Mobil Announces Second Quarter 1999 Operating Earnings of $650 Million
23 July 1999
MOBIL ANNOUNCES SECOND QUARTER 1999 OPERATING EARNINGS OF $650 MILLION
FAIRFAX, Va.--July 23, 1999--
Second Quarter
1998 1999 Change
Operating Earnings ($millions) 655 650 (5)
per share ($) 0.82 0.82 -
assuming dilution ($) 0.81 0.81 -
Net Income ($millions) 642 749 107
per share ($) 0.81 0.95 0.14
assuming dilution ($) 0.79 0.93 0.14
-- Although crude oil prices showed considerable improvement in the
second quarter, the benefit was more than offset by lower
worldwide natural gas prices and a significant deterioration in
margins, particularly in International Downstream operations and
worldwide petrochemicals.
-- Our self-help programs contributed about $140 million.
- Per barrel operating expenses are down about 8 percent
year-to-date.
-- Upstream earnings increased primarily due to higher worldwide
crude oil prices.
- Crude oil prices were up over $2.00 per barrel.
- Expense performance continued to be favorable.
- However, production was down about 3 percent.
- And exploration expenses were higher.
-- Downstream earnings decreased overall as the International
enclaves were hit hard by a deterioration in industry
fundamentals; however
- U.S. Marketing and Refining generated record second quarter
and six-month earnings, despite lower margins.
- Refining performance continued strong overall.
- Expense performance continued to improve.
-- Chemical earnings were weak.
- Polyethylene and paraxylene margins continued to decline.
Mobil Corporation today reported second quarter 1999 estimated operating earnings of $650 million. This is essentially unchanged from the $655 million earned in the same period last year. Operating earnings per common share, assuming dilution, were $0.81, the same as in the second quarter of 1998.
Including special items, net income for the quarter was $749 million, or $0.93 per common share, versus $642 million, or $0.79 per share, last year. Special items included in this year's second quarter net income were a $141 million upstream tax benefit in Indonesia offset by charges of $22 million for the write-off of an upstream property in Venezuela and $20 million for costs related to the proposed Exxon Mobil merger. Last year's second quarter net income included a charge of $13 million for implementation costs associated with the BP European downstream alliance.
"Industry fundamentals lowered this year's second quarter results by about $110 million versus the comparable period last year," said Mobil Chairman and CEO Lucio A. Noto. "Higher crude oil prices were more than offset by lower worldwide natural gas prices, weaker margins in refining and marketing, especially in Mobil's international markets, and lower petrochemical margins. Our ongoing self-help programs generated about $140 million of benefits, thereby offsetting the impact of these unfavorable industry fundamentals and higher exploration expenses. During the first six months of 1999, self-help contributed over $260 million to Mobil's earnings and helped reduce per barrel operating expenses by 8 percent.
"The Upstream benefited from higher worldwide crude oil prices and lower operating expenses. We continued to see the benefits from our refocused investment program, which resulted in lower new business expenses, and from asset rationalization synergies, such as the swap we did with Arco last year. These benefits were offset somewhat by higher exploration expenses, lower natural gas prices and a 3 percent decline in production versus the second quarter of last year. Higher volumes from key growth areas in 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 and natural field declines in mature areas.
"The second quarter saw a number of significant developments in our E&P operations. Sales commenced from our Ras Laffan LNG project in Qatar; the NSO project in Indonesia streamed, which will help offset declines at the Arun field; production started at the Aasgard field in Norway; we announced a major one billion plus barrel discovery in the deepwater Gulf of Mexico (Crazy Horse) where Mobil has a 25 percent interest; we participated in a major gas discovery in Bolivia; and we signed participation agreements in two very promising deep water blocks offshore Brazil.
"In the Downstream, Mobil's U.S. operations achieved record earnings for both the quarter and for the first six months of 1999, as benefits from expense initiatives, strong refining performance, sales volume growth and higher lube income more than offset lower industry margins. In the international area, earnings declined significantly, as refining margins continued to collapse in the face of product oversupply, and marketing margins eroded as product prices lagged the increase in crude oil costs and were impacted by competitive pressures in several markets. Again, continuing self-help improvements, particularly in Asia-Pacific, helped offset the deterioration in industry fundamentals.
"In Chemical, earnings were down significantly, reflecting lower polyethylene and paraxylene margins."
Noto concluded, "Crude oil prices, after deteriorating during the entire year of 1998 and most of the first quarter of 1999, have recently shown significant improvement. However, international refining and marketing margins remain depressed, as do margins for much of our petrochemicals business. Industry 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 second quarter of 1999 as compared with the same quarter in 1998 (refer to Table 2):
COMPARISON OF SECOND QUARTER 1999 WITH SECOND QUARTER 1998
-- Exploration & Producing operating earnings of $382 million were
$147 million higher than last year's $235 million.
In the United States, earnings of $82 million increased $38 million as higher crude oil prices and lower operating expenses were only partially offset by lower natural gas prices and lower natural gas production.
International earnings of $300 million were $109 million higher, primarily reflecting an increase in crude oil prices and lower operating expenses. These benefits were partly offset by higher exploration expenses, lower natural gas prices and lower production. The effects of higher volumes from the key growth areas in 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 and increased maintenance in the North Sea.
-- Marketing & Refining operating earnings of $320 million were $97
million lower than in 1998.
Operating earnings in the United States were $198 million, $4 million higher than last year's record second quarter results, in spite of the unfavorable impact of lower industry margins. This quarter's results benefited from lower operating expenses, continued strong refinery performance, 3 percent higher gasoline trade sales and increased lube income.
International earnings of $122 million were $101 million lower than in 1998. In Asia-Pacific and Europe, earnings were lower mainly due to a significant deterioration in both refining and marketing margins. Earnings benefited from performance initiatives in all regions and continued strong refinery performance; however, these were not enough to offset the deterioration in industry fundamentals.
| -- | Chemical earnings of $24 million were $34 million lower than last year as a result of lower polyethylene and paraxylene margins. |
| -- | Corporate and Financing expenses of $76 million were $21 million higher than in the second quarter of 1998 primarily due to higher financing expenses related to an increase in average net debt balances. |
COMPARISON OF SIX MONTHS 1999 WITH SIX MONTHS 1998
Mobil's first half 1999 net income was $1,213 million, compared with $1,347 million for the same period in 1998. This year's net income included a $141 million upstream tax benefit related to our operations in Indonesia offset by special charges of $27 million for costs related to the proposed Exxon Mobil merger and $22 million for the write-off of an upstream property in Venezuela. First half 1998 net income included special charges of $23 million for Mobil-BP European downstream alliance implementation costs.
Excluding special items, first half operating earnings of $1,121 million were down $249 million, or 18 percent, from the comparable period in 1998. The decline was primarily due to lower worldwide natural gas prices, higher exploration expenses, lower downstream margins in all major markets and lower petrochemicals margins. Lower expenses, better refinery performance and benefits from self-help initiatives partly offset the effects of these negative factors.
Estimates of key financial and operating data are shown below and on the attached tables.
Investment Spending for the second quarter of 1999 was $1,023 million, $484 million lower than in the comparable period last year. For the first six months of 1999, investment spending was $2,252 million, compared with $2,360 million for the same period last year.
Mobil's Return on Average Capital Employed for the twelve months ended June 30, 1999, based on operating earnings (excluding special items), was 8.8 percent, compared with 10.2 percent for calendar year 1998. On a net income basis, returns were 6.8 percent and 7.7 percent for the same periods.
Return on Average Shareholders' Equity for the twelve months ended June 30, 1999, based on operating earnings (excluding special items), was 11.1 percent, compared with 12.5 percent for calendar year 1998. On a net income basis, returns were 8.2 percent and 9.0 percent for the same periods.
Mobil's Debt-to-Capitalization Ratio was 33 percent at June 30, 1999, and 29 percent at December 31, 1998. The increase reflects higher debt levels.
Common Stock Dividends were $0.57 per share in the second quarter of 1999 and $1.14 per share on a year-to-date basis, unchanged from the comparable periods in 1998.
-0-
Table 1
MOBIL CORPORATION
Second Quarter Six Months
1998 1999 Incr/ 1998 1999 Incr/
INCOME ($ Millions) Act Est (Decr) Act Est (Decr)
---- ---- ---- ---- ---- ----
Exploration & Producing:
United States $ 44 $ 82 $ 38 $124 $105 $(19)
International 191 419 228 501 627 126
--- --- --- --- --- ---
Total Exploration &
Producing 235 501 266 625 732 107
--- --- --- --- --- ---
Marketing & Refining:
United States 194 198 4 280 288 8
International 210 122 (88) 439 323 (116)
--- --- --- --- --- ---
Total Marketing &
Refining 404 320 (84) 719 611 (108)
--- --- --- --- --- ---
Chemical 58 24 (34) 125 30 (95)
Corporate and
Financing (a) (55) (96) (41) (122) (160) (38)
---- ---- ---- ---- ---- ----
Net Income $642 $749 $107 $1,347 $1,213 $(134)
==== ==== ==== ==== ==== ====
NET INCOME $0.81 $0.95 $0.14 $1.69 $1.54 $(0.15)
PER COMMON SHARE ($) (b)
Assuming Dilution (c) 0.79 0.93 0.14 1.65 1.51 (0.14)
COMMON SHARES
OUTSTANDING (Millions)
End of Period - - - 781.6 775.6 (6.0)
Average 781.6 775.3 (6.3) 781.8 774.5 (7.3)
Average
-- Assuming Dilution 811.1 806.6 (4.5) 810.7 804.7 (6.0)
DIVIDENDS
Common Stock
Total Paid
($ Millions) $446 $447 $ 1 $891 $892 $ 1
Per Share ($) 0.57 0.57 - 1.14 1.14 -
Preferred Stock
($ Millions) 12 12 - 25 24 (1)
(a) Includes corporate administrative expenses, net financing expense
and other items.
(b) The net income per common share calculation is based on net
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 1998 1999 Incr/ 1998 1999 Incr/
SPECIAL ITEMS Act Est (Decr) Act Est (Decr)
($ Millions) ---- ---- ---- ---- ---- ----
Exploration & Producing:
United States $ 44 $ 82 $ 38 $124 $105 $(19)
International 191 300 109 501 508 7
--- --- --- --- --- ---
Total Exploration &
Producing 235 382 147 625 613 (12)
--- --- --- --- --- ---
Marketing & Refining:
United States 194 198 4 280 288 8
International 223 122 (101) 462 323 (139)
--- --- --- --- --- ---
Total Marketing &
Refining 417 320 (97) 742 611 (131)
--- --- --- --- --- ---
Chemical 58 24 (34) 125 30 (95)
Corporate and
Financing (a) (55) (76) (21) (122) (133) (11)
--- --- --- --- --- ---
Operating Earnings (Before
Special Items) 655 650 (5) 1,370 1,121 (249)
--- --- --- --- --- ---
Special Items (13) 99 112 (23) 92 115
--- --- --- --- --- ---
Net Income $642 $749 $107 $1,347 $1,213 $(134)
==== ==== ==== ==== ==== ====
EARNINGS PER COMMON SHARE ($)
BASED ON:
Operating Earnings
(Before Special
Items) (b) $0.82 $0.82 $ - $1.72 $1.42 $(0.30)
Assuming
Dilution(c) 0.81 0.81 - 1.68 1.39 (0.29)
Net Income (b) 0.81 0.95 0.14 1.69 1.54 (0.15)
Assuming
Dilution(c) 0.79 0.93 0.14 1.65 1.51 (0.14)
(a) Includes corporate administrative expenses, net financing expense
and other items.
(b) The earnings per common share calculation is based on income, less
preferred stock dividend requirements, divided by the weighted average
number of common shares outstanding.
(c) Earnings per common share assuming dilution includes the dilutive
effects of stock options and convertible preferred stock.
Table 3
MOBIL CORPORATION
1998 by Quarter and Year 1999
SPECIAL ITEMS
AFFECTING INCOME ($MM) 1Q 2Q 3Q 4Q Year 1Q 2Q
---- ---- ---- ---- ---- ---- ----
E&P--United States
Asset Impairments/
Write-offs - - - (156) (156) - -
Federal Royalty
Settlement - - (29) - (29) - -
E&P--International
Asset Impairments/
Write-offs - - - (231) (231) - (22)
Asset Sales - - 55 - 55 - -
Deferred Tax Benefit - - - - - - 141
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) (20)
---- ---- ---- ---- ---- ---- ----
Total Special Items $(10) $(13) $ 12 $(651) $(662) $ (7) $ 99
==== ==== ==== ==== ==== ==== ====
Table 4
MOBIL CORPORATION
Second Quarter Six Months
INVESTMENT SPENDING 1998 1999 Incr/ 1998 1999 Incr/
($Millions) Act Est (Decr) Act Est (Decr)
---- ---- ---- ---- ---- ----
Capital and Exploration Expenditures
Exploration & Producing:
United States $174 $ 69 $(105) $272 $148 $(124)
International 765 717 (48) 1,266 1,385 119
---- ---- ---- ---- ---- ----
Total Exploration &
Producing 939 786 (153) 1,538 1,533 (5)
---- ---- ---- ---- ---- ----
Marketing & Refining:
United States 103 56 (47) 163 96 (67)
International 70 39 (31) 113 74 (39)
---- ---- ---- ---- ---- ----
Total Marketing &
Refining 173 95 (78) 276 170 (106)
---- ---- ---- ---- ---- ----
Chemical 70 21 (49) 96 63 (33)
Other 70 21 (49) 98 42 (56)
---- ---- ---- ---- ---- ----
Total Capital and
Exploration
Expenditures 1,252 923 (329) 2,008 1,808 (200)
Cash Investments in
Equity Companies 255 100 (155) 352 444 92
---- ---- ---- ---- ---- ----
Total Investment
Spending $1,507 $1,023 $(484) $2,360 $2,252 $(108)
===== ===== ===== ===== ===== =====
Memo: Exploration expenses
charged to operating
earnings, included above
United States $ 32 $ 25 $ (7) $ 49 $ 48 $ (1)
International 65 105 40 122 173 51
---- ---- ---- ---- ---- ----
Total Exploration
Expenses $ 97 $130 $ 33 $171 $221 $ 50
==== ==== ==== ==== ==== ====
OTHER FINANCIAL DATA ($Millions)
Total Revenues $13,233 $14,246 $1,013 $26,863 $26,429 $(434)
Depreciation, Depletion
and Amortization 621 600 (21) 1,220 1,197 (23)
Income Taxes 392 267(a) (125) 921 514(a)(407)
AVERAGE U.S. PRICES
Crude ($/BBL) -- Mobil 11.73 15.10 3.37 12.50 12.75 0.25
Crude ($/BBL) --
Mobil + Aera 10.38 13.25 2.87 11.06 11.15 0.09
NGL ($/BBL) 8.44 10.48 2.04 9.07 8.91 (0.16)
Natural Gas ($/MCF) 2.07 1.99 (0.08) 2.05 1.83 (0.22)
AVERAGE INT'L. PRICES
Crude ($/BBL) 12.70 15.10 2.40 13.15 13.10 (0.05)
Natural Gas ($/MCF) 2.12 1.95 (0.17) 2.29 2.00 (0.29)
(a) Reflects a deferred tax benefit of $141 million related to
recovery of exploration expenses incurred in prior years, which was
recorded as a Special Item (see Table 3).
Table 5
MOBIL CORPORATION
Second Quarter Six Months
1998 1999 Incr/ 1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr) Act Est (Decr)
NET PRODUCTION OF
LIQUIDS (TBD) ----- ----- ----- ----- ----- ------
United States 242 243 1 241 243 2
----- ----- ----- ----- ----- ------
International:
Australia 41 30 (11) 36 31 (5)
Canada 60 79 19 61 73 12
Equatorial Guinea 46 55 9 46 57 11
Indonesia 41 30 (11) 43 31 (12)
Kazakhstan 42 52 10 42 53 11
Nigeria 239 263 24 241 262 21
Norway 76 66 (10) 77 67 (10)
United Kingdom 60 57 (3) 62 62 -
Middle East/Other 72 73 1 71 73 2
----- ----- ----- ----- ----- ------
Total International 677 705 28 679 709 30
----- ----- ----- ----- ----- ------
Worldwide 919 948 29 920 952 32
===== ===== ===== ===== ===== ======
NET PRODUCTION OF NATURAL
GAS (MMCFD)
United States 1,119 863 (256) 1,121 882 (239)
------ ----- ----- ----- ----- ------
International:
Canada 461 421 (40) 446 422 (24)
Germany 407 576 169 478 588 110
Indonesia 1,252 964 (288) 1,367 1,034 (333)
United Kingdom 592 493 (99) 669 567 (102)
Other 362 421 59 363 421 58
----- ----- ------ ----- ----- ------
Total International 3,074 2,875 (199) 3,323 3,032 (291)
----- ----- ------ ----- ----- ------
Worldwide 4,193 3,738 (455) 4,444 3,914 (530)
----- ----- ------ ----- ----- ------
TOTAL NET
PRODUCTION (TBDOE) 1,679 1,625 (54) 1,725 1,661 (64)
===== ===== ====== ===== ===== ======
Table 6
MOBIL CORPORATION
Second Quarter Six Months
1998 1999 Incr/ 1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr) Act Est (Decr)
------ ------ ------ ------ ------ ------
REFINERY RUNS (TBD)
United States (a) 941 804 (137) 921 792 (129)
Europe (b) 365 350 (15) 366 357 (9)
Asia-Pacific 726 743 17 737 758 21
All Other 139 177 38 162 179 17
------ ------ ------ ------ ------ ------
Worldwide 2,171 2,074 (97) 2,186 2,086 (100)
====== ====== ====== ====== ====== ======
PETROLEUM PRODUCT SALES (TBD) (c)
United States:
Automotive Gasoline
Sales to Trade 606 625 19 584 607 23
Supply/Other Sales 250 284 34 214 246 32
------ ------ ------ ------ ------ ------
Total Automotive Sales 856 909 53 798 853 55
Distillates/Jet Fuel 330 359 29 344 378 34
Other 266 269 3 264 271 7
------ ------ ------ ------ ------ ------
Total United States 1,452 1,537 85 1,406 1,502 96
------ ------ ------ ------ ------ ------
International:
Europe (b) 651 646 (5) 663 660 (3)
Asia-Pacific 830 800 (30) 835 841 6
All Other 434 450 16 443 457 14
------ ------ ------ ------ ------ ------
Total International 1,915 1,896 (19) 1,941 1,958 17
------ ------ ------ ------ ------ ------
Worldwide 3,367 3,433 66 3,347 3,460 113
====== ====== ====== ====== ====== ======
CHEMICAL SALES (MM LBS)
Worldwide Polyethylene
Resin 705 704 (1) 1,406 1,437 31
Worldwide Paraxylene 488 433 (55) 946 854 (92)
CHEMICAL SALES BY PRODUCT
CATEGORY ($MM)
Petrochemicals $ 420 $ 385 $ (35) $ 892 $ 722 $ (170)
Films Products 171 164 (7) 338 325 (13)
Chemical Products 41 38 (3) 79 77 (2)
------ ------ ------ ------ ------ ------
Total $ 632 $ 587 $ (45) $1,309 $ 1,124 $ (185)
====== ====== ====== ====== ====== ======
(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.