Mobil Announces Third Quarter 1999 Operating Earnings of $705 Million
25 October 1999
Mobil Announces Third Quarter 1999 Operating Earnings of $705 Million
FAIRFAX, Va.--Oct. 25, 1999--
Third Quarter
1998 1999 Change
Operating Earnings ($millions) 497 705 208
per share (S) 0.62 0.89 0.27
assuming dilution ($) 0.61 0.87 0.26
Net Income ($millions) 509 688 179
per share ($) 0.64 0.87 0.23
assuming dilution ($) 0.63 0.85 0.22
- Overall, industry fundamentals and favorable expense performance
helped earnings.
- Crude oil and natural gas prices increased significantly.
- However, downstream margins, particularly in the international
area, came under severe pressure.
- Per barrel operating expenses decreased 6 percent on a
year-to-date basis.
- Upstream earnings increased primarily due to improved industry
fundamentals.
- Crude prices were up about $8.00 per barrel; natural gas prices
also up.
- Expense performance continued to be favorable.
- Exploration expenses were lower.
- Volumes from growth areas were up significantly; however, overall
production was down about 3 percent primarily due to contractual
reductions in Indonesia.
- Downstream earnings decreased as margins lagged the rapid rise in
crude prices.
- U.S. Marketing and Refining experienced a significant amount of
unscheduled refinery downtime which has been rectified.
- However, benefits from initiatives in the international area
continued to grow resulting in favorable expense performance.
- Chemical earnings improved.
- Polyethylene margins strengthened.
- Expenses were lower.
- Performance at the recently upgraded Beaumont olefins plant
approached capacity.
Mobil Corporation today reported third quarter 1999 estimated operating earnings of $705 million. This is $208 million higher than the $497 million earned in the same period last year. Operating earnings per common share, assuming dilution, were $0.87, $0.26 higher than in the third quarter of 1998.
Including special items, net income for the quarter was $688 million, or $0.85 per common share, versus $509 million, or $0.63 per share, last year. Included in this year's third quarter net income was a special charge of $17 million for costs related to the proposed Exxon Mobil merger. Last year's third quarter net income included net special benefits of $12 million, as the gain on a European upstream asset sale more than offset charges related to a U.S. federal royalty settlement and implementation costs associated with the BP European downstream alliance.
"In this year's third quarter, overall industry fundamentals helped our earnings," said Mobil Chairman and CEO Lucio A. Noto. "While worldwide crude oil and natural gas prices were up significantly, margins in refining and marketing, especially in Mobil's international markets, came under severe pressure. Earnings also benefited from lower exploration expenses, our continuing focus on cost reduction initiatives and other performance improvement programs. Overall, per barrel operating expenses were down 6 percent on a year-to-date basis. However, our results were negatively impacted by a significant amount of unscheduled downtime in our U.S. refinery operations.
"The Upstream benefited from higher worldwide crude oil and natural gas prices and lower exploration and operating expenses. These benefits were offset somewhat by a decline in production versus the third quarter of last year. Higher volumes from key growth areas in the North Sea (Aasgard and Beryl area fields), Qatar (RasGas Train 1), Eastern Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more than offset by the impact of contractual reductions in Indonesia and natural field declines in mature areas.
"In the Downstream, Mobil's U.S. earnings declined as a result of lower industry margins impacting both fuels and lubes operations. Also, unscheduled refinery downtime hurt earnings by about $40 million. All the problems that caused the downtime have been rectified. In the international area, earnings declined as industry refinery margins weakened in the face of product oversupply and marketing margins eroded as product prices lagged the increase in crude prices and competitive pressures continued to prevail in several markets. However, lower expenses and ongoing self-help programs helped offset some of the effects of the deterioration in industry fundamentals.
"In Chemical, earnings were slightly improved, reflecting higher polyethylene margins and lower expenses. Earnings benefited from improved performance at the recently expanded Beaumont olefins plant as it approached capacity."
Noto concluded, "Worldwide crude oil and natural gas prices have continued to improve. However, worldwide refining and marketing margins remain depressed, as do margins for much of our petrochemicals business. Industry fundamentals continue to be unpredictable in the near term."
The following comments address the operating performance of the major business segments during the third quarter of 1999 as compared with the same quarter in 1998 (refer to Table 2):
COMPARISON OF THIRD QUARTER 1999 WITH THIRD QUARTER 1998
- Exploration & Producing operating earnings of $515 million were $385 million higher than last year's $130 million.
In the United States, earnings of $141 million increased $103 million as higher crude oil and natural gas prices and lower operating and exploration expenses were only partially offset by the impact of lower natural gas production.
International earnings of $374 million were $282 million higher, primarily reflecting increases in crude oil and natural gas prices and lower exploration expenses. These benefits were partly offset by the impact of lower production. The favorable effects of higher volumes from the key growth areas in the North Sea (Aasgard and Beryl area fields), Qatar (RasGas Train 1), Eastern Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more than offset by the impacts of contractual reductions in Indonesia and natural field declines in mature areas.
- Marketing & Refining operating earnings of $214 million were $162 million lower than in 1998.
Operating earnings in the United States were $123 million, $56 million lower than last year's third quarter results, reflecting the unfavorable impacts of lower industry margins, including compressed lube margins, and significantly higher refinery downtime. This quarter's results benefited from higher gasoline trade sales, which were up about 4 percent.
International earnings of $91 million were $106 million lower than in 1998. In Asia-Pacific and Europe, earnings were lower, mainly due to a continued deterioration in marketing and refining margins. Overall, earnings benefited from lower expenses, performance initiatives and improved refinery performance; however, these were not enough to offset the deterioration in industry fundamentals.
- Chemical earnings of $50 million were $9 million higher than last year as a result of higher polyethylene margins and lower expenses.
- Corporate and Financing expenses of $74 million were $24 million higher than in the third quarter of 1998 primarily due to higher financing expenses related to an increase in average net debt balances.
COMPARISON OF NINE MONTHS 1999 WITH NINE MONTHS 1998
Mobil's net income for the first nine months of 1999 was $1,901 million, compared with $1,856 million for the same period in 1998. This year's net income included a $141 million special tax benefit related to our upstream operations in Indonesia offset by special charges of $44 million for costs related to the proposed Exxon Mobil merger and $22 million for the write-off of an upstream property in Venezuela. The first nine months of 1998 net income included net special charges of $11 million as gains on asset sales were more than offset by the U.S. federal royalty settlement and implementation costs for the Mobil-BP downstream European alliance.
Excluding special items, operating earnings for the first nine months of $1,826 million were down $41 million, or 2 percent, from the comparable period in 1998. The decline was primarily due to lower downstream integrated margins in all major markets, weak petrochemical margins and lower upstream production. The impacts of these negative factors were mostly offset by the favorable effects of higher crude prices and lower operating expenses.
Estimates of key financial and operating data are shown below and on the attached tables.
Investment Spending for the third quarter of 1999 was $936 million, $497 million lower than in the comparable period last year. For the first nine months of 1999, investment spending was $3,188 million, compared with $3,793 million for the same period last year.
Mobil's Return on Average Capital Employed for the twelve months ended September 30, 1999, based on operating earnings (excluding special items), was 9.2 percent, compared with 10.2 percent for calendar year 1998. On a net income basis, returns were 7.2 percent and 7.7 percent for the same periods.
Return on Average Shareholders' Equity for the twelve months ended September 30, 1999, based on operating earnings (excluding special items), was 12.2 percent, compared with 12.5 percent for calendar year 1998. On a net income basis, returns were 9.2 percent and 9.0 percent for the same periods.
Mobil's Debt-to-Capitalization Ratio was 33 percent at September 30, 1999, and 29 percent at December 31, 1998. The increase primarily reflects higher debt levels.
Common Stock Dividends were $0.57 per share in the third quarter of 1999 and $1.71 per share on a year-to-date basis, unchanged from the comparable periods in 1998.
Table 1
MOBIL CORPORATION
Third Quarter Nine Months
1998 1999 Incr/ 1998 1999 Incr/
INCOME ($ Millions) Act Est (Decr) Act Est (Decr)
---- ---- ------ ---- ---- ------
Exploration & Producing:
United States $ 9 $ 141 $ 132 $ 133 $ 246 $ 113
International 147 374 227 648 1,001 353
------ ------ ------ ------ ------ ------
Total Exploration
& Producing 156 515 359 781 1,247 466
------ ------ ------ ------ ------ ------
Marketing & Refining:
United States 179 123 (56) 459 411 (48)
International 183 91 (92) 622 414 (208)
------ ------ ------ ------ ------ ------
Total Marketing
& Refining 362 214 (148) 1,081 825 (256)
------ ------ ------ ------ ------ ------
Chemical 41 50 9 166 80 (86)
Corporate and
Financing (a) (50) (91) (41) (172) (251) (79)
------ ------ ------ -------- ------- ------
Net Income $ 509 $ 688 $ 179 $ 1,856 $1,901 $ 45
====== ====== ====== ======== ======= ======
NET INCOME
PER COMMON
SHARE ($) (b) $0.64 $0.87 $ 0.23 $ 2.33 $ 2.41 $0.08
Assuming
Dilution (c) 0.63 0.85 0.22 2.28 2.36 0.08
COMMON SHARES OUTSTANDING
(Millions)
End of Period - - - 772.1 776.1 4.0
Average 780.7 775.8 (4.9) 781.5 775.0 (6.5)
Average--Assuming
Dilution 808.4 807.1 (1.3) 809.7 805.3 (4.4)
DIVIDENDS
Common Stock
Total Paid
($ Millions) $ 446 $ 446 - $ 1,337 $ 1,338 $ 1
Per Share ($) 0.57 0.57 - 1.71 1.71 -
Preferred Stock
($ Millions) 13 12 (1) 38 36 (2)
(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
Third Quarter Nine Months
INCOME ADJUSTED 1998 1999 Incr/ 1998 1999 Incr/
FOR SPECIAL ITEMS Act Est (Decr) Act Est (Decr)
($ Millions) ----- ----- ------ ------ ------- -------
Exploration & Producing:
United States $ 38 $141 $ 103 $ 162 $ 246 $ 84
International 92 374 282 593 882 289
----- ----- ------ ------- ------- -------
Total Exploration
& Producing 130 515 385 755 1,128 373
----- ----- ------ ------- ------- -------
Marketing & Refining:
United States 179 123 (56) 459 411 (48)
International 197 91 (106) 659 414 (245)
----- ----- ------ ------- ------- -------
Total Marketing
& Refining 376 214 (162) 1,118 825 (293)
----- ----- ------ ------- ------- -------
Chemical 41 50 9 166 80 (86)
Corporate and
Financing (a) (50) (74) (24) (172) (207) (35)
----- ----- ------ ------- ------- -------
Operating Earnings
(Before Special Items) 497 705 208 1,867 1,826 (41)
----- ----- ------ ------- ------- -------
Special Items 12 (17) (29) (11) 75 86
----- ----- ------ ------- ------- -------
Net Income $509 $688 $ 179 $1,856 $1,901 $ 45
===== ===== ====== ======= ======= =======
EARNINGS PER COMMON
SHARE ($) BASED ON:
Operating Earnings
(Before Special
Items) (b) $0.62 $ 0.89 $ 0.27 $ 2.34 $ 2.31 $ (0.03)
Assuming
Dilution (c) 0.61 0.87 0.26 2.30 2.27 (0.03)
Net Income (b) 0.64 0.87 0.23 2.33 2.41 0.08
Assuming
Dilution (c) 0.63 0.85 0.22 2.28 2.36 0.08
(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 3Q
----- ----- ----- ------ ------ ----- ----- ----
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) (17)
----- ----- ----- ------ ------ ----- ----- ----
Total Special
Items $(10) $(13) $ 12 $(651) $(662) $ (7) $ 99 $(17)
===== ===== ==== ====== ====== ===== ===== ====
Table 4
MOBIL CORPORATION
INVESTMENT SPENDING Third Quarter Nine Months
($ Millions) 1998 1999 Incr/ 1998 1999 Incr/
Act Est (Decr) Act Est (Decr)
------ ------- ------ ------ ------ ------
Capital and Exploration
Expenditures
Exploration & Producing:
United States $ 89 $ 64 $(25) $361 $212 $(149)
International 793 615 (178) 2,059 2,000 (59)
------- ------ ------- ------ ------ ------
Total Exploration
& Producing 882 679 (203) 2,420 2,212 (208)
------- ------ ------- ------ ----- -------
Marketing & Refining:
United States 95 69 (26) 258 165 (93)
International 85 47 (38) 198 121 (77)
------- ------- ------ ------ ------ -------
Total Marketing
& Refining 180 116 (64) 456 286 (170)
------- ------- ------ ------- ------- -------
Chemical 92 15 (77) 188 78 (110)
Other 44 12 (32) 142 54 (88)
------- ------ ------ ------ ------- -------
Total Capital and
Exploration
Expenditures 1,198 822 (376) 3,206 2,630 (576)
Cash Investments in
Equity Companies 235 114 (121) 587 558 (29)
------- ------- ------ ------ ------- -------
Total Investment
Spending $1,433 $ 936 $ (497) $3,793 $3,188 $ (605)
======= ======= ======= ======= ======= =======
Memo: Exploration expenses
charged to operating
earnings, included above
United States $ 44 $ 20 $ (24) $ 93 $ 68 $ (25)
International 141 102 (39) 263 275 12
------- ------- ------- ------ ------- -------
Total Exploration
Expenses $ 185 $ 122 $ (63) $ 356 $ 343 $ (13)
======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA
($ Millions)
Total Revenues $13,634 $16,353 $2,719 $40,497 $42,782 $2,285
Depreciation, Depletion
and Amortization 633 627 (6) 1,853 1,824 (29)
Income Taxes 331 545 214 1,252 1,059(a) (193)
AVERAGE U.S. PRICES
Crude ($/BBL)
--Mobil 11.44 19.15 7.71 12.15 14.85 2.70
Crude ($/BBL)
--Mobil+Aera 10.49 17.40 6.91 10.86 13.20 2.34
NGL ($/BBL) 7.60 14.40 6.80 8.58 10.62 2.04
Natural Gas ($/MCF) 1.84 2.42 0.58 1.99 2.04 0.05
AVERAGE INT'L. PRICES
Crude ($/BBL) 12.07 20.10 8.03 12.78 15.40 2.62
Natural Gas ($/MCF) 1.95 2.25 0.30 2.18 2.10 (0.08)
(a) Reflects a deferred tax benefit of $141 million related to
recovery of exploration expenses incurred in prior years, which
was recorded as a Second Quarter 1999 Special Item (see Table 3).
Table 5
MOBIL CORPORATION
Third Quarter Nine Months
1998 1999 Incr/ 1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr) Act Est (Decr)
----- ----- ----- ----- ----- -----
NET PRODUCTION OF LIQUIDS (TBD)
United States 236 239 3 239 242 3
----- ----- ----- ----- ----- -----
International:
Australia 42 32 (10) 38 31 (7)
Canada 77 81 4 67 76 9
Equatorial Guinea 50 61 11 48 58 10
Indonesia 35 19 (16) 40 27 (13)
Kazakhstan 44 54 10 43 53 10
Nigeria 244 270 26 242 265 23
Norway 64 72 8 73 69 (4)
United Kingdom 56 64 8 60 63 3
Middle East/Other 73 67 (6) 70 71 1
----- ----- ----- ----- ----- -----
Total International 685 720 35 681 713 32
----- ----- ----- ----- ----- -----
Worldwide 921 959 38 920 955 35
===== ===== ===== ===== ===== =====
NET PRODUCTION OF NATURAL
GAS (MMCFD)
United States 1,091 868 (223) 1,111 878 (233)
----- ----- ----- ----- ----- -----
International:
Canada 435 472 37 442 439 (3)
Germany 357 510 153 437 562 125
Indonesia 1,524 956 (568) 1,420 1,008 (412)
United Kingdom 360 456 96 565 530 (35)
Other 359 391 32 362 409 47
----- ----- ----- ----- ----- -----
Total International 3,035 2,785 (250) 3,226 2,948 (278)
----- ----- ----- ----- ----- -----
Worldwide 4,126 3,653 (473) 4,337 3,826 (511)
===== ===== ===== ===== ===== =====
TOTAL NET
PRODUCTION (TBDOE) 1,669 1,621 (48) 1,706 1,648 (58)
===== ===== ===== ===== ===== =====
Table 6
MOBIL CORPORATION
Third Quarter Nine Months
1998 1999 Incr/ 1998 1999 Incr/
OPERATING HIGHLIGHTS Act Est (Decr) Act Est (Decr)
------ ------ ------ ------ ------ -------
REFINERY RUNS (TBD)
United States (a) 869 766 (103) 903 783 (120)
Europe (b) 358 338 (20) 365 351 (14)
Asia-Pacific 702 640 (62) 724 715 (9)
All Other 186 175 (11) 170 177 7
------ ------ ------ ------ ------- -------
Worldwide 2,115 1,919 (196) 2,162 2,026 (136)
====== ====== ====== ====== ======= =======
PETROLEUM PRODUCT
SALES (TBD) (c)
United States:
Automotive Gasoline
Sales to Trade 619 641 22 596 618 22
Supply/Other Sales 256 244 (12) 229 245 16
------ ------ ------ ------ ------- -------
Total Automotive
Sales 875 885 10 825 863 38
Distillates/Jet Fuel 326 356 30 344 371 27
Other 285 291 6 265 278 13
------ ------ ------ ------ ------- -------
Total United States 1,486 1,532 46 1,434 1,512 78
------ ------ ------ ------ ------- -------
International:
Europe (b) 691 630 (61) 672 650 (22)
Asia-Pacific 815 788 (27) 828 823 (5)
All Other 495 478 (17) 460 464 4
------ ------ ------- ------ ------- -------
Total International 2,001 1,896 (105) 1,960 1,937 (23)
------ ------ ------- ------ ------- -------
Worldwide 3,487 3,428 (59) 3,394 3,449 55
====== ====== ======= ====== ======= =======
CHEMICAL SALES (MM LBS)
Worldwide
Polyethylene Resin 719 659 (60) 2,125 2,096 (29)
Worldwide Paraxylene 438 471 33 1,383 1,324 (59)
CHEMICAL SALES BY PRODUCT
CATEGORY ($MM)
Petrochemicals $ 370 $ 462 $ 92 $1,261 $ 1,184 $ (77)
Films Products 163 171 8 502 496 (6)
Chemical Products 35 36 1 114 113 (1)
------ ------ ------ ------ ------- -------
Total $ 568 $ 669 $ 101 $1,877 $ 1,793 $ (84)
====== ====== ====== ====== ======= =======
(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.