Mobil Announces Q1 1999 Operating Earnings Of $471 Million
23 April 1999
MOBIL ANNOUNCES FIRST QUARTER 1999 OPERATING EARNINGS OF $471 MILLION
FAIRFAX, Va.--April 23, 1999--
First Quarter
1998 1999 Change
Operating Earnings ($millions) 715 471 (244)
per share ($) 0.90 0.59 (0.31)
assuming dilution ($) 0.88 0.59 (0.29)
Net Income ($millions) 705 464 (241)
per share ($) 0.88 0.58 (0.30)
assuming dilution ($) 0.86 0.58 (0.28)
| - | Improved performance due to our self-help programs contributed about $125 million and helped offset the impact of sharp declines in industry fundamentals. - Per barrel operating costs down about 7 percent. |
| - | Upstream earnings down primarily due to deterioration in industry fundamentals. - Crude prices down about $2.70 per barrel. - Natural gas prices off about $0.45 per thousand cubic feet. - Production down about 4 percent. - Favorable expense performance. |
| - | Downstream earnings held up relatively well despite weaker margins in all enclaves. - Refining and marketing margins down both in U.S. and International. - Worldwide trade sales up about 3 percent, with U.S. 4 percent higher and record volumes in Japan. - Refinery downtime costs significantly lower. - Favorable expense performance. |
| - | Chemical earnings weak. - Polyethylene and paraxylene margins continued to decline. - Plant downtime costs higher due to tie-in of Beaumont olefins upgrading/expansion project. |
Mobil Corporation today reported first quarter 1999 estimated operating earnings of $471 million. This is a decrease of $244 million, or 34 percent, from the $715 million earned in the same period last year. Operating earnings per common share, assuming dilution, were $0.59, compared with $0.88 in the first quarter of 1998. On a reported basis, including special items, net income for the quarter was $464 million, or $0.58 per share, down from net income of $705 million, or $0.86 per share, last year.
This year's first quarter net income included a $7 million charge for Exxon Mobil merger-related costs, while last year's first quarter net income included a charge of $10 million for implementation costs associated with the BP European alliance.
"In the first quarter, all of our businesses experienced a significant deterioration in industry fundamentals versus the same quarter last year," said Chairman and Chief Executive Officer Lucio A. Noto. "However, improved performance due to our self-help programs contributed about $125 million, helping to offset the deterioration in industry fundamentals.
"In the Upstream, earnings were impacted by lower worldwide crude oil and natural gas prices. Crude oil prices were down about $2.70 per barrel, while natural gas declined approximately $0.45 per thousand cubic feet. Production volumes were down about 4 percent versus the same period in 1998 as higher volumes from Eastern Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more than offset by the impact of anticipated contractual reductions in Indonesia, natural field declines in mature areas such as the U.S. and the North Sea, and operational problems in Australia and Canada.
"Downstream earnings were somewhat lower as higher sales volumes and favorable refinery and expense performance offset most of the impact from weaker margins in all enclaves. In the U.S., product trade sales were up over 4 percent, while the international area improved by about 2 percent.
"In Chemical, earnings were down significantly, reflecting lower polyethylene and paraxylene margins. Earnings were also hurt by downtime associated with the tie-in of the Beaumont olefins expansion/upgrading project. When the project achieves full design rate, ethylene capacity at Beaumont will be increased by about 45 percent to over 1.8 billion pounds a year."
Noto concluded, "Crude oil prices, after deteriorating during the entire year of 1998 and most of the first quarter of 1999, have recently improved somewhat. However, some pressure is building on marketing and lubes margins due to the lag effect of rising crude prices. Business fundamentals, as reflected in these price and margin swings, continue to be unpredictable in the near term. Therefore, we 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 first quarter 1999 as compared with the same period in 1998 (refer to Table 2):
COMPARISON OF FIRST QUARTER 1999 WITH FIRST QUARTER 1998
- Exploration & Producing operating earnings of $231 million were
$159 million lower than last year's $390 million.
In the United States, earnings of $23 million decreased $57 million due primarily to the impact of lower crude oil and natural gas prices and lower volumes from natural field declines which more than offset lower operating expenses.
International earnings of $208 million were $102 million lower, due mainly to the significant decline in crude oil and natural gas prices.
Production was down as higher volumes from Eastern Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more than offset by the impact of anticipated contractual reductions in Indonesia, natural field declines in mature areas such as the North Sea, and operational problems in Australia and Canada.
- Marketing & Refining operating earnings of $291 million were $34
million lower than in 1998.
Operating earnings in the United States were $90 million, $4 million above last year. The unfavorable impacts of lower industry margins and the narrowing of the light/heavy crude spread were more than offset by substantially lower scheduled refinery downtime, strong sales performance and lower operating expenses.
International earnings of $201 million were $38 million lower than in 1998. In Europe, despite additional benefits from the BP alliance, earnings were down as a result of weaker margins for both refining and marketing. Earnings were flat in Asia-Pacific and other International M&R operations, as the impact of lower integrated margins were offset by our initiatives programs and increased sales volumes, including record volumes in Japan and significantly higher levels in Africa.
| - | Chemical earnings of $6 million were $61 million lower than last year as a result of lower polyethylene and paraxylene margins as well as downtime associated with the tie-in of the Beaumont olefins expansion/upgrading project. |
| - | Corporate and Financing expenses of $57 million were $10 million lower than in the first quarter of 1998 primarily due to the timing of expenses and other one-time items. |
Estimates of key financial and operating data are shown below and on the attached tables.
Investment Spending for the first quarter of 1999 was $1,229 million, $376 million higher than in the comparable period last year. Total spending for 1999 is still expected to be $4.8 billion.
Income Taxes decreased $282 million principally due to this quarter's lower level of pre-tax income and a shift in earnings from upstream to downstream operations that have a lower effective tax rate. Additionally, as crude prices decline, taxes associated with our fixed margin production decrease as a percent of pre-tax income, which also contributes to a lower effective tax rate.
Mobil's Return on Average Capital Employed for twelve months ended March 31, 1999, based on operating earnings, was 9.0 percent, compared with 10.2 percent for calendar year 1998. On a reported net income basis, returns were 6.6 percent and 7.7 percent for the same periods.
Return on Average Shareholders' Equity for twelve months ended March 31, 1999, based on operating earnings, was 11.2 percent, compared with 12.5 percent for calendar year 1998. On a net income basis, returns were 7.7 percent and 9.0 percent for the same periods.
Mobil's Debt-to-Capitalization Ratio was 31 percent at March 31, 1999, compared with 29 percent at December 31, 1998.
Common Stock Dividends were $0.57 per share in the first quarter of 1999, unchanged from the comparable period in 1998.
Table 1
MOBIL CORPORATION
First Quarter
1998 1999 Incr/
INCOME ($ Millions) Act Est (Decr)
Exploration & Producing:
United States $ 80 $ 23 $ (57)
International 310 208 (102)
--- --- ---
Total Exploration & Producing 390 231 (159)
--- --- ---
Marketing & Refining:
United States 86 90 4
International 229 201 (28)
--- --- ---
Total Marketing & Refining 315 291 (24)
--- --- ---
Chemical 67 6 (61)
Corporate and Financing (a) (67) (64) 3
--- --- ---
Net Income $ 705 $ 464 $ (241)
=== === ===
NET INCOME PER COMMON SHARE ($)(b) $0.88 $0.58 $(0.30)
Assuming Dilution (c) 0.86 0.58 (0.28)
COMMON SHARES OUTSTANDING (Millions)
End of Period 781.9 774.5 (7.4)
Average 782.1 773.7 (8.4)
Average -- Assuming Dilution 810.4 803.2 (7.2)
DIVIDENDS
Common Stock
Total Paid ($ Millions) $ 445 $ 445 $ -
Per Share ($) 0.57 0.57 $ -
Preferred Stock ($ Millions) 13 12 (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
First Quarter
INCOME ADJUSTED FOR SPECIAL 1998 1999 Incr/
ITEMS ($ Millions) Act Est (Decr)
Exploration & Producing:
United States $ 80 $ 23 $ (57)
International 310 208 (102)
--- --- ---
Total Exploration & Producing 390 231 (159)
--- --- ---
Marketing & Refining:
United States 86 90 4
International 239 201 (38)
--- --- ---
Total Marketing & Refining 325 291 (34)
--- --- ---
Chemical 67 6 (61)
Corporate and Financing (a) (67) (57) 10
--- --- ---
Operating Earnings (Before
Special Items) 715 471 (244)
--- --- ---
Special Items (10) (7) 3
--- --- ---
Net Income $ 705 $ 464 $ (241)
==== ==== ====
EARNINGS PER COMMON SHARE ($)
BASED ON:
Operating Earnings (Before
Special Items) (b) $0.90 $ 0.59 $ (0.31)
Assuming Dilution(c) 0.88 0.59 (0.29)
Net Income (b) 0.88 0.58 (0.30)
Assuming Dilution(c) 0.86 0.58 (0.28)
(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
1998 by Quarter and Year 1999
------------------------------------ ----
SPECIAL ITEMS
AFFECTING INCOME ($MM) 1Q 2Q 3Q 4Q Year 1Q
--- --- --- ---- ---- ---
E&P--United States
Asset Impairment - - - (156) (156) -
Federal Royalty Settlement - - (29) - (29) -
E&P--International
Asset Impairment - - - (231) (231) -
Asset Sales - - 55 - 55 -
M&R--United States
LIFO Inventory Adjustment - - - 8 8 -
M&R--International
LIFO Inventory Adjustment - - - (17) (17) -
Restructuring (10) (13) (14) (97) (134) -
Lower of Cost or Market
Inventory Adjustment - - - (261) (261) -
Chemical
Lower of Cost or Market
Inventory Adjustment - - - (9) (9) -
Corporate and Financing
Settlement of Prior Years'
Tax Disputes - - - 137 137 -
Exxon Mobil Merger-Related
Costs - - - (25) (25) (7)
--- --- --- ---- ---- ---
Total Special Items $ (10) $ (13) $ 12 $ (651) $ (662) $ (7)
=== === === ==== ==== ===
Table 4
MOBIL CORPORATION
First Quarter
INVESTMENT SPENDING ($Millions) 1998 1999 Incr/
Act Est (Decr)
Capital and Exploration Expenditures
Exploration & Producing:
United States $ 98 $ 79 $ (19)
International 501 668 167
--- --- ---
Total Exploration & Producing 599 747 148
--- --- ---
Marketing & Refining:
United States 60 40 (20)
International 43 35 (8)
--- --- ---
Total Marketing & Refining 103 75 (28)
--- --- ---
Chemical 26 42 16
Other 28 21 (7)
--- --- ---
Total Capital and Exploration Expenditure 756 885 129
Cash Investments in Equity Companies 97 344 247
--- ----- ---
Total Investment Spending $ 853 $1,229 $ 376
=== ===== ===
Memo: Exploration expenses charged
to operating earnings, included above
United States $ 17 $ 23 $ 6
International 57 68 11
--- --- ---
Total Exploration Expenses $ 74 $ 91 $ 17
=== === ===
OTHER FINANCIAL DATA ($Millions)
Total Revenues $13,630 $12,183 $(1,447)
Depreciation, Depletion and Amortization 599 597 (2)
Income Taxes 529 247 (282)
AVERAGE U.S. PRICES
Crude ($/BBL) -- Mobil 13.25 10.50 (2.75)
Crude ($/BBL) -- Mobil + Aera 11.75 9.10 (2.65)
NGL ($/BBL) 9.71 7.28 (2.43)
Natural Gas ($/MCF) 2.04 1.61 (0.43)
AVERAGE INT'L. PRICES
Crude ($/BBL) 13.55 10.95 (2.60)
Natural Gas ($/MCF) 2.42 1.96 (0.46)
Table 5
MOBIL CORPORATION
First Quarter
1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr)
NET PRODUCTION OF LIQUIDS (TBD)
United States 240 243 3
--- --- ---
International:
Australia 30 32 2
Canada 63 68 5
Equatorial Guinea 47 58 11
Indonesia 44 33 (11)
Kazakhstan 42 53 11
Nigeria 243 262 19
Norway 79 69 (10)
United Kingdom 65 68 3
Middle East/Other 68 71 3
--- --- ---
Total International 681 714 33
--- --- ---
Worldwide 921 957 36
=== === ===
NET PRODUCTION OF NATURAL
GAS (MMCFD)
United States 1,123 902 (221)
---- --- -----
International:
Canada 430 423 (7)
Germany 550 600 50
Indonesia 1,484 1,106 (378)
United Kingdom 747 642 (105)
Other 365 419 54
----- ----- -----
Total International 3,576 3,190 (386)
----- ----- -----
Worldwide 4,699 4,092 (607)
===== ===== =====
TOTAL NET
PRODUCTION (TBDOE) 1,772 1,698 (74)
===== ===== =====
Table 6
MOBIL CORPORATION
First Quarter
1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr)
REFINERY RUNS (TBD)
United States (a) 900 781 (119)
Europe (b) 371 365 (6)
Asia-Pacific 747 774 27
All Other 184 179 (5)
----- ----- -----
Worldwide 2,202 2,099 (103)
===== ===== =====
PETROLEUM PRODUCT SALES (TBD) (c)
United States:
Automotive Gasoline
Sales to Trade 561 589 28
Supply/Other Sales 178 207 29
----- ----- ---
Total Automotive Sales 739 796 57
Distillates/Jet Fuel 380 397 17
Other 241 275 34
----- ----- ---
Total United States 1,360 1,468 108
----- ----- ---
International:
Europe (b) 674 674 -
Asia-Pacific 841 883 42
All Other 453 462 9
----- ----- ---
Total International 1,968 2,019 51
----- ----- ---
Worldwide 3,328 3,487 159
===== ===== ===
CHEMICAL SALES (MM LBS)
Worldwide Polyethylene Resin 701 733 32
Worldwide Paraxylene 458 421 (37)
CHEMICAL SALES BY PRODUCT
CATEGORY ($MM)
Petrochemicals $ 472 $ 337 $ (135)
Films Products 167 161 (6)
Chemical Products 38 39 1
--- --- ----
Total $ 677 $ 537 $ (140)
=== === ====
(a) 1999 reflects reduced volumes due to the sale of the Paulsboro
refinery in third quarter, 1998.
(b) Includes Mobil's share for the M&R alliance with BP in Europe.
(c) Includes trade and supply sales.