Exxon Mobil Corporation (XOM)

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Exxon Mobil (XOM)

Q3 2010 Earnings Call

October 28, 2010 11:00 am ET

Executives

David Rosenthal - Vice President of Investor Relations and Secretary

Analysts

Edward Westlake - Crédit Suisse AG

Douglas Terreson - ISI Group Inc.

Jacques Rousseau - RBC Capital Markets Corporation

Evan Calio - Morgan Stanley

Pavel Molchanov - Raymond James & Associates

Mark Gilman - The Benchmark Company, LLC

Paul Cheng

Faisel Khan - Citigroup Inc

Robert Kessler - Simmons & Company

Douglas Leggate - BofA Merrill Lynch

Paul Sankey - Deutsche Bank AG

Blake Fernandez - Howard Weil Incorporated

Jason Gammel - Macquarie Research

Presentation

Operator

Good day, and welcome to the Exxon Mobil Corporation Third Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, for opening remarks, I would like to turn the call over Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

David Rosenthal

Good morning, and welcome to Exxon Mobil's Third Quarter Earnings Call and Webcast. The focus of this call is Exxon Mobil's financial and operating results for the third quarter of 2010. We will refer to the slides that are available through the Investor section of our website.

Before we go further, I would like to draw your attention to our cautionary statement shown on Slide 2. Statements of future events or conditions are forward-looking statements. Actual results, including resource recoveries, volume growth and project outcomes, could differ materially due to factors I discussed and factors noted in our SEC filings. Please see Factors Affecting Future Results and the Form 8-K we furnished this morning, which are available through the Investors Section of our website. Please also see the Frequently Used Terms and the 2009 financial and operating review on our website. This material defines key terms I will use today and shows Exxon Mobil's net interest in specific projects.

Moving to Slide 3, we have provided an overview of some of the external factors impacting third quarter results. We continue to see the effects of mixed economic activity, with ongoing uncertainty in the United States and Europe, offset in part by a stronger growth in the developing world, mainly in the Asia-Pacific and Latin American regions. The pace of the global economic recovery and the resulting near-term supply and demand balances have been impacted by these effects.

Crude oil prices remained well above levels of a year ago. Natural gas prices and Downstream margins have also shown improvement relative to 2009. Chemical margins have improved relative to last year, but have been negatively impacted by new industry capacity coming online.

Now turning to the third quarter financial results, as shown on Slide 4. Exxon Mobil's third quarter 2010 earnings, excluding special items, were $7.4 billion, an increase of $2.6 billion from the third quarter of 2009. Earnings per share, excluding special items were $1.44, up $0.46 from a year ago.

The corporation distributed more than $5.2 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding. Of that total, $3 billion was distributed to purchase shares. Share purchases to reduce shares outstanding are expected to increase to $5 billion in the fourth quarter of 2010.

CapEx in the third quarter was $8.8 billion, up $2.3 billion from 2009, primarily due to the inclusion of XTO activity and unfavorable foreign exchange impacts. We continue to invest in robust projects through the business cycle to help meet global demand for crude oil, natural gas and finished products.

Our cash generation remains very strong. At the end of the third quarter, our cash balance was $12 billion and debt was just over $18 billion after reducing the XTO debt assumed in the acquisition by over $3 billion.

Moving to Slide 5. Exxon Mobil's earnings, excluding special items, increased $2.6 billion from the third quarter of 2009, reflecting strong results across all business lines. Upstream earnings increased $1.5 billion, driven by higher crude oil and natural gas prices and significant volume growth.

The Downstream saw notable improvement over the 2009 third quarter, with an increase in earnings of $835 million, largely due to stronger industry Refining margins. Chemicals continued its solid performance as earnings increased $353 million on stronger margins. Corporate and Financing expenses were $506 million during the quarter, up $23 million versus the third quarter of 2009.

As shown on Slide 6, Exxon Mobil's earnings, excluding special items, declined $210 million from the second quarter of 2010. Upstream earnings increased $131 million, primarily due to volume growth. While Downstream earnings were down $60 million due to lower industry margins. Chemical earnings decreased from the second quarter by $139 million on lower commodity margins. Compared with the second quarter of 2010, Corporate and Financing expenses increased by $142 million, mainly due to the impact of retiring a portion of XTO's long term debt.

Moving next to the Upstream results on Slide 8. During the quarter, Exxon Mobil began production from the Odoptu field, the latest development phase of the Sakhalin-1 project in far eastern Russia. This region is one of the most challenging sub-arctic environments in the world. The project is performing well and current production is approximately 50,000 barrels of oil per day.

Employing world-class extended rig drilling, the project started up on schedule and within development cost expectations. Since start up of the first phase at Chayvo in 2005, the Sakhalin-1 project has produced over 270 million barrels of oil for export to world markets.

Moving to the United States, our LNG terminal at Golden Pass on the Texas Gulf Coast recently received a commissioning cargo. Once commissioning activities are complete, the start up of this terminal will represent the final stage of the integrated project between Exxon Mobil and Qatar Petroleum that includes the entire LNG supply chain, production, liquefaction, LNG ships and LNG receiving terminals. Our four trains in Qatar with annual capacity of 7.8 million metric tons each are all running at capacity. And our Al Khaleej Gas Phase 2 domestic gas project continues to benefit from strong local demand. These facilities are well positioned to help meet the growing global gas demand in Asia, Europe and the United States.

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