Mobil Reports Q2 1998 Operating Earnings
22 July 1998
Mobil Announces Second Quarter 1998 Operating Earnings of $655 Million
FAIRFAX, Va.--July 22, 1998--
Second Quarter
1997 1998 Change
---------------------------
Operating Earnings ($ millions) 870 655 (215)
per share ($) 1.09 0.82 (0.27)
assuming dilution ($) 1.07 0.81 (0.26)
Net Income ($ millions) 850 642 (208)
per share ($) 1.06 0.81 (0.25)
assuming dilution ($) 1.04 0.79 (0.25)
- Self-help initiatives of an additional $90 million, including 4
percent higher downstream product trade sales, higher chemical
sales and other performance improvements, cushioned the impact of
sharp declines in industry fundamentals.
- Worldwide downstream earnings were strong reflecting improved
operating performance.
- U.S. Marketing and Refining matched last year's record second
quarter earnings and set a new six-month earnings record.
- Benefits from our European alliance with BP continued to
grow, in line with expectations.
- Asia-Pacific earnings were up despite weak fundamentals in
the region, reflecting strong performance and benefits from
initiatives.
- Lube earnings improved, benefiting from initiatives and lower
feedstock costs.
- Upstream production was down, largely as a result of temporary
constraining factors including OPEC quota reductions and a drop
in Asian LNG demand.
Mobil Corporation today reported second quarter 1998 estimated operating earnings of $655 million.
This is a decrease of $215 million, or 25 percent, from the $870 million earned in the same period last year. Operating earnings per common share, assuming dilution, were $0.81, compared with $1.07 in the second quarter of 1997. Including special items, net income for the quarter was $642 million, or $0.79 per common share, versus $850 million, or $1.04 per share, last year.
This year's second quarter net income included a $13 million special charge for on-going implementation costs associated with the BP European downstream alliance, while last year's second quarter net income included a charge of $20 million for these implementation costs.
"In addition to significantly lower crude oil prices, down about $5 per barrel from the same period last year, weak industry fundamentals in many of our businesses hurt earnings in the second quarter," said Mobil Chairman and CEO Lucio A. Noto.
International natural gas prices trended lower, particularly for LNG; Asia-Pacific downstream margins, both refining and marketing, weakened considerably; and petrochemical margins remained under downward pressure.
Considering these fundamentals, Mobil's earnings held up fairly well due to about $90 million of benefits from self-help programs. During the first six months, self-help has contributed almost $200 million to Mobil's 1998 earnings.
"In the Downstream, self-help included continued growth in trade sales volumes, strong refinery performance and contributions from on-going initiatives. In the U.S., strong refinery performance and the effects of successful marketing programs to increase gasoline sales contributed to record second quarter and six months earnings.
"Benefits from the BP downstream alliance in Europe continued to grow, and in Asia-Pacific, earnings were up despite significantly lower margins, benefiting from numerous initiatives implemented over the last year and improved refinery performance. Lube earnings were higher, benefiting from initiatives and increased margins due to lower feedstock costs.
"In the Upstream, lower worldwide crude oil and international natural gas prices impacted earnings by over $200 million. Additionally, Mobil's year-to-date production declined by over 1 percent versus the same period last year, largely due to temporary constraining factors.
"These factors include economic conditions in Asia, which have resulted in the deferral of LNG cargoes from Indonesia, and cutbacks in OPEC quotas, which primarily impact our Nigerian operations. Longer term, our goal to grow production by an average of 4 percent per year, remains unchanged."
Noto concluded, "This year's collapse of crude oil prices is evidence of the continuing volatility in industry conditions to which Mobil is subjected. Due to uncertainty with respect to the pace of economic recovery in Asia and the outlook for crude oil supplies in the near term, Mobil will continue to focus on self-help initiatives to sustain and grow earnings."
The following comments address the operating performance of the major business segments during the second quarter of 1998 as compared with the same quarter in 1997 (refer to Table 2):
COMPARISON OF SECOND QUARTER 1998 WITH SECOND QUARTER 1997
- Exploration & Producing operating earnings of $235 million were
$223 million lower than last year's $458 million.
In the United States, earnings of $44 million decreased $83 million as significantly lower crude oil prices and higher exploration expenses were only partly offset by higher natural gas prices.
International earnings of $191 million were $140 million lower, primarily reflecting a large decline in average crude oil and natural gas prices. The effects of higher liquids volumes in Canada, Equatorial Guinea and Australia were offset by the effects of OPEC constraints, mainly in Nigeria, and the deferral of LNG cargoes from Indonesia.
- Marketing & Refining operating earnings of $417 million were
$3 million lower than in 1997.
Operating earnings in the United States were $194 million, matching last year's record second quarter results. This quarter's strong results were driven by excellent operating performance, strong integrated margins and the success of various marketing programs. Gasoline trade sales were 6 percent higher than last year and lube income was up due to improved margins and product mix.
International earnings of $223 million were $3 million lower than in 1997. In Europe, earnings were higher due to stronger integrated margins and additional benefits from the Mobil-BP alliance. Earnings were also stronger in Asia-Pacific, despite the significant deterioration in both refining and marketing margins.
Earnings benefited from performance initiatives in the region, improved refinery performance and higher trade sales volumes. Other international earnings were negatively impacted by the scheduled turnaround at our Yanbu, Saudi Arabia joint venture refinery and lower margins for product exports from this facility.
- Chemical earnings of $58 million were $33 million lower than last
year as a result of lower polyethylene and paraxylene margins,
somewhat offset by the effects of higher volumes.
- Corporate and Financing expenses of $55 million were $44 million
lower than in the second quarter of 1997 primarily due to lower
average net debt balances, the timing of expenses and certain
one-time benefits in this year's second quarter.
COMPARISON OF SIX MONTHS 1998 WITH SIX MONTHS 1997
Mobil's first half 1998 net income was $1,347 million, compared with $1,676 million for the same period in 1997. This year's net income included special charges of $23 million for implementation costs for the Mobil-BP downstream European alliance. First half 1997 net income included special charges of $38 million for Mobil-BP alliance implementation costs.
Excluding special items, first half operating earnings of $1,370 million were down $344 million, or 20 percent, from the comparable period in 1997. The decline was primarily due to the significant drop in worldwide average crude oil and natural gas prices and lower downstream margins in Asia-Pacific, partly offset by self-help initiatives and stronger downstream margins in the U.S. and Europe.
Self-help included the overall favorable effects of volumes, excellent refinery performance and benefits from the Mobil-BP European downstream alliance. Additionally, Asia-Pacific downstream benefited from on-going restructuring initiatives throughout the region.
Estimates of key financial and operating data are shown below and on the attached tables.
Investment Spending for the second quarter of 1998 was $1,507 million, $49 million higher than in the comparable period last year. For the first six months of 1998, investment spending was $2,360 million, compared with $2,292 million for the same period last year.
Mobil's Return on Average Capital Employed for the twelve months ended June 30, 1998, based on operating earnings (excluding special items), was 11.9 percent, compared with 14.0 percent for calendar year 1997. On a net income basis, returns were 11.4 percent and 13.4 percent for the same periods.
Return on Average Shareholders' Equity for the twelve months ended June 30, 1998, based on operating earnings (excluding special items), was 15.8 percent, compared with 17.8 percent for calendar year 1997. On a net income basis, returns were 15.1 percent and 17.0 percent for the same periods.
Mobil's Debt-to-Capitalization Ratio was 30 percent at June 30, 1998, and 25 percent at December 31, 1997.
Common Stock Dividends were $0.57 per share in the second quarter of 1998, up by $.04 per share from the second quarter of last year and by $.08 per share on a year-to-date basis.
MOBIL CORPORATION
Table 1
Second Quarter Six Months
-------------------- --------------------
INCOME ($MM) 1997 1998 Incr/ 1997 1998 Incr/
(Decr) (Decr)
------ ------ ------ ------ ------ -----
Petroleum Operations
E&P: United States 127 44 (83) 351 124 (227)
International 331 191 (140) 801 501 (300)
------ ------ ------ ------ ----- ------
Total Exploration &
Producing 458 235 (223) 1,152 625 (527)
M&R: United States 194 194 - 152 280 128
International 206 210 4 380 439 59
------ ------ ------ ------ ----- ------
Total Marketing &
Refining 400 404 4 532 719 187
------ ------ ------ ------ ------ -----
Total Petroleum 858 639 (219) 1,684 1,344 (340)
Chemical 91 58 (33) 176 125 (51)
Corporate and
Financing (a) (99) (55) 44 (184) (122) 62
------ ------ ------ ------ ------ ------
Net Income 850 642 (208) 1,676 1,347 (329)
========= ====== ====== ====== ====== ====== ======
COMMON SHARES OUTSTANDING (MM)
End of Period ... ... ... 787.1 781.6 (5.5)
Average 787.0 781.6 (5.4) 787.6 781.8 (5.8)
Average -- Assuming
Dilution 815.6 811.1 (4.5) 815.8 810.7 (5.1)
NET INCOME PER COMMON
SHARE ($) (b) 1.06 0.81 (0.25) 2.10 1.69 (0.41)
Assuming Dilution (c) 1.04 0.79 (0.25) 2.05 1.65 (0.40)
DIVIDENDS
Common Stock
Total Paid ($MM) 417 446 29 835 891 56
Per Share ($) 0.53 0.57 0.04 1.06 1.14 0.08
Preferred Stock ($MM) 13 12 (1) 26 25 (1)
(a) Includes corporate administrative expenses, net financing expense
and other items.
(b) The net income per common share calculation is based on income,
less preferred stock dividend requirements, divided by the
weighted average number of common shares outstanding.
(c) Net income per common share assuming dilution includes the
dilutive effects of stock options and convertible preferred stock.
Table 2
MOBIL CORPORATION
Second Quarter Six Months
-------------------- --------------------
INCOME ADJUSTED FOR 1997 1998 Incr/ 1997 1998 Incr/
SPECIAL ITEMS ($MM) (Decr) (Decr)
------ ------ ------ ------ ------ ------
Petroleum Operations
E&P: United States 127 44 (83) 351 124 (227)
International 331 191 (140) 801 501 (300)
------ ------ ------ ------ ------ ------
Total Exploration &
Producing 458 235 (223) 1,152 625 (527)
M&R: United States 194 194 - 152 280 128
International 226 223 (3) 418 462 44
------ ------ ------ ------ ------ ------
Total Marketing &
Refining 420 417 (3) 570 742 172
------ ------ ------ ------ ------ ------
Total Petroleum 878 652 (226) 1,722 1,367 (355)
Chemical 91 58 (33) 176 125 (51)
Corporate and Financing (a) (99) (55) 44 (184) (122) 62
------ ------ ------ ------ ------ ------
Operating Earnings (Before
Special Items) 870 655 (215) 1,714 1,370 (344)
Special Items (20) (13) 7 (38) (23) 15
------ ------ ------ ------ ------ ------
Net Income 850 642 (208) 1,676 1,347 (329)
========== ====== ====== ===== ====== ====== =====
EARNINGS PER COMMON SHARE ($)
BASED ON:
Operating Earnings (Before
Special Items) (b) 1.09 0.82 (0.27) 2.14 1.72 (0.42)
Assuming Dilution(c) 1.07 0.81 (0.26) 2.10 1.68 (0.42)
Net Income (b) 1.06 0.81 (0.25) 2.10 1.69 (0.41)
Assuming Dilution(c) 1.04 0.79 (0.25) 2.05 1.65 (0.40)
(a) Includes corporate administrative expenses, net financing expense
and other items.
(b) The earnings per common share calculation is based on income, less
preferred stock dividend requirements, divided by the weighted
average number of common shares outstanding.
(c) Earnings per common share assuming dilution includes the dilutive
effects of stock options and convertible preferred stock.
Table 3
MOBIL CORPORATION
1997 by Quarter and Year 1998
SPECIAL ITEMS ----------------------------- ----- -----
AFFECTING INCOME ($MM) 1Q 2Q 3Q 4Q Year 1Q 2Q
----- ----- ----- ----- ------ ----- -----
E&P United States
Asset Sales - - 53 - 53 - -
Litigation - - (12) - (12) - -
Employee Performance Award - - (4) - (4) - -
E&P International
Asset Sales - - - 41 41 - -
Employee Performance Award - - (4) - (4) - -
M&R United States
Asset Impairment - - - (18) (18) - -
LIFO/Other Inv. Adj. - - - 8 8 - -
Employee Performance Award - - (10) - (10) - -
M&R International
LIFO/Other Inv. Adj. - - - 12 12 - -
Restructuring (18) (20) (72) (148) (258) (10) (13)
Employee Performance Award - - (21) - (21) - -
Chemical
Asset Sales - - 48 - 48 - -
Litigation - - 10 - 10 - -
Employee Performance Award - - (5) - (5) - -
Corporate and Financing
Asset Sales - - 39 - 39 - -
Litigation - - (31) - (31) - -
Employee Performance Award - - (6) - (6) - -
----- ----- ----- ----- ------ ----- -----
Total Special Items (18) (20) (15) (105) (158) (10) (13)
===== ===== ===== ===== ===== ===== =====
Table 4
MOBIL CORPORATION
Second Quarter Six Months
------------------- -------------------
INVESTMENT SPENDING 1997 1998 Incr/ 1997 1998 Incr/
($MM) (Decr) (Decr)
---- ---- ----- ---- ---- -----
Capital and Exploration Expenditures
Petroleum Operations
Exploration & Producing
United States 136 174 38 208 272 64
International 629 765 136 1,095 1,266 171
------ ------ ------ ------ ------ ------
Total E&P 765 939 174 1,303 1,538 235
------ ------ ------ ------ ------ ------
Marketing & Refining
United States 77 103 26 152 163 11
International 150 70 (80) 244 113 (131)
------ ------ ------ ------ ------ ------
Total M&R 227 173 (54) 396 276 (120)
------ ------ ------ ------ ------ ------
Total Petroleum 992 1,112 120 1,699 1,814 115
Chemical 70 70 - 124 96 (28)
Other 20 70 50 31 98 67
------ ------ ------ ------ ------ ------
Total Capital and Exploration
Expenditures 1,082 1,252 170 1,854 2,008 154
Cash Investments in Equity
Companies 376 255 (121) 438 352 (86)
------ ------ ------ ------ ------ ------
Total Investment Spending 1,458 1,507 49 2,292 2,360 68
====== ====== ====== ====== ====== ======
Memo: Exploration expenses
charged to income,
included above
United States 11 32 21 16 49 33
International 71 65 (6) 141 122 (19)
------ ------ ------ ------ ------ ------
Total Exploration Expenses 82 97 15 157 171 14
====== ====== ====== ====== ====== ======
======================================================================
OTHER FINANCIAL DATA ($MM)
Total Revenues 16,749 13,233 (3,516) 32,935 26,863 (6,072)
Depreciation, Depletion,
and Amortization 615 621 6 1,258 1,220 (38)
Income Taxes 738 392 (346) 1,602 921 (681)
AVERAGE U.S. PRICES
Crude ($/BBL)--Mobil 16.92 11.73 (5.19) 18.37 12.50 (5.87)
Crude ($/BBL)--Mobil +
Aera 15.90 10.38 (5.52) 17.21 11.06 (6.15)
NGL ($/BBL) 11.02 8.44 (2.58) 12.10 9.07 (3.03)
Natural Gas ($/MCF) 1.88 2.07 0.19 2.34 2.05 (0.29)
AVERAGE INT'L. PRICES
Crude ($/BBL) 17.83 12.70 (5.13) 18.99 13.15 (5.84)
Natural Gas ($/MCF) 2.63 2.12 (0.51) 2.84 2.29 (0.55)
Table 5
MOBIL CORPORATION
Second Quarter Six Months
---------------------- ---------------------
1997 1998 Incr/ 1997 1998 Incr/
OPERATING HIGHLIGHTS (Decr) (Decr)
------ ------ ------ ----- ----- -----
NET PRODUCTION OF LIQUIDS
(TBD)
United States 248 242 (6) 241 241 -
Australia 33 41 8 30 36 6
Canada 46 60 14 45 61 16
Equatorial Guinea 31 46 15 28 46 18
Indonesia 47 41 (6) 52 43 (9)
Kazakhstan 42 42 - 38 42 4
Nigeria 251 239 (12) 247 241 (6)
Norway 82 76 (6) 80 77 (3)
United Kingdom 74 60 (14) 75 62 (13)
Middle East/Other 68 72 4 69 71 2
------ ------ ------- ----- ----- ------
Total International 674 677 3 664 679 15
------ ------ ------- ----- ----- ------
Worldwide 922 919 (3) 905 920 15
====== ====== ======= ===== ===== ======
NET PRODUCTION OF NATURAL
GAS (MMCFD)
United States 1,136 1,119 (17) 1,172 1,121 (51)
Canada 375 461 86 373 446 73
Germany 402 407 5 497 478 (19)
Indonesia (a) 1,527 1,252 (275) 1,593 1,367 (226)
United Kingdom 644 592 (52) 733 669 (64)
Other 311 362 51 306 363 57
------ ------ ------- ----- ----- ------
Total International 3,259 3,074 (185) 3,502 3,323 (179)
------ ------ ------- ----- ----- ------
Worldwide 4,395 4,193 (202) 4,674 4,444 (230)
====== ====== ======= ===== ===== ======
TOTAL NET
PRODUCTION (TBDOE) 1,718 1,679 (39) 1,752 1,725 (27)
====== ====== ======= ===== ===== ======
(a) Year-to-date production reflects a downward restatement of first
quarter 1998.
Table 6
MOBIL CORPORATION
Second Quarter Six Months
------ ------ ------- ------ ----- ------
1997 1998 Incr/ 1997 1998 Incr/
OPERATING HIGHLIGHTS (Decr) (Decr)
------ ------ ------- ------ ----- ------
REFINERY RUNS (TBD)
United States 978 941 (37) 919 921 2
Europe (a) 377 365 (12) 365 366 1
Asia-Pacific 574 726 152 634 737 103
All Other 188 133 (55) 186 156 (30)
------ ------ ------ ------ ----- -------
Worldwide 2,117 2,165 48 2,104 2,180 76
====== ====== ====== ====== ====== =======
PETROLEUM PRODUCT SALES (b)
(TBD)
United States
Automotive Gasoline
Sales to Trade 573 606 33 559 584 25
Supply/Other Sales 288 250 (38) 245 214 (31)
------ ------ ------- ------ ----- ------
Total Automotive Sale 861 856 (5) 804 798 (6)
Distillates/Jet Fuel 332 330 (2) 369 344 (25)
Other 256 266 10 231 264 33
------ ------ ------- ------ ------ ------
Total United States 1,449 1,452 3 1,404 1,406 2
Europe (a) 704 651 (53) 697 663 (34)
Asia-Pacific 767 830 63 814 835 21
All Other 360 434 74 376 443 67
------ ------ ------- ------ ----- -------
Total International 1,831 1,915 84 1,887 1,941 54
------ ------ ------- ------ ----- -------
Worldwide 3,280 3,367 87 3,291 3,347 56
====== ====== ====== ====== ===== =======
CHEMICAL SALES (MM LBS)
Worldwide Polyethylene 679 705 26 1,377 1,406 29
Worldwide Paraxylene 337 488 151 684 946 262
CHEMICAL SALES BY PRODUCT
CATEGORY ($MM)
Petrochemicals 524 420 (104) 1,051 892 (159)
Films Products 194 171 (23) 385 338 (47)
Chemical Products 34 41 7 67 79 12
------ ------ ------- ------ ------ -------
Total 752 632 (120) 1,503 1,309 (194)
====== ====== ======= ====== ====== =======
(a) Includes Mobil's share for the M&R alliance with BP in Europe.
(b) Includes trade and supply sales.