Exxon Mobil Corporation (XOM)

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Exxon Mobil (XOM)

Q1 2011 Earnings Call

April 28, 2011 11:00 am ET

Executives

David Rosenthal - Vice President of Investor Relations and Secretary

Analysts

Edward Westlake - Crédit Suisse AG

Katherine Minyard

Mark Gilman - The Benchmark Company, LLC

Paul Cheng

Pavel Molchanov - Raymond James & Associates, Inc.

Faisel Khan - Citigroup Inc

Doug Terreson - ISI Group Inc.

Douglas Leggate - BofA Merrill Lynch

Paul Sankey - Deutsche Bank AG

Iain Reid - Jefferies & Company, Inc.

Blake Fernandez - Howard Weil Incorporated

Presentation

Operator

Good day, and welcome to this ExxonMobil Corporation First Quarter 2011 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

David Rosenthal

Good morning, and welcome to ExxonMobil's first quarter earnings call and webcast. The focus of this call is ExxonMobil's financial and operating results for the first quarter of 2011. I will refer to the slides that are available through the Investors section of our website. But before we go further, I would like to draw your attention to our customary cautionary statement shown on Slide 2.

Moving to Slide 3. We provide an overview of some of the external factors impacting our results. The global economic recovery remains uncertain as a result of continued sovereign debt concerns, inflationary pressures in major non-OECD markets and the tragic events in Japan. Energy markets are experiencing greater uncertainty with the political unrest in North Africa and the Middle East. These events, along with the effects of the weak U.S. dollar, have resulted in significantly higher crude oil prices. Natural gas prices outside the United States also increased relative to the first quarter of 2010. In addition, refining margins in the United States and the Asia Pacific region improved relative to a weak first quarter 2010 environment for the Downstream. We also saw strong Chemical margins, especially commodity margins in the United States and Europe.

Turning now to the first quarter financial results as shown on Slide 4. ExxonMobil's first quarter 2011 earnings, excluding special items, were $10.7 billion, an increase of $4.4 billion from the first quarter of 2010. Our effective tax rate for the quarter was 47%. Earnings per share for the quarter, excluding special items, were $2.14, up $0.81 from a year ago.

The corporation distributed more than $7 billion to shareholders in the first quarter through dividends and share purchases to reduce shares outstanding. Of that total, $5 billion was distributed to purchase shares. Share purchases to reduce shares outstanding are expected to be $5 billion in the second quarter of 2011. CapEx in the first quarter was $7.8 billion, up over $900 million from the first quarter of 2010, reflecting the increase in our U.S. unconventional activities.

Across our diverse portfolio, 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 with $18.2 billion in cash flow from operations and asset sales. At the end of the first quarter of 2011, our cash balance was $13.2 billion and debt was $15.9 billion.

The next slide provides additional detail on first quarter sources and uses of cash. Over the quarter, our cash balance grew from $8.5 billion to $13.2 billion. The combined impact of strong earnings, depreciation expense, lower working capital and the benefit of our ongoing asset management program yielded $18.2 billion of cash flow from operations. Uses of cash included additions to plant, property and equipment or PP&E of $7.1 billion and shareholder distributions of $7.2 billion.

We will now provide a review of segmented results starting on Slide 6. ExxonMobil's first quarter 2011 earnings of $10.7 billion increased $4.4 billion or 69% from the first quarter of 2010 with strong results across all business lines. Upstream earnings increased $2.9 billion, while Downstream earnings improved by $1.1 billion and Chemical earnings grew about $270 million. Corporate and financing expenses of $640 million during the quarter were down $160 million versus the first quarter of 2010 due mainly to the absence of the tax charge related to the U.S. healthcare legislation and remained within our continued guidance of $500 million to $700 million per quarter.

As shown on Slide 7, ExxonMobil's first quarter 2011 earnings of $10.7 billion increased $1.4 billion from the fourth quarter of 2010, mainly due to higher earnings in the Upstream and Chemical businesses.

Moving next to the Upstream results and beginning on Slide 8. ExxonMobil, along with our co-venturers, reached a major production milestone in the redevelopment of the West Qurna 1 oil field in Southern Iraq. We achieved the improved production target under the contract by increasing production 10% above the initial field production rate of 244,000 barrels per day gross. The current field production is now about 320,000 barrels per day gross. Day-to-day operations have been transferred to the West Qurna 1 Field Operating division, which is staffed by personnel from the South Oil Company and ExxonMobil. Operations include drilling new wells, working over existing wells and debottlenecking and optimizing facilities. We currently have 3 drilling rigs operating in the field and expect to add additional rigs during the year.

Turning now to our exploration and development activities on Slide 9. Beginning with our deepwater activity in the U.S. Gulf of Mexico, where ExxonMobil holds 2.1 million net acres, we are currently drilling the Hadrian-5 exploration well, which spud in March, within several days of receiving permit approval from the Bureau of Ocean Energy Management. Hadrian-5 is a further evaluation of the Hadrian North oil complex. The Hadrian South gas discovery is fully appraised. As you know, we and other members of the Marine Well Containment Company recently announced the readiness of an initial well containment response system. Work is continuing on additional enhancements to expand the system, which will be deployed next year. The Marine Well Containment Company membership continues to grow and now consists of 10 member companies.

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