively returning capital through an increased share repurchase program, having spent $8.0 billion in the first quarter of 2008 to reduce outstanding shares. The company also increased its dividend payments, resulting in a total 13% increase in distributions to shareholders compared to the first quarter of 2007.

ExxonMobil significantly increased its capital and exploration expenditures to $5.5 billion in the first quarter of 2008, a 30% rise year-over-year. This reflects a continued commitment to investing in projects aimed at increasing crude oil, natural gas, and finished product supply. The company anticipates spending between $25 billion and $30 billion annually over the next few years.

ExxonMobil's interest in the Cerro Negro Heavy Oil Project in Venezuela was expropriated in June 2007. Discussions regarding compensation are ongoing, and the company has initiated arbitration proceedings. While the net impact on consolidated financial results cannot be reasonably estimated at this time, ExxonMobil does not expect the resolution to materially affect its operations or financial condition. The net book investment at the time of expropriation was approximately $750 million.