1996
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 1-7555
MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2850309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3225 Gallows Road, Fairfax, Virginia 22037-0001
Telephone: (703) 846-3000
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $2.00 Par Value New York Stock Exchange
7 5/8% Debentures due 2033 New York Stock Exchange
8% Debentures Due 2032 New York Stock Exchange
8 3/8% Notes Due 2001 New York Stock Exchange
8 5/8% Debentures Due 2021 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Guarantee, Mobil Oil Corporation Employee Stock Ownership Plan (ESOP) Trust
9.17% Sinking Fund Debentures Due 2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ____
The number of voting securities of the registrant outstanding on February 28,
1997, the latest practicable date, was (i) 394,331,412 shares of common stock,
all of which comprise a single class with a $2.00 par value, and each being
entitled to one vote and (ii) 87,489 shares of Series B ESOP Convertible
Preferred Stock, $1.00 par value per share, and each being entitled to 100 votes
for a total of 8,748,900 votes. As of the same date, the aggregate market value
of voting stock held by non-affiliates of the registrant was $48,360,023,279,
based on a closing price of $122.750 per share. The approximate number of common
equity security holders as of the same date was 184,988.
Parts I and II incorporate information by reference to the Annual Report to
Shareholders for the year ended December 31, 1996. Part III contains information
incorporated by reference to the registrant's definitive proxy statement, which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1996.
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<PAGE>
MOBIL CORPORATION
Form 10-K
December 31, 1996
TABLE OF CONTENTS
Page(s)
------------------------
1996 1996
Annual Annual
Report on Report to
Form 10-K Shareholders
PART I
Item 1. Business ................................... 1 -
(a) General .............................. 1 -
(b) Environmental Matters ................ 1 28,47
(c) Segment and Geographic Information ... 2 36,37
(d) Business Description and Properties .. 2 53,54,59
Petroleum Operations ............... 2 -
Upstream ......................... 3 -
Downstream ....................... 15 -
Chemical Operations ................ 16 -
Other Operations ................... 18 -
Item 2. Properties ................................. 19 -
Item 3. Legal Proceedings .......................... 19 -
Item 4. Submission of Matters to a Vote
of Security Holders ...................... 20 -
PART II
Item 5. Market for Registrant's Common Stock
and Related Stockholder Matters .......... 21 29
Item 6. Selected Financial Data .................... 21 57
Item 7. Management's Discussion and Analysis
of Results of Operations and
Financial Condition ...................... 21 19-30,32,34
Item 8. Financial Statements and
Supplementary Data ....................... 21 29,31,33,35-56
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure ..................... 21 -
PART III
Item 10. Directors and Executive Officers
of the Registrant ........................ 21 -
Item 11. Executive Compensation ..................... 21 -
Item 12. Security Ownership of Certain Beneficial
Owners and Management .................... 21 -
Item 13. Certain Relationships and
Related Transactions ..................... 21 -
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K .................. 23 -
Supplemental Financial Information ......... 25 -
Financial Statement Schedule ............. 25 -
Signatures ................................. 26 -
Exhibit Index ............................. 27 -
Exhibits ................................... 28 -
<PAGE>
PART I
Item 1. Business.
(a) General
Mobil Corporation (Mobil) was incorporated in March 1976 in the state of
Delaware. Mobil's principal business, which is conducted primarily through
wholly-owned subsidiaries, is in the petroleum industry. Mobil is also a
manufacturer and marketer of petrochemicals, packaging films and specialty
chemical products. Through its subsidiaries, Mobil had business interests in
more than 125 countries and employed approximately 43,000 people worldwide at
December 31, 1996.
Through its subsidiaries, Mobil operates a worldwide oil and gas exploration
and producing business, a global marketing and refining complex, a network of
pipelines and tankers linking these worldwide oil and gas businesses, a
world-scale chemical business and a highly sophisticated research and
engineering operation.
A list of Mobil's most significant subsidiaries is contained on pages 30
through 32 of this Annual Report on Form 10-K. In this Report, except as
otherwise indicated by the context, the term "Mobil" refers to the parent
corporation and all of its subsidiaries and affiliates and their operating
divisions collectively, and sometimes to one or more of them.
Mobil makes no representations as to the future trend of its business and
earnings, or as to future events and developments that could affect the oil
industry in particular and that may affect other businesses in which Mobil is
directly or indirectly engaged. These include such matters as the divestiture of
certain operations, environmental quality control standards, oil imports, new
discoveries of hydrocarbons and the demand for petroleum products. Furthermore,
Mobil's business could be affected by future price changes or controls, material
and labor costs, legislation, taxes, labor conditions, transportation
regulations, tariffs, litigation, embargoes, foreign currency exchange
restrictions and changes in foreign currency exchange rates. Mobil has direct
and indirect investments and interests in many enterprises worldwide and makes
no representation as to future developments which may have a profound effect on
its business enterprises throughout the world. Mobil also recognizes that such
enterprises are subject to political uncertainties in many of the countries in
which it operates. Countries in addition to the U.S. which currently are, and
are expected to continue to be, significant contributors to Mobil's operating
earnings are Australia, Germany, Indonesia, Japan, Nigeria, Norway, Saudi
Arabia, Singapore and the United Kingdom (U.K.).
(b) Environmental Matters
The discussions of Environmental Matters on pages 28 and 47 of Mobil's 1996
Annual Report to Shareholders are incorporated herein by reference.
Mobil and certain of its subsidiaries and affiliates are parties to numerous
proceedings instituted by governmental authorities and others under provisions
of applicable laws or regulations relating to the discharge of materials into
the environment. Such environmental proceedings are further discussed herein on
page 19 under Item 3. Legal Proceedings.
Mobil - 1 -
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(c) Segment and Geographic Information
Segment and Geographic information for 1994, 1995 and 1996 on pages 36 and 37
of Mobil's 1996 Annual Report to Shareholders is incorporated herein by
reference.
(d) Business Description and Properties
In addition to the business description and properties contained herein, the
following data included in Mobil's 1996 Annual Report to Shareholders are
incorporated herein by reference:
1996 Annual
Report to
Shareholders
Description Page
Estimated Quantities of Net Proved Oil and
Natural Gas Liquids Reserves (Table 1) ..... 53
Estimated Quantities of Net Proved Natural
Gas Reserves (Table 2) ..................... 54
Petroleum Product Sales ...................... 59
Refinery Runs ................................ 59
Chemical Sales by Product Category ........... 59
PETROLEUM OPERATIONS
Mobil is one of the largest oil companies in the world, with petroleum product
sales of almost 3.4 million barrels a day. In 1996 Mobil produced the oil
equivalent of 1.7 million barrels daily of crude oil, natural gas liquids and
natural gas and had refinery runs of 2.1 million barrels per day. Petroleum net
sales in 1996 were $66,709 million, up 25% from 1994 and 15% from 1995.
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Petroleum Sales (a) 1994 1995 1996
(Millions of dollars)
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Automotive gasoline ........................ $19,888 $21,697 $23,193
Distillate and jet fuels ................... 13,671 14,710 17,842
Other refined petroleum products ........... 6,501 7,318 8,193
------- ------- -------
Total refined petroleum products ........... 40,060 43,725 49,228
Crude oil .................................. 7,593 8,268 11,206
Natural gas ................................ 5,072 5,282 5,369
Other products ............................. 686 846 906
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Net Sales of Petroleum ..................... $53,411 $58,121 $66,709
======= ======= =======
(a) Excludes excise and state gasoline
taxes of .............................. $ 7,762 $ 8,646 $ 9,236
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Prices for crude oil have experienced dramatic fluctuations during the past
several years in response to both political and market factors, making it
difficult to forecast future trends in prices or margins in Petroleum
Operations. During 1996 Mobil's worldwide average price of crude oil increased
over $3.50 per barrel reflecting colder winter weather in the northern
hemisphere, higher demand, and political uncertainties in the Middle East.
Mobil's Petroleum Operations are divided into two primary business activities
- -- Upstream, which refers to exploration and producing; and Downstream, which
refers to marketing, refining, supply and transportation.
Mobil - 2 -
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PETROLEUM OPERATIONS -- UPSTREAM
Exploration and Producing
Significant developments in 1996 in Mobil's exploration and producing
operations included the following:
Worldwide
In 1996, Mobil conducted exploration and producing activities in 34
countries. Net production of liquids (crude oil and natural gas liquids)
averaged 854 thousand barrels a day (TBD) in 1996, an increase of 44 TBD from
810 TBD in 1995. Net natural gas production of 4,587 million cubic feet a day
(MMCFD) in 1996 was 33 MMCFD higher than 1995. Combined production in the United
States was down 7% compared with 1995. International total production was up 8%,
primarily due to continued development of resources in Nigeria, new production
in Equatorial Guinea and acquisitions of Ampolex and a 25% interest in the
Tengiz field. Worldwide natural gas sales in 1996 were 5,475 MMCFD, a decrease
of 1,151 MMCFD, as less third-party gas was purchased for resale due to the
start-up of the gas marketing joint venture with PanEnergy. Proved liquids and
natural gas reserve additions replaced 133% of 1996 production on a barrel of
oil equivalent (BOE) basis, including purchases and sales. The following table
summarizes net production of crude oil and natural gas liquids (NGL) and of
natural gas for 1994 through 1996.
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Crude Oil & NGL(TBD) Natural Gas(MMCFD)
Net Production 1994 1995 1996 1994 1995 1996
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Fully consolidated companies
United States .................... 300 282 262 1,568 1,439 1,333
Europe ........................... 173 173 153 948 1,098 1,187
Asia-Pacific ..................... 100 97 106 1,664 1,554 1,581
Other Areas ...................... 234 213 271 461 432 446
--- --- --- ----- ----- -----
Total Consolidated ............. 807 765 792 4,641 4,523 4,547
--- --- --- ----- ----- -----
Mobil's share of production of
equity companies ................. 47 45 62 29 31 40
--- --- --- ----- ----- -----
Total Production ................... 854 810 854 4,670 4,554 4,587
=== === === ===== ===== =====
This table presents Mobil's net production from properties in which it has a
working or royalty interest and its share of production of investees accounted
for on the equity method. Net production excludes royalties and quantities due
others when produced, whether taken in kind or settled in cash.
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United States
In the United States, Mobil produced 1,333 MMCFD of natural gas and 262 TBD of
liquids, or a total of 504 thousand barrels a day of oil equivalent (TBDOE)
during 1996. When compared to 1995, total production decreased 7% as a result of
natural declines of maturing fields and asset divestment.
To reduce operating costs and focus capital and people resources on core
growth areas, Mobil sold 52 non-strategic fields and most of its natural gas
gathering and processing assets. The proceeds will be reinvested in more
attractive U.S. and international opportunities.
On August 1, 1996 Mobil's North American natural gas marketing unit and
PanEnergy Corp.'s natural gas marketing unit finalized a joint venture to become
the third largest natural gas distributer in the U.S., marketing approximately 7
billion cubic feet a day (BCFD). Mobil owns 40% of the new venture, which
conducts business as PanEnergy Marketing, L.L.C. in the United States, and
PanEnergy Marketing, L.P. in Canada. The joint venture will market nearly all of
Mobil's North American natural gas production.
Mobil - 3 -
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Significant developments -- continued
In California, Mobil and a subsidiary of Shell (CalResources) have agreed in
principle to form a joint venture that will own and operate the current
California upstream operations of both companies. Negotiations are currently
under way and, if successful, the new company would be the largest producer of
oil and natural gas in the state of California with annual production rates in
excess of 250 TBDOE.
Production from the Gulf of Mexico, which accounts for 26% of Mobil's total
U.S. production, was approximately 500 MMCFD of natural gas and 41 TBD of oil in
1996. The Mobile Bay development program, accelerated in 1996, will continue to
increase production, making Mobil the largest natural gas producer in Mobile
Bay. In the deepwater Gulf of Mexico, one of the world's large unexplored
basins, Mobil acquired new ownership interests in 51 additional exploration
blocks. Mobil now has interests in over 220 blocks.
Europe
Mobil produced 65 TBD of liquids and 618 MMCFD of gas in the United Kingdom
during 1996. Liquid volumes were down slightly from 1995's record volumes
primarily due to operational problems in the Scott field early in the year.
Natural gas production increased 7% as new field development more than offset
natural declines in some of the older fields.
During the year, Mobil successfully re-negotiated its North Sea 'take or pay'
natural gas contracts with British Gas plc. In consideration for terminating two
(2) contracts and certain other price reductions, Mobil will receive additional
interests in producing and transportation assets in and around the Beryl field.
In all, these assets will provide Mobil with an additional 27 million BOE proved
reserves and will increase daily production by approximately 9 TBDOE.
In 1996, Mobil's share of production in Beryl area fields amounted to 40 TBD
of liquids and 86 MMCFD of natural gas. This included contributions from the
Nevis development, on stream in the third quarter, and the Telford field, on
stream in the fourth quarter.
All Mobil-equity and third-party gas from the Beryl area and the Scott field
is moved through the Mobil-operated 210-mile long Scottish Area Gas Evacuation
(SAGE) pipeline and onshore processing plant at St. Fergus, Scotland. In 1996,
the plant became the first of its kind in the U.K. to receive the prestigious
'ISO 9002' quality assurance award for processing natural gas. An upgrade of
facilities to accommodate natural gas from the Britannia field, starting in
1998, remains on schedule.
Mobil produced 83 TBD of liquids and 53 MMCFD of natural gas in Norway during
1996, primarily from two of Europe's largest fields, Statfjord and Oseberg.
Nearly 300% of production was replaced, reflecting the significant contribution
of reserves from the Aasgard development in the Haltenbanken area, offshore
mid-Norway.
The Aasgard development was approved by the Norwegian parliament in June
1996. Aasgard, a 2.2 BBOE field, is the largest subsea development in the world
with over 60 subsea completions. Liquids production will begin in 1998 and
natural gas two years later, with Mobil's share (7.35% interest) at 17 TBD of
liquids and 70 MMCFD of natural gas.
Mobil - 4 -
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Significant developments -- continued
The Njord Field, in which Mobil acquired a 20% interest in 1995, is being
developed using subsea completions and floating production facilities. First
production is scheduled for the fourth quarter of 1997. Mobil's share of
production at peak rate is expected to be 13 TBD.
In early 1996, Mobil was awarded five licenses in the northern North Sea and
Norwegian Sea in the 15th Norwegian license round. These awards will allow us to
continue exploring and to build on core production in these two areas. In 1997,
Mobil will participate in four wildcat wells and will pursue additional high-
potential exploration acreage to be awarded in the Barents Sea.
An onshore natural gas discovery, Lauwersoog East, was made on the North
Friesland concession in the Netherlands in 1996. The field is located in the
Anjum area where Mobil has had a string of successful exploration wells in the
past. Production from Anjum, scheduled to start in the third quarter 1997, will
double Mobil's current Netherlands production of 53 MMCFD by 1999.
In 1996, Mobil produced 463 MMCFD of natural gas and 5 TBD of crude oil in
Germany, totaling 89 TBDOE, a 14% growth over 1995. Mobil's natural gas sales in
Germany set a record in 1996, increasing by 15% from 1995. Natural gas sales to
Ruhrgas, Mobil's major customer, were unchanged. However, sales to other
customers increased significantly, mainly due to deliveries to the former East
Germany.
Mobil's German operation replaced 127% of production, as a result of a
successful wildcat and appraisal drilling program and improved reservoir
performance.
The Eggstaett/Breitbrunn project (Mobil share, 20%) in southern Germany
commenced in 1996 as a part of Mobil's growing natural gas storage business.
Mobil now participates in four significant natural gas storage ventures in
Germany. This business provides a reliable contribution to earnings not impacted
by price fluctuations. Mobil is well positioned to further grow this business
since it owns several depleted reservoirs which can be converted into storage
operations in the future.
Asia-Pacific
Arun, located in northern Sumatra, supplied virtually all of Mobil's
production in Indonesia. Mobil's share of production volumes averaged 1,556
MMCFD of natural gas, 35 TBD of condensate and 31 TBD of liquefied petroleum gas
(LPG).
Additional fields in North Sumatra are being developed to supplement declining
Arun production. The onshore South Lhok Sukon A&D fields were brought on line in
late 1996. Development of the smaller Pase field began in 1996 with production
expected to be on stream in 1998. Development activities commenced for the North
Sumatra Offshore "A" field to enable a 1999 start up.
Additionally, in 1996 Mobil obtained a 26% participating interest in the
production sharing contract (PSC) for the Natuna D-Alpha field which is located
in the South China Sea northeast of Singapore. Joint efforts to commercialize
the project are under way as a supply source for LNG and/or pipeline natural
gas.
Mobil - 5 -
<PAGE>
Significant developments -- continued
Mobil acquired Ampolex Limited, an Australian based upstream oil and natural
gas company, in 1996. At year-end 1996, Ampolex had proved reserves of 98
million BOE. The bulk of Ampolex's assets are located in the Asia-Pacific area.
In Australia, Ampolex participates in a number of oil and natural gas fields.
When combined with Mobil's existing production from the Griffin field, Mobil's
Australia production increased by 11 TBDOE to about 34 TBDOE. The
Ampolex-operated Wandoo oil development is expected to start production at 40
TBD in the second quarter 1997 (Mobil share, 24 TBD).
The Gorgon field, also a part of the Ampolex acquisition, in Australia's North
West Shelf, is being jointly evaluated with Texaco as a potential LNG
development.
Ampolex is a partner in the successful Chevron-operated Kutubu oil development
in the highlands of Papua New Guinea (Mobil share, 17 TBD). In late 1996, a
significant oil discovery was made at the Moran prospect in the same country.
Other
Mobil restructured its western Canada operations to reduce costs and re-focus
efforts on areas which have the potential for long-term growth. In Alberta,
Mobil is now concentrating on natural gas exploitation and developing its heavy
oil resources. Mobil commenced a pilot Steam Assisted Gravity Drainage (SAGD)
project to determine the economic viability of this technology on its large
heavy oil resources at Celtic, Cold Lake, and Athabasca. Early results are
encouraging and the pilot project is being expanded in 1997.
In eastern Canada, the Hibernia development project (Mobil share, 33%)
achieved several major milestones in 1996. Newfoundland Transshipment Ltd.
(Mobil share, 41%) was formed in October 1996 to transport Hibernia crude, with
the potential to accommodate regional expansion, including the Terra Nova
project. In November, the gravity based structure and topsides were completed
and preparations are on schedule for tow-out by June 1997. Production from this
large oil field, 195 miles offshore Newfoundland, will commence in late 1997,
and peak production of about 135 TBD (Mobil share, 45 TBD) is expected by the
year 2000.
Design engineering and detailed cost estimates are currently under way for
Terra Nova (Mobil share, 20.7%), a 300-400 million barrel oil field, located 25
miles southeast of Hibernia. Regulatory approval of the development plan is
anticipated in mid-1997. First production is expected by late 2001 with peak
production rates of 100 TBD shortly thereafter.
In early 1997, Mobil successfully concluded an asset exchange that resulted in
an increase in its interest in the Sable project, off the east coast of Nova
Scotia, to 50%. Plans are progressing for the Sable Offshore Energy Project
(SOEP) to develop six fields of natural gas. The development plan has been
filed, a three-dimensional geophysical survey over three of the fields has been
completed, and the front end engineering design contract was awarded in July.
Mobil - 6 -
<PAGE>
Significant developments -- continued
A natural gas transportation system is being developed concurrently with the
SOEP activities. It will include the Maritimes & Northeast Pipeline, a proposed
640 mile natural gas pipeline and related facilities. The pipeline (Mobil share,
25%) will transport natural gas from the Sable area through the Canadian
Maritime provinces and into the northeast United States where it will connect
with the North American pipeline grid. Applications have been submitted to the
U.S. Federal Energy Regulatory Commission and the Canadian National Energy Board
for development of this project.
Equity production in Nigeria was 209 TBD, 33% above the 1995 level of 157 TBD.
The most significant contributor to the increase was the Asasa field which
streamed in June 1996 and was producing over 125 TBD (Mobil share, 50 TBD) by
year-end. Mobil's Nigerian operation replaced over 200% of production, due to
new finds and improvements in the existing resource base.
Production is expected to grow to 600 TBD (Mobil share, 240 TBD) in 1997 and
to 900 TBD (Mobil share, 360 TBD) during the next decade. Major projects
initiated in support of this growth plan include Ekpe gas compression, the Usari
field development and further development of the Oso field. The Oso NGL project
(Mobil share, 51%) to extract natural gas liquids from the Oso field was about
75% complete at year-end 1996 and is on track to stream in 1998. Peak production
is projected to be 50 TBD (Mobil share, 26 TBD).
Mobil has a 40% interest in a joint venture with the Nigerian National
Petroleum Corporation (NNPC) covering leases in shallow water offshore
southeastern Nigeria. Work obligations have been completed and discussions with
NNPC are currently under way for commercializing these leases. Mobil also
operates a 565,000 acre deepwater block under a Production Sharing Contract in
which Mobil holds a 50% interest. Exploration continues, with the first
exploration well spudded at year-end 1996.
The Zafiro field was discovered in March 1995, marking the first significant
oil discovery in Equatorial Guinea. Mobil holds a 75% interest in the 547,000
acre Block B concession, located 50 miles offshore Bioko Island in the Gulf of
Guinea. In August 1996, Mobil, as operator, and partner, United Meridian, began
producing from the Zafiro field--only 18 months after the discovery well
test--to a floating production, storage and offloading vessel, the Zafiro
Producer. By the end of 1996, the field was delivering approximately 30 TBD
(Mobil share, 21 TBD) from six subsea wells. Phase II development of the Zafiro
field is planned to increase gross production to about 80 TBD by 1998.
In addition to Zafiro development activity, Mobil made two discoveries in the
vicinity of the Zafiro field. The Rubi-1 wildcat tested oil and gas from a
reservoir not previously seen in Zafiro. The second reservoir was discovered by
the Jade-1 wildcat. Further appraisal drilling of the Jade reservoir is planned
in early 1997.
Mobil's two Qatar LNG ventures in partnership with the Qatar General Petroleum
Corporation (QGPC) continued to progress steadily during 1996. Both ventures
will develop the giant North Field that has about 250 trillion cubic feet of
proved reserves.
Mobil - 7 -
<PAGE>
Significant developments -- continued
The Qatargas LNG Venture, in which Mobil has a 10% interest, achieved a major
milestone in 1996. The first cargo of LNG to be produced from Qatar was shipped
in December, marking the first new source of LNG from the Middle East since
1977. The LNG was delivered to Japan's Chubu Electric Power Company in early
1997 commencing a 25 year supply agreement. Sales to Japanese gas and electric
utilities will ultimately reach 6 million metric tons a year (MMTA). The second
Qatargas liquefaction train was completed in early 1997. A third is scheduled
for commissioning and start-up in 1998. Peak gross production volumes of 1,200
MMCFD of natural gas and 40 TBD of condensate will be reached soon thereafter.
Development of Mobil's second LNG project in Qatar, Ras Laffan Liquefied
Natural Gas Company, Ltd., (Ras Laffan) is well under way. Equipment, such as
main heat exchangers and storage tanks, that require a long lead time, are being
fabricated, and site preparation is complete. Construction of the LNG plant is
under way at the onshore location, while upstream, the offshore jackets for the
producing platforms have been set and drilling activities will begin by the
second quarter of 1997.
During 1996, the Ras Laffan shareholders, QGPC(70%) and Mobil(30%), reached
agreement with two Japanese trading companies, Itochu Corporation and Nissho
Iwai Corporation, to sell them a 7% interest in Ras Laffan; commencing in 1997,
this will reduce Mobil's interest to 26.5%.
Ras Laffan has contracted to sell 2.4 MMTA of LNG to Korea Gas Corporation
(KOGAS) for 25 years with initial deliveries planned for 1999. In early 1997,
Ras Laffan reached an agreement in principle to increase its sale of LNG to
KOGAS under the contract to 4.8 MMTA. Marketing is ongoing for future sales with
a goal of supplying at least 10 MMTA of LNG to both existing and emerging
markets in the Far East, Asia and Europe.
Mobil has a 4.75% interest in an onshore oil concession operated by ADCO, the
Abu Dhabi Company for Onshore Oil Operations. A capacity expansion program is
expected to raise Mobil's share of sustainable production from 42 TBD in 1996 to
nearly 60 TBD by the year 2001.
New Business Development
Mobil continues to expand its portfolio of new business opportunities with the
acquisition and development of Upstream projects throughout the world.
South America
- - Venezuela: Exploration activities are progressing at the Mobil-operated
La Ceiba exploration block (Mobil share, 50%), located on the southeastern
shores of Lake Maracaibo in western Venezuela, at a pace that will allow
drilling to start in the second quarter of 1997. In addition to La Ceiba, the
Quiamare block in eastern Venezuela was recently added to Mobil's assets by
Ampolex's 25% interest in a production service contract. Quiamare also
contains several large exploration prospects to be further evaluated in 1997.
Mobil and Lagoven, an affiliate of Petroleos de Venezuela, signed a Heads of
Agreement in September 1996, outlining basic terms for a joint venture
involving the production of extra-heavy crude oil from Venezuela's Orinoco
Tar Belt. This venture also involves partially upgrading the crude in
Venezuela, with final
Mobil - 8 -
<PAGE>
Significant developments -- continued
New Business Development -- South America
processing at Mobil's Chalmette, Louisiana refinery. In February 1997,
Veba Oel, an affiliate of Veba AG, joined Mobil and Lagoven in the joint
venture with a 16.7% interest. The remaining 83.3% interest will be shared
equally by Mobil and Lagoven. Part of the terms of the agreement call for
50-50 ownership of the Chalmette facility by Mobil and Lagoven. The Mobil
- Lagoven venture requires formal approval by the Venezuelan Congress and
completion of the formal joint venture agreements, which are expected
early in the second quarter of 1997.
- - Peru: Mobil and its partner Shell signed a license agreement for rights to
develop Camisea, the largest natural gas field in South America. Camisea is
located in southern Peru, 500 kilometers southeast of the capital, Lima.
Mobil's share in the Camisea project is 42.5% with Shell, as operator,
holding the remaining 57.5% of the joint venture. The license agreement
provides that during an initial two-year period, there will be three
appraisal wells, detailed engineering studies, seismic reprocessing and
environmental assessments, and a commercial program aimed at developing the
Peruvian gas market.
- - Argentina: Mobil acquired an interest in two natural gas properties in 1996,
strengthening its position in the Argentinian natural gas sales market. In
addition, Mobil expects to utilize new regional pipelines to Brazil and Chile
to expand its natural gas sales.
Through its acquisition of Ampolex, Mobil gained a 23% interest in the
Aguarague block located in northwestern Argentina. Mobil's share of current
production is about 30 MMCFD. Mobil also purchased a 28% interest in the
Chihuidos block located in central Argentina's Neuquen basin. The block
contains one producing field, Sierra Chata, which is currently producing
160 MMCFD (Mobil share, 45 MMCFD). Sierra Chata natural gas will be the first
exported to Santiago, Chile, when the new GasAndes pipeline is completed in
1997.
Africa
- Angola: Mobil, with 50% interest and operatorship, signed a production
sharing contract for a deepwater block located in the lightly explored
Kwanza Basin. The first wildcat was drilled in late 1996. Evaluation of
the commerciality of this prospect and another wildcat are planned for
1997. Additionally, Mobil holds a 21% interest in a Shell-operated block.
- Algeria: In December 1996, Mobil spudded its second wildcat well on the
2.25 million-acre Touggourt concession. After the completion of this
wildcat, the first appraisal well to the 1995 oil discovery will be
drilled to test the feasibility of horizontal completions. Mobil has the
option to enter into the third exploration phase with a further wildcat
obligation. A decision is to be made by July 1997.
Europe
- Italy: Mobil participated with partners in the third appraisal well of the
Tempa Rossa field. Two additional appraisal wells will be drilled in 1997
with a decision to develop the field expected before the end of the year.
Mobil - 9 -
<PAGE>
Significant developments -- continued
Former Soviet Union
- Russia: A Mobil-led consortium was awarded exclusive rights to negotiate a
Production Sharing Agreement (PSA) for exploration of the 1.7 million-acre
Kirin block, offshore Sakhalin Island. The PSA for Kirin has been
negotiated and is being reviewed in Moscow by the appropriate authorities.
- Kazakstan: During 1996, Mobil purchased a 25 percent equity interest in
the Tengizchevroil joint venture, which operates the Tengiz oil field.
Located on the eastern shore of the Caspian Sea, Tengiz is one of the
world's largest oil fields. Gross production at the end of 1996 was about
160 TBD (Mobil share, 40 TBD), and is projected to peak at 940 TBD (Mobil
share, 235 TBD) around the year 2014.
In 1993, Kazakstan selected Mobil as the only U.S.-based company in a
consortium to explore for hydrocarbons in the Kazak sector of the Caspian
Sea. The Caspian Sea Consortium completed a seismic program in the summer
of 1996, ahead of schedule and under budget, as a prelude to exploratory
drilling. Block selection for drilling will be completed by the second
quarter of 1997.
In April 1995, Mobil signed an agreement with three Kazakstani companies
forming the Tulpar Munai Joint Venture to explore and develop the 4
million acre Tulpar block in northern Kazakstan. In 1996, Shell and Japan
Kazakstan Petroleum Company each acquired 12.5% interest in the Tulpar
block -- half of Mobil's 50% interest.
Mobil has worked closely with the governments of Kazakstan, Oman and
Russia and seven other oil companies to plan a 900-mile pipeline from the
Tengiz oil field to Russia's Black Sea port of Novorossiysk. In April
1996, an agreement to restructure the Caspian Pipeline Consortium was
reached; the restructured shareholder's agreement was signed in December
1996 providing Mobil with a 7.5% interest. The pipeline will provide
economic benefits for the entire region and give Kazakstan a new export
route for its oil when completed in 1999.
- Azerbaijan: Negotiations with the State Oil Company of the Azerbaijan
Republic are in progress for the Tagiev deepwater block and the Oguz
block, which lie immediately south and adjacent to the Neft Dashlary and
Guneshli fields. Technical and commercial evaluations are expected to be
be completed in early 1997.
Mobil has joined with Ramco and Total in an alliance to study and
evaluate the shallow water coastline of Azerbaijan. In addition, Mobil
is conducting a regional study of the entire southern Caspian Sea area
to identify additional near term and longer term opportunities.
- Turkmenistan: Mobil opened a venture office in Ashkabat, the capital of
Turkmenistan, in July 1996. Mobil concluded an agreement with Monument
Oil & Gas plc. and the government of Turkmenistan to develop and explore
opportunities in the Nebit Dag License, onshore western Turkmenistan. The
license contains five producing properties and additional exploration
potential. Production is scheduled to commence in 1997. In early 1997,
Mobil and Monument entered into separate agreements with the government of
Turkmenistan to extend their exploration and producing program to cover
other opportunities in the same region.
Mobil - 10 -
<PAGE>
Significant developments -- continued
Reserves
Mobil is required to report reserve estimates to the U.S. Department of
Energy. During 1996 Mobil filed proved reserve estimates covering the year
1995 under forms EIA-23, Annual Survey of Domestic Oil and Gas Reserves, and
EIA-28, Financial Reporting System. Such estimates were consistent with
reserve data filed with the Securities and Exchange Commission (S.E.C.).
- ------------------------------------------------------------------------------
Wells in Process of Being Drilled Total
at December 31, 1996 Gross Net
- ------------------------------------------------------------------------------
United States ......................................... 6 3
International ......................................... 46 19
-- --
Worldwide ............................................. 52 22
== ==
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Improved Recovery Projects Being Installed In Operation
at December 31, 1996 Gross Net Gross Net
- ------------------------------------------------------------------------------
United States .................... - - 205 62
International .................... 2 1 73 39
- - --- ---
Worldwide ........................ 2 1 278 101
= = === ===
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
------- International --------
Productive Wells at Asia- Other World- Mult.
December 31, 1996 U.S. Europe Pacific Areas Total wide Compl.(a)
- ------------------------------------------------------------------------------
Oil: Gross ....... 19,086 1,039 683 1,578 3,300 22,386 701
Net ......... 6,945 303 102 877 1,282 8,227 285
Gas: Gross ....... 4,699 480 84 958 1,522 6,221 708
Net ......... 3,083 137 80 255 472 3,555 408
(a) Multiple completions included in geographic totals.
- ------------------------------------------------------------------------------
Mobil - 11 -
<PAGE>
Significant developments -- continued
- ------------------------------------------------------------------------------
Net Exploratory and ------- International --------
Development Wells Asia- Other World-
Drilled U.S. Europe Pacific Areas Total wide
- ------------------------------------------------------------------------------
1994
Exploratory wells
Productive ............. 42 2 - 17 19 61
Dry .................... 19 7 5 23 35 54
Development wells
Productive ............. 393 14 2 17 33 426
Dry .................... 14 - - 1 1 15
1995
Exploratory wells
Productive ............. 41 - - 25 25 66
Dry .................... 18 7 3 17 27 45
Development wells
Productive ............. 476 14 1 62 77 553
Dry .................... 15 - 1 1 2 17
1996
Exploratory wells
Productive ............. 21 3 1 45 49 70
Dry .................... 18 12 4 18 34 52
Development wells
Productive ............. 293 13 12 100 125 418
Dry .................... 8 - 1 1 2 10
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Oil and Gas Acreage
at December 31, 1996 Undeveloped Acreage Developed Acreage
(Thousands of acres) Gross Net Gross Net
- -------------------------------------------------------------------------------
United States .................. 4,186 2,474 4,408 2,739
Europe ......................... 14,001 5,112 1,594 568
Asia-Pacific ................... 46,155 19,850 1,764 342
Other .......................... 61,966 26,885 3,719 1,574
------- ------ ------ -----
Total International .......... 122,122 51,847 7,077 2,484
------- ------ ------ -----
Worldwide ...................... 126,308 54,321 11,485 5,223
======= ====== ====== =====
- --------------------------------------------------------------------------------
Mobil - 12 -
<PAGE>
- --------------------------------------------------------------------------------
Average Sales Price/Transfer Value
- --------------------------------------------------------------------------------
The following table shows Mobil's average sales price/transfer value (transfer
values are essentially equal to third-party sales prices) and average production
costs in oil and natural gas producing activities in 1994, 1995 and 1996. In
calculating the "dollar per barrel" data, the divisor used is net production.
Natural gas volumes have been converted to oil equivalent barrels and restated
on a BTU (British Thermal Unit) basis, using 5,516, 5,510, and 5,519 cubic feet
of gas per barrel for 1994, 1995, and 1996, respectively. Mobil's share of
equity companies represents Mobil's share of results of operations for producing
activities of investees accounted for on the equity method. The geographic
segment "Other Areas", in this table, includes principally Canada and Nigeria.
- --------------------------------------------------------------------------------
UNITED STATES 1994 1995 1996
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel) ............................ $12.91 $14.52 $17.40
NGL (per barrel) .................................. $10.37 $ 9.94 $13.16
Natural gas (per thousand cubic feet) (a).......... $ 1.72 $ 1.41 $ 2.17
Average dollars per barrel of oil equivalent
Revenues .......................................... $10.41 $10.13 $13.48
Production (lifting) costs ........................ (4.43) (4.95) (5.08)
Exploration expenses .............................. ( .54) ( .36) ( .41)
Depreciation, depletion and amortization .......... (4.45) (5.86) (3.46)
Other operating revenues/(expenses) ............... ( .15) .16 1.43
Income tax expense ................................ ( .25) .34 (1.99)
------ ------ -------
Results of operations for producing activities ...... $ .59 $( .54) $ 3.97
====== ====== =======
Mobil's share of equity companies ................... - - (b)
====== ====== =======
Total ............................................... $ .59 $( .54) $ 4.00
====== ====== =======
Above results include the following special items:
Asset sales and write-downs ....................... ( .85) ( .11) .65
Restructuring provisions .......................... - ( .26) (.04)
Asset impairment (FAS 121) ........................ - (1.85) (.37)
(a) Effective 1996, the wellhead price is reported. Prior year numbers have
been restated to reflect current year reporting. This reporting change to
wellhead price is consistent with our gas marketing business realignment.
(b) Not applicable
- --------------------------------------------------------------------------------
EUROPE 1994 1995 1996
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel) ............................ $16.21 $17.47 $20.85
NGL (per barrel) .................................. $11.69 $14.32 $17.47
Natural gas (per thousand cubic feet) ............. $ 2.70 $ 2.70 $ 2.78
Average dollars per barrel of oil equivalent
Revenues .......................................... $15.43 $15.99 $17.62
Production (lifting) costs ........................ (5.24) (5.29) (5.44)
Exploration expenses .............................. (1.15) ( .94) (1.17)
Depreciation, depletion and amortization .......... (3.40) (3.43) (3.49)
Other operating revenues/(expenses) ............... .52 .91 .71
Income tax expense ................................ (3.65) (4.06) (4.73)
------ ------ ------
Results of operations for producing activities ...... $ 2.51 $ 3.18 $ 3.50
====== ====== ======
Mobil's share of equity companies ................... $ 1.96 $ 2.79 $ 4.04
====== ====== ======
Total ............................................... $ 2.51 $ 3.17 $ 3.50
====== ====== ======
Above results include the following special items:
Asset sales and write-downs ....................... ( .13) .04 -
Restructuring provisions .......................... ( .07) (.19) -
Tax related items ................................. - .19 -
Asset impairment (FAS 121) ........................ - (.09) -
- --------------------------------------------------------------------------------
Mobil - 13 -
<PAGE>
- --------------------------------------------------------------------------------
ASIA-PACIFIC 1994 1995 1996
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel) ............................ $14.93 $15.09 $20.92
NGL (per barrel) .................................. $11.77 $16.35 $18.19
Natural gas (per thousand cubic feet) ............. $ 1.99 $ 2.15 $ 2.50
Average dollars per barrel of oil equivalent
Revenues .......................................... $11.69 $12.77 $15.18
Production (lifting) costs ........................ (1.78) (1.73) (2.01)
Exploration expenses .............................. ( .71) ( .56) (1.09)
Depreciation, depletion and amortization .......... (1.57) (1.48) (2.12)
Other operating revenues/(expenses) ............... ( .04) ( .06) .04
Income tax expense ................................ (4.54) (5.18) (6.11)
------ ------ ------
Results of operations for producing activities ...... $ 3.05 $ 3.76 $ 3.89
====== ====== ======
Mobil's share of equity companies ................... $ .41 $ 1.73 *
====== ====== ======
Total ............................................... $ 3.01 $ 3.74 $ 3.87
====== ====== ======
Above results include the following special items:
Asset sales and write-downs ....................... - .12 (.15)
Restructuring provision ........................... - - (.03)
- --------------------------------------------------------------------------------
OTHER AREAS 1994 1995 1996
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel) ............................ $15.26 $17.03 $20.67
NGL (per barrel) .................................. $11.44 $14.74 $16.54
Natural gas (per thousand cubic feet) ............. $ 1.29 $ .78 $ .89
Average dollars per barrel of oil equivalent
Revenues .......................................... $12.94 $13.49 $17.03
Production (lifting) costs ........................ (4.38) (5.83) (5.46)
Exploration expenses .............................. (1.31) (1.41) ( .95)
Depreciation, depletion and amortization .......... (2.59) (3.75) (1.41)
Other operating revenues/(expenses) ............... .95 .73 1.48
Income tax expense ................................ (4.15) (3.44) (8.43)
------ ------ ------
Results of operations for producing activities ...... $ 1.46 $( .21) $ 2.26
====== ====== ======
Mobil's share of equity companies ................... $ .96 $ .94 $ 2.02
====== ====== ======
Total ............................................... $ 1.39 $( .07) $ 2.23
====== ====== ======
Above results include the following special items:
Asset sales and write-downs ....................... ( .32) - .22
Restructuring provision ........................... - ( .12) -
Asset impairment (FAS 121) ........................ - ( .89) -
- --------------------------------------------------------------------------------
WORLDWIDE 1994 1995 1996
- --------------------------------------------------------------------------------
Revenues
Crude oil (per barrel) ............................ $14.64 $16.10 $19.76
NGL (per barrel) .................................. $ 8.99 $10.38 $15.48
Natural gas (per thousand cubic feet) ............. $ 1.96 $ 1.87 $ 2.29
Average dollars per barrel of oil equivalent
Revenues .......................................... $12.26 $12.75 $15.61
Production (lifting) costs ........................ (3.95) (4.42) (4.50)
Exploration expenses .............................. ( .86) ( .74) ( .87)
Depreciation, depletion and amortization .......... (3.17) (3.85) (2.70)
Other operating revenues/(expenses) ............... .23 .39 .94
Income tax expense ................................ (2.76) (2.70) (5.01)
------ ------ ------
Results of operations for producing activities ...... $ 1.75 $ 1.43 $ 3.47
====== ====== ======
Mobil's share of equity companies ................... $ .96 $ 1.15 $ 2.26
====== ====== ======
Total ............................................... $ 1.73 $ 1.42 $ 3.42
====== ====== ======
Above results include special items, net ............ ( .40) ( .93) .08
- --------------------------------------------------------------------------------
* Not meaningful due to the exploratory nature of related activities.
Mobil - 14 -
<PAGE>
PETROLEUM OPERATIONS -- DOWNSTREAM
Refining
At December 31, 1996, Mobil owned or had an operating interest in 21
refineries in 13 countries. Mobil's share of crude oil refinery capacity was
2,297 TBD, about 45% of which was located in the United States. Worldwide
utilization of Mobil's refining capacity averaged 92% in 1994, 92% in 1995 and
94% in 1996.
Significant developments in 1996 in Mobil's refining operations included the
following:
- At Altona, Australia, construction is under way on a new fluid catalytic
cracking unit, which will increase gasoline and distillate production at
the refinery. It is scheduled for completion mid-1997.
- Construction is under way on a residual fuel oil upgrading unit at a joint
venture refinery (Mobil share, 25%) in Kawasaki, Japan, and will be
completed in mid-1997. It will increase production of gasoline and
low-sulfur distillates and fuel oil.
- Construction is under way on an 8 TBD lubricant base stock unit which will
enhance the Jurong, Singapore, refinery. It is scheduled to start-up in
mid- 1997.
- At Yanbu, Saudi Arabia, the Petromin Lubricating Oil Refining Company
(Mobil share, 30%) is constructing a new 5 TBD lubricant base stock
refinery, with completion scheduled during the first half of 1997.
- Mobil acquired an interest in the La Pampilla, Peru, Refinery.
Marketing
- ------------------------------------------------------------------------------
Petroleum Sales Volumes By Product (TBD) 1994 1995 1996
- ------------------------------------------------------------------------------
Automotive gasoline ............................ 1,216 1,291 1,322
Jet fuel ....................................... 246 262 275
Distillate ..................................... 911 954 1,033
Other products ................................. 702 715 738
----- ----- -----
Total .......................................... 3,075 3,222 3,368
===== ===== =====
- ------------------------------------------------------------------------------
Petroleum products are marketed extensively in the U.S. and in almost 100
other countries. Mobil has over 18,000 retail outlets, about 45% of which are
located in the United States. Petroleum products include automotive and aviation
gasolines, motor oils, lubricants and greases, marine fuels, jet fuels, fuel
oil, diesel oil, kerosene, asphalts, naphthas, solvents, waxes and liquefied
petroleum gas.
The principal brand names identifying Mobil's products are "Mobil(R)
Unleaded", "Mobil Super+(R) ", "Mobil(R) Special", "Mobil(R) Regular", and
"Mobil(R) Premium" gasolines, and "Mobiloil(R)", "Mobilheat(TM)",
"Mobilgrease(R)", "Mobil 1(R)", "Delvac 1(R)", and "Mobil(R)" industrial and
marine lubricants and process products.
In 1996, Mobil and British Petroleum p.l.c. (BP) entered into a strategic
alliance to strengthen their European operations in the refining and marketing
of fuels and lubricants. The alliance will be implemented through separate
operating businesses
Mobil - 15 -
<PAGE>
Marketing -- continued
for fuels and lubricants in each of 43 countries where Mobil and BP affiliates
are already active or may develop future business. The businesses in the United
Kingdom, Turkey and Portugal commenced operations in the fourth quarter of 1996.
Businesses in the remaining countries will be implemented in 1997.
In each country, Mobil will have a 30% interest in the fuels business and a
51% interest in the lubricants business. The alliance is expected to produce
efficiencies through sharing costs, eliminating duplication, and achieving
economies of scale, while providing a platform for future growth.
In Tianjin, China, a lubricant blending plant was streamed in late 1996. This
was the first 100% foreign-owned oil industry facility approved in China. A
second lubricant blending plant, located at Taicang, China (near Shanghai), is
under construction and is scheduled to be streamed in late 1997. Mobil has
entered the lubricants market in Peru with the acquisition of Petrolube
facilities.
In Africa, Mobil entered the Kenya market with a full line of oil products
with its purchase of Exxon's affiliate in that country.
Tankers
At December 31, 1996, Mobil owned 25 ocean-going tankers with an aggregate of
3,268 thousand deadweight tons, of which one, with a capacity of 49 thousand
deadweight tons, was registered in the United States. An additional 5 tankers,
aggregating 838 thousand deadweight tons, were under term charter including
Mobil's newest very large crude carriers (VLCCs), the RAVEN and EAGLE. The
RAVEN, Mobil's second double-hull, 280 thousand deadweight-ton VLCC was placed
in service in June 1996. The vessel, with a capacity of 2.2 million barrels of
crude oil, is similar to the EAGLE which was commissioned in 1993. Both the
EAGLE and RAVEN were sold to separate joint venture (J/V) companies (Mobil's
share, 50%) in December 1996. These vessels will continue to be operated by
Mobil under long-term charter with the J/V companies. In July 1996, Mobil
ordered two additional double-hull VLCCs similar in size to the two already in
service. These two new construction contracts were subsequently assigned in
December to the same J/V company that owns the RAVEN and will be operated by
Mobil under similar term charter arrangements. The first of the newly contracted
ships is scheduled to be delivered November 1998, and the second in May 1999.
Pipelines
At December 31, 1996, Mobil's U.S. pipeline system, including partly-owned
facilities, consisted of 13,589 miles of crude oil, natural gas liquids, natural
gas, and carbon dioxide trunk and gathering lines, and 8,026 miles of product
lines. Also at that date, Mobil's pipeline system outside the U.S., including
partly owned facilities, consisted of 10,362 miles of crude oil, natural gas
liquids, and natural gas trunk and gathering lines, and 1,914 miles of product
lines.
CHEMICAL OPERATIONS
Mobil Chemical, with manufacturing operations in 11 countries, is a large
producer of petrochemicals, packaging films and specialty chemical products.
Mobil - 16 -
<PAGE>
Chemical Operations -- continued
- ------------------------------------------------------------------------------
Mobil Chemical Facilities United Inter- World-
at December 31, 1996 States national (a) wide
- ------------------------------------------------------------------------------
Petrochemicals ....................... 6 7 13
OPP Films ............................ 3 6 9
Additives and Synthetics ............. 3 2 5
Research and Development ............. 3 - 3
-- -- --
Total Chemical facilities ........... 15 15 30
== == ==
(a) Includes seven partly owned facilities.
- ------------------------------------------------------------------------------
Principal chemical products include basic petrochemicals (ethylene, propylene,
benzene, paraxylene), intermediates (ethylene glycol) and a key derivative
(polyethylene). Other products include synthetic lubricant base stocks and lube
additives, and plastic films for packaging and industrial applications.
Significant developments in 1996 in Mobil's chemical operations included the
following:
- In February, the sale of Muehlstein, Mobil's resin trading operation, was
completed. In June, the Tucker Housewares business was sold, completing
Mobil's withdrawal from the polyethylene and polystyrene plastics
fabricating businesses in North America. In August, the sale of Mobil's
Composite Products (Trex) wood-thermoplastic lumber substitute business
was completed.
- Mobil Yanbu Petrochemical Company and Saudi Basic Industries Corporation
are expanding their 50-50 joint venture petrochemicals complex in Yanbu,
Saudi Arabia, by the addition of a second ethylene production facility and
facilities to produce additional polyethylene and ethylene glycol as well
as polypropylene.
- In January 1997, Mobil Chemical signed a previously announced agreement to
enter into a 50-50 joint venture with Pequiven, the petrochemical
affiliate of Venezuela's state-owned oil company, Petroleos de
Venezuela, S.A. to evaluate the feasibility of developing a new
olefins complex at an existing petrochemicals site at Jose, Venezuela.
The facility will include an ethylene cracker and related facilities
to produce polyethylene and ethylene glycol.
- As part of Mobil's previously announced program to expand worldwide
paraxylene production capacity, the major expansion in Chalmette,
Louisiana, was streamed in late 1996. Construction is substantially
completed at the grassroots complex in Beaumont, Texas, and start-up is
slated for late first quarter, 1997.
Mobil - 17 -
<PAGE>
OTHER OPERATIONS
Mining and Minerals
Mobil Mining and Minerals produced and sold phosphate rock and fertilizers,
marketed Mobil's recovered sulfur in the U.S. and administered other mineral
resources. In April 1996 Mobil completed the previously announced sale of its
Nichols phosphate mine in Polk County, Florida. In conjunction with the sale,
the purchaser, Agrifos L.L.C. entered into a long-term tolling agreement to
process rock at Mobil's fertilizer plant in Pasadena, Texas. This sale completes
Mobil's exit from the phosphate mining business.
Real Estate
Mobil Land Development Corporation (Mobil Land) carried on Mobil's real estate
activities in the United States. In the fourth quarter of 1996, Mobil Land
completed the previously announced sale of its community development business in
seven states to a real estate investment fund. The sale of Phase I of Reston
Town Center, a mixed office/retail complex in Reston, Virginia, and the sale of
the Hyatt Hotel in Reston were also completed. With these sales, Mobil has now
divested all of its land holdings with the exception of the Desert Mountain
development, located in North Scottsdale, Arizona.
Research
Mobil engages in research and development, principally in the U.S., Australia,
France, Germany, Japan, Norway and the United Kingdom. Activities include the
development of technologies and services which improve Mobil's competitiveness
in core business areas -- finding oil and gas, and converting them to fuels,
lubricants and chemicals while meeting environmental, health and safety
standards. Annual research expense was $275 million in 1994, $252 million in
1995, and $206 million in 1996.
Mobil - 18 -
<PAGE>
Item 2. Properties.
Mobil and its subsidiaries own, lease or have interests in extensive
production, manufacturing, marketing, transportation and other facilities
worldwide. Information on these properties has been incorporated into Item 1.
Business.
Item 3. Legal Proceedings.
Environmental Litigation
Mobil periodically receives notices from the Environmental Protection Agency
(EPA) or equivalent agencies at the state level that Mobil is a "potentially
responsible party" under Superfund or equivalent state legislation with respect
to various waste disposal sites. The majority of these sites are either still
under investigation by the EPA or the state agencies concerned, or under
remediation, or both. In certain instances, Mobil and other potentially
responsible parties have been named in court or administrative proceedings by
federal or state agencies seeking the cleanup of these sites. Mobil has also
been named as a defendant in various suits brought by private parties alleging
injury from disposal of wastes at these sites. The ultimate impact of these
proceedings on the business or accounts of Mobil cannot be predicted at this
time due to the large number of other potentially responsible parties and the
speculative nature of clean-up cost estimates, but based on our long experience
in managing environmental matters, we do not anticipate that the aggregate level
of future remediation costs will increase above recent levels so as to
materially and adversely affect our consolidated financial position or
liquidity.
On November 25, 1996, a previously-reported civil action, brought by the
Department of Justice on March 28, 1996 in the U.S. District Court for the
Middle District of Florida, was dismissed. The Department of Justice had alleged
that the operation of Mobil Mining and Minerals Company's facilities located in
South Fort Meade, Fort Meade and Nichols, Florida, violated the Clean Water Act
by reason of (a) discharges of pollutants into navigable waters of the United
States in violation of permits issued under that Act and (b) unpermitted point
source discharges. The maximum potential amount of the penalties sought in the
action, based upon the maximum statutory penalty amount of $25,000 per day per
violation, were approximately $6.5 million. The action was dismissed upon a
payment of $200,000.
On December 11, 1996, a previously-reported proceeding, brought by the Maine
Department of Environmental Protection (the "MDEP") against Mobil Oil
Corporation on March 13, 1996 was settled. The MDEP had (1) alleged that the
operation of a service station in Saco, Maine violated MDEP's regulations by
reason of (a) failure to report evidence of a leak, (b) discharge of oil to the
environment, (c) failure to maintain leak detection equipment and (d) failure to
annually test electronic leak detection equipment, and (2) proposed a penalty of
$127,500. The proceeding was settled by a payment of $69,750.
Mobil - 19 -
<PAGE>
Item 3. Legal Proceedings -- continued
On October 9, 1996, a previously-reported proceeding, brought by the EPA
against Mobil Oil Corporation on September 27, 1996, was settled. The EPA had
filed an administrative complaint with the USEPA hearing clerk alleging that
Mobil Oil Corporation had violated the Toxic Substances Control Act by failing
to submit to the EPA copies of several studies regarding toxic substances, and
had sought a penalty of $303,000. The proceeding was settled by a payment of
this amount.
The matters described in the preceding paragraphs are not of material
importance in relation to Mobil's accounts and are described in compliance with
SEC rules regarding disclosure of such matters although not material.
Other Than Environmental Litigation
Mobil and its subsidiaries are engaged in various litigations and have a
number of unresolved claims pending. While the amounts claimed are substantial
and the ultimate liability in respect of such litigations and claims cannot be
determined at this time, Mobil is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not likely to be of
material importance in relation to its accounts.
Mobil has provided in its accounts for items and issues not yet resolved based
on management's best judgement.
Item 4. Submission of Matters to a Vote of Security Holders.
None submitted.
Mobil - 20 -
<PAGE>
PART II
The information required by Items 5 through 7 is incorporated herein by
reference to Mobil's 1996 Annual Report to Shareholders. The charts, graphs and
associated captions appearing on pages 18 through 34 of Mobil's 1996 Annual
Report to Shareholders are not incorporated into this Annual Report on Form
10-K. Below is an index to the incorporated information.
1996 Annual Report
To Shareholders
Item Description Page(s)
5. Market for Registrant's Common Stock and Related
Stockholder Matters .............................. 29
6. Selected Financial Data ............................ 57
7. Management's Discussion and Analysis of Results of
Operations and Financial Condition ............... 19-30,32,34
Item 8. Financial Statements and Supplementary Data.
See page 23 for a list of the financial statements and supplementary data
including those incorporated herein by reference to Mobil's 1996 Annual Report
to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Item 13. Certain Relationships and Related Transactions.
For Item 10, the names and ages of the Executive Officers of Mobil as of March
1, 1997, and the position(s) each of them has held during the past five years,
are provided on page 22 of this Annual Report on Form 10-K. The other
information called for by Item 10, and the information called for by Items 11,
12 and 13, is incorporated by reference to the Registrant's definitive proxy
statement for its Annual Meeting of Shareholders, to be held on May 8, 1997,
which will be filed with the S.E.C. within 120 days after December 31, 1996.
Information required by Item 10 of this report related to the names and ages
of the Executive Officers of Mobil Corporation as of March 1, 1997 and the
position(s) each of them has held during the past five years, is provided on the
following page.
Mobil - 21 -
<PAGE>
- --------------------------------------------------------------------------------
Executive Officers of the Registrant
- --------------------------------------------------------------------------------
Name (Age) Position(s) Held During Past Five Years Years Held
Robert F. Vice President, Administration .................... 1996 - Present
Amrhein (54) Manager, Human Resources, Mobil Business
Resources Corporation ........................... 1995 - 1996
Manager, Employee Relations, Exploration and
Producing Division, Mobil Oil Corporation........ 1992 - 1995
General Manager, Corporate Employee Relations...... 1988 - 1992
Walter R. Treasurer ......................................... 1995 - Present
Arnheim (52) Vice President, Planning and Economics ............ 1991 - 1995
Controller/Treasurer, Exploration and Producing
Division, Mobil Oil Corporation.................. 1988 - 1991
Thomas C. Senior Vice President, Chief Financial Officer .... 1994 - Present
DeLoach, Jr. Executive Vice President - International, Marketing
(49) and Refining Division, Mobil Oil Corporation .... 1993 - 1994
Vice President, Supply and Trading, Marketing and
Refining Division, Mobil Oil Corporation ........ 1991 - 1993
Vice President, Planning and Economics ............ 1990 - 1991
Charles H. Corporate Secretary and Secretary of the Board of
DuBois (47) Directors and Executive Committee ............... 1996 - Present
General Counsel, Mobil Exploration and Producing
U.S. Inc. ....................................... 1989 - 1996
Samuel H. Vice President .................................... 1996 - Present
Gillespie III General Counsel ................................. 1995 - Present
(54) Associate General Counsel ....................... 1994 - 1995
General Counsel, Exploration and Producing
Division, Mobil Oil Corporation ............... 1990 - 1994
Paul J. Executive Vice President, responsible for: the
Hoenmans (64) North America Exploration and Producing, New
Exploration and Producing Ventures/Exploration
and Liquefied Natural Gas/Independent Power
Projects Business Groups ........................ 1996 - Present
Executive Vice President, Exploration and Producing
Division, Mobil Oil Corporation ................. 1986 - 1996
M. Frances Controller ........................................ 1996 - Present
Keeth (50) Manager of Finance - Oil Products, Shell
International Petroleum Company ................. 1996 - 1996
Area Coordinator, East and Australia Region, Shell
International Petroleum Company ................. 1995 - 1996
Deputy Group Controller, Royal Dutch/Shell Group of
Companies, Shell International Petroleum Company. 1992 - 1995
General Manager, Products Finance, Shell Oil Company1991 - 1992
Aldis V. Vice President, Planning and Economics ............ 1995 - Present
Liventals (54) Vice President, Middle East and Marine Transportation
Marketing and Refining Division, Mobil Oil
Corporation ..................................... 1993 - 1995
Region Executive, Mobil Asia Pacific Pte. Limited . 1991 - 1993
Lucio A. Chairman of the Board and Chief Executive Officer . 1994 - Present
Noto (58) President and Chief Operating Officer ............. 1993 - Present
Chief Financial Officer ........................... 1989 - 1993
Vice President, Finance ........................... 1988 - 1993
Eugene A. Executive Vice President, responsible for: the
Renna (52) North America Marketing and Refining, Europe/Former
Soviet Union, South America and Supply, Trading
and Transportation Business Groups ............. 1996 - Present
Executive Vice President, Marketing and Refining
Division, Mobil Oil Corporation ................ 1986 - 1996
Robert O. Executive Vice President, responsible for: the Africa
Swanson (60) and Middle East Asia Pacific, Worldwide Chemical
and Technology Business Groups, and the office
of Diversity and Inclusion ...................... 1996 - Present
Senior Vice President, responsible for: Mobil
Chemical Company; Mobil Mining and Minerals
Company; Mobil Land Development Corporation; and
Mobil Technology Corporation .................... 1993 - 1996
Executive Vice President, International, Marketing
and Refining Division, Mobil Oil Corporation .... 1985 - 1993
- --------------------------------------------------------------------------------
Mobil - 22 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
Mobil's consolidated financial statements, together with the report thereon of
Ernst & Young LLP, independent auditors, dated February 28, 1997, and
Supplementary Information appearing in Mobil's 1996 Annual Report to
Shareholders on the pages indicated below, are incorporated herein by reference.
With the exception of the aforementioned information, no other data appearing in
Mobil's 1996 Annual Report to Shareholders are deemed to be filed as part of
this Annual Report under Items 8 and 14. Any chart, graph and/or associated
caption appearing in the consolidated financial statements from pages 31 through
51 of Mobil's 1996 Annual Report to Shareholders are not incorporated into this
Annual Report on Form 10-K.
Financial Statement Schedules: Page(s)
1996 Annual 1996 Annual
Report on Report to
Form 10-K Shareholders
(a)1. Financial Statements.
Consolidated Statement of Income .......... - 31
Consolidated Statement of Changes in
Shareholders' Equity ..................... - 31
Consolidated Balance Sheet ................ - 33
Consolidated Statement of Cash Flows ...... - 35
Segment and Geographic Information ........ - 36,37
Notes to Financial Statements ............. - 38-51
Report of Ernst & Young LLP, Independent
Auditors ................................. - 52
Supplementary Information ................. - 29,53-56
(a)2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying
Accounts.................................. 25 -
Schedules not included above have been omitted because they are not
applicable, not material, or the required information is given in the financial
statements or notes thereto or combined with the information presented in other
schedules.
Mobil - 23 -
<PAGE>
(a)3. Exhibits
An index to exhibits filed as part of this Annual Report on Form 10-K is
included on page 27.
(b) Reports on Form 8-K.
Date of 8-K Description of 8-K
October 21, 1996 Submitted a copy of the Mobil News Release dated
October 21, 1996, reporting estimated earnings for the
third quarter of 1996.
January 3, 1997 Submitted documents related to the Mobil Corporation
Pass Through Trust 1996-A issuance of $231,900,000 in
certificates (principal amount at maturity).
January 27, 1997 Submitted a copy of the Mobil News Release dated
January 27, 1997, reporting estimated earnings for
the fourth quarter and full year of 1996.
January 31, 1997 Submitted a copy of the Mobil News Release dated
January 31, 1997, which announced that the Mobil
Corporation Board of Directors voted to split Mobil's
outstanding common stock two shares for one subject to
Mobil stockholders' approval of an increase in the
authorized number of shares of common stock.
Mobil - 24 -
<PAGE>
(c) Supplemental Financial Information.
FINANCIAL STATEMENT SCHEDULE
- ------------------------------------------------------------------------------
MOBIL CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1995 and 1996
(Millions of dollars)
- ------------------------------------------------------------------------------
Balance Balance
Beginning End of
Description of Period Additions Deductions Period
- ----------------------------- --------- --------- ---------- -------
For the year ended December 31, 1994:
Reserves deducted in the balance sheet from the assets to which they apply:
For doubtful accounts (a) .... $128 $ 36 $42 $122
For investments and
long-term receivables ...... 32 3 - 35
For deferred tax assets (b)(c) 171 307 48 430
For the year ended December 31, 1995:
Reserves deducted in the balance sheet from the assets to which they apply:
For doubtful accounts (a) .... $122 $ 58 $74 $106
For investments and
long-term receivables ...... 35 5 - 40
For deferred tax assets (b)(c) 430 15 77 368
For the year ended December 31, 1996:
Reserves deducted in the balance sheet from the assets to which they apply:
For doubtful accounts (a) .... $106 $ 61 $51 $116
For investments and
long-term receivables ...... 40 17 2 55
For deferred tax assets ...... 368 62 12 418
(a) Deductions include accounts written off.
(b) Deductions reflect utilization of tax credit carryforwards.
(c) Prior year amounts have been restated to reflect reclassification of
certain balance sheet amounts.
- ------------------------------------------------------------------------------
Mobil - 25 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant, Mobil Corporation, has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT MOBIL CORPORATION
By:/s/ M. Frances Keeth
(M. Frances Keeth, Controller,
Principal Accounting Officer)
Date: March 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on March 14, 1997 on
behalf of the registrant and in the capacities indicated.
Signature Title
Lucio A. Noto* Director, Chairman of the Board and
(Lucio A. Noto) President, Principal Executive and
Operating Officer
Thomas C. DeLoach, Jr.* Principal Financial Officer
(Thomas C. DeLoach, Jr.)
M. Frances Keeth* Controller, Principal Accounting Officer
(M. Frances Keeth)
DIRECTORS
Lewis M. Branscomb*
Donald V. Fites*
Charles A. Heimbold, Jr.*
Paul J. Hoenmans*
Allen F. Jacobson*
Samuel C. Johnson*
Helene L. Kaplan*
J. Richard Munro*
Aulana L. Peters*
Eugene A. Renna*
Charles S. Sanford, Jr.*
Robert G. Schwartz*
Robert O. Swanson*
Iain D. T. Vallance*
*By /s/ Gordon G. Garney
(Gordon G. Garney, Attorney-in-fact)
Date: March 14, 1997
Mobil - 26 -
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
3(i).1 Certificate of Incorporation Incorporated by reference to Exhibit
of Mobil Corporation, as amended, 3-a(i) to the Registration Statement
in effect October 27, 1989. on Form S-3 (S.E.C. File
No.33-32651), filed under Form
SE dated December 14, 1989.
3(i).2 Certificate of Designation, Incorporated by reference to Exhibit
Preferences and Rights of Series 3-a(ii) to the Registration Statement
A Junior Participating Preferred on Form S-3 (S.E.C. File No.
Stock of Mobil Corporation dated 33-32651), filed under Form SE dated
April 25, 1986. December 14, 1989.
3(i).3 Certificate of Designation, Incorporated by reference to Exhibit
Preferences and Rights of Series 3-a(iii) to the Registration
B ESOP Convertible Preferred Statement on Form S-3 (S.E.C. File
Stock of Mobil Corporation dated No.33-32651), filed under Form SE
November 22, 1989. dated December 14, 1989.
3(ii).4 By-laws of Mobil Corporation, Incorporated by reference to Exhibit
as amended to June 14, 1955. 3.4 filed on Form 8-K dated July 6,
1995.
10.1 1995 Mobil Incentive Compensation Incorporated by reference to
and Stock Ownership Plan. Definitive Proxy Statement filed
March 20, 1995.
10.2 1991 Mobil Incentive Compensation Incorporated by reference to Exhibit
and Stock Option Plan. 15 to the Registration Statement on
Form S-8 (S.E.C. File No. 33-48887)
filed August 10, 1992.
10.3 1986 Mobil Incentive Compensation Incorporated by reference to Exhibit
and Stock Option Plan. 15 to the Registration Statement on
Form S-8 (S.E.C. File No. 33-5797)
filed May 20, 1986.
11. Computation of Earnings per Electronic
Common Share. (Page 28)
12. Computation of Ratio of Earnings Electronic
to Fixed Charges. (Page 29)
13. Mobil Corporation 1996 Annual Electronic
Report to Shareholders.
21. Subsidiaries of the Registrant. Electronic
(Pages 30-32)
23. Consent of Ernst & Young LLP, Electronic
Independent Auditors, dated
March 10, 1997. (Page 33)
24.1 Power of attorney dated as of Electronic
February 28, 1997, executed by
the Board of Directors of Mobil
Corporation authorizing execution
of Annual Report on Form 10-K.
24.2 Certified copy of Board of Electronic
Directors' Resolutions adopted
February 28, 1997, authorizing
signature by officers pursuant
to power of attorney.
27. Financial Data Schedule. Electronic
Mobil - 27 -
EXHIBITS
- --------------------------------------------------------------------------------
Exhibit 11
MOBIL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Millions of dollars except per-share amounts; number of shares in thousands)
- --------------------------------------------------------------------------------
Primary 1994 1995 1996
- ------- ------ ------ ------
[S] [C] [C] [C]
Income before change in accounting principle ........ $1,759 $2,376 $2,964
Less dividends on preferred stock ................... 58 56 54
------ ------ ------
Adjusted income applicable to common shares before
change in accounting principle ................... $1,701 $2,320 $2,910
Cumulative effect of change in accounting principle. (680) - -
------ ------ ------
Adjusted net income applicable to common shares .... $1,021 $2,320 $2,910
====== ====== ======
Weighted average number of primary common shares
outstanding ...................................... 397,955 395,444 394,146
Issuable on assumed exercise of stock options ...... 2,918 3,984 4,709
------- ------- -------
Total ........................................ 400,873 399,428 398,855
======= ======= =======
Primary earnings per common share
Income applicable to common shares before change
in accounting principle ........................ $ 4.24 $ 5.81 $ 7.30
Cumulative effect of change in accounting principle (1.69) - -
------ ------ ------
Net income per common share ........................ $ 2.55 $ 5.81 $ 7.30
====== ====== ======
Fully Diluted
- -------------
Income before change in accounting principle ....... $1,759 $2,376 $2,964
Less additional contribution to ESOP ............... -(a) 22 18
Less dividends on preferred stock .................. 58(a) - -
------ ------ ------
Adjusted income applicable to common shares before
change in accounting principle ................... $1,701 $2,354 $2,946
Cumulative effect of change in accounting principle (680) - -
------ ------ ------
Adjusted net income applicable to common shares .... $1,021 $2,354 $2,946
====== ====== ======
Weighted average number of primary common shares ... 400,873 399,428 398,855
Increment to assumed exercise of stock options to
reflect maximum dilutive effect .................. 392 1,362 561
Assumed conversion of preferred stock .............. -(a) 9,286 8,817
------- ------- -------
Total ........................................ 401,265 410,076 408,233
======= ======= =======
Fully diluted earnings per common share
Adjusted income before change in accounting
principle(s) ................................... $ 4.24 $ 5.74 $ 7.22
Cumulative effect of change in accounting principle. (1.70) - -
------ ------ ------
Net income per common share ........................ $ 2.54 $ 5.74 $ 7.22
====== ====== ======
This Exhibit is included to show that dilution of earnings per common share is
immaterial and therefore not necessary for presentation on the Consolidated
Statement of Income.
(a) For the year ended December 31, 1994, the incremental shares attributable
to the assumed conversion of preferred stock were not considered for the
fully diluted earnings per share calculation due to their antidilutive
effect.
- --------------------------------------------------------------------------------
Mobil - 28 -
<PAGE>
- ------------------------------------------------------------------------------
Exhibit 12
MOBIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except for ratio amount)
- ------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
Income Before Change in
Accounting Principle(s) ........ $1,308 $2,084 $1,759 $2,376 $2,964
Add:
Income taxes ................... 1,567 1,931 1,919 2,015 3,147
Portion of rents representative
of interest factor ........... 319 339 340 368 376
Interest and amortization
of debt discount expense ..... 612 529(a) 461 467 455
Earnings (greater) less
than dividends from
equity affiliates ............ 36 265 (40) (51) 153
------ ------ ------ ------ ------
Income as Adjusted ............... $3,842 $5,148 $4,439 $5,175 $7,095
====== ====== ====== ====== ======
Fixed Charges:
Interest and amortization
of debt discount expense ..... $ 612 $ 529(a) $ 461 467 $ 455
Capitalized interest ........... 42 42 37 47 78
Portion of rents representative
of interest factor ........... 319 339 340 368 376
------ ------ ----- ------ ------
Total Fixed Charges .............. $ 973 $ 910 $ 838 $ 882 $ 909
====== ====== ===== ====== ======
Ratio of Earnings to Fixed Charges 3.9 5.7(a) 5.3 5.9 7.8
------ ------ ------ ------ ------
For the years ended December 31, 1992, 1993, 1994, 1995 and 1996, Fixed Charges
exclude $37 million, $31 million, $37 million, $28 million and $24 million,
respectively, of interest expense attributable to debt issued by the Mobil Oil
Corporation Employee Stock Ownership Plan Trust and guaranteed by Mobil.
(a) Excludes the favorable effect of $205 million of interest benefits from the
resolution of prior-period tax issues.
- -----------------------------------------------------------------------------
Mobil - 29 -
MOBIL The energy
to make a difference(TM)
MOBIL CORPORATION 1996
[Artwork FC]
1996 ANNUAL REPORT
<PAGE>
TABLE OF
CONTENTS
Letter to Shareholders 1
Mobil At a Glance 4
THE ENERGY TO
MAKE A DIFFERENCE
Partnerships 6
Growth 8
Expansion 10
Service 12
Opportunity 14
Technology 16
Commitment 17
FINANCIAL SECTION
Management Discussion
and Analysis 19
Consolidated Financial
Statements 31
Notes to Financial Statements 38
Reports of Management and
Independent Auditors 52
Supplementary Information 53
Shareholder Information 60
Directors and Officers 61
[Bar Chart - IFC]
AVERAGE
ANNUAL
RETURNS TO SHAREHOLDER
Mobil share-price appreciation
plus reinvested dividends
% as of year-end 1996
<TABLE>
<CAPTION>
FINANCIAL
HIGHLIGHTS
1995 1996 %Change
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (millions) $2,376 $2,964 25
Per common share (based on average shares outstanding) 5.87 7.38 26
- -----------------------------------------------------------------------------------------------------
Return on average shareholders' equity 13.5% 16.0% --
Return on average capital employed 10.9% 12.7% --
Income per dollar of revenue 3.2(cent) 3.6(cent) 13
Petroleum earnings per gallon sold 2.2(cent) 4.5(cent) 105
- -----------------------------------------------------------------------------------------------------
Revenues (millions) $75,370 $81,503 8
Total assets, year-end (millions) 42,138 46,408 10
Investment spending (millions) 4,525 7,019 55
Shareholders' equity, year-end (millions) 17,951 19,072 6
Per common share (based on shares outstanding at year-end) 44.71 47.62 7
- -----------------------------------------------------------------------------------------------------
Common shares outstanding, year-end (thousands) 394,560 393,794 --
Shareholders of common stock, year-end 188,800 185,600 (2)
Number of employees, year-end 50,400 43,000 (15)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
MOBIL: THE ENERGY TO MAKE A DIFFERENCE
[Photograph of Lucio A. Noto]
I am pleased to report that Mobil achieved record operating earnings in 1996 and
made tangible progress toward our vision of becoming a great, global company.
Mobil people everywhere created "the energy to make a difference," and helped us
meet some of our 1998 goals a full two years early.
Operating income rose to $3.1 billion, up 9% from 1995. Higher oil and
natural gas prices in our upstream businesses helped substantially, although
this was partially offset by lower margins downstream and in chemical. We also
benefited from higher production and sales volumes and lower operating expenses,
which declined 10% on a per-barrel basis. On the other hand, we were
disappointed with a higher level of unscheduled downtime at some of our
manufacturing facilities.
Our 1998 goals had called for more than $3 billion in earnings, a 12% or
better return on capital employed, and a share price of $125. Our income was
essentially at that level, our return on an operating basis rose to 13.2%, and
our stock price topped $130 in January 1997. However, we didn't do as well as we
would have liked versus our competition.
We raised our spending during 1996 to take advantage of a number of
world-class growth opportunities. Investment spending was $7.0 billion, up from
$4.5 billion in 1995. In 1997 we plan to spend $5.4 billion.
Our investments included acquiring 25% interest in the giant Tengiz oil
field in Kazakstan in Central Asia, one of the world's great producing
provinces. We also acquired Ampolex, an Australian oil and gas company, gaining
attractive production and development potential, especially in the Asia-Pacific
region.
We funded a substantial portion of our spending by redeploying $1.8
billion realized from the sale of noncore assets in land development, chemicals,
mining, gas processing and some North American production. Since 1985, this
strategy has yielded $13 billion for redeployment.
Production rose 3% last year despite those divestments, and we replaced
133% of our production with new oil and natural gas reserves, including
purchases and sales. Total resources, which include proven and potential
reserves, rose 28%, a promising note for the future. Marketing and refining
volumes rose nearly 5%, while in Mobil Chemical, volumes in our continuing
businesses declined 3% due to lower aromatics production.
We also better aligned Mobil's structure to become more responsive to our
markets by reorganizing into 11 business groups. And we designated Mobil
Technology Company as a business group since our technology represents a
critical competitive advantage for Mobil.
1
<PAGE>
LETTER TO SHAREHOLDERS
All these achievements were accompanied by further improvement in our
safety performance. I am proud of these efforts, and we intend additional
progress.
STOCK SPLIT, DIVIDENDS RAISED TO ENHANCE SHAREHOLDER RETURN
Our shareholders received a 13% return during 1996. This was below the
market performance of companies whose business mix brought greater benefit from
the higher energy prices. However, our 5- and 10-year average annual returns of
17% still outpace those of our peers and the market.
WE APPROACH THE NEW MILLENNIUM WITH THE FINEST INVENTORY OF DEVELOPMENT
PROSPECTS IN OUR HISTORY
In January 1997 Mobil proposed a two-for-one stock split and declared a
six-cents-per-share, or 8% annualized, dividend increase. This will be the 10th
straight year of higher dividends, reflecting our strong balance sheet and
confidence in the future of our business.
MOBIL'S STRATEGIES FOCUS ON PERFORMANCE, GROWTH AND PEOPLE
PERFORMANCE--We're maximizing results from existing assets by reducing costs and
improving efficiency. Even as savings grow from such past initiatives as the
staff redesign project, we're developing new ones. For example, by working more
closely with fewer vendors, we plan to reduce future procurement costs.
Cumulative annual net cost savings since 1991 now stand at $1.3 billion, even
after absorbing higher expenses from inflation and volume growth.
We're also seizing opportunities for both efficiency and growth by forming
alliances with other companies. Two are being implemented--with British
Petroleum in European marketing and refining, and with PanEnergy in North
American energy marketing. We plan a third, with Shell, to optimize heavy-oil
production in California.
GROWTH--We intend to grow production by an average of 3.5% annually, to more
than replace production with new reserves, to expand our core chemicals business
and to profitably grow our marketing and refining business.
EXPLORATION & PRODUCING: Among our "megaprojects," oil production should
begin this year from the Hibernia project in Canada, and we've asked for
government approval to develop the nearby Terra Nova and Sable projects.
Our West African reserves have tripled since 1990, with production rising
rapidly from Nigeria and Equatorial Guinea, where we recently streamed a
fast-track development project.
We also expect substantial increases from Tengiz through 2010 with
completion of an export pipeline.
In Venezuela, we plan to begin heavy-oil production in 1999, and hope for
new discoveries on recently acquired exploration blocks. In Peru and Argentina,
we're building a strategic position in natural gas.
In Qatar, we expect rising liquefied natural gas output from Qatargas in
the near term and from the startup of the Ras Laffan project in 1999.
2
<PAGE>
MOBIL CHEMICAL: We're growing our core aromatics and olefins businesses
while focusing on becoming the industry's low-cost producer.
Among major projects, the Yanpet facility in Saudi Arabia will double in
size by 2000, an expansion is under way at the Beaumont, Texas, plant, and an
expansion streamed at the Chalmette, Louisiana, plant. We've also agreed to
study production of ethylene derivatives in Venezuela.
MARKETING & REFINING: We're investing for growth in the Asia-Pacific
region, Latin America and Africa, while focusing on efficiency and selective
growth in mature markets such as the U.S. and Europe. Meanwhile, we're pursuing
our goal of becoming the world's number-one lubricants company.
In Asia, we're upgrading fuels refineries, and a lubes refinery is under
construction in Singapore. A blending plant recently streamed in China, where a
second plant and an import terminal for liquefied petroleum gas are under
development.
In Latin America, we're focusing on the fuels and lubes markets. In Peru,
we acquired 5% interest in a refinery, and 100% interest in a lubes blending
plant. And in Africa, we acquired Exxon's downstream assets in Kenya.
In the U.S., we're rolling out new convenience stores, new service
initiatives and new technology.
PEOPLE--The contributions of our people are enabling Mobil to undertake an
ongoing transformation that is better positioning us for growth. We are proud of
our people, and are taking steps to assure that we continue providing them
challenging work and rewarding them for performance.
A diverse, inclusive and productive workforce is essential to our future.
Early in 1996 we heightened our focus on inclusion and diversity, and tied
management compensation to progress in these areas. This effort has the full
commitment of our board and senior management, as well as my own personal
attention.
NEW BOARD MEMBER ELECTED
We are pleased to welcome a new board member, Iain D.T. Vallance, chairman of
British Telecommunications, raising the number of directors to 15. Iain will
significantly enhance our perspective on international business development.
OUR FUTURE IS PROMISING
We began working several years ago toward becoming a great, global company.
Today, as a result, Mobil is more efficient, more responsive, and better
positioned for growth. In that respect, 1996 was a pivotal year for our company.
We can now see the Mobil of tomorrow taking shape--more profitable, a
recognized leader in all our businesses, with unprecedented opportunities for
long-term growth for our shareholders, better products and services for our
customers, and a challenging and inclusive environment for our employees.
/S/LUCIO A. NOTO
Lucio A. Noto
Chairman, President and Chief Executive Officer
3
<PAGE>
MOBIL AT A GLANCE
[Mobil Logo]
MOBIL CORPORATION
We are one of the world's preeminent companies, with energy and chemical
operations in more than 125 countries. Our 11 business groups in the upstream,
downstream and chemical areas are:
o North America Exploration & Producing
o North America Marketing & Refining
o Europe & Commonwealth of Independent States
o Asia/Pacific
o South America
o Africa & Middle East
o New Exploration & Producing Ventures &
Exploration
o Supply, Trading & Transportation
o Liquefied Natural Gas & Independent Power
Projects
o Mobil Chemical Company
o Mobil Technology Company
[Photograph]
EXPLORATION & PRODUCING
We find and produce crude oil and natural gas, manufacture liquefied natural
gas, and market all three. Our current production in North America, Europe,
Nigeria and Indonesia is being joined by new production from West Africa,
Eastern Canada, Central Asia, Qatar, the Asia-Pacific region, and South America.
We plan to grow production by an average of 3.5% annually, and to more than
replace production with new reserves.
4
<PAGE>
[Photograph]
MARKETING & REFINING
We process crude oil into fuels, lubricants and petrochemical feedstocks at 21
refineries in 13 nations, and market Mobil(R) products worldwide. We are
currently increasing our market share in such rapidly growing areas as the
Asia-Pacific region, Latin America and Africa, while achieving new efficiency
and seizing targeted growth opportunities in markets like the United States and
Europe. We are also pursuing the goal of becoming the world's number-one
lubricants company.
[Photograph]
MOBIL CHEMICAL
We manufacture and market basic petrochemicals and key derivatives that form the
building blocks of thousands of consumer products, such as plastic bags, milk
bottles, toys and synthetic lubricants. We are selectively growing our core
chemicals businesses: in particular, the manufacture of aromatics products such
as paraxylene, and ethylene derivatives such as polyethylene.
MOBIL(R) The Energy
to make a difference(TM)
The energy of Mobil's people made possible a number of landmark achievements in
1996. This year's report highlights only a few of the more prominent examples,
as Mobil people at work throughout the world describe how these accomplishments
were achieved, and what they mean for the future.
Our Mobil: The energy to make a difference message captures the spirit of
our drive to become a great, global company. In this quest, Mobil is dedicated
to building trust and respect through innovative people, products and
partnerships. The company is also committed to achieving a better future for our
stakeholders.
5
<PAGE>
PARTNERSHIPS
[Photograph]
PARTNERSHIPS are providing Mobil with new ways to operate successfully in
today's fiercely competitive markets. During 1996, Mobil entered into alliances
with British Petroleum (BP) to strengthen marketing and refining in Europe, and
with PanEnergy Corporation to enhance North American energy marketing efforts.
Both show early signs of success.
"In Europe, Mobil did not have sufficient scale. Despite highly efficient
regional networks, our retail gasoline market share was only 5%," explained Hal
Cramer, operating officer, Europe & Commonwealth of Independent States. "Now we
and BP together have 12% of the market. We are a pacesetter and can go after
further growth."
Prospects are equally bright in lubricants, where Mobil's 10% market share
rose to 18% for the joint venture. "This makes us the market leader, and we also
see opportunities to grow our share and our profitability," said Jean-Louis
Schilansky, CEO, Mobil Europe Lubricants.
6
<PAGE>
MOBIL-PANENERGY EMPLOYEES
ARE GENERATING RISING SALES
VOLUMES IN THE BOOMING NAT-
URAL GAS AND ELECTRICITY TRAD-
ING MARKETS.
In addition, the merging of operations is going well. "We're finding that
the Mobil and BP people have more compatible business practices and more
commonality in their views of the market than we first thought. They recognize
the strength and potential of the new partnership," said Schilansky.
The alliance combines businesses with revenues of $20 billion and assets
of $5 billion. BP operates the fuels venture with 9,000 service stations
ultimately carrying BP colors and marketing Mobil(R) lubricants. Mobil operates
the lubricants venture, which offers three brands: Mobil(R), BP and Duckham's (a
BP brand in the U.K.). Mobil has 30% interest in the fuels venture and 51%
interest in the lubricants venture.
[BP-Mobil Logo]
A projected $400 million-$500 million in annual savings and other
synergies between the two companies will begin in 1997.
Reports are also encouraging from Mobil's alliance with PanEnergy, a major
natural gas transportation and marketing company. A new joint venture with
PanEnergy Trading and Marketing Services (PTMS) sells natural gas production in
the U.S. and Canada.
"The Mobil-PanEnergy combination provides immediate scale in an industry in
which being one of the biggest is virtually a prerequisite," said Tom Case,
Mobil Natural Gas executive vice president assigned to PTMS. "In December, total
gas moved exceeded the combined volumes of the old organizations for the first
time, and we expect future increases."
ALLIANCES FORMED WITH MAJOR PLAYERS IN EUROPE AND NORTH AMERICA WILL
LEVERAGE MOBIL'S STRENGTHS AND REDUCE COSTS
PTMS is North America's third-largest gas marketer, and also holds a firm
beachhead in the rapidly growing wholesale electricity trading
market--attractive because the U.S. and Canada consume three times as much
electricity as gas on an energy equivalent basis.
PTMS ranks 10th in wholesale electricity marketing, and volumes increased
eight-fold during 1996. Planned government deregulation will soon open market
access to industrial and retail consumers, thus creating another huge base of
potential customers.
"Electricity sales are progressing much faster than expected," said Lou
Allstadt, operating officer, North America Exploration & Producing. "And the
proposed merger of PanEnergy with Duke Power will make PTMS an even bigger
player." Duke, a North Carolina-based electric utility, ranks as the
second-largest electricity trader.
Industry reaction to the Mobil-PanEnergy alliance has been favorable.
"We've seen a wave of similar alliances since ours was announced," added
Allstadt. "The consensus is that Mobil got in early and did it right."
7
<PAGE>
GROWTH
[Photograph]
GROWTH in production by a company Mobil's size usually requires major
discoveries that take years of planning and assessment to develop. But during
1996, Mobil initiated production in Equatorial Guinea's Zafiro field only 18
months after drilling the discovery well, a landmark achievement.
"Early production really helps the economics, so we took the risk of doing
things in new ways to make it possible," said Art Green, general manager, Mobil
Equatorial Guinea.
At an unprecedented pace, Mobil drilled producing wells, installed subsea
wellheads and tied them back to a floating production system based on a
converted oil tanker.
The valves opened on August 25, and by year-end, production exceeded
37,000 barrels daily (Mobil has 75% interest). Two satellite fields also await
development, and production is expected to reach 80,000 barrels daily by 1998.
Success came despite an initial wildcat that turned up dry in 1994. But
Mobil's proprietary basin modeling and growing understanding of the geology
8
<PAGE>
[Photograph]
HUMAN MUSCLE AND
MOBIL TECHNOLOGY
YIELDED DEVELOPMENT
DRILLING SUCCESS AND
DISCOVERY OF TWO
SATELLITE OILFIELDS.
MOBIL DISPLAYS UNPARALLELED SPEED IN BRINGING MAJOR OFFSHORE OIL PRODUCTION
ONSTREAM IN EQUATORIAL GUINEA
[Map of Equatorial Guinea]
achieved a discovery with the second well in March 1995.
Fast-track development was always the goal, but a new approach was
essential to getting there. Mobil adopted a parallel process in which a small
interdisciplinary team worked in tandem instead of in cycles. "Team members
could better see how their work affected each other," said Green. "Things got
done faster. I can't say enough about the ingenuity of our people."
The team reduced risk by incorporating flexibility into its designs. The
production equipment accepts easy modification, and the tanker can be moved to
accommodate future outlying well locations.
Contractors were chosen for their ability to deliver quality work on time
and within budget and for their proximity to each other, so they could work
together to ensure compatibility of the many separate systems.
"It all worked," Green said. "Zafiro came onstream faster than any
similar-sized project in oil-industry history. And we also brought it in under
budget."
9
<PAGE>
EXPANSION
BOOMING WORLD DEMAND FOR LNG POSES A LANDMARK GROWTH OPPORTUNITY FOR MOBIL
DURING THE 21ST CENTURY
EXPANSION of Mobil's interests in the emerging liquefied natural gas (LNG)
business is a key to future growth. Long a market leader through participation
in Indonesia's massive Arun LNG project, Mobil is now pursuing an aggressive
global growth strategy. As a result, the company is favorably positioned to help
meet a projected doubling in international LNG demand by 2010.
"LNG is the highest-growth sector of the world natural gas business, and
we intend to be the market leader," said John Simpson, operating officer for
Liquefied Natural Gas & Independent Power Projects.
Indonesia has long been a major supplier, thanks largely to Arun, which
Mobil operates under a production-sharing contract. "Our experience there with
Pertamina in designing, building and operat-
[Photograph]
10
<PAGE>
ing LNG facilities places us among the few elite companies with world-class
capability," added Simpson.
With Arun now mature, Mobil is developing two satellite fields to feed the
LNG plant there. The company is also evaluating Indonesia's giant Natuna field
(Mobil acquired 26% interest in mid-1996). Natuna holds at least 46 trillion
cubic feet of recoverable gas, triple Arun's original reserves. Production may
begin as early as 2003 via an LNG project or a pipeline.
Meanwhile, LNG production has already begun in Qatar, site of the huge
North field just offshore. "With 380 trillion cubic feet of recoverable gas,
it's the largest field in the world, with twice the reserves of the entire U.S.
So it represents an enormous opportunity for Qatar and for Mobil," stated Ken
Hull, president and general manager of Mobil Oil Qatar.
Shipments began in December from Qatargas, in which Mobil holds 10%
interest, following completion of the first two liquefaction "trains." A third
train entering service in 1998 will boost annual production to six million
metric tons.
"The first two trains were below budget and ahead of schedule, a result of
our Indonesian experience," said Dave Kulig, Qatargas venture manager.
WHY IS LNG SO ATTRACTIVE?
IT BRINGS CLEAN-BURNING METHANE (NATURAL GAS) TO AREAS THAT CANNOT BE SERVED
ECONOMICALLY BY PIPELINES. WHEN CHILLED TO MINUS 160 DEGREES CELSIUS, METHANE
CONDENSES INTO A LIQUID (LNG) THAT TAKES UP ONLY 1/600TH OF ITS FORMER VOLUME.
AND THAT LIQUID CAN BE TRANSPORTED IN SPECIALLY INSULATED SHIPS.
Progress on the nearby Ras Laffan project included closure on $2.6 billion
in financing, beginning work on production and liquefaction facilities and
agreeing in principle to add several partners, which will reduce Mobil's current
30% interest to no less than 25%. Production will begin in 1999 and is expected
to reach at least 10 million metric tons annually.
Another potential LNG project could develop Australia's Gorgon field, site
of seven trillion cubic feet of reserves. Mobil acquired 14% interest as part of
the 1996 Ampolex acquisition and is studying various options for development.
[Map of Arabian Gulf]
[Caption of Photograph on Page 10]
LEFT: A TANKER LOADED QATAR'S FIRST LNG EXPORTS IN DECEMBER. VOLUMES ARE RISING
AS MOBIL AND ITS PARTNERS COMPLETE ADDITIONAL LIQUEFACTION FACILITIES ASSOCIATED
WITH THE WORLD'S LARGEST NATURAL GAS FIELD.
11
<PAGE>
SERVICE
Service is the key to earning customer loyalty and ensuring the success of
Mobil's retail gasoline marketing. During 1996, three innovations in management,
marketing and technology moved Mobil closer to "delighting every customer every
time," a goal delineated by Brian Baker, operating officer, North America
Marketing & Refining. The new initiatives join the Friendly Serve(SM) program,
introduced in the U.S. in 1995 and rolled out broadly in 1996.
Foremost of the new initiatives is Franchise 2000. "It redefines and
strengthens relations between Mobil and our franchisees," Baker said. That is
important because over 7,000 of Mobil's 7,700 U.S. outlets are independently
operated. Although several competitors have more sites, Mobil's higher sales per
unit usually enable the company to rank first or second in all its major
markets.
Franchise 2000 offers dealers expanded opportunities to grow their
businesses, as well as guidelines and training to help them develop
industry-best retailing practices that will earn customer loyalty.
"We benchmarked Franchise 2000 against the best franchises in the world,"
said Mike Roman, fuels franchise development manager, "and it puts us well in
front of the industry."
[Artwork]
Franchise 2000 features five core commitments to customers--quality
products; friendly, helpful people; speedy, reliable service; clean, attractive
facilities; and responsible environmental stewardship.
Mobil also accelerated rollout of new On The Run(SM) convenience stores
that include up to five separate but complementary businesses--gasoline, car
wash, convenience items, quick-service restaurant, and banking. Together, they
offer one-stop shopping convenience and maximize site profitability for Mobil
and dealers. By year-end, 147 were in operation, with 1,200 planned by 2001.
"Shoppers increasingly demand speed, convenience and fair prices, and
quality and variety as well," said Rob Kelly, manager of convenience store
marketing. "These were once contradictory. But our On The Run(SM) concept
responds with larger stores, an inviting atmosphere and a greater variety of
high-quality takeout foods in addition to traditional merchandise."
Store owners receive training and support in marketing, advertising,
back-office systems and operations. "Where we've achieved critical mass in
numbers of stores, On The Run(SM) is exceeding expectations," said Kelly. Mobil
will build additional stores in strategic market clusters.
Another new convenience is Speedpass(TM), an electronic system located in
the pump that transmits information to and from a window sticker or key ring
issued to the customer. It automatically activates the pump and charges
purchases to a credit card.
"Speedpass(TM) is a big hit," said Vince Betette, project team lead. "It's
the fastest and easiest payment method available in the industry today."
Following testing at 50 Mobil stations in St. Louis, Speedpass(TM) will debut
nationwide during 1997.
12
<PAGE>
MOBIL'S STELLAR U.S. RETAIL MARKETING NETWORK GAINS AN ENHANCED DEALER
RELATIONS PROGRAM AND OFFERS NEW CONVENIENCE TO CUSTOMERS
[Photograph]
A GROWING NUMBER OF ATTRACTIVE ON THE RUN(SM) STORES APPEAL TO BUSY CONSUMERS BY
OFFERING ONE-STOP SHOPPING FOR CONVENIENCE ITEMS, TAKEOUT FOODS, GASOLINE, A CAR
WASH AND BANKING SERVICES.
13
<PAGE>
OPPORTUNITY
OPPORTUNITY can knock twice. Twenty years after exiting Venezuela due to
nationalization, Mobil is back. "We've returned because Venezuela offers massive
reserves, a strategic location and new access to its energy markets," said Don
Voelte, operating officer, New Exploration & Producing Ventures & Exploration.
MOBIL REENTERS VENEZUELA IN EXPLORATION AND HEAVY-OIL PRODUCTION AND REFINING,
AND EARNS SELECTION AS A PARTNER IN A MAJOR PETROCHEMICALS PLANT
The first step came in 1995, with acquisition of 50% interest in C.A.
Nacional de Grasas Lubricantes, Venezuela's largest private lubricants
manufacturer.
Then in 1996, a Mobil partnership won the La Ceiba exploration block with
a bid of $104 million (Mobil has 50% interest). "We believe La Ceiba holds at
least 400 million barrels of recoverable oil. An earlier discovery by the
national oil company, PDVSA, was never developed, and a shipping port is only
five miles away," said Travis Crouch, general manager, Mobil Exploration &
Development Venezuela.
Mobil's stake grew when the Ampolex acquisition brought with it the
Quiamare block, which already produces 3,000 net barrels of oil per day.
[Photograph]
Next came proposed entry into a $2.5 billion venture to extract and
upgrade 120,000 barrels per day of heavy crude oil in partnership with
PDVSA-affiliate Lagoven and Germany's Veba Oel AG. Mobil would have 42% interest
in the Venezuelan operations. After upgrading, most of the oil would go to
Mobil's Chalmette, Louisiana, refinery, with Veba's share going to Germany.
Lagoven would also acquire 50% interest in the Chalmette refinery.
"We would gain 600 million barrels of recoverable oil that would provide
income for 35 years," said Ray Kruep, manager for business development,
manufacturing and logistics. Chalmette would receive 50,000 barrels per day by
1999, and double that in 2002.
[Map of Northwestern South America]
14
<PAGE>
[Photograph]
MOBIL GAINS ACCESS TO 600 MILLION BARRELS OF HEAVY-OIL RESERVES IN VENEZUELA'S
ORINOCO OIL BELT, WITHIN EASY SHIPPING DISTANCE OF THE COMPANY'S CHALMETTE,
LOUISIANA, REFINERY.
Meanwhile, Mobil Chemical was named a 50-50 partner to evaluate the
feasibility of building a $1.5 billion petrochemicals facility with
PDVSA-subsidiary Pequiven. The plant would manufacture 910,000 tons of
polyethylene and ethylene glycol annually, with start-up in 2000.
"We competed against 25 other companies for this project," recalled Joe
McGregor, vice president of new business development, Mobil Chemical. "We won
due to our technical expertise and the responsiveness and openness of our
people."
[Map of Asia-Pacific Region]
OPPORTUNITY IN THE ASIA-PACIFIC REGION
The Asia-Pacific region is booming, opening new opportunities even after a
century of operations that have made Mobil a leader in a number of markets.
"We are expanding in China and Malaysia, and entering emerging markets
that are being deregulated," said Steve Pryor, operating officer for the region.
"We're also reducing costs and improving asset utilization in mature markets
like Japan and Australia, where competitive pressures have intensified."
Refineries in Japan, Singapore and Australia are being upgraded, and a new
lubricants hydrocracker under construction in Singapore will make Mobil the
region's low-cost supplier.
In China, Mobil is already the leading lubes importer, and will start up
two new blending plants in 1997. The company intends to become a leader in
China's liquefied petroleum gas (LPG) market by developing large-scale import
terminal and inland distribution networks.
Mobil is also establishing joint ventures in lubricants and LPG that will
serve as a platform for future growth on the Indian subcontinent.
In exploration and producing, the Ampolex acquisition added attractive
prospects in Australia's North West Shelf and in Papua New Guinea.
"Mobil is well positioned to serve the region's growing needs across the
energy chain--from oil and gas to refined products to power," said Pryor.
15
<PAGE>
TECHNOLOGY
EXPERTISE DEVELOPED BY MOBIL TECHNOLOGY COMPANY HELPS DRIVE PROGRESS IN ALL
MOBIL BUSINESS UNITS
Technology, always a core strength for Mobil, became a more integral part of
company business in 1996 with designation of Mobil Technology Company (MTC) as a
separate business group. MTC supports Mobil's other groups by contributing
innovations that enhance their short-term results, while also exploring
potential breakthroughs that can drive long-term growth.
"We intend to remain a pacesetter in bringing technology's value to the
bottom line," said Mike Ramage, president of MTC and Mobil's chief technology
officer. "Our job is to continue pushing the limit to help differentiate Mobil's
performance from that of the competition."
[Molecule Artwork]
A KEY MOLECULE IN THE NEW MOBIL 1(R) 0W-40 LUBRICANT.
For example, in Mobil's upstream businesses, horizontal and extended-reach
drilling is adding oil and natural gas reserves while reducing costs.
In Nigeria, Mobil drilled horizontal wells in the declining Ubit field to
tap new reservoirs identified by advanced 3-D seismic imaging and other
techniques. The results were a 400-million-barrel increase in oil reserves and
significantly higher production.
And in Germany, Mobil drilled the world's longest, deepest fractured
horizontal well into a gas reservoir three miles beneath the surface. To ensure
sufficient gas flow, the company fractured the hard-as-marble rock along the
well's path. Mobil technology thus transformed previously uneconomic reserves
into an indigenous supply of gas for Germany.
Downstream, Mobil extended its leadership in synthetic lubricants by
introducing Mobil 1(R) 0W-40 engine oil, a new high-efficiency, high-performance
lubricant for virtually any engine application.
The company also completed a five-year, million-mile test of a BMW
automobile that ran on Mobil 1(R) oil and Mobil(R) super unleaded gasoline.
Later inspections found almost no engine wear. In addition, in an exclusive
partnership formed during 1996, Porsche began filling all its new cars with
Mobil 1(R) synthetic lubricant.
Mobil's many technological feats are part of industry legend--from
building giant concrete production platforms in the North Sea to developing
unique catalysts that revolutionized the refining industry.
"We intend to develop even higher capabilities in the future, then put
them into the hands of Mobil people in the field so they can do their jobs
better," said Ramage. "That's how technology is sharpening Mobil's competitive
advantage."
16
<PAGE>
COMMITMENT
MOBIL'S ENVIRONMENTAL, HEALTH AND SAFETY PERFORMANCE ACHIEVES MILESTONES AS A
BROAD NEW POLICY AIMS FOR FURTHER IMPROVEMENT
Commitment to a goal can achieve wonders. Day after day, as cranes lifted
process equipment into place and sparks flew from welders' torches, the more
than 1,400 workers at the Singapore refinery's lubricants base stock project
were building a vital new facility, while also working toward a key safety
milestone.
They exceeded two million hours worked without a lost-time injury during
1996, a banner achievement for such a major industrial construction project.
In Japan, Mobil's marketing and refining operations completed the entire
year, almost three million hours worked, without a lost-time injury. Elsewhere,
dozens of other Mobil units throughout the world recorded their own safety
milestones.
[Artwork]
Overall, Mobil employees continued a three-year-long reduction in days
away from work due to injuries. The decline now stands at more than 35%.
"In addition to these individual achievements, we took steps to reinforce
our culture of operating safely and practicing sound environmental stewardship,"
said Bill Dalgetty, general manager, Environmental, Health & Safety (EHS).
Among its environmental actions, Mobil put into service the Raven, its
second double-hulled very large crude carrier. Such vessels reduce the risk of
spills caused by accidental groundings or collisions. Two others are on order.
To heighten internal awareness, the company adopted a new policy entitled
Mobil's Commitment to the Environment, Health & Safety, which spells out
principles and commitments to ensure further improvement in Mobil's EHS
performance.
"The policy makes every Mobil employee and contractor responsible for
protecting the environment and the health and safety of our people, our
customers and the communities in which we work," said Dalgetty. "No one can
claim that these responsibilities are someone else's job."
The policy also serves as the foundation of the Mobil EHS Management
System, which establishes certain expectations of how company facilities
throughout the world will operate. The system provides employees with a better
understanding of how their actions affect EHS performance.
A comprehensive account of Mobil's overall record and achievements will be
communicated through a new report, Meeting our Commitments: Mobil's EHS
Performance Report. Copies will be available in May 1997 from Mobil's
Publications Department at 1-800-293-5796.
17
<PAGE>
FINANCIAL SECTION
FINANCIAL
HIGHLIGHTS
OPERATING EARNINGS EXCEEDED $3 BILLION FOR THE FIRST TIME, SURPASSING LAST
YEAR'S $2.8 BILLION RECORD HIGH.
E&P OPERATING EARNINGS OF OVER $2 BILLION WERE THE HIGHEST EVER, WORLDWIDE
PRODUCTION WAS UP 3%, AND NET RESERVE REPLACEMENT WAS 133% OF PRODUCTION.
M&R OPERATING EARNINGS OF OVER $1 BILLION BENEFITED FROM HIGHER PETROLEUM
PRODUCT SALES VOLUMES, UP 5%, A SIXTH CONSECUTIVE ANNUAL INCREASE.
CHEMICAL'S PROGRAMS TO REDUCE COST AND IMPROVE ASSET UTILIZATION HELPED
ACHIEVE A 13% RETURN ON CAPITAL EMPLOYED DESPITE DIFFICULT WORLDWIDE
PETROCHEMICAL BUSINESS CONDITIONS.
VOLUME GROWTH WAS ACHIEVED IN THE PETROLEUM SECTOR, WHILE PER-BARREL EXPENSES
WERE REDUCED BY ABOUT 10%.
ASSET SALES PROCEEDS OF $1.8 BILLION HAVE BEEN REDEPLOYED TOWARD MORE
PROFITABLE PROJECTS THAT FIT OUR LONG-TERM STRATEGIES.
CONTENTS
MANAGEMENT DISCUSSION AND ANALYSIS ........................19
CONSOLIDATED FINANCIAL STATEMENTS .........................31
NOTES TO FINANCIAL STATEMENTS .............................38
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS.............52
SUPPLEMENTARY INFORMATION .................................53
SHAREHOLDER INFORMATION ...................................60
18
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT DISCUSSION AND ANALYSIS
KEY FINANCIAL INDICATORS
(In millions, except per-share and ratio amounts)1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Earnings(1) $ 1,488(2) $ 2,224 $ 2,231(2) $ 2,846 $ 3,097
Special Items (180) (140) (472) (470) (133)
- ---------------------------------------------------------------------------------------------------------
Income, Excluding the Effects of Change in
Accounting Principle(s) $ 1,308(2) $ 2,084 $ 1,759(2) $ 2,376 $ 2,964
Per common share 3.13 5.07 4.28 5.87 7.38
Common Stock Dividends Per Share 3.20 3.25 3.40 3.625 3.925
- ---------------------------------------------------------------------------------------------------------
Capital and Exploration Expenditures $ 4,470 $ 3,656 $ 3,825 $ 4,268 $ 6,361
Cash Investments in Equity Companies 21 31 102 257 658
- ---------------------------------------------------------------------------------------------------------
Total Investment Spending $4,491 $ 3,687 $ 3,927 $ 4,525 $ 7,019
- ---------------------------------------------------------------------------------------------------------
Debt-to-capitalization Ratio 34% 32% 31% 27% 29%
Total Debt $ 8,520 $ 8,027 $ 7,727 $ 6,756 $ 7,875
- ---------------------------------------------------------------------------------------------------------
Shareholders' Equity $16,540 $17,237 $17,146 $17,951 $19,072
Per common share 41.06 42.74 42.61 44.71 47.62
- ---------------------------------------------------------------------------------------------------------
<FN>
(1) Operating earnings exclude the effects of special items and change in
accounting principle(s).
(2) Excludes unfavorable effects of adopting FAS 106 and 109 ($446 million) in
1992; Inventory lower of cost or market ($680 million) in 1994.
</FN>
</TABLE>
OUTLOOK
WHILE REVIEWING THE GOALS AND FINANCIAL RESULTS THAT FOLLOW, YOU MAY FIND IT
HELPFUL TO UNDERSTAND MOBIL'S OUTLOOK FOR THE PETROLEUM AND CHEMICAL INDUSTRIES.
ALTHOUGH MOBIL CANNOT BE CERTAIN THIS VIEW WILL PROVE ACCURATE, DESCRIBED BELOW
ARE BOTH KNOWN AND ANTICIPATED TRENDS RELEVANT TO PLANNING THE COMPANY'S FUTURE
OPERATIONS.
OVERALL, THE ENERGY BUSINESS WILL REMAIN HIGHLY COMPETITIVE, REQUIRING
CONTINUING, LARGE CAPITAL INVESTMENTS TO SUPPORT FUTURE OPERATIONS AND GROWTH,
WHICH WILL BE PREDOMINANTLY IN INTERNATIONAL AREAS. THE SIZE OF SUCH INVESTMENT
PROGRAMS AND THE LEAD TIME OFTEN NEEDED TO COMPLETE THEM NECESSITATES A
LONG-TERM VIEW.
Oil and natural gas will continue to satisfy much of the world's energy
needs well into the next century. Near term, Mobil expects continued volatility
in prices and related profitability, reflecting market forces, political
uncertainties and host-country regulation. With new production capacity
streaming and the return of Iraqi crude exports, oil prices are expected to
soften in 1997, and then rise gradually in the longer term, in line with
inflation. Supplies appear adequate to meet demand growth for the forseeable
future.
In this environment, Mobil balances its overall supply and demand and
manages its price risk by using different instruments on various markets.
Contracts on some of these markets require physical deliveries, whereas
contracts on others, such as forwards, futures, swaps and options do not require
settlement with physical volumes. All of these contracts are integral to
achieving Mobil's overall business strategies.
Mobil believes the industry will continue to grow in the international
upstream sector where investment opportunities are more available. Many
countries, previously closed to outside investment, are beginning to open to
companies like Mobil as those countries recognize the financial and technical
strength that such companies can provide. Mobil looks to these areas as the
basis of its program to increase its hydrocarbon reserves and to provide
continuing production and earnings growth. Mobil's program reflects a strategy
of assessing political, economic and geologic risks and managing these risks
through a geographically diverse portfolio of existing assets and new projects,
maximum use of nonrecourse financing, economic use of long-term leasing, staged
development, joint ventures, alliances and careful monitoring of cash exposure.
In the U.S., economic opportunities remain limited.
The marketing and refining industry will continue to face competitive market
pressures. More downstream alliances, such as Mobil-BP in Europe and proposed
competitor ventures in the U.S., can be expected. U.S. industry net margins
should show gradual improvement as moderate demand growth and efficiency
improvements will be partly offset by modest increases in capacity at existing
refineries. Refin-
19
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Chart]
INCOME
(Millions of dollars)
INCOME CONTINUED TO TREND UP-
ARD, REFLECTING THE STRENGTH-
ENING OF OUR CORE BUSINESSES
AND THE EFFECTS OF FAVORABLE
MARKET FACTORS.
[Bar Chart]
TOTAL RETURN TO SHAREHOLDERS
(Per $100 invested on December 31, 1991)*
*Mobil share price appreciation plus
reinvested dividends returned 17.2%
annually, on average, over the last
five years -- 2 percentage points above
the S&P 500.
OUTLOOK (concluded)
ing will also continue to require expenditures to meet environmental
regulations, including those pertaining to introduction of Phase II reformulated
gasolines by the end of the decade. Mobil's U.S. refining system is among the
best in the industry and is generally well positioned to meet these
requirements.
International marketing and refining will also face competitive pressures.
Marketing margins in most enclaves are, on average, expected to remain at about
the levels experienced in 1996. However, margins in the United Kingdom should
show some improvement over the depressed levels of 1996. Refining margins are
expected to improve somewhat over the long term as demand growth is expected to
exceed capacity additions.
The worldwide petrochemical business continues to be cyclical. Over the
longer term, polyethylene and paraxylene margins are expected to improve from
1996, as demand growth outpaces new capacity.
INVESTMENT PROGRAM
Mobil's planned 1997 investment program, including capital and exploration
expenditures and cash investments in equity companies, is $5.4 billion. Spending
this year will continue to be focused in international areas
(International--75%; U.S.--25%), where opportunities to find and develop
resources are the greatest and product demand growth is the highest. The 1997
spending program is also consistent with Mobil's strategy to grow the upstream
sector as a share of its overall asset base. The company will continue to
monitor its business environment and remain flexible to adjust its plans as
attractive opportunities arise or economic and political conditions warrant.
Mobil's debt-to-capitalization ratio rose from 27% to 29% in 1996, reflecting
the financing of the Ampolex and Tengiz acquisitions. Mobil's primary focus for
all business segments is to realize the greatest value from its existing assets,
to grow selected businesses and to provide superior returns to shareholders.
RESTRUCTURINGS
In 1996, Mobil and The British Petroleum Company p.l.c. (BP) formed a strategic
alliance by combining their European operations in the refining and marketing of
fuels and lubricants. This program is designed to enhance the companies'
positions in numerous national markets and product sectors and to provide a
strong basis for future profit growth. The alliance is expected to produce
efficiencies through sharing costs, eliminating duplication, and achieving
economies of scale.
The Mobil-BP alliance will result in the elimination of approximately 2,700
positions from the combined work forces of the two companies, the
rationalization of certain marketing assets, and the disposal of surplus
facilities. The alliance, which is being implemented on a country-by-country
basis, should be essentially completed by midyear 1997. In 1996, Mobil recorded
restructuring charges of $184 million ($145 million after tax), primarily for
separation costs related to work force reductions and facilities closing costs.
Cash outlays associated with these charges will be made throughout 1997 and
1998. Additionally, about $140 million ($110 million after tax) in charges are
expected to be incurred during 1997-1998 for one-time implementation costs,
primarily for reimaging of retail outlets and for systems implementation. Annual
benefits from the combined operations are expected to be in the range of
$400-$500 million before tax, and should be fully achieved by year-end 1998.
During 1995 and 1996, Mobil implemented five major restructuring programs
affecting worldwide staff support services, U.S. upstream and downstream
businesses, and European refining and lubricant blending operations. These and
other smaller programs resulted in the closure of certain facilities and the
elimination of about 7,000 positions, approximately half in 1995 and half in
1996. During 1995, the company established restructuring provisions of $911
million ($590 million after tax), primarily to cover the cost of employee
separation benefits and the closure of certain facilities. Of this amount, $671
million represented forecast cash expenditures. As of December 31, 1996,
cumulative cash outlays for these restructuring provisions totaled $452 million.
The remainder is expected to be spent by midyear 1997. In addition to these
restructuring provisions, implementation costs for these programs totaled about
$170 million ($125 million after tax) through the end of 1996. All of the
programs required to support the $1.3 billion reduction in costs announced over
the past few years were in place by the end of 1996.
See Note 2 to Financial Statements on page 39 for further details of these
restructuring programs.
20
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Chart]
ANNUAL DIVIDENDS
(Per share of common stock, in dollars)
DIVIDEND PAYMENTS INCREASED
FOR THE NINTH CONSECUTIVE
YEAR.
FINANCIAL RESULTS
A DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL AND OPERATING PERFORMANCE
APPEARS ON THIS PAGE. MOBIL'S BUSINESS SEGMENTS ARE SEPARATELY REVIEWED ON PAGES
22-27. WHILE READING THESE DISCUSSIONS, YOU MAY FIND IT HELPFUL TO REFER TO
PAGES 30-51 FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND COMMENTARY, AND TO
PAGES 53-59 FOR SUPPLEMENTARY INFORMATION.
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS
- --------------------------------------------------------------------------------
NET INCOME (In millions, except per-share amounts) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Petroleum Operations
Exploration & Producing $1,076 $845 $2,109
Marketing & Refining 888 673 913
- --------------------------------------------------------------------------------
Total Petroleum 1,964 1,518 3,022
Chemical 102 1,164 306
- --------------------------------------------------------------------------------
Segment Earnings 2,066 2,682 3,328
Corporate and Other (98) (11) (122)
Net Financing Expense (209) (295) (242)
- --------------------------------------------------------------------------------
Income Before Change in Accounting Principle 1,759 2,376 2,964
Cumulative Effect of Change in Accounting Principle (680) -- --
- --------------------------------------------------------------------------------
Net Income $1,079 $2,376 $2,964
Per common share 2.57 5.87 7.38
- --------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED NET INCOME of $2,964 million in 1996 was $588 million higher than
1995. Charges for special items reduced net income by $133 million, primarily
due to restructuring provisions for the Mobil-BP alliance and the write-down of
an offshore Gulf of Mexico property, partly offset by gains on asset sales.
EXPLORATION & PRODUCING earnings improved significantly, reflecting higher
prices for crude oil and natural gas, as well as lower producing expenses and
lower capital recovery charges. Additionally, results were favorably impacted by
gains on asset sales and a lower level of charges for FAS 121 asset impairments
and restructurings in 1996. MARKETING & REFINING income was higher in 1996, as
increases in worldwide petroleum product sales, which were up 5%, and a lower
level of restructuring charges more than offset a higher level of refinery
downtime and lower overall margins. Operating results were adversely affected by
extremely competitive market conditions in many of the areas where Mobil does
business. CHEMICAL earnings were lower, reflecting significantly lower
petrochemicals margins, the absence of income from divested businesses and the
expiration of certain tax benefits. Additionally, last year's results included
the gain on the sale of the Plastics Division.
Consolidated net income in 1995 of $2,376 million was $617 million higher
than in 1994, excluding a $680 million noncash charge for a change in accounting
principle. The earnings improvement primarily reflected excellent operating
performance and initiatives throughout the company that reduced costs and
increased sales volumes.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OPERATING EARNINGS (In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Earnings $2,231 $2,846 $3,097
Memo:Special Items (472) (470) (133)
- --------------------------------------------------------------------------------
</TABLE>
OPERATING EARNINGS of $3.1 billion were very near the company's 1998 goal of
$3.2 billion, two years ahead of plan, and its 1996 operating return on capital
employed of 13.2% exceeded the 12% target. Mobil's continued growth in earnings
in 1996 was due to overall favorable industry fundamentals, volume growth in
petroleum operations, and initiatives-driven expense reductions.
Operating earnings, which exclude special items and the effect of any change
in accounting principle, were $3,097 million in 1996, exceeding last year's
record high $2,846 million. Operating earnings in 1994 were $2,231 million.
Special items decreased net income in 1996 by $133 million, compared with
decreases of $470 million in 1995 and $472 million in 1994. Special items
represent the earnings effects from events or circumstances not attributable to
Mobil's current operations and are more fully described in the business segment
discussions that follow.
Graphs, charts and associated captions on pages 18-51 are not a part of the
Consolidated Financial Statements and Notes thereto.
21
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Chart]
UPSTREAM EARNINGS
(Millions of dollars)
RECORD UPSTREAM EARNINGS RE-
FLECTED HIGHER OIL AND GAS
PRICES AND LOWER EXPENSES.
[Bar Chart]
NET PRODUCTION
(Thousands of barrels daily
of oil equivalent)
INTERNATIONAL VOLUME GROWTH
IS DUE TO THE IMPACT OF CAPITAL
PROGRAMS IN WEST AFRICA, PLUS
THE AMPOLEX AND TENGIZ
ACQUISITIONS. U.S. VOLUMES FELL
DUE TO NATURAL FIELD DECLINES
AND ASSET SALES.
PETROLEUM OPERATIONS
UPSTREAM-EXPLORATION & PRODUCING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXPLORATION & PRODUCING SEGMENT FINANCIAL INDICATORS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Income (Loss) $ 125 $ (107) $ 737
International Income 951 952 1,372
- --------------------------------------------------------------------------------
Total Upstream Net Income $ 1,076 $ 845 $ 2,109
- --------------------------------------------------------------------------------
Revenues(1) $10,193 $11,081 $12,841
- --------------------------------------------------------------------------------
Assets $14,116 $14,393 $18,279
- --------------------------------------------------------------------------------
Capital Expenditures $ 1,642 $ 2,247 $ 3,914
Exploration Expenses 516 427 512
Cash Investments in Equity Companies 80 213 520
- --------------------------------------------------------------------------------
Total Investment Spending $ 2,238 $ 2,887 $ 4,946
- --------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>
MOBIL'S PRIMARY UPSTREAM GOALS ARE TO GROW LONG-TERM PRODUCTION, RESERVES AND
EARNINGS WHILE ENHANCING ITS CORE ASSET BASE THROUGH SELECTIVE INVESTMENT,
EFFICIENT DEPLETION AND MANAGED DIVESTITURE. Earnings exceeded $2 billion on the
strength of favorable fundamentals and lower expenses.
UPSTREAM net income of $2,109 million was $1,264 million higher than in 1995.
Operating earnings of $2,059 million (U.S., $694 million; International, $1,365
million; refer to tables on page 23) increased $662 million, or 47%, due to
higher worldwide crude oil and natural gas prices, lower operating expenses and
lower capital recovery charges.
In 1996, Mobil produced 854,000 barrels per day of liquids and 4,587 million
cubic feet per day of natural gas. Worldwide production increased the equivalent
of 49,000 barrels per day from 1995 due to the success of capital programs in
West Africa and the acquisitions of Ampolex and a 25% interest in the Tengiz
field, offset somewhat by natural field declines and asset sales, primarily in
North America. Mobil replaced 133% of its production with new reserves, compared
with 105% in 1995.
In 1995, net income of $845 million was $231 million lower than in 1994
mainly due to FAS 121 impairments of $487 million. Operating earnings of $1,397
million increased $73 million, due to higher crude oil prices, lower capital
recovery charges and lower exploration expenses, partly offset by lower natural
gas prices and production volumes.
Revenues in 1996 were up 16% as the effects of higher crude oil and natural
gas prices and higher international volumes were only partially offset by the
effects of lower crude oil production in the United States. In 1995, revenues
were up 9% from 1994 as higher crude oil prices and higher natural gas sales
volumes were partially offset by lower crude oil sales volumes and lower natural
gas prices in North America and the United Kingdom. Revenues include sales to
other segments of the company, which are eliminated in consolidated financial
information.
Investment spending in 1996 was $4.9 billion, compared with $2.9 billion in
1995. The increase was primarily due to the acquisitions of Ampolex and a 25%
equity interest in a joint venture that owns the Tengiz field. Mobil has paid
$0.5 billion as of December 31, 1996, for its Tengiz interest, and has recorded
its obligation for the remaining $0.6 billion. Planned investment spending for
1997 is $3.5 billion, and continues to be mainly in international areas where
opportunities are greatest.
First production from the Zafiro offshore complex in Equatorial Guinea began
in the third quarter of 1996. Natural gas production from the giant North field
in Qatar began in the fourth quarter, and the first LNG deliveries from the
Qatargas project were made in January 1997. Work continued in Canada on the
Hibernia production facilities, with production start-up scheduled for late
1997. In Nigeria, the Oso NGL construction project continued with streaming
expected in 1998. First deliveries of LNG from the Ras Laffan project are
scheduled for 1999. In addition, development is under way on new fields in South
America, the North Sea, and Asia-Pacific.
In 1996, Mobil drilled 44 wildcat exploration wells, resulting in 15
discoveries. Exploration activities continued in 34 countries on 6 continents.
Efforts to replace reserves in established areas continue through participation
in new producing ventures and acquisitions.
22
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
PETROLEUM OPERATIONS (continued)
[Bar Chart]
CRUDE OIL
AVERAGE SALES PRICE
(Dollars per barrel)
HIGHER WORLDWIDE CRUDE
PRICES WERE A MAJOR FACTOR IN
THIS YEAR'S EARNINGS INCREASE.
[Bar Chart]
NATURAL GAS
AVERAGE SALES PRICE
(Dollars per thousand cubic feet)
HIGHER NATURAL GAS PRICES
ALSO CONTRIBUTED TO THIS YEAR'S
EARNINGS INCREASE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
U.S. EXPLORATION & PRODUCING EARNINGS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Income (Loss) $125 $(107) $ 737
Special Items in Income
Asset sales and write-downs (181) (22) 119
Asset impairment (FAS 121) -- (366) (69)
Restructuring provisions -- (51) (7)
- --------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $306 $332 $694
- --------------------------------------------------------------------------------
</TABLE>
U.S. UPSTREAM operating earnings of $694 million in 1996 were $362 million
higher than 1995, mainly due to higher prices for crude oil and natural gas.
Lower producing expenses and decreased capital recovery charges largely offset
the impacts of lower production volumes, which resulted primarily from natural
field declines and asset disposals. Opportunity losses on forward hydrocarbon
sales slightly lessened the favorable impact of the higher prices. The weakening
of heavy crude prices relative to prices of light crudes somewhat reduced the
benefits from higher crude oil prices. Operating earnings increased $26 million
in 1995 from 1994 mainly due to higher crude oil prices, lower exploration
expenses and reduced capital recovery charges, largely offset by lower natural
gas prices and lower production volumes.
Mobil's average U.S. crude oil price per barrel of $17.40 increased $2.88
from 1995 due to strong demand and political uncertainties in the Middle East.
In 1996, average U.S. natural gas prices per thousand cubic feet rose $.76 to
$2.17, reflecting higher weather-related demand and low inventories. Natural gas
prices have been restated to reflect the wellhead price.
Special items in 1996 included gains on asset sales, a FAS 121 write-down of
a Gulf of Mexico property, and additional charges for restructuring. Income in
1995 included losses on asset sales, FAS 121 impairments and charges for major
restructuring initiatives. Income in 1994 included charges for asset write-downs
and losses on asset sales.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INTERNATIONAL EXPLORATION & PRODUCING EARNINGS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International Income $ 951 $ 952 $1,372
Special Items in Income
Asset sales and write-downs (58) 23 12
Restructuring provisions (9) (41) (5)
Asset impairment (FAS 121) -- (121) --
Tax rate changes and other items -- 26 --
- --------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $1,018 $1,065 $1,365
- --------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL UPSTREAM operating earnings of $1,365 million were $300 million
higher than 1995, principally due to higher crude oil and natural gas prices.
Increased production volumes also contributed to higher earnings. These factors
were slightly offset by higher exploration expenses. Operating earnings in 1995
were $47 million higher than 1994, reflecting higher prices for liquids and
Indonesian LNG, which more than offset higher operating expenses in new growth
areas, lower production volumes and lower natural gas prices in the U.K. and
Canada. Exploration expenses were also lower in 1995 than in 1994.
Mobil's average international crude oil price per barrel rose $3.87 to
$20.81, reflecting strong global demand and political uncertainties in the
Middle East. International natural gas prices, which tend to follow the movement
of crude oil prices on a lagged basis, also increased.
Production increased by 8% in 1996 due to additional volumes from Nigeria,
reflecting the success of our capital program, and the acquisitions of Ampolex
and a 25% interest in a joint venture that owns the Tengiz field. Additionally,
production commenced from the Zafiro field in Equatorial Guinea late in the
year.
Special items in 1996 included gains on asset sales, partly offset by asset
write-downs and a restructuring charge. Income in 1995 included gains on asset
sales, charges for restructuring initiatives and FAS 121 impairments, and
benefits from tax adjustments. Income in 1994 included charges for asset
write-downs and for restructuring.
23
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
PETROLEUM OPERATIONS (continued)
[Bar Chart]
DOWNSTREAM EARNINGS
(Millions of dollars)
NET INCOME IMPROVED PRIMARI-
LY DUE TO HIGHER SALES VOL-
UMES AND LOWER SPECIAL
CHARGES.
[Bar Chart]
REFINERY RUNS FOR MOBIL
(Thousands of barrels daily)
HIGHER U.S. RUNS REFLECTED CA-
PACITY EXPANSION. INTERNATION-
AL RUNS WERE ESSENTIALLY FLAT
AS THE IMPACT OF THE WOERTH
REFINERY SHUTDOWN WAS OFFSET
BY HIGHER RUNS IN SINGAPORE,
JAPAN AND THE MIDDLE EAST.
<TABLE>
<CAPTION>
DOWNSTREAM-MARKETING & REFINING
- --------------------------------------------------------------------------------
MARKETING & REFINING SEGMENT FINANCIAL INDICATORS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Income $ 241 $ 226 $ 407
International Income 647 447 506
- --------------------------------------------------------------------------------
Total Downstream Net Income $ 888 $ 673 $ 913
- --------------------------------------------------------------------------------
Revenues(1) $56,861 $62,362 $70,796
- --------------------------------------------------------------------------------
Assets $21,767 $22,463 $23,592
- --------------------------------------------------------------------------------
Capital Expenditures $ 1,297 $ 1,292 $ 1,554
Cash Investments in Equity Companies 13 41 131
- --------------------------------------------------------------------------------
Total Investment Spending $ 1,310 $ 1,333 $ 1,685
- --------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>
MOBIL'S PRIMARY DOWNSTREAM GOAL IS TO RAISE ITS RETURN ON CAPITAL EMPLOYED TO A
TOP-TIER COMPETITIVE LEVEL BY IMPROVING THE QUALITY OF A GOOD ASSET BASE,
STREAMLINING OPERATIONS, PURSUING ATTRACTIVE GROWTH OPPORTUNITIES, AND
SATISFYING ITS CUSTOMERS' NEEDS WHILE KEEPING PACE WITH ENVIRONMENTAL DEMANDS.
Operating results in 1996 were strong despite weak fundamentals in several of
Mobil's large markets.
DOWNSTREAM net income of $913 million in 1996 was $240 million higher than
in 1995. Excluding special items (refer to tables on page 25), operating
earnings of $1,051 million (U.S., $372 million; International, $679 million)
decreased $84 million. Lower margins in some of Mobil's key markets more than
offset the benefits from initiatives, including higher worldwide product sales
volumes.
The company recorded restructuring provisions of $145 million after tax
related to the formation of its alliance with British Petroleum in Europe.
Additionally, about $110 million after tax charges are expected to be incurred
during 1997-1998 for one-time implementation costs. The Mobil-BP alliance will
essentially be in place by midyear 1997. Continued implementation of other
business initiatives in all downstream businesses and further cost reductions
are expected to favorably impact 1997 results. To strengthen its competitive
position, Mobil is continuing to look closely at all of its assets and, if
needed, will further restructure operations or divest assets to maximize
long-term returns.
Net income in 1995 totaled $673 million, down $215 million from 1994.
Operating earnings in 1995 increased $171 million. Business initiatives
contributed to lower expenses, higher volumes, better refinery performance and
higher lube income, which more than offset lower worldwide industry refining
margins.
Downstream revenues increased 14% in 1996 versus 1995, and 10% in 1995
versus 1994, due to higher product sales volumes and prices.
Overall, investment spending was $1.7 billion in 1996, with continued focus
on international opportunities. Planned spending for 1997 is $1.3 billion, down
23% from 1996, with approximately 30% in the U.S. and 70% directed to
international areas.
Mobil continues to strengthen its position in areas with growth potential.
A lubricant blending plant was streamed late in 1996 in Tianjin, China (near
Beijing), the first 100% foreign-owned oil industry facility in China. A second
lube blending plant in Taicang, China (near Shanghai) is under construction and
scheduled to be streamed in 1997. The company's joint interest refinery in
Kawasaki, Japan, is scheduled to complete a project to upgrade lower-value
residual fuels to higher-value products in mid-1997, and a new cracking unit at
the Altona, Australia, refinery is scheduled to be streamed in the same time
frame. Mobil concluded a purchase of Exxon's fuels and lube assets in Kenya at
the end of 1996. A new lube base stock unit is scheduled to be streamed at the
Jurong, Singapore, refinery in mid-1997. In Latin America, the company increased
its presence in the fuels market with the purchase of a share of the La Pampilla
refinery in Peru. Mobil also enhanced its lubes position in Peru through the
purchase of Petrolubes' lubricant business. In Yanbu, Saudi Arabia, the Petromin
Lubricating Oil Refining Company, in which Mobil owns a 30% interest, is
scheduled to complete construction of a new, two-million-barrel-per-year
lubricant base stock refinery in the first half of 1997. The company furthered
its marketing strategies through significant investments in key markets around
the world.
24
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
PETROLEUM OPERATIONS (concluded)
[Bar Chart]
DOWNSTREAM PETROLEUM PRODUCT
SALES VOLUMES
(Thousands of barrels daily)
WORLDWIDE SALES VOLUMES
WERE UP 5%, THE SIXTH CONSEC-
UTIVE ANNUAL INCREASE.
[Bar Chat]
DOWNSTREAM PETROLEUM PRODUCT
SALES REVENUES
(Millions of dollars)
PETROLEUM PRODUCT SALES REV-
ENUES WERE UP 13%,DRIVEN
BY HIGHER PRICES AND SALES
VOLUMES.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
U.S. MARKETING & REFINING EARNINGS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Income $241 $226 $407
Special Items in Income
Restructuring provisions (11) (104) --
Asset write-downs (35) -- --
LIFO/other inventory adjustments 14 -- 35
- --------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $273 $330 $372
- --------------------------------------------------------------------------------
</TABLE>
U.S. DOWNSTREAM operating earnings were $372 million in 1996, $42 million
higher than 1995. Results benefited from higher margins, although margins
declined somewhat in the second half when continued increases in crude costs
could not be recovered in the marketplace. This earnings improvement also
reflected continued growth in retail automotive gasoline sales, up about 3%
versus an estimated industry growth of 1%, due to the success of new marketing
programs. Wider price spreads between heavy and light crudes also benefited
Mobil's refineries, which are among the best in the industry at processing heavy
crudes. Partly offsetting these favorable items was a higher level of refinery
downtime.
In 1995, operating earnings of $330 million were $57 million higher than in
1994. Benefits from business initiatives, including lower expenses, higher sales
volumes, improved lube income, and excellent refinery performance, more than
offset weaker business conditions.
The special item in 1996 was for favorable LIFO/other inventory adjustments,
while income in 1995 included a charge for restructuring provisions. Special
items in 1994 included a restructuring provision, asset write-downs and
favorable LIFO/other inventory adjustments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INTERNATIONAL MARKETING & REFINING EARNINGS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International Income $647 $447 $506
Special Items in Income
Restructuring provisions (44) (316) (154)
LIFO/other inventory adjustments -- (13) 8
Other -- (29) (27)
- --------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $691 $805 $679
- --------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL DOWNSTREAM operating earnings were $679 million, $126 million
lower than in 1995, primarily due to lower marketing margins in Europe and
Asia-Pacific. Although U.K. marketing margins were particularly weak due to
competitive pressures, they improved in the fourth quarter. Lower paraxylene
margins at Mobil's Singapore refinery, where earnings are shared between
Marketing & Refining and Chemical, and a higher level of scheduled refinery
downtime also reduced earnings. These factors were partly offset by improved
refining margins at Singapore and higher product sales volumes.
Operating earnings of $805 million in 1995 were $114 million higher than
1994. Lower expenses in Europe and Australia, benefits from business
initiatives, higher sales volumes, higher lube income, and benefits from the
Singapore refinery upgrade more than offset generally weak industry refining
margins and lower marketing margins in Japan.
Special items in 1996 include restructuring provisions for the Mobil-BP
European alliance ($145 million) and other European operations, and a LIFO/other
inventory adjustment. Special items in 1995 included restructuring provisions
and a LIFO adjustment. In 1994, income included a special item for restructuring
provisions.
25
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
CHEMICAL
[Bar Chart]
CHEMICAL EARNINGS
(Millions of dollars)
LOWER EARNINGS WERE DUE TO
LOWER MARGINS, THE ABSENCE
OF OPERATING INCOME FROM DI-
VESTED BUSINESSES AND, IN NET
INCOME, LAST YEAR'S GAIN ON
SALE OF THE PLASTICS DIVISION.
[Bar Chart]
CHEMICAL NET SALES TO TRADE
(Millions of dollars)
THIS YEAR'S DECLINE IN REV-
ENUES IS PRIMARILY DUE TO THE
EFFECTS OF OUR DIVESTED BUSI-
NESSES AND PRICE DECLINES.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CHEMICAL SEGMENT FINANCIAL INDICATORS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Petrochemicals Income $ 129 $ 544 $ 167
Other Income 88 135 139
Restructuring Provisions/Asset Sales (115) 485 --
- --------------------------------------------------------------------------------
Total Chemical Net Income $ 102 $1,164 $ 306
- --------------------------------------------------------------------------------
Revenues(1) $4,463 $6,390 $3,280
- --------------------------------------------------------------------------------
Assets $3,672 $3,212 $2,987
- --------------------------------------------------------------------------------
Capital Expenditures $ 212 $ 220 $ 339
Cash Investments in Equity Companies -- -- 7
- --------------------------------------------------------------------------------
Total Investment Spending $ 212 $ 220 $ 346
- --------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CHEMICAL EARNINGS
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Chemical Income $ 102 $1,164 $306
Special Items in Income
Asset sale -- 501 --
Restructuring provisions (115) (16) --
Environmental provision (7) -- --
- --------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items) $ 224 $ 679 $306
- --------------------------------------------------------------------------------
</TABLE>
CHEMICAL'S GOALS ARE TO GROW AGGRESSIVELY IN AREAS WHERE IT HAS COMPETITIVE
ADVANTAGES AND TO ACHIEVE A FOCUSED PORTFOLIO OF LEADER-BUSINESSES, EACH OF
WHICH PROVIDES SUPERIOR RETURNS ON INVESTED CAPITAL. Chemical earnings declined
in 1996 from the previous year's record high levels, largely due to weaker
petrochemical industry fundamentals and changes in its business portfolio.
Despite the industry downturn, Mobil's chemical businesses returned 13% on
capital employed, reflecting efforts to trim costs and divest nonstrategic
assets.
CHEMICAL operating earnings of $306 million in 1996 were $373 million lower
than last year's record earnings when results benefited from very high worldwide
petrochemical margins. Petrochemical margins in 1996 were significantly lower,
the result of higher feedstock costs and lower commodity chemical prices,
notably for polyethylene and paraxylene. Current year results were also
adversely impacted by the absence of income from divested businesses and the
expiration of the tax holiday for Mobil's petrochemicals joint venture in Saudi
Arabia. Partly offsetting these negative factors were higher earnings from the
oriented polypropylene (films) and chemical products businesses.
Operating earnings were $679 million in 1995, an increase of $455 million
from 1994 due to significantly improved petrochemical prices. Margins for
integrated polyethylene resin operations improved, and strong demand for
paraxylene, especially in the Asia-Pacific region, coupled with tight supply,
drove prices to record highs.
Trade sales revenues decreased by 42% in 1996 (see graph at left), reflecting
Chemical's divestiture of noncore businesses and declines in petrochemical
prices. The divested businesses accounted for approximately 90% of the 1996
decline in sales. Trade sales increased 23% in 1995 from 1994 due to higher
prices and volumes. This increase in volumes, up 7%, reflected a full year of
operations at the Singapore aromatics complex.
Chemical's asset divestiture program continued in 1996 with the completion of
employee-led buyouts of the Muehlstein polyethylene resin trading business, and
the Composite Products (Trex) wood-thermoplastic lumber substitute business. The
Tucker Housewares business was also sold in 1996 to Zeta Consumer Products
Corp., thereby completing Mobil's withdrawal from the polyethylene and
polystyrene plastics fabricating businesses in North America. The sale of these
assets generated about $200 million in cash in 1996, and when coupled with the
sale of the Plastics Division to Tenneco in late 1995, provided $1.2 billion in
cash (after-tax).
Investments and plans for worldwide growth opportunities continued in 1996.
Mobil Chemical and
26
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
CHEMICAL (concluded)
Pequiven, the petrochemical affiliate of Venezuela's state-owned oil
company, signed a 50-50 joint venture agreement to evaluate the feasibility
of developing a new olefins complex at an existing petrochemicals site at
Jose. This facility would include an ethylene cracker and related facilities
to produce polyethylene and ethylene glycol. Additionally, Mobil Yanbu
Petrochemical Company and Saudi Basic Industries Corp. are expanding their
50-50 joint venture petrochemicals complex in Yanbu, Saudi Arabia, by the
addition of a second ethylene production facility and facilities to produce
additional polyethylene and ethylene glycol as well as polypropylene.
Investment spending was $346 million in 1996, up from 1995's $220 million,
mainly due to the Beaumont, Texas, paraxylene project and an expansion of
ethylene capacity at the Houston, Texas, olefins plant. Planned investment
spending for 1997 is $500 million to support worldwide capacity expansions and
productivity improvements.
<TABLE>
<CAPTION>
CORPORATE AND OTHER
- --------------------------------------------------------------------------------
CORPORATE AND OTHER EXPENSE
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate and Other Expense $(98) $(11) $(122)
Special Items included:
Staff redesign implementation -- -- (75)
Asset sales and write-downs (46) 74 30
Litigation settlement -- 71 --
Restructuring provisions 20 (62) --
Environmental provision -- (24) --
- --------------------------------------------------------------------------------
Operating Expense (Excludes Special Items) $(72) $(70) $(77)
- --------------------------------------------------------------------------------
</TABLE>
CORPORATE AND OTHER expense increased $111 million in 1996 to $122 million. This
category includes results from Real Estate and Mining and Minerals operations,
corporate administrative expenses and other items. Excluding special items,
operating expense of $77 million was $7 million higher than 1995.
Special items in 1996 included implementation costs associated with the
restructuring of staff support services and gains on various asset sales. In
1995, results included benefits from the sale of the South Fort Meade phosphate
mine and a favorable litigation settlement, as well as charges for restructuring
and an environmental provision related to mining operations. In 1994, expenses
included charges for property write-downs, partly offset by a credit for
prior-year restructuring charges allocated to the Chemical business segment when
the program was implemented.
Excluding special items, Corporate and Other operating expense decreased $2
million in 1995 from 1994.
During 1996, Mobil sold substantially all of its land development business
and essentially all of its remaining mining and minerals assets.
<TABLE>
<CAPTION>
NET FINANCING EXPENSE
- --------------------------------------------------------------------------------
NET FINANCING EXPENSE
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Financing Expense $(209) $(295) $(242)
- --------------------------------------------------------------------------------
</TABLE>
NET FINANCING EXPENSE is primarily the interest Mobil pays on third-party
borrowings, net of earned interest income. Net Financing Expense of $242 million
was $53 million lower than last year due to the effects of higher capitalized
interest for major projects in Canada, Nigeria and Qatar, and certain other
favorable, nonrecurring items. Net Financing Expense of $295 million in 1995 was
$86 million higher than in 1994, mainly reflecting higher average interest rates
in 1995 and the absence of certain favorable, nonrecurring items in 1994.
27
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
OVER THE PAST THREE YEARS
MOBIL HAS SPENT $2.6
BILLION TO SAFEGUARD THE
ENVIRONMENT.
<TABLE>
<CAPTION>
ENVIRONMENTAL MATTERS
- --------------------------------------------------------------------------------
ENVIRONMENTAL EXPENDITURES U.S. INTERNATIONAL
- --------------------------------------------------------------------------------
(In millions) 1994 1995 1996 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital $279 $172 $149 $174 $135 $108
Protection and Compliance
Ongoing operations 303 238 212 191 184 171
Remediation 91 67 46 22 24 27
- --------------------------------------------------------------------------------
Total Environmental Expenditures $673 $477 $407 $387 $343 $306
- --------------------------------------------------------------------------------
</TABLE>
MOBIL'S COMMITMENT AND PRACTICE IS TO CONDUCT ITS OPERATIONS WITH FULL CONCERN
FOR SAFEGUARDING THE ENVIRONMENT, EMPLOYEES, CUSTOMERS AND THE PUBLIC--WHEREVER
IT OPERATES. The company accomplishes this through clear, visible corporate
policies, innovative technologies, sharing best practices, extensive training
and constant attention to environmental matters in its day-to-day operations.
Environmental expenditures are a significant cost of doing business, and the
U.S. and other countries continue to impose more stringent environmental
requirements. Although Mobil cannot predict accurately how environmental
expenditures will affect future operations and earnings, it expects to continue
to incur substantial costs. Mobil believes its costs will not vary significantly
from those of its competitors.
CAPITAL EXPENDITURES are additions or modifications to plants and facilities
to limit, monitor and control emissions and waste generation and to manufacture
products. The majority of U.S. environmental capital expenditures has been made
to comply with federal and state clean air and water regulations as well as
waste-management requirements. The capital expenditures incurred from 1994
through 1996 related mainly to the manufacture of reformulated gasoline/clean
fuels. As required in 1995, Mobil began selling clean-burning reformulated
gasoline in those metropolitan areas designated by the Environmental Protection
Agency (EPA) where Mobil markets gasoline products. Additional emission
reductions are mandated by the year 2000.
Internationally, capital expenditures were made in response to a growing need
for protecting ground and surface water and reducing air emissions. Worldwide
capital expenditures for environmental matters in 1997 are expected to remain
near the 1996 expenditure level.
PROTECTION AND COMPLIANCE EXPENDITURES are Mobil's recurring costs associated
with managing hazardous substances, emissions and waste generation in ongoing
operations, and the costs to remediate identified contamination. The decline in
U.S. expenditures reflects corrective action taken in prior years to meet
compliance requirements, the use of improved remediation technology and resource
utilization, and a continuing government/industry trend toward utilizing a
risk-based corrective action approach to remediating subsurface contamination.
Like many other companies, Mobil periodically receives notices from the EPA,
or equivalent state agencies, that it has been designated as a potentially
responsible party (PRP) for remediation of hazardous-waste sites. The majority
of these sites are still under investigation by the EPA or the state agencies
concerned. All PRPs are jointly and severally liable under the federal Superfund
law; however, since the early 1980s, Mobil has been successful in sharing
cleanup costs with other financially sound companies. At December 31, 1996,
Mobil had been successful in resolving its involvement in 110 of the 257 sites
where it had been named a PRP. The number of PRP sites does not represent a
relevant measure of liability as each company's involvement in a site can vary
substantially.
Mobil believes it has provided adequate reserves for known environmental
obligations. However, Mobil may be subject to future environmental remediation
liabilities relating to assets previously sold, closed facilities, requirements
not yet identified or the sale or disposition of operating facilities. While the
amounts could be material to Mobil's earnings in the periods in which such
liabilities arise, the extent of such future remediation requirements and costs
is not subject to reasonable estimation. Based on Mobil's long experience in
managing environmental matters in its businesses, it does not anticipate that
the aggregate level of future remediation costs will increase above recent
levels so as to materially and adversely affect its consolidated financial
position or liquidity. See also Note 12 to Financial Statements on page 47 for
further discussion of environmental liabilities.
28
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA (unaudited)
1995 1996
------------------------------------------- --------------------------------------------
First Second Third Fourth Full FIRST SECOND THIRD FOURTH FULL
(In millions, except per-share amounts) Quarter Quarter Quarter Quarter Year QUARTER QUARTER QUARTER QUARTER YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Sales and services $17,402 $18,700 $18,267 $19,044 $73,413 $18,528 $19,262 $19,852 $22,723 $80,365
Income from equity investments, asset
sales, interest and other 225 149 370 1,213 1,957 172 258 474 234 1,138
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenues 17,627 18,849 18,637 20,257 75,370 18,700 19,520 20,326 22,957 81,503
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Crude oil, products and operating
supplies and expenses 10,003 10,598 10,172 10,857 41,630 10,671 11,228 11,788 13,803 47,490
Exploration expenses 95 79 102 151 427 76 72 143 221 512
Selling and general expenses 1,256 1,868 1,274 1,290 5,688 1,126 1,239 1,176 1,646 5,187
Depreciation, depletion
and amortization 669 868 688 1,523 3,748 655 603 645 822 2,725
Interest and debt discount expense 115 117 119 116 467 116 97 119 123 455
Taxes other than income taxes 4,259 4,739 4,880 5,141 19,019 4,534 4,693 4,850 4,946 19,023
Income taxes 594 401 616 404 2,015 786 805 836 720 3,147
- ------------------------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 16,991 18,670 17,851 19,482 72,994 17,964 18,737 19,557 22,281 78,539
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 636 $ 179 $ 786 $ 775 $ 2,376 $ 736 $ 783 $ 769 $ 676 $ 2,964
- ------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net Income $ 1.57 $ 0.42 $ 1.95 $ 1.93 $ 5.87 $ 1.83 $ 1.95 $ 1.92 $ 1.68 $ 7.38
Dividends $ 0.85 $ 0.925 $ 0.925 $ 0.925 $ 3.625 $0.925 $ 1.00 $ 1.00 $ 1.00 $ 3.925
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL ITEMS INCLUDED IN NET INCOME
Asset sale gains/(losses) -- $ (22) $ -- $ 598 $ 576 -- $ -- $ 129 $ 41 $ 170
Restructuring provisions -- (505) -- (85) (590) -- -- -- (166) (166)
Staff redesign project implementation -- -- -- -- -- -- (31) (28) (16) (75)
Asset impairment (FAS 121) -- -- -- (487) (487) -- -- -- (69) (69)
Litigation settlement -- -- 71 -- 71 -- -- -- -- --
Tax-related issues -- -- -- 26 26 -- -- -- -- --
Environmental provision -- -- -- (24) (24) -- -- -- -- --
LIFO/other inventory adjustments -- -- -- (13) (13) -- -- -- 43 43
Other -- -- (29) -- (29) -- -- -- (36) (36)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Special Items -- (527) 42 15 (470) -- (31) 101 (203) (133)
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS(1) $ 636 $ 706 $ 744 $ 760 $ 2,846 $ 736 $ 814 $ 668 $ 879 $ 3,097
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Price per Common Share(2)
High $93 1/2 $ 102 $103 5/8 $116 5/8 $116 5/8 $118 1/8 $120 1/8 $119 7/8 $125 7/8 $125 7/8
Low $82 3/4 $ 88 1/4 $ 93 1/2 $ 98 1/2 $ 82 3/4 $107 1/2 $108 5/8 $107 3/4 $113 1/4 $107 1/2
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes special items.
(2) The principal market for trading of Mobil's common stock is the New
York Stock Exchange. The stock symbol is "MOB." The reported prices
represent a composite of transactions on the New York Stock Exchange, the
Chicago, Pacific, Philadelphia, Boston and Cincinnati regional exchanges
and the over-the-counter market.
</FN>
</TABLE>
29
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Cahrt]
TOTAL REVENUES VS.
COSTS AND EXPENSES
(Millions of dollars)
REVENUES ROSE, REFLECTING
HIGHER PRICES AND HIGHER SALES
VOLUMES. HIGHER EXPENSES ARE
DUE TO HIGHER SALES VOLUMES
AND GROWTH PROGRAMS.
[Bar Chart]
RETURN ON AVERAGE
SHAREHOLDERS' EQUITY
(In percent)
RETURN ON AVERAGE SHAREHOLD-
ERS' EQUITY INCREASED TO 16.0%,
THE HIGHEST LEVEL SINCE 1986.
COMMENTARY ON CONSOLIDATED STATEMENT OF INCOME
REVENUES from Sales and Services increased $6,952 million from 1995, mainly due
to higher crude oil, natural gas and petroleum product prices, and higher
petroleum product sales volumes. Higher excise and state gasoline taxes also
contributed to the increase in revenues. Partly offsetting these increases were
lower petrochemical prices and the absence of revenues from divested chemical
businesses. The increase in 1995 from 1994 resulted from higher sales volumes,
higher crude oil and chemical prices, and increased excise and state gasoline
sales taxes, partly offset by lower U.S. natural gas prices and lower crude oil
production volumes.
Income from Equity Investments, Asset Sales, Interest and Other decreased
from 1995 mainly due to a lower level of gains on asset sales, lower earnings
from equity affiliates and the nonrecurrence of a litigation settlement. The
increase in 1995 from 1994 was due to gains from the sales of the Plastics
Division and mining assets, and from higher income at our joint venture
petrochemicals operation in Saudi Arabia.
Total COSTS AND EXPENSES increased by $5,545 million from 1995, primarily due
to higher costs for crude oil and products and higher expenses related to
increased volumes and new growth programs, partially offset by benefits from
initiatives. The increase in 1995 from 1994 was primarily due to increases in
volume-related expenses and increased charges to Depreciation, Depletion and
Amortization, primarily for FAS 121 asset impairments.
Crude Oil, Products and Operating Supplies and Expenses increased $5,860
million in 1996 from 1995 due to increased worldwide crude oil and
product-related costs and higher volumes partly offset by the effects of
divested businesses. The increase in 1995 from 1994 was due to increases in
crude oil and product-related costs as well as higher volume-related expenses,
mainly in the United States. Included in this expense category are research
costs of $275 million in 1994, $252 million in 1995, and $206 million in 1996.
Exploration Expenses increased in 1996, primarily reflecting higher dry
drilling expenses and Ampolex's exploration activities. Expenses in 1995
decreased from 1994 due to reduced dry well costs resulting from greater
drilling success and timing of new well completions.
Selling and General Expenses decreased by $501 million to $5,187 million in
1996, primarily due to a lower level of restructuring charges this year, expense
reductions resulting from 1995 restructuring programs, and the effects of the
divestiture of various chemical businesses. Selling and General Expenses were
higher in 1995 than in 1994, primarily due to the 1995 special charges for
restructuring programs.
Depreciation, Depletion and Amortization Expenses were $1,023 million lower
in 1996, largely due to the effects of adopting FAS 121 in the fourth quarter of
1995 and the absence of 1995 restructuring-related asset write-downs. Expenses
in 1995 increased from 1994 primarily due to the $774 million charge resulting
from the adoption of FAS 121 (see Note 6 on page 42), which was higher than the
1994 asset write-downs.
Taxes Other than Income Taxes were essentially unchanged in 1996 versus 1995,
as the effects of higher worldwide product sales volumes were offset by the
absence of import duties on crude oil resulting from the closure of the Woerth
refinery in Germany. In 1995, Taxes Other than Income Taxes increased $1.5
billion from 1994 due to higher U.S. sales volumes, currency translation effects
and higher foreign excise tax rates.
Income Taxes increased in 1996 over 1995, mainly due to higher pre-tax income
and mix changes in the sources of earnings. Income Taxes increased in 1995 from
1994, due to higher U.S. pre-tax income.
COMMENTARY ON CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Total SHAREHOLDERS' EQUITY rose $1,121 million in 1996. Earnings Retained
in the Business increased $1,363 million in 1996, as income exceeded common and
preferred stock dividends. The cost of Common Stock Held in the Treasury
increased by $281 million in 1996, as 2,397,700 shares were purchased on the
open market to offset the dilutive effects of the issuance of shares upon
exercise of stock options. Return on average shareholders' equity increased from
10.4 % in 1994 (excluding the effect of the change in accounting principle), to
13.5% in 1995 and to 16.0% in 1996.
Common stock dividends paid were $3.40 per share, $3.625 per share, and
$3.925 per share in 1994, 1995 and 1996, respectively.
30
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31 (In millions, except per-share amounts) 1994 1995 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales and services(1) $66,757 $73,413 $80,365
Income from equity investments, asset sales,
interest and other 626 1,957 1,138
- -------------------------------------------------------------------------------------------------
Total Revenues 67,383 75,370 81,503
- -------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Crude oil, products and operating supplies
and expenses 36,665 41,630 47,490
Exploration expenses 516 427 512
Selling and general expenses 5,453 5,688 5,187
Depreciation, depletion and amortization 3,098 3,748 2,725
Interest and debt discount expense 461 467 455
Taxes other than income taxes(1) 17,512 19,019 19,023
Income taxes 1,919 2,015 3,147
- -------------------------------------------------------------------------------------------------
Total Costs and Expenses 65,624 72,994 78,539
- -------------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle 1,759 2,376 2,964
Cumulative Effect of Change in Accounting Principle (680) -- --
- -------------------------------------------------------------------------------------------------
NET INCOME $ 1,079 $ 2,376 $ 2,964
- -------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE
Income before change in accounting principle $ 4.28 $ 5.87 $ 7.38
Cumulative effect of change in accounting principle (1.71) -- --
- -------------------------------------------------------------------------------------------------
Net income $ 2.57 $ 5.87 $ 7.38
- -------------------------------------------------------------------------------------------------
<FN>
(1) Includes excise and state gasoline taxes: 1994-$7,762 million; 1995-$8,646
million; 1996-$9,236 million.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended December 31 (In millions) 1994 1995 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK (ESOP-related)
-Beginning of year $ 763 $ 745 $ 722
-End of year, after redemptions $ 745 $ 722 $ 686
- -------------------------------------------------------------------------------------------------
UNEARNED EMPLOYEE COMPENSATION (ESOP-related)
-Beginning of year $ (543) $ (472) $ (411)
-End of year, after amortization $ (472) $ (411) $ (365)
- -------------------------------------------------------------------------------------------------
COMMON STOCK
-Beginning of year $ 883 $ 885 $ 888
-End of year, after issuance of shares $ 885 $ 888 $ 891
- -------------------------------------------------------------------------------------------------
CAPITAL SURPLUS
-Beginning of year $ 1,279 $ 1,325 $ 1,396
-End of year, after issuance of common shares $ 1,325 $ 1,396 $ 1,468
- -------------------------------------------------------------------------------------------------
EARNINGS RETAINED IN THE BUSINESS
-Beginning of year $17,191 $16,859 $17,745
-Net income 1,079 2,376 2,964
-Common stock dividends (1,353) (1,434) (1,547)
-Preferred stock dividends (ESOP-related) (58) (56) (54)
- -------------------------------------------------------------------------------------------------
-End of year $16,859 $17,745 $19,108
- -------------------------------------------------------------------------------------------------
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
-Beginning of year $ (526) $ (123) $ (27)
-End of year, after adjustments $ (123) $ (27) $ (73)
- -------------------------------------------------------------------------------------------------
COMMON STOCK HELD IN TREASURY, AT COST
-Beginning of year $(1,810) $(2,073) $(2,362)
-End of year, after purchases $(2,073) $(2,362) $(2,643)
- -------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $17,146 $17,951 $19,072
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements on pages 38-51.
31
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Chart]
TOTAL DEBT
(Millions of dollars)
DEBT INCREASED DUE TO THE
FUNDING OF THE AMPOLEX AND
TENGIZ ACQUISITIONS.
[Bar Chart]
RETURN ON AVERAGE
CAPITAL EMPLOYED
(In percent)
RETURN ON AVERAGE CAPITAL
EMPLOYED ROSE TO 12.7%, THE
HIGHEST LEVEL SINCE 1981.
COMMENTARY ON CONSOLIDATED BALANCE SHEET
Total CURRENT ASSETS increased $839 million in 1996, primarily reflecting higher
Accounts and Notes Receivable. A higher level of Cash and Cash Equivalents was
offset by lower Inventories and a decrease in the Deferred Income Tax balance.
Cash and Cash Equivalents increased $310 million from last year. The
movements that contributed to this increase are presented in the Consolidated
Statement of Cash Flows on page 35.
Accounts and Notes Receivable increased due to higher worldwide prices and
petroleum product sales volumes, partly offset by the effects of the sale of the
Muehlstein resin trading business.
Inventories were lower in 1996, mainly reflecting the sale of certain noncore
businesses and decreases in petroleum products.
Investments and Long-term Receivables increased $894 million to $5,078
million, primarily due to the acquisition of a 25% equity interest in a joint
venture that owns the Tengiz field in the Republic of Kazakstan.
Net Properties, Plants and Equipment increased $2,629 million to $27,479
million. Capital expenditures, including the acquisition of Ampolex, were partly
offset by depreciation, depletion and amortization, and asset sales.
Total CURRENT LIABILITIES of $15,248 million increased $2,194 million from
year-end 1995. This increase reflected higher Short-term Debt, primarily due to
the funding of the Ampolex acquisition. Accounts Payable increased mainly due to
higher crude oil, natural gas and product prices, and higher volumes. Accrued
Liabilities increased primarily due to Tengiz obligations and restructuring
provisions for the Mobil-BP alliance.
At year-end 1996, the TOTAL DEBT of Mobil and its consolidated subsidiaries
was $7,875 million, an increase of $1,119 million from the prior year. Mobil's
year-end debt-to-capitalization ratio was 29%, up from 27% at year-end 1995,
primarily reflecting the effects of the acquisitions of Ampolex and a 25%
interest in Tengiz.
Deferred Credits and Other Noncurrent Obligations increased mainly due to
future obligations incurred with Mobil's acquisition of an interest in the
Tengiz field.
Deferred Income Taxes increased primarily due to the acquisition of Ampolex
and accelerated depreciation associated with an increase in spending, primarily
in international areas.
Mobil continues to have ready access to global financial markets, providing
flexibility to take advantage of growth opportunities and low borrowing costs.
At year-end 1996, Mobil had effective shelf registration statements on file with
the Securities and Exchange Commission (SEC) that would permit the offer and
sale of an aggregate of $1,815 million of debt securities pursuant to Rule 415
of the Securities Act of 1933. Also in place were a Euro-Medium-Term-Note
program to facilitate the offering and sale outside the U.S. of an additional $2
billion of debt securities in 1997 or later years and a facility allowing the
issuance in Japan of bonds having a principal amount of 30 billion Japanese yen.
Total SHAREHOLDERS' EQUITY rose $1.1 billion (see Commentary on Consolidated
Statement of Changes in Shareholders' Equity on page 30).
Mobil's capital and exploration expenditures totaled $6,361 million, an
increase of $2,093 million from the previous year. At year-end 1996, the unspent
balance of total appropriations for capital expenditures was $4.8 billion. Mobil
is not contractually committed to spend all of this amount but generally expects
to do so over the next several years.
32
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
At December 31 (In millions) 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 498 $ 808
Accounts and notes receivable 7,316 8,192
Inventories 3,287 3,017
Prepaid expenses and other current assets 642 627
Deferred income taxes 313 251
- --------------------------------------------------------------------------------
Total Current Assets 12,056 12,895
- --------------------------------------------------------------------------------
Investments and Long-term Receivables 4,184 5,078
Net Properties, Plants and Equipment 24,850 27,479
Deferred Charges and Other Assets 1,048 956
- --------------------------------------------------------------------------------
TOTAL ASSETS $42,138 $46,408
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 2,127 $ 3,425
Accounts payable 5,358 5,935
Accrued liabilities 2,703 2,968
Income, excise, state gasoline and other taxes payable 2,676 2,615
Deferred income taxes 190 305
- --------------------------------------------------------------------------------
Total Current Liabilities 13,054 15,248
- --------------------------------------------------------------------------------
Long-term Debt 4,629 4,450
Reserves for Employee Benefits 1,624 1,681
Accrued Restoration, Removal and Environmental Costs 1,254 1,240
Deferred Credits and Other Noncurrent Obligations 884 1,255
Deferred Income Taxes 2,647 3,416
Minority Interest in Subsidiary Companies 95 46
- --------------------------------------------------------------------------------
Total Liabilities 24,187 27,336
- --------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock (ESOP-related)--shares issued and outstanding:
1995-92,864; 1996-88,168 722 686
Unearned employee compensation (ESOP-related) (411) (365)
Common stock--shares issued:
1995-443,905,531; 1996-445,537,805 888 891
Capital surplus 1,396 1,468
Earnings retained in the business 17,745 19,108
Cumulative foreign exchange translation adjustment (27) (73)
Common stock held in treasury, at cost--shares:
1995-49,345,650; 1996-51,743,350 (2,362) (2,643)
- --------------------------------------------------------------------------------
Total Shareholders' Equity 17,951 19,072
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $42,138 $46,408
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements on pages 38-51.
33
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
[Bar Chart]
ASSET SALES PROCEEDS
(Millions of dollars)
MOBIL CONTINUED ITS EMPHASIS
ON SALE OF NONCORE ASSETS;
PROCEEDS WERE REINVESTED
IN MORE PROFITABLE PROJECTS
THAT BETTER FIT THE COMPANY'S
LONG-TERM STRATEGIES.
[Mountain Chart]
INVESTMENT SPENDING
(Millions of dollars)
INVESTMENT SPENDING WAS HIGHER
IN 1996, PRIMARILY REFLECTING
THE ACQUISITIONS OF AMPOLEX
AND TENGIZ.
COMMENTARY ON CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows reports movements in cash balances from year to
year and summarizes the cash provided and used during the year for operating,
investing and financing activities. The impact of changes in foreign currency
translation rates has been removed from the amounts reported in this statement.
Therefore, except for Cash and Cash Equivalents, these amounts do not agree with
the differences that would be derived from the changes in Balance Sheet amounts.
During 1996, Net Cash Used in Investing Activities and Cash Dividends
exceeded Net Cash from Operating Activities by $449 million. These cash
requirements were funded by the issuance of debt.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cash Requirements--Operating Activities Over (Under) Investing
- --------------------------------------------------------------------------------
Year ended December 31 (In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash from operating activities $5,362 $5,024 $6,352
Net cash used in investing activities (3,557) (2,462) (5,200)
Cash dividends (1,411) (1,490) (1,601)
- --------------------------------------------------------------------------------
Excess (shortfall) of cash requirements $ 394 $1,072 $ (449)
- --------------------------------------------------------------------------------
</TABLE>
NET CASH FROM OPERATING ACTIVITIES increased by $1,328 million from 1995. Net
Cash from Operating Activities is derived by adjusting reported Net Income for
charges or credits that have no cash effect (primarily Depreciation, Depletion
and Amortization, Deferred Income Taxes and the Cumulative Effect of Change in
Accounting Principle) and cash items reported elsewhere in this Statement
(primarily Exploration Expenses).
NET CASH USED IN INVESTING ACTIVITIES increased by $2,738 million from 1995
due to the acquisitions of Ampolex and a 25% interest in Tengiz and a higher
overall level of capital and exploration spending. These were partially offset
by proceeds from asset sales, primarily noncore, including the land development
business, certain chemical businesses, a phosphate mine and various Exploration
and Producing properties in North America, including gas gathering and
processing facilities (see Note 3--Acquisitions and Dispositions, page 40).
NET CASH USED IN FINANCING ACTIVITIES in 1996 was $861 million versus $2,551
million in 1995. This variance reflects the financing of the two major
acquisitions of Ampolex and an interest in Tengiz, consistent with Mobil's
stated growth strategy in international oil and gas.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT SPENDING
- --------------------------------------------------------------------------------
Year ended December 31 (In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Petroleum Operations
Exploration & Producing -- U.S. $ 486 $ 758 $ 480
-- International 1,156 1,489 3,434(1)
Marketing & Refining -- U.S. 572 484 403
-- International 725 808 1,151
Chemical -- U.S. 159 165 301
-- International 53 55 38
Corporate and Other 158 82 42
- --------------------------------------------------------------------------------
Total Capital Expenditures $3,309 $3,841 $5,849
- --------------------------------------------------------------------------------
Exploration Expenses -- U.S. 115 72 76
-- International 401 355 436
- --------------------------------------------------------------------------------
Total Exploration Expenses 516 427 512
- --------------------------------------------------------------------------------
Total Capital Expenditures and Exploration Expenses $3,825 $4,268 $6,361
- --------------------------------------------------------------------------------
Cash Investments in Equity Companies 102 257 658
- --------------------------------------------------------------------------------
Total Investment Spending $3,927 $4,525 $7,019
- --------------------------------------------------------------------------------
<FN>
(1) Includes $1,394 million for the acquisition of Ampolex.
</FN>
</TABLE>
34
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31 (In millions) 1994 1995 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,079 $2,376 $2,964
Adjustments to reconcile to net cash from operating activities
Depreciation, depletion and amortization 3,098 3,748 2,725
Deferred income taxes (210) (233) 446
Earnings (greater) less than dividends from
equity affiliates (40) (51) 153
Exploration expenses (includes noncash charges:
1994-$33; 1995-$26; 1996-$36) 516 427 512
Gain on sales of properties, plants and equipment
and other assets (68) (1,041) (423)
Decrease (increase) in working capital items (detailed below) 346 (388) (290)
Other, net (39) 186 265
Cumulative effect of change in accounting principle 680 -- --
- ------------------------------------------------------------------------------------------------------
Net Cash from Operating Activities 5,362 5,024 6,352
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital and exploration expenditures (3,825) (4,268) (4,967)
Acquisition of Ampolex Limited, net of $47 cash acquired -- -- (1,347)
Proceeds from sales of properties, plants and equipment
and other assets 349 2,034 1,759
Payments attributable to investments and
long-term receivables (81) (228) (645)(1)
- ------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (3,557) (2,462) (5,200)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (1,411) (1,490) (1,601)
Proceeds from borrowings having original terms
greater than three months 1,018 1,739 1,494
Repayments of borrowings having original terms
greater than three months (2,076) (1,594) (1,215)
Increase (decrease) in other borrowings 542 (991) 667
Proceeds from issuance of common stock 48 74 75
Purchase of common stock for treasury (263) (289) (281)
- ------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (2,142) (2,551) (861)
- ------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents(2) 41 (44) 19
- ------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (296) (33) 310
Cash and Cash Equivalents--Beginning of Year 827 531 498
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 531 $ 498 $ 808
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Includes the cash expenditure for the acquisition of a 25% interest in a joint
venture that owns the Tengiz field.
(2) Cash equivalents are liquid investments convertible to cash and have
original maturities of three months or less.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
CHANGES IN WORKING CAPITAL ITEMS Decrease (Increase)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts and notes receivable $ (810) $ (994) $(1,199)
Inventories 29 (66) 91
Prepaid expenses and other current assets (14) (22) 24
Accounts payable 813 477 836
Accrued liabilities 195 83 (19)
Income, excise, state gasoline and other taxes payable 133 134 (23)
- ------------------------------------------------------------------------------------------------------
Decrease (Increase) in Working Capital Items $ 346 $ (388) $ (290)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MEMO ITEMS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash income taxes paid $ 1,948 $ 2,091 $ 2,416
Cash interest paid 522 556 458
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements on pages 38-51.
35
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEGMENT AND GEOGRAPHIC INFORMATION
Year ended December 31 (In millions) 1994 1995 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES BY SEGMENT
Petroleum Operations
Exploration & Producing - Third Party $ 6,374 $ 7,028 $ 8,055
- Intersegment 3,819 4,053 4,786
Marketing & Refining - Third Party 56,230 61,376 69,931
- Intersegment 631 986 865
Chemical - Third Party 4,195 6,155 3,023
- Intersegment 268 235 257
Corporate and Other 584 811 494
Intersegment Elimination (4,718) (5,274) (5,908)
- ------------------------------------------------------------------------------------------------------
Total Revenues $67,383 $75,370 $81,503
- ------------------------------------------------------------------------------------------------------
REVENUES BY GEOGRAPHIC AREA
United States - Third Party $22,388 $25,598 $27,447
- Intersegment 405 537 461
Europe - Third Party 21,094 23,676 25,414
- Intersegment 663 899 1,478
Asia-Pacific - Third Party 15,411 17,160 17,690
- Intersegment 537 796 675
Other Areas(1) - Third Party 7,906 8,125 10,458
- Intersegment 5,378 5,574 5,657
Corporate and Other 584 811 494
Intersegment Elimination (6,983) (7,806) (8,271)
- ------------------------------------------------------------------------------------------------------
Total Revenues $67,383 $75,370 $81,503
- ------------------------------------------------------------------------------------------------------
At December 31 (In millions)
- ------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY SEGMENT
Petroleum Operations
Exploration & Producing $14,116 $14,393 $18,279
Marketing & Refining 21,767 22,463 23,592
Chemical 3,672 3,212 2,987
Corporate and Other 2,380 2,510 2,042
Adjustments (393) (440) (492)
- ------------------------------------------------------------------------------------------------------
Total Assets $41,542 $42,138 $46,408
- ------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY GEOGRAPHIC AREA
United States $15,316 $14,268 $13,726
Europe 9,150 9,920 10,049
Asia-Pacific 8,674 8,778 11,316
Other Areas(1) 6,604 7,312 9,965
Corporate and Other 2,380 2,510 2,042
Adjustments (582) (650) (690)
- ------------------------------------------------------------------------------------------------------
Total Assets $41,542 $42,138 $46,408
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Includes principally Nigeria, Saudi Arabia and Canada.
</FN>
</TABLE>
The distribution of Mobil's operations by business segment and geographic area
is presented above. Petroleum Operations consist of exploration, producing,
marketing and refining. Exploration & Producing explores for, develops and
produces crude oil and natural gas, and extracts natural gas liquids, sulfur and
carbon dioxide. Marketing & Refining is responsible for petroleum refining
operations and the marketing of all refined petroleum products. Chemical
manufactures and sells various petroleum-based chemical products. Corporate and
Other includes the operations of Real Estate and Mining and Minerals
(substantially all of these businesses were sold in 1996), corporate
administrative expenses and other items.
36
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
UNITED STATES EARNINGS WERE
UP, LARGELY DUE TO HIGHER
HYDROCARBON PRICES.
<TABLE>
<CAPTION>
SEGMENT AND GEOGRAPHIC INFORMATION (continued)
Year ended December 31 (In millions) 1994 1995 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS BY SEGMENT
Pre-tax Operating Profits
Petroleum Operations
Exploration & Producing $ 2,737 $ 2,410 $ 5,075
Marketing & Refining 1,359 894 1,338
Chemical 82 1,551 342
- ------------------------------------------------------------------------------------------------------
Total Pre-tax Operating Profits 4,178 4,855 6,755
Income Taxes (2,112) (2,173) (3,427)
- ------------------------------------------------------------------------------------------------------
Segment Earnings 2,066 2,682 3,328
Corporate and Other (Net of income taxes) (98) (11) (122)
Net Financing Expense (Net of income taxes) (209) (295) (242)
Cumulative Effect of Change in Accounting
Principle (Net of income taxes) (680) -- --
- ------------------------------------------------------------------------------------------------------
Net Income $ 1,079 $ 2,376 $ 2,964
- ------------------------------------------------------------------------------------------------------
EARNINGS BY GEOGRAPHIC AREA (Net of Income Taxes)
United States $ 302 $ 827 $ 1,293
Europe 380 323 357
Asia-Pacific 1,029 1,193 1,096
Other Areas(1) 355 339 582
- ------------------------------------------------------------------------------------------------------
Geographic Earnings 2,066 2,682 3,328
Corporate and Other (98) (11) (122)
Net Financing Expense (209) (295) (242)
Cumulative Effect of Change in Accounting Principle (680) -- --
- ------------------------------------------------------------------------------------------------------
Net Income $ 1,079 $ 2,376 $ 2,964
- ------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES BY SEGMENT
Petroleum Operations
Exploration & Producing $ 1,642 $ 2,247 $ 3,914
Marketing & Refining 1,297 1,292 1,554
Chemical 212 220 339
- ------------------------------------------------------------------------------------------------------
Segment Capital Expenditures 3,151 3,759 5,807
Corporate and Other 158 82 42
- ------------------------------------------------------------------------------------------------------
Total Capital Expenditures $ 3,309 $ 3,841 $ 5,849
- ------------------------------------------------------------------------------------------------------
DEPRECIATION, DEPLETION AND AMORTIZATION BY SEGMENT
Petroleum Operations
Exploration & Producing $ 1,907 $ 2,230 $ 1,596
Marketing & Refining 923 1,168 966
Chemical 226 290 126
- ------------------------------------------------------------------------------------------------------
Segment Depreciation, Depletion and Amortization 3,056 3,688 2,688
Corporate and Other 42 60 37
- ------------------------------------------------------------------------------------------------------
Total Depreciation, Depletion and Amortization $ 3,098 $ 3,748 $ 2,725
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Includes principally Nigeria, Saudi Arabia and Canada.
</FN>
</TABLE>
Significant investments in companies owned 50% or less are accounted for on
the equity method. Mobil's share of the net income of such companies is included
in Revenues. Information on these affiliates is presented in Note 4 on page 41.
Intersegment and intergeographic revenues are sales to other business or
geographic segments within Mobil and are at estimated market prices. These
intercompany transactions are eliminated for consolidation purposes. Income
taxes are allocated to segments and geographic areas on the basis of operating
results.
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all companies
owned more than 50%. Significant investments in affiliated companies owned 50%
or less are accounted for on the equity basis. Investments in other companies in
which Mobil owns less than a majority interest are stated at cost less
applicable reserves. Investments that represent direct interests in the assets,
liabilities and operations of ventures are reported as Mobil's share of each
account in the venture. Intercompany transactions are eliminated.
USE OF ESTIMATES
The financial statements, which are prepared in conformity with generally
accepted accounting principles, include amounts that are based, in part, on
management's best estimates and judgments.
INVENTORIES
Substantially all crude oil and product inventories are valued at cost
under the last-in, first-out (LIFO) method. Other inventories, primarily
materials and supplies, are valued generally at average cost.
OIL AND GAS ACCOUNTING
Mobil follows the successful efforts method of accounting for oil and gas
exploration and producing activities. Under this method, direct acquisition
costs of unproved mineral rights are capitalized and then amortized as described
below. Payments made in lieu of drilling on nonproducing leaseholds are charged
to expense currently. Geological and geophysical costs are charged to expense as
incurred. Costs of all development wells and of exploratory wells that result in
additions to proved reserves are capitalized.
DEPRECIATION, DEPLETION AND AMORTIZATION
Annual charges to income for depreciation are computed on a straight-line
basis over the useful lives of the assets. Costs of producing properties are
generally accumulated by field. Depletion of these costs and amortization of
capitalized, intangible drilling costs are calculated on a unit-of-production
basis.
Capitalized acquisition costs of significant unproved mineral rights are
assessed periodically on a property-by-property basis to determine whether their
values have been impaired; where impairment is indicated, a loss is recognized.
Capitalized acquisition costs of other unproved mineral rights are
amortized over the expected holding period. When a mineral right is surrendered,
any unamortized cost is charged to expense. When a property is determined to
contain proved reserves, the mineral right then becomes subject to depletion on
a unit-of-production basis. When assets that are part of a composite group are
retired, sold, abandoned or otherwise disposed of, the cost is charged against
accumulated depreciation, depletion and amortization. Where depreciation is
accumulated for specific assets, gains or losses on disposal are included in
income currently.
RESTORATION, REMOVAL AND ENVIRONMENTAL LIABILITIES
The estimated costs of restoration and removal of major producing
facilities are accrued on a unit-of-production basis over the life of the
property. The estimated future costs for known environmental remediation
requirements are accrued when it is probable that a liability has been incurred
and the amount of remediation costs can be reasonably estimated. These amounts
are the undiscounted, future estimated costs under existing regulatory
requirements and using existing technology.
DERIVATIVE FINANCIAL INSTRUMENTS
Mobil uses derivative financial instruments primarily for purposes of
hedging its exposure to fluctuations in interest rates, foreign currency
exchange rates and hydrocarbon prices. Gains and losses are recognized
concurrent with the recognition of the economic impact of the underlying
exposures using either the accrual or deferral method of accounting. Under the
accrual method, which is used for swaps, differentials in the swapped amounts
are recorded as adjustments of the underlying periodic cash flows that are being
hedged. Under the deferral method, gains and losses resulting from changes in
value of derivative instruments are deferred and recognized in the same period
as the gains and losses of the items being hedged.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES (concluded)
FOREIGN CURRENCY TRANSLATION
The functional currency for most foreign operations is the local currency. The
cumulative effects of translating the balance sheet accounts from the functional
currency into the U.S. dollar at current exchange rates are included in the
Cumulative Foreign Exchange Translation Adjustment in Shareholders' Equity. The
U.S. dollar is used as the functional currency for operations in highly
inflationary foreign economies and for exploration and producing operations in
Indonesia, Nigeria and Australia. For all operations, gains or losses from
remeasuring foreign currency transactions into the functional currency are
included in income.
2. ALLIANCES AND RESTRUCTURINGS
ALLIANCE WITH BP
Mobil and The British Petroleum Company p.l.c. (BP) agreed to form a strategic
alliance that will combine their European refining and marketing operations for
fuels and lubricants. The alliance will be implemented through separate
operating businesses for fuels and for lubricants in each of the countries where
Mobil and BP affiliates are already active or may develop future business. The
43 countries covered by the alliance include the 15 European Union nations,
together with Switzerland, Turkey, Cyprus, all of the countries of Eastern
Europe, and Russia west of the Urals. The businesses in the United Kingdom,
Turkey, and Portugal commenced operations in the fourth quarter of 1996.
Businesses in the remaining countries will be implemented in 1997.
In each country, Mobil will have a 30% interest in the fuels business and a
51% interest in the lubricants business. Employees and management teams of the
two companies were realigned so that BP manages and operates the fuels
businesses and Mobil manages and operates the lubricants businesses. Commercial
and financial strategy for the alliance is coordinated by a committee with an
equal number of representatives from each company. Mobil reports its share of
the alliance assets, liabilities, revenues and operating expenses.
The implementation of the alliance will result in the elimination of
approximately 2,700 positions from the combined work forces of the companies,
the rationalization of certain marketing assets and the disposal of surplus
facilities. In 1996, Mobil recorded restructuring charges of $184 million ($145
million after tax) primarily for employee separation costs and facilities
closure costs. Cash outlays associated with these provisions will be made
throughout 1997 and 1998.
ALLIANCE WITH PANENERGY
In 1996, Mobil Natural Gas Inc., a subsidiary of Mobil Corporation, and
PanEnergy Trading and Marketing Services, Inc., a subsidiary of PanEnergy
Corporation, formed a joint venture to market both equity and third party
natural gas. This venture, conducting business as PanEnergy Marketing, L.L.C. in
the United States, and PanEnergy Marketing, L.P. in Canada, is being operated by
PanEnergy. PanEnergy has a 60% equity interest in both natural gas marketing
entities with Mobil owning the remaining 40% interest.
Under the terms of the agreement, Mobil will process its U.S. and Canadian
equity natural gas production with PanEnergy for an initial period of ten years.
In addition, in a separate transaction, Mobil sold its domestic natural gas
gathering and processing assets to PanEnergy in 1996 for approximately $300
million, resulting in a gain of $104 million ($62 million after tax).
OTHER RESTRUCTURINGS
During 1995 and 1996, Mobil implemented five major restructuring programs
affecting worldwide staff support services, U.S. upstream and downstream
businesses, and European refining and lubricant blending operations, resulting
in the elimination of about 7,000 positions and the closure of certain
facilities. Provisions for these and other smaller programs totaled $911 million
($590 million after tax) and were charged to income in 1995 as the programs were
announced. An additional provision of $11 million ($7 million after tax) was
charged to income in 1996, mainly for additional cash outlays for a
larger-than-expected number of work force reductions.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. ALLIANCES AND RESTRUCTURINGS (concluded)
Following is an update on the progress of these plans:
Staff Support Services -This program was implemented in 1996 and resulted
in work force reductions of about 5,000 employees. Cash outlays for this pro-
gram primarily related to employee separation benefits, totaled $226 million at
December 31, 1996. The remaining reserve balance of $98 million is expected to
be spent in 1997 for ongoing employee separation benefits. Noncash costs, mainly
to write-down surplus facilities and equipment in the U.S. and United Kingdom to
estimated realizable value, totaled $68 million ($52 million after tax) in 1995.
Other Programs -The U.S. upstream and downstream programs were completed in
1996 and resulted in work force reductions of approximately 1,350 employees. The
European refining and lubricant blending restructurings were completed in 1996,
and resulted in work force reductions of about 650 employees at year-end. Cash
spending for these programs totaled $212 million at December 31, 1996, mainly
for employee separations and facility shutdown costs. The remaining reserve
balance of $125 million is expected to be spent in 1997 for ongoing employee
separation benefits. Noncash costs for writing off the investment at the Woerth
refinery and for other plant write-offs totaled $161 million ($76 million after
tax) in 1995.
3. ACQUISITIONS AND DISPOSITIONS
In 1996, Mobil Exploration and Producing Australia Pty Ltd, an Australian
subsidiary of Mobil, acquired Ampolex Limited (Ampolex), an Australian oil and
gas company, for $1,394 million. This acquisition was recorded using the
purchase accounting method for business combinations with the purchase price
being allocated to the assets acquired and liabilities assumed on the basis of
estimated fair value. Had Ampolex been consolidated since the beginning of the
year, the impact on the financial statements would not have been significant.
In 1996, Mobil acquired a 25% equity interest in a joint venture that owns
the Tengiz oil field in the Republic of Kazakstan. To date, Mobil has paid $546
million and has recorded its obligation for the remaining $555 million that is
payable in installments through the year 2000, upon reaching certain project
milestones.
In 1996, Mobil sold its land development business and various other noncore
assets, including: 1) Tucker Housewares, the Composite Products Division and the
Muehlstein resin trading business (units of Mobil Chemical), 2) a phosphate
mine, 3) a 20-acre commercial development and hotel in Reston, Virginia, and 4)
various Exploration & Producing properties in North America, including gas
gathering and processing facilities in the United States. Total proceeds for
these and other assets sold in 1996 were $1,759 million.
In 1995, Mobil Chemical sold its Plastics Division for $1.27 billion,
generating a gain on sale of assets in excess of $500 million after tax. The
Plastics Division was a marketer and manufacturer of plastic packaging and
consumer products in North America. Total proceeds from this and other smaller
sales, including various noncore oil and gas properties, were $2,034 million in
1995.
Net pre-tax gains from asset sales are included on the line "Income from
equity investments, asset sales, interest and other" on the Consolidated Income
Statement (see page 31). These sales are part of Mobil's long-term strategy of
redirecting its investments to its core petroleum and petrochemicals businesses.
40
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. SUMMARY FINANCIAL INFORMATION OF UNCONSOLIDATED EQUITY AFFILIATES
Summary financial information for affiliated companies (owned 50% or less)
accounted for on the equity method is shown in the table below. Mobil's
investment in these companies is included in Investments and Long-term
Receivables. The equity affiliates are primarily engaged in producing,
refining and marketing in Germany, the Middle East, Kazakstan, Japan and
elsewhere in the Asia-Pacific region, gas marketing in the U.S. and
petrochemical and lube manufacturing in the Middle East. Also included are
interests in several pipeline ventures.
Undistributed earnings of the equity affiliates included in Earnings
Retained in the Business were $544 million at December 31, 1996. Dividends
received from these companies were $203 million in 1994, $346 million in 1995
and $432 million in 1996.
Accounts and Notes Receivable in the Consolidated Balance Sheet include
$227 million and $359 million at December 31, 1995 and 1996, respectively, of
amounts due from equity affiliates. Accounts Payable include $531 million and
$609 million at December 31, 1995 and 1996, respectively, of amounts due to
equity affiliates.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
EQUITY METHOD AFFILIATES (In millions) 1994 1995 1996
- ------------------------------------------------------------------------------------------------
Total Mobil Share Total Mobil Share TOTAL MOBIL SHARE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 8,559 $ 2,639 $ 8,345 $ 2,678 $ 9,784 $ 3,237
Noncurrent assets 11,366 3,637 12,220 3,735 16,224 5,260
Current liabilities (7,865) (2,493) (8,027) (2,643) (9,817) (3,354)
Long-term debt (2,271) (822) (2,520) (758) (4,455) (1,117)
Other liabilities (2,101) (576) (2,122) (595) (2,064) (605)
- ------------------------------------------------------------------------------------------------
Net assets $ 7,688 $ 2,385 $ 7,896 $ 2,417 $ 9,672 $ 3,421
- ------------------------------------------------------------------------------------------------
Gross revenues $ 27,600 $ 8,696 $ 31,324 $ 9,835 $ 32,296 $ 10,337
- ------------------------------------------------------------------------------------------------
Income before taxes $1,175 $ 349 $ 1,360 $ 466 $ 1,307 $ 429
Net income 578 187(1) 1,088 397 969 279
- ------------------------------------------------------------------------------------------------
Capital expenditures $ 1,711 $ 421 $ 1,650 $ 337 $ 2,044 $ 435
- ------------------------------------------------------------------------------------------------
<FN>
(1) Includes $56 million charge related to the LCM change in accounting
principle (see Note 5 on pages 41-42).
</FN>
</TABLE>
5. INVENTORIES
Inventories valued at cost under the LIFO method represented about 60% of
Mobil's worldwide consolidated inventories, both at December 31, 1995, and 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVENTORIES (In millions)
- --------------------------------------------------------------------------------
At December 31 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Crude oil and petroleum products $2,371 $2,314
Chemical products 298 260
Other, mainly materials and supplies 618 443
- --------------------------------------------------------------------------------
Total $3,287 $3,017
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, the worldwide excess of market over book value of
inventories valued under the LIFO method was $1,188 million. At December 31,
1996, the worldwide excess of market over book value of inventories valued under
the LIFO method was $1,621 million ($1,187 million--U.S.; $214 million--Europe;
$178 million--Asia-Pacific; and $42 million--Other Areas).
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS
5. INVENTORIES (Concluded)
Effective January 1, 1994, Mobil changed the method of accounting it uses to
apply the lower of cost or market (LCM) test for its crude oil and product
inventories. The LCM test is now measured, and the results are recognized
separately, on a country-by-country basis, and any resulting write-downs to
market are recorded as permanent adjustments to the last-in, first-out (LIFO)
cost of inventory. Previously, Mobil aggregated its worldwide inventories into
one pool for the determination of the LCM measurement. The $680 million
after-tax charge to 1994 net income represents the cumulative effect of this
accounting change as of January 1, 1994. The new method of applying the LCM test
to the book value of inventories is preferable because Mobil's financial
statements will better reflect local market conditions and exchange rates in the
countries in which Mobil operates.
If Mobil had not changed its accounting method, it would have been required
to restore to 1994 income the $250 million after-tax LCM charge taken in 1993 as
local currency crude oil and product prices rose above year-end 1993 levels.
6. PROPERTIES, PLANTS AND EQUIPMENT
Properties, plants and equipment are stated at cost, less accumulated
depreciation, depletion and amortization of $26,869 million at December 31,
1995, and $27,648 million at December 31, 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PROPERTIES, PLANTS AND EQUIPMENT (In millions) 1995 1996
- --------------------------------------------------------------------------------
At December 31 Net Gross NET GROSS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Petroleum Operations
Exploration & Producing $11,452 $27,612 $14,000 $30,472
Marketing 4,904 7,496 5,213 8,030
Refining 5,179 10,002 5,251 10,545
Other Marketing & Refining Activities 1,244 2,843 1,003 2,583
Chemical 1,530 2,886 1,662 2,919
Corporate and Other 541 880 350 578
- --------------------------------------------------------------------------------
Total $24,850 $51,719 $27,479 $55,127
- --------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of 1995, Mobil adopted FAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
resulting in a before-tax, $774 million noncash charge to "Depreciation,
depletion and amortization" on the Consolidated Statement of Income ($487
million after tax). The charge relates to impairment of upstream producing
properties, primarily in the U.S. and Canada.
Prior to the adoption of FAS 121, the company's policy was to write down to
breakeven significant properties determined to be permanently impaired. Under
this pre-FAS 121 policy, significant fields (defined as $50 million or more of
net book value) were evaluated separately and written down to breakeven if
expected operating results were not projected to recover the carrying value of
the field. Smaller properties were considered on a worldwide basis. The adoption
of FAS 121 required that the company change its former policy to a policy of:
(1) assessing all producing fields, without regard to the carrying value of a
field, on a field-by-field basis; (2) using breakeven, based on undiscounted
cash flows, for the recognition test; and (3) measuring impairment based on fair
values rather than undiscounted breakeven values.
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. LEASES
Mobil leases real estate, service stations, pipelines, tankers and other
equipment through noncancelable capital and operating leases.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RENTAL EXPENSE (In millions)
- --------------------------------------------------------------------------------
Year ended December 31 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $1,121 $1,195 $1,260
Contingent rentals 71 97 55
- --------------------------------------------------------------------------------
Total 1,192 1,292 1,315
Less: sublease rental income 172 187 188
- --------------------------------------------------------------------------------
Net rental expense $1,020 $1,105 $1,127
- --------------------------------------------------------------------------------
</TABLE>
Contingent lease rentals for operating and capital leases are determined
generally by volumetric measurement or sales revenue. Some rental agreements
contain escalation provisions that may require higher, future rent payments.
Mobil does not expect that such rent increases, if any, will have a material
effect on future earnings.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUTURE MINIMUM LEASE PAYMENTS UNDER NONCANCELABLE LEASES (In millions)
- --------------------------------------------------------------------------------
At December 31, 1996 Operating Leases Capital Lease Obligations
- --------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 312 $ 59
1998 259 67
1999 207 65
2000 162 11
2001 133 10
Later years 1,629 125
- --------------------------------------------------------------------------------
Future minimum lease payments $2,702 $337
- --------------------------------------------------------------------------------
Less: executory costs 1
interest 89
- --------------------------------------------------------------------------------
Total capital lease obligations 247
Less: short-term portion of capital lease obligations 39
- --------------------------------------------------------------------------------
Long-term portion of capital lease obligations $208
- --------------------------------------------------------------------------------
</TABLE>
Future minimum lease payments have not been reduced by future minimum
sublease rentals of $86 million under operating leases. Capital leases included
in Net Properties, Plants and Equipment were $312 million at December 31, 1995,
and $243 million at December 31, 1996.
8. SHORT-TERM DEBT
At December 31, 1996, Mobil had $645 million of unused short-term lines of
credit supporting commercial paper borrowing arrangements. A total of $369
million of these unused lines is subject to annual commitment fees. Interest on
borrowings under these lines is based on the London Interbank Offered Rate, the
Domestic Certificate of Deposit Rate or a specified prime rate, as selected from
time to time by Mobil.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Short-term debt (In millions) 1995 1996
- ------------------------------------------------------------------------------------------------
At December 31 Amount Interest Rate(1) AMOUNT INTEREST RATE(1)
- ------------------------------------------------------------------------------------------------
Notes and loans payable
<S> <C> <C> <C> <C>
Commercial paper $ 853 6 3/8% $1,634 5 7/8%
Banks and Other 766 7 % 894 6 5/8%
- ------------------------------------------------------------------------------------------------
Total notes and loans payable 1,619 2,528
- ------------------------------------------------------------------------------------------------
Long-term debt maturing within one year 508 897
- ------------------------------------------------------------------------------------------------
Total short-term debt $2,127 $3,425
- ------------------------------------------------------------------------------------------------
<FN>
(1) Percentages shown in the table are weighted average interest rates at the end
of the year.
</FN>
</TABLE>
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OUR DEBT-TO-CAPITALZATION RATIO
OF 29% PROVIDES FINANCIAL FLEXI-
BILITY TO INCREASE INVESTMENT
SPENDING WHEN ECONOMIC OPPORTUN-
ITIES ARISE.
9. LONG-TERM DEBT
The table below summarizes Mobil's consolidated Long-term Debt. A significant
portion of this debt is issued by subsidiaries and is guaranteed by Mobil.
At year-end 1996, Mobil had shelf registrations on file with the SEC that
would permit the offer and sale of $1,815 million of debt securities.
Additionally, at December 31, 1996, the ESOP Trust had a shelf registration on
file with the SEC permitting the offer and sale of $190 million of debt
securities, guaranteed by Mobil. Subsequent to year-end, the ESOP Trust issued
$35 million principal amount of fixed rate notes with the proceeds used to fund
a portion of the scheduled principal and interest payments on its existing
indebtedness. The proceeds of any additional debt securities issued by the ESOP
Trust would similarly be used to refund its existing indebtedness. Also at
year-end 1996, shelf registrations allowing the issuance of U.S. $2 billion of
Euro-Medium-Term Notes and bonds having a principal amount of 30 billion
Japanese yen were in place.
Long-term debt that becomes due during the next five years is: 1997-$897
million; 1998-$745 million; 1999-$908 million; 2000-$350 million; and 2001-$363
million.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG-TERM DEBt (In millions)
- --------------------------------------------------------------------------------
At December 31 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
6 1/2% notes due 1996 $ 148 $ --
6 1/2% notes due 1997 148 148
6.025% notes due 1998 -- 200
7 1/4% notes due 1999 172 162(1)
8 5/8% notes due 2006 -- 250
7 5/8% debentures due 2033 250 240(1)
8% debentures due 2032 250 250
8 1/8% Canadian dollar Eurobonds due 1998 111 111
(swapped into 6.8% U.S. $ debt)
8 3/8% notes due 2001 200 200
8 5/8% debentures due 2021 250 250
9% Canadian dollar Eurobonds due 1997 110 110
(swapped into 7.0% U.S. $ debt)
9% European Currency Unit Eurobonds due 1997 148 148
(swapped into 7.0% U.S. $ debt)
9 5/8% U.K. sterling Eurobonds due 1999 170 187
Variable rate notes due 1999 (6.8%)(2) 107 110
Japanese yen loans due 2003-2005 (2.6%)(2) 438 388
ESOP Trust debentures/notes due 2000-2004 (8.6%)(2) 578 525
Variable rate project financing due 1998 (6.6%)(2) 157 105
Industrial revenue bonds due 1998-2030 (5.7%)(2) 390 491
Other foreign currencies due 1996-2030 (6.5%)(2) 1,087 1,090
Other due 1997-2008 (7.9%)(2) 149 135
Capital lease obligations 274 247
- --------------------------------------------------------------------------------
Total 5,137 5,347
Less: long-term debt maturing within one year 508 897
- --------------------------------------------------------------------------------
Total long-term debt $4,629 $4,450
- --------------------------------------------------------------------------------
<FN>
(1) Net of repurchases.
(2) The percentages shown in parentheses in the table are weighted average
interest rates at December 31, 1996.
</FN>
</TABLE>
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Mobil uses derivative financial instruments to manage risks resulting from
fluctuations in underlying interest rates, foreign exchange rates, and
hydrocarbon prices. Because Mobil operates in the international oil and gas
markets and has significant financing requirements, it has exposure to these
risks, which can affect the cost of operating, investing, and financing.
Derivative instruments creating essentially equal and offsetting market
exposures are used to help manage these risks. The derivative financial
instruments held by Mobil are not leveraged and are principally held for
purposes other than trading.
In addition to creating market risks that offset the risks associated with
the underlying business exposures, derivative instruments also give rise to
credit risk due to possible nonperformance by counter-parties. However, through
its ongoing control procedures, Mobil monitors the creditworthiness of its
counter-parties and its existing exposures to them under the derivative
instruments. The overall exposure to credit risk is considered to be minimal.
Debt-related Derivative Instruments - Mobil has entered into interest rate
swaps, cross currency interest rate swaps, futures, and forward exchange
contracts. These financial instruments have the effect of changing the interest
rate and currency of the original borrowings with the objective of minimizing
Mobil's borrowing costs. The maturities of most of these instruments are closely
matched to the maturities of the underlying debt. The notional principal amounts
of these derivative instruments were $5,797 million and $4,053 million at
December 31, 1995 and 1996, respectively. These activities resulted in a
substantial portion of the fixed interest rate debt being swapped into floating
interest rate debt as of December 31, 1995 and 1996.
Interest differentials paid or received under interest rate swaps and cross
currency interest rate swaps are recognized over the life of the contracts as
adjustments to the effective yields of the underlying debt. Futures and foreign
exchange contracts are valued at current rates. Gains and losses on contracts
related to debt principal and current interest are recorded in income. Gains and
losses related to future period interest are deferred and recognized in income
in the period to which they relate.
The fair value of Mobil's debt portfolio was $6,646 million ($6,746 million
debt less $100 million derivatives) and $7,825 million ($7,784 million debt plus
$41 million derivatives) at December 31, 1995 and 1996, respectively. These fair
values were greater than the carrying value by $139 million and $106 million at
December 31, 1995 and 1996, respectively. This change was due to a small
increase in long-term interest rates in 1996.
Nondebt-related Instruments - Mobil has entered into forward exchange
contracts and currency options to hedge U.S. dollar payables for purchases of
crude oil and petroleum products, firm commitments for capital projects, the
cash return from net investments in foreign affiliates to be remitted within the
coming year, and local currency taxes. Changes in the value of these financial
instruments offset the foreign exchange gains and losses of the transactions
they are hedging. The notional principal amounts of the nondebt-related currency
instruments were $8,969 million and $10,075 million at December 31, 1995 and
1996, respectively, and substantially all of them have maturities of less than
one year. The fair value of nondebt-related financial instruments generally
approximates carrying value.
Mobil has also entered into commodity derivative financial instruments that
can only be settled in cash. The notional amounts outstanding for these
contracts were $1,653 million and $1,404 million at December 31, 1995 and 1996,
respectively. Fair value approximates carrying value.
Risk Based Measurements - In its risk management activities, Mobil measures
its value at risk using simulation techniques that project probability of
expected changes in values from market movements on financial exposures that
vary from management's defined benchmarks. These benchmarks are standards that
have been established by management and represent the risk profile of the
environment in which Mobil operates and the assets that are being financed.
Value at risk is defined as the maximum potential gain or loss from a one-day
market movement in interest and currency rates that would cover 99.7% of all
such movements measured against the benchmarks. At December 31, 1995 and 1996,
the value at risk in Mobil's debt and currency portfolio, as measured against
these defined benchmarks, was $5 million.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
11. TAXES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TOTAL TAXES (In millions) 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
Year ended December 31 U.S. Foreign Total U.S. Foreign Total U.S. FOREIGN TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Excise and state gasoline $ 3,669 $ 4,093 $ 7,762 $ 3,972 $ 4,674 $ 8,646 $ 4,207 $ 5,029 $ 9,236
Import duties -- 9,067 9,067 -- 9,657 9,657 -- 9,130 9,130
Property, production, payroll
and other 442 241 683 427 289 716 385 272 657
- --------------------------------------------------------------------------------------------------------------------------
Total other than income taxes 4,111 13,401 17,512 4,399 14,620 19,019 4,592 14,431 19,023
- --------------------------------------------------------------------------------------------------------------------------
Income taxes(1)
U.S. state and local 63 -- 63 113 -- 113 63 -- 63
U.S. federal and foreign
-current 125 1,941 2,066 336 1,799 2,135 217 2,421 2,638
-deferred (184) (26) (210) (140) (93) (233) 163 283 446
- --------------------------------------------------------------------------------------------------------------------------
Total income taxes 4 1,915 1,919 309 1,706 2,015 443 2,704 3,147
- --------------------------------------------------------------------------------------------------------------------------
Total taxes $ 4,115 $15,316 $19,431 $ 4,708 $16,326 $21,034 $ 5,035 $17,135 $22,170
- --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes tax benefits of $358 million related to the cumulative effect of
change in accounting principle in 1994.
</FN>
</TABLE>
Income from U.S. operations before income taxes was $481 million in 1994, $1,261
million in 1995 and $1,939 million in 1996. Income from foreign operations
before income taxes for the same three years was $3,697 million, $3,594 million
and $4,816 million, respectively. The loss from Corporate and Other and Net
Financing Expense before income taxes for the same three years was $500 million,
$464 million and $644 million, respectively.
Deferred income taxes are provided for the temporary differences between the
financial statement and tax bases of Mobil's assets and liabilities, and relate
primarily to depreciation, intangible drilling costs, and provisions for
restoration, removal and environmental costs, and employee benefits. Mobil does
not provide deferred taxes for amounts that could result from the remittance of
undistributed earnings of foreign affiliates since it is generally Mobil's
intention to continue reinvesting these earnings indefinitely. Mobil's share of
the undistributed earnings of consolidated subsidiaries and equity method
affiliates, which could be subject to additional income taxes if remitted, was
approximately $3.0 billion at December 31, 1996. If such dividends were to be
remitted, foreign tax credits available under present law would reduce the
amount of U.S. taxes payable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEFERRED TAXES (In millions)
- --------------------------------------------------------------------------------
At December 31 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Depreciation and amortization $3,898 $4,034
Other 582(1) 1,287
- --------------------------------------------------------------------------------
Total deferred tax liabilities 4,480 5,321
- --------------------------------------------------------------------------------
Deferred tax assets
Book reserves 1,485 1,442
Tax credits available for carry-forward
(primarily without expiration) 839 827
- --------------------------------------------------------------------------------
Total deferred tax assets 2,324 2,269
- --------------------------------------------------------------------------------
Valuation allowance (368)(1) (418)
- --------------------------------------------------------------------------------
Net deferred tax liabilities $2,524 $3,470
- --------------------------------------------------------------------------------
<FN>
(1) Prior year data reclassified to conform with current year presentation.
</FN>
</TABLE>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
11. TAXES (concluded)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RECONCILIATION OF U.S. STATUTORY
RATE TO ACTUAL TAX RATE (In millions) 1994 1995 1996
- --------------------------------------------------------------------------------
Year ended December 31 Amount % Amount % Amount %
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income before taxes and change in
accounting principle $3,678 100.0 $4,391 100.0 $6,111 100.0
- --------------------------------------------------------------------------------
Theoretical tax at U.S. rate 1,287 35.0 1,537 35.0 2,139 35.0
Foreign taxes in excess of
U.S. statutory rate 661 18.0 611 13.9 1,108 18.1
Other items, net (29) (0.8) (133) (3.0) (100) (1.6)
- --------------------------------------------------------------------------------
Total income taxes $1,919 52.2 $2,015 45.9 $3,147 51.5
- --------------------------------------------------------------------------------
</TABLE>
12. RESTORATION, REMOVAL AND ENVIRONMENTAL LIABILITIES
Exploration and producing properties must generally be restored to their
original condition when the oil or gas reserves are depleted and/or operations
cease. At December 31, 1995 and 1996, $835 million and $864 million,
respectively, had been accrued for restoration and removal costs, mainly related
to offshore producing facilities.
Mobil accrues for its best estimate of the future costs associated with known
environmental remediation requirements at its service stations, marketing
terminals, refineries and plants, and at certain Superfund sites. At December
31, 1995 and 1996, the accumulated reserve for environmental remediation costs
was $519 million and $460 million, respectively. Of these amounts, $100 million
and $84 million were included in current accrued liabilities in the Consolidated
Balance Sheet. Amounts accrued with respect to Superfund waste disposal sites,
which are not material, are based on the company's best estimate of its portion
of the costs of remediating such sites.
13. FOREIGN CURRENCY
Foreign exchange transaction gains of $70 million in 1994, $8 million in 1995
and losses of $17 million in 1996 were included in income. These include amounts
applicable to companies accounted for on the equity method.
The effect of foreign currency translation on Mobil's balance sheet
accounts is shown below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cumulative foreign exchange translation adjustment (In millions)
- --------------------------------------------------------------------------------
At December 31 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Properties, plants and equipment, net $(273) $(124) $ (27)
Deferred income taxes (199) (252) (256)
Working capital, debt and other items, net 349 349 210
- --------------------------------------------------------------------------------
Total $(123) $ (27) $ (73)
- --------------------------------------------------------------------------------
</TABLE>
14. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Mobil Oil's Employees Savings Plan includes an ESOP covering most U.S.
employees. In 1989 the ESOP Trust, supported by Mobil guarantees, borrowed $800
million. The ESOP Trust used the proceeds of the loan to purchase 102,894 shares
of Series B ESOP Convertible Preferred Stock from Mobil. Each preferred share
has a liquidation value of $7,775, is convertible into 100 shares of common
stock and is entitled to 100 votes. Dividends on the preferred stock are
cumulative and payable at an annual rate of $600 per share. The ESOP Trust uses
the preferred dividends not allocated to employees to make principal and
interest payments on the notes. As debt service exceeds the dividends, Mobil is
required to fund the excess. In 1994, 1995 and 1996, this excess was $29
million, $50 million and $47 million, respectively.
The guaranteed ESOP borrowing is included in Mobil's debt. The future
compensation to be earned by employees is classified in Shareholders' Equity.
These amounts are reduced and expense is recognized as the debt is repaid and
shares are earned by employees. In 1994, 1995 and 1996, total ESOP- related
expenses were $32 million, $54 million and $49 million, respectively.
Interest incurred on ESOP debt in 1994, 1995 and 1996 was $58 million, $54
million and $48 million, respectively.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
15. EMPLOYEE BENEFITS
Employee benefits that Mobil provides in the U.S. are contributory and
noncontributory medical and dental plans, pension plans, group life insurance,
savings plans, an employee stock ownership plan, disability plans for sickness
and accidents, and termination plans. Mobil's international affiliates also
provide various pension and other employee benefit plans. Mobil makes
contributions to funded plans and provides book reserves for unfunded plans.
Mobil also provides certain postretirement health care and life insurance
benefits for most U.S. retirees, if they are working for the company when they
become eligible for retirement. Premium costs are shared on a plan-by-plan basis
between Mobil and the participants. Postretirement health care benefits are
provided both before and after eligibility for Medicare. The life insurance
plans provide for a single lump sum payment to a designated beneficiary. The
amount of the lump sum payment varies depending on employment date, age and
years since retirement. There is no material obligation for Mobil to provide
postretirement benefits for international retirees because they are covered
primarily by local government programs.
The charge to Mobil's income for U.S. postretirement health care and life
insurance plans was $67 million in 1994, $60 million in 1995 and $64 million in
1996.
The components of Mobil's net postretirement benefit expense for U.S. plans
and the status of Mobil's U.S. postretirement benefit plans and the amounts
recognized in the Consolidated Balance Sheet are detailed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Postretirement benefit expense, excluding pensions (In millions) Health Care Life Insurance
- -------------------------------------------------------------------------------------------------------
Year ended December 31 1994 1995 1996 1994 1995 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned by employees during the year $ 11 $ 8 $ 10 $ 2 $ 1 $ 2
Interest cost on accumulated postretirement benefit obligations 29 28 27 27 28 26
Actual (earnings) on assets -- -- -- (1) -- --
Amortization of unrecognized amounts (1) (5) (1) -- -- --
- -------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 39 $ 31 $ 36 $ 28 $ 29 $ 28
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
STATUS OF POSTRETIREMENT BENEFIT PLANS (In millions) Health Care Life Insurance
- -------------------------------------------------------------------------------------------------------
At December 31 1995 1996 1995 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF ACCUMULATED
POSTRETIREMENT BENEFIT OBLIGATIONS
Retirees $242 $315 $312 $302
Other fully eligible plan participants 52 37 53 34
Other active plan participants 113 96 24 18
- -------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligations $407 $448 $389 $354
- -------------------------------------------------------------------------------------------------------
BOOK RESERVES $443 $457 $353 $359
- -------------------------------------------------------------------------------------------------------
BOOK RESERVES GREATER (LESS) THAN
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATIONS $ 36 $ 9 $(36) $ 5
- -------------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized prior service costs $ 11 $ 10 $ -- $ --
Unrecognized net gain (loss) 25 (1) (36) 5
- -------------------------------------------------------------------------------------------------------
<FN>
At December 31, 1996, the health care cost trend used to calculate the
accumulated postretirement benefit obligations is 9.1% for 1997 and is assumed
to decrease gradually over 8 years to 5.5%. At December 31, 1995, the health
care cost trend rate was assumed to be 9.7% for 1996, declining gradually to
5.5% after 9 years. A 1% increase in the assumed health care cost trend rate for
each year would increase the 1996 net postretirement benefit expense and the
accumulated postretirement benefit obligation as of December 31, 1996, by
approximately $5 million and $46 million, respectively.
The discount rate used in determining the postretirement benefit obligation
was 7.25% in 1996 and 7.0% in 1995.
</FN>
</TABLE>
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PENSION PLAN ASSETS AND
BOOK RESERVES EXCEEDED
ACCUMULATED BENEFIT OBLIGATIONS
BY $1,111 MILLION AT THE END OF
1996.
15. EMPLOYEE BENEFITS (concluded)
The majority of full-time U.S. employees are covered by funded
noncontributory pension plans. These plans are primarily final average pay
plans. Mobil's funding for these plans is based on the projected unit credit
actuarial cost method.
Mobil's international employees are covered by pension and similar plans.
Coverage and benefits vary from country to country. Mobil's funding policy also
varies, in line with local commercial, actuarial and taxation practices.
The worldwide charge to Mobil's income for pension plans was $214 million in
1994, $192 million in 1995 and $208 million in 1996.
The components of net pension expense for Mobil's plans and the status of
Mobil's pension plans and the amounts recognized in the Consolidated Balance
Sheet are detailed below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PENSION EXPENSE (In millions) U.S. Plans International Plans
- ---------------------------------------------------------------------------------------------------------------
Year ended December 31 1994 1995 1996 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned by employees during the year $ 107 $ 76 $ 92 $ 91 $ 85 $ 84
Interest cost on projected benefit obligations 194 190 185 117 125 128
Actual (earnings) loss on assets (4) (638) (334) 30 (143) (101)
Deferral of actual earnings on assets
greater (less) than expected returns (224) 418 94 (103) 68 24
Amortization of unrecognized amounts (12) (10) (16) 18 21 52
- ---------------------------------------------------------------------------------------------------------------
Net pension expense $ 61 $ 36 $ 21 $ 153 $ 156 $ 187
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
STATUS OF PENSION PLANS (In millions) U.S. Plans International Plans
- ---------------------------------------------------------------------------------------------------------------
At December 31 1995 1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
Vested $2,169 $2,026 $1,602 $1,679
Non-vested 173 146 126 129
- ---------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 2,342 2,172 1,728 1,808
Additional amounts related to projected pay increases 498 398 418 438
- ---------------------------------------------------------------------------------------------------------------
Projected benefit obligations $2,840 $2,570 $2,146 $2,246
- ---------------------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES
Plan assets at fair value, primarily in equity
and fixed income securities $2,919 $2,750 $1,044 $1,145
Book reserves 132 136 1,043 1,060
- ---------------------------------------------------------------------------------------------------------------
Total assets and book reserves $3,051 $2,886 $2,087 $2,205
- ---------------------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES GREATER (LESS)
THAN PROJECTED BENEFIT OBLIGATIONS $ 211 $ 316 $ (59) $ (41)
- ---------------------------------------------------------------------------------------------------------------
Consisting of:
Unrecognized net asset (liability) at date of
initial application of FAS 87 $ 181 $ 150 $ (52) $ (26)
Unrecognized prior service cost (164) (178) (66) (27)
Unrecognized net gain (loss) 57 192 (169) (213)
Minimum liability and pre-funded expenses 137 152 228 225
- ---------------------------------------------------------------------------------------------------------------
Assets and book reserves greater (less) than
projected benefit obligations $ 211 $ 316 $ (59) $ (41)
- ---------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE RATES USED IN DETERMINING
THE ACTUARIAL PRESENT VALUE OF THE
PROJECTED BENEFIT OBLIGATIONS (percent)
Discount rate 7.00 7.25 7.3 6.9
Rate of increase in future compensation levels 4.00 4.00 5.3 5.3
EXPECTED LONG-TERM RATE OF RETURN ON PLAN ASSETS
USED IN DETERMINING CURRENT YEAR EXPENSE (percent) 9.00 9.00 8.7 8.4
- ---------------------------------------------------------------------------------------------------------------
Memo: assets and book reserves greater than
accumulated benefit obligations $ 709 $ 714 $ 359 $ 397
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
16. STOCK-BASED COMPENSATION PLANS
Under the 1995 Mobil Incentive Compensation and Stock Ownership Plan (the Plan)
approved by shareholders, options may be granted to key employees to purchase
annually a maximum of 0.9% of the total common shares outstanding at the end of
the year preceding each year of its five-year life (less the number of shares of
restricted stock granted and the number of equivalent share units allotted as
long-term incentive awards under the Plan), cumulative from the effective date
of the Plan. No additional options may be granted under earlier plans. Stock
options have a maximum term of 10 years, are granted at 100% of the fair market
value of Mobil common stock at the time of the award, and may be exercised to
purchase stock after vesting requirements have been met. Stock appreciation
rights (SARs), where applicable, permit the holder to receive stock, cash or a
combination thereof equal to the amount by which the fair market value at the
time of relinquishment of the option exceeds the option price.
Based on the December 31, 1996, number of shares outstanding, there were
5,614,174 shares or share units available for option grants and other awards
referred to above in 1997. Based on the December 31, 1995, number of shares
outstanding, there were 4,341,973 shares or share units available for option
grants and other awards referred to above in 1996.
There were 129,270 and 370,635 shares under option in the 1981 plan at
January 1, 1995 and 1994, respectively, of which 127,720 and 237,665 shares were
exercised during 1995 and 1994, respectively, and 3,700 shares expired or were
cancelled in 1994, and the remaining shares expired or were canceled during
1995.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
STOCK OPTION TRANSACTIONS 1986 Plan 1991 Plan 1995 Plan
- --------------------------------------------------------------------------------------------------------------------------
Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Price Price Price
- --------------------------------------------------------------------------------------------------------------------------
January 1, 1994-shares under option 5,298,517 $52.37 6,006,817 $ 62.88
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Changes during 1994
Options granted 2,143,100 80.69
Options granted 1,121,000 86.06
Options expired or canceled (27,818) 74.34
Options exercised (553,849) 47.04 (309,696) 62.81
SARs exercised (267,702) 55.05 (73,047) 61.44
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1994-shares under option 4,476,966 $52.88 8,860,356 $ 70.10
- --------------------------------------------------------------------------------------------------------------------------
Changes during 1995
Options granted 2,677,350 $ 87.31
Options granted 7,000 100.63
Options expired or canceled (26,231) 85.68 (12,900 87.31
Options exercised (1,000,891) 49.03 (534,270) 65.26 (1,220) 87.31
SARs exercised (121,749) 56.95 (109,444) 62.87
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1995-shares under option 3,354,326 $53.87 8,190,411 $ 70.46 2,670,230 $ 87.35
- --------------------------------------------------------------------------------------------------------------------------
Changes during 1996
Options granted 2,217,850 115.00
Options granted 20,000 115.06
Options expired or canceled (500) 28.78 (22,350) 86.06 (51,750) 103.58
Options exercised (896,502) 49.35 (715,739) 68.19 (58,910) 87.31
SARs exercised (41,444) 62.63 (28,446) 62.05
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1996-shares under option 2,415,880 $55.41 7,423,876 $ 70.67 4,797,420 $100.07
Weighted average contractual life (years) 2.54 6.00 8.46
Range of exercise price $44.19-64.25 $61.44-86.06 $87.31-115.06
- --------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1994 4,476,966 $52.88 5,125,425 $ 63.22
- --------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1995 3,354,326 $53.87 6,517,350 $ 66.96 184,280 $ 87.31
- --------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1996 2,415,880 $55.41 6,442,376 $ 68.32 609,770 $ 88.74
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The effect of stock options on the company's consolidated financial statements
is not significant.
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
17. CAPITAL STOCK
At December 31, 1996, 600,000,000 shares of $2.00 par value preferred stock
were authorized, and 445,357,805 shares were issued, including 51,743,350 shares
held in the treasury.
At December 31, 1996, 30,000,000 shares of $1.00 par value preferred stock
were authorized, of which 6,000,000 shares of Series A Junior Participating
Preferred Stock were authorized for issuance upon exercise of certain preferred
stock purchase rights (no shares issued or outstanding) and 102,894 shares of
Series B ESOP Convertible Preferred Stock were authorized for issuance. At
December 31, 1995 and 1996, respectively, 92,864 and 88,168 shares of Series B
ESOP Convertible Preferred Stock were outstanding. During 1995 and 1996, 2,914
and 4,696 of such shares, respectively, were redeemed.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
CHANGES IN SHARES OF COMMON STOCK OUTSTANDING
- ----------------------------------------------------------------------------------------------------
Year ended December 31 1994 1995 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares outstanding- beginning of year 398,167,941 395,987,017 394,559,881
Purchase of common stock for treasury (3,198,000) (2,996,350) (2,397,700)
Exercise of stock options and stock appreciation rights 1,014,245 1,554,945 1,599,816
Incentive compensation awards and restricted stock 2,831 14,269 32,458
- ----------------------------------------------------------------------------------------------------
Common shares outstanding- end of year 395,987,017 394,559,881 393,794,455
- ----------------------------------------------------------------------------------------------------
</TABLE>
Subsequent to year end, Mobil's Board of Directors voted to split the
company's outstanding common stock, two shares for one. This action is subject
to Mobil stockholders approving an increase in the authorized common stock, from
600,000,000 shares of $2.00 par value to 1,200,000,000 shares of $1.00 par
value, at the company's annual meeting scheduled for May 8, 1997. In addition, a
special distribution of Series B ESOP Convertible Preferred Stock would be made
that would double the number of shares of that stock outstanding and halve the
liquidation value per share to $3,887.50.
The accompanying consolidated financial statements have not been adjusted to
reflect the effects of the proposed stock splits.
18. COMMITMENTS AND CONTINGENT LIABILITIES
Substantial commitments are made in the normal course of business for the
purchase of crude oil and petroleum products, and the acquisition or
construction of properties, plants and equipment (including tankers for time
charter to Mobil).
Mobil has guaranteed $125 million of the obligations of others, excluding
$276 million of certain cross-guarantees, primarily foreign customs duties, made
with other responsible companies in the ordinary course of business. Mobil has
also indirectly guaranteed repayment of approximately $500 million of debt
issued by companies in which Mobil has an interest in the event projects
financed with that debt are not completed as specified in the project completion
guarantee agreements. In addition, Mobil has guaranteed specified revenues from
crude oil, product and carbon dioxide shipments under agreements with pipeline
companies in which it holds stock interests. If these companies are unable to
meet certain obligations, Mobil may be required to advance funds against future
transportation charges. No material loss is anticipated under these guarantees.
Mobil and its subsidiaries are engaged in various litigations and have a
number of unresolved claims pending. The amounts claimed are substantial, and
the ultimate liability in respect of such litigations and claims cannot be
determined at this time. Mobil has provided in its accounts for these items
based on management's best judgment. Mobil is of the opinion that such
liability, to the extent not provided for through insurance or otherwise, is not
likely to be of material importance in relation to its accounts.
51
<PAGE>
REPORTS
REPORT OF MANAGEMENT
The management of Mobil Corporation has the responsibility for preparing the
accompanying financial statements and for their integrity and objectivity. The
statements, which include amounts that are based, in part, on management's best
estimates and judgments, were prepared in conformity with generally accepted
accounting principles.
Mobil maintains a system of internal accounting controls and a program of
internal auditing that we believe provide us with reasonable assurance that
Mobil's assets are protected and that published financial statements are
reliable and free of material misstatement.
The Audit Committee of the Board of Directors, composed solely of directors
who are not officers or employees, meets regularly with Mobil's financial
management and counsel, with Mobil's General Auditor, and with the independent
auditors. These meetings include discussion of internal accounting controls and
the quality of financial reporting. The independent auditors and the General
Auditor have free and independent access to the Audit Committee to discuss the
results of their audits or any other matters relating to Mobil's financial
affairs.
The accompanying consolidated financial statements have been audited by Ernst
& Young LLP, independent auditors, whose appointment was approved by the
shareholders. Ernst & Young's audit report follows.
/S/LUCIO A. NOTO /S/THOMAS C. DELOACH, JR.
Lucio A. Noto Thomas C. DeLoach, Jr.
Chairman and Chief Executive Officer Senior Vice President and
Chief Financial Officer
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
MOBIL CORPORATION
We have audited the accompanying consolidated balance sheets of Mobil
Corporation as of December 31, 1995 and 1996, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996, appearing on pages 31,
33, and 35 through 51. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mobil Corporation
at December 31, 1995 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
As discussed in Note 6 to the financial statements, in 1995, Mobil
Corporation changed its method of accounting for the impairment of long-lived
assets. As discussed in Note 5 to the financial statements, in 1994, the Company
changed the method of accounting it uses to value its crude oil and product
inventories at the lower of cost or market.
/S/ERNST & YOUNG LLP
Fairfax, Virginia
February 28, 1997
52
<PAGE>
SUPPLEMENTARY INFORMATION
OIL AND GAS PRODUCING ACTIVITIES (unaudited)
THE ACCOMPANYING TABLES SET FORTH INFORMATION CONCERNING MOBIL'S OIL AND GAS
PRODUCING ACTIVITIES AT DECEMBER 31, 1994, 1995 AND 1996, AND FOR THE YEARS THEN
ENDED, AS REQUIRED BY FINANCIAL ACCOUNTING STANDARD (FAS) 69, DISCLOSURES ABOUT
OIL AND GAS PRODUCING ACTIVITIES.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 1: ESTIMATED QUANTITIES OF NET PROVED OIL AND NATURAL GAS LIQUIDS RESERVES (Millions of barrels)
- ------------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific Other Areas Total
----------------- ---------------- ---------------- ------------------ ------------------
Year ended December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proved reserves of fully
consolidated companies:
Beginning of year 1,116 1,052 986 357 401 373 204 175 103 1,132 1,291 1,426 2,809 2,919 2,888
Revisions (3) (9) (8) 5 (13) 7 6 (37) 5 62 105 69 70 46 73
Improved recovery 49 32 40 101 20 9 -- -- -- 130 21 49 280 73 98
Purchases 2 11 4 -- 24 -- 2 -- 54 5 2 10 9 37 68
Sales (9) (6) (36) -- -- (6) -- -- -- (2) (4) (31) (11) (10) (73)
Extensions, discoveries
and other additions 7 9 12 1 5 40 -- -- -- 49 89 113 57 103 165
Production (110) (103) (96) (63) (64) (57) (37) (35) (39) (85) (78) (98) (295) (280) (290)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 1,052 986 902 401 373 366 175 103 123 1,291 1,426 1,538 2,919 2,888 2,929
- ------------------------------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year -- -- -- 2 2 2 8 7 -- 524 516 529 534 525 531
Revisions -- -- -- -- -- -- -- 1 -- -- (4) 9 -- (3) 9
Purchases -- -- -- -- -- -- -- -- -- -- -- 336(2) -- -- 336
Sales -- -- -- -- -- -- -- (7) -- -- -- -- -- (7) --
Extensions, discoveries
and other additions -- -- -- -- -- -- -- -- -- 8 32 -- 8 32 --
Production -- -- -- -- -- -- (1) (1) -- (16) (15) (23) (17) (16) (23)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year -- -- -- 2 2 2 7 -- -- 516 529 851 525 531 853
- ------------------------------------------------------------------------------------------------------------------------------------
Total net proved reserves 1,052 986 902 403 375 368 182 103 123 1,807 1,955 2,389 3,444 3,419 3,782
- ------------------------------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
Beginning of year 871 826 816 196 215 184 196 165 93 790 809 910 2,053 2,015 2,003
End of year 826 816 759 215 184 204 165 93 91 809 910 967 2,015 2,003 2,021
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of net proved reserves of investees accounted for
on the equity method.
(2) Acquisition of a 25% interest in a joint venture that owns the Tengiz field
in the Republic of Kazakstan.
</FN>
</TABLE>
Mobil's estimated net proved reserves and changes thereto for the years 1994,
1995 and 1996 are presented in Tables 1 and 2. The estimates represent only
those volumes considered to be proved reserves and include fields where
additional investment may be required to recover these reserves.
Definitions used in developing these data are in accordance with the SEC
guidelines, which state: "Proved oil and gas reserves are the estimated
quantities of crude oil, natural gas and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions, i.e., prices and costs as of the date the estimate is made." Proved
developed reserves are recoverable from existing wells with existing equipment
and operating methods. These reserve estimates are subject to revisions over
time as more information becomes available. In the past, some revisions have
been significant. The company's net proved reserves exclude royalties and
interests owned by others, and natural gas liquids volumes received under
natural gas processing contracts.
53
<PAGE>
SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 2: ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES (Billions of cubic feet)
- ------------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific Other Areas Total
----------------- ---------------- ---------------- ------------------ ------------------
Year ended December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proved reserves of fully
consolidated companies:
Beginning of year 5,372 5,055 5,061 4,021 4,251 4,188 6,058 5,607 4,896 1,508 1,744 1,784 16,959 16,657 15,929
Revisions 164 317 (43) 234 110 (15) 51 (198) (338) 9 50 (42) 458 279 (438)
Improved recovery 30 51 20 -- 18 10 -- -- -- 5 61 19 35 130 49
Purchases 8 42 6 20 15 -- 34 -- 92 32 1 368 94 58 466
Sales (64) (52) (173) -- (42) -- -- -- -- (51) (19) (182) (115) (113) (355)
Extensions, discoveries
and other additions 117 173 16 322 237 452 71 54 -- 410 105 190 920 569 658
Production (572) (525) (488) (346) (401 (434) (607) (567) (579) (169) (158) (163)(1,694)(1,651)(1,664)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 5,055 5,061 4,399 4,251 4,188 4,201 5,607 4,896 4,071 1,744 1,784 1,974 16,657 15,929 14,645
- ------------------------------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
Beginning of year -- -- -- 33 33 34 97 94 -- 594 891 2,005 724 1,018 2,039
Revisions -- -- -- 2 4 3 4 -- -- -- -- (36) 6 4 (33)
Purchases -- -- -- -- -- -- -- -- -- -- -- 467(2) -- -- 467
Sales -- -- -- -- -- -- -- (88) -- -- -- -- -- (88) --
Extensions, discoveries
and other additions -- -- -- 2 2 2 -- -- -- 297 1,114 -- 299 1,116 2
Production -- -- -- (4) (5) (5) (7) (6) -- -- -- (10) (11) (11) (15)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year -- -- -- 33 34 34 94 -- -- 891 2,005 2,426 1,018 2,039 2,460
- ------------------------------------------------------------------------------------------------------------------------------------
Total net proved reserves 5,055 5,061 4,399 4,284 4,222 4,235 5,701 4,896 4,071 2,635 3,789 4,400 17,675 17,968 17,105
- ------------------------------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
Beginning of year 4,158 3,902 3,923 2,932 3,081 3,094 4,325 3,810 3,018 1,307 1,223 1,212 12,722 12,016 11,247
End of year 3,902 3,923 3,826 3,081 3,094 2,907 3,810 3,018 2,175 1,223 1,212 1,138 12,016 11,247 10,046
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of net proved reserves of investees accounted for
on the equity method.
(2) Acquisition of a 25% interest in a joint venture that owns the Tengiz field
in the Republic of Kazakstan.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 3: CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES (In millions)
- ------------------------------------------------------------------------------------------------------------------------------------
United States(1) Europe Asia-Pacific Other Areas Total(1)
----------------- ---------------- ---------------- ------------------ ------------------
Year ended December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capitalized costs:
Unproved properties $ 254 $ 212 $ 197 $ 11 $ 11 $ 58 $ 14 $ 13 $ 273 $ 108 $ 137 $ 324 $ 387 $ 373 $ 852
Proved properties,
wells, plants
and other equipment 15,988 13,638 12,535 6,929 7,119 7,639 2,098 2,149 3,854 4,430 4,533 5,592 29,445 27,439 29,620
- ------------------------------------------------------------------------------------------------------------------------------------
Total capitalized
costs 16,242 13,850 12,732 6,940 7,130 7,697 2,112 2,162 4,127 4,538 4,670 5,916 29,832 27,812 30,472
Accumulated
depreciation,
depletion and
amortization 11,033 9,181 8,623 3,993 4,123 4,593 1,274 1,457 1,742 2,026 1,599 1,514 18,326 16,360 16,472
- ------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs 5,209 4,669 4,109 2,947 3,007 3,104 838 705 2,385 2,512 3,071 4,402 11,506 11,452 14,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs
of equity
companies(2) -- -- -- 28 37 34 30 1 1 168 269 1,558 226 307 1,593
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 5,209 $ 4,669 $ 4,109 $2,975 $3,044 $3,138 $ 868 $ 706 $2,386 $2,680 $3,340 $5,960 $11,732 $11,759 $15,593
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Prior year data restated to conform with current year presentation.
(2) Represents Mobil's share of net capitalized costs of investees accounted
for on the equity method.
</FN>
</TABLE>
Table 3 summarizes the aggregate amount of capitalized costs related to oil and
gas producing activities and related accumulated depreciation, depletion and
amortization at December 31, 1994, 1995 and 1996. Capitalized costs include: (1)
mineral interests in properties; (2) wells, plants and related equipment and
facilities; and (3) support equipment and facilities used in oil and gas
producing activities.
54
<PAGE>
SUPPLEMENTARY INFORMATION
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 4: COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES (In millions)
- ------------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific Other Areas Total
----------------- ---------------- ---------------- ------------------ ------------------
Year ended December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition costs:(1)
Unproved properties $ 17 $ 28 $ 8 $ -- $ -- $ 46 $ 3 $ -- $ 260 $ 12 $ 34 $ 122 $ 32 $ 62 $ 436
Proved properties 8 9 57 10 4 -- 4 -- 1,455 -- 16 388 22 29 1,900
- ------------------------------------------------------------------------------------------------------------------------------------
Total acquisition costs 25 37 65 10 4 46 7 -- 1,715 12 50 510 54 91 2,336
Exploration costs 199 183 122 174 177 192 87 72 79 188 193 215 648 625 608
Development costs 365 593 417 319 421 398 265 78 273 474 833 981 1,423 1,925 2,069
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenditures 589 813 604 503 602 636 359 150 2,067 674 1,076 1,706 2,125 2,641 5,013
- ------------------------------------------------------------------------------------------------------------------------------------
Property acquisition,
exploration and
development costs of
equity companies(2) -- -- -- 12 11 8 2 8 4 84 57 1,297 98 76 1,309
- ------------------------------------------------------------------------------------------------------------------------------------
Total $589 $813 $604 $515 $613 $644 $361 $158 $2,071 $758 $1,133 $3,003 $2,223 $2,717 $6,322
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Primarily as a result of recording deferred taxes of $506 million,
the total costs allocated to property for the Ampolex acquisition
exceeded the net purchase price by $690 million ($607 million-Asia-Pacific;
and $83 million-Other).
(2) Represents Mobil's investment in companies accounted for on the equity
method.
</FN>
</TABLE>
The table above sets forth certain costs incurred, both capitalized and
expensed, in oil and gas producing activities. Property acquisition costs
represent costs incurred to purchase or lease oil and gas properties.
Exploration costs include costs of geological and geophysical activities and
drilling of exploratory wells. Expenditures to drill and equip development wells
and construct production facilities to extract, treat and store oil and gas are
included in development costs. Exploration and development costs also include
depreciation of support equipment and facilities used in these activities rather
than the acquisition costs for support equipment.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 5: RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (In millions)
- ------------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific Other Areas Total
----------------- ---------------- ---------------- ------------------ ------------------
Year ended December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Results of Operations
Revenues:
Trade sales $ 890 $ 678 $1,027 $1,486 $1,357 $1,535 $1,367 $1,429 $1,811 $ 494 $ 411 $ 464 $4,237 $3,875 $4,837
Intercompany sales 1,331 1,330 1,458 456 815 841 350 339 369 1,003 1,022 1,727 3,140 3,506 4,395
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues(1) 2,221 2,008 2,485 1,942 2,172 2,376 1,717 1,768 2,180 1,497 1,433 2,191 7,377 7,381 9,232
Production (lifting) costs (946) (982) (937) (660) (719) (734) (261) (239) (288) (507) (619) (702)(2,374)(2,559)(2,661)
Exploration expenses (115) (72) (76) (145) (128) (158) (104) (77) (156) (152) (150) (122) (516) (427) (512)
Depreciation, depletion
and amortization (949)(1,161) (638) (428) (466) (471) (230) (205) (305) (300) (398) (182)(1,907) 2,230)(1,596)
Other operating revenues
and (expenses) (31) 32 263 66 123 96 (6) (8) 6 110 77 190 139 224 555
Income tax expense (55) 68 (367) (459) (551) 638) (667) (717) (878) (480) (365)(1,083)(1,661)(1,565)(2,966)
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities 125 (107) 730 316 431 471 449 522 559 168 (22) 292 1,058 824 2,052
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations for
producing activities of
equity companies(2) -- -- 7 2 3 4 1 4 (3) 15 14 49 18 21 57
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 125 $ (107)$ 737 $ 318 $ 434 $ 475 $ 450 $ 526 $ 556 $ 183 $ (8) $ 341 $1,076 $ 845 $2,109
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Revenues in this table will not agree with Exploration & Producing Segment
Revenues (pages 22 and 36) because revenues from operations that are
ancillary to oil and gas producing activities have been classified as Other
Operating Revenues and Expenses for this presentation.
(2) Represents Mobil's share of results of operations for producing activities
of investees accounted for on the equity method.
</FN>
</TABLE>
Mobil's results of operations for producing activities for the years ended
December 31, 1994, 1995 and 1996, are shown above. Revenues include sales to
unaffiliated parties and sales or transfers (essentially at third-party sales
prices) to Mobil's other operations. All revenues reported in this table are net
of royalty interests of others. Production (lifting) costs and exploration
expenses are determined as defined by accounting standards.
55
<PAGE>
SUPPLEMENTARY INFORMATION
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (concluded)
FAS 69 requires disclosure with respect to future net cash flows from future
production of net proved, developed and undeveloped reserves. Future cash
inflows are computed by applying year-end prices to estimated future production
of net proved reserves. Future price changes are considered only to the extent
they are covered by contractual agreements in existence at year-end. Development
and production costs are based on year-end estimated future expenditures
incurred in developing and producing net proved reserves, assuming continuation
of existing economic conditions. Future income taxes are calculated using
year-end statutory tax rates. Discounted future net cash flows are computed
using a discount factor of 10%.
The standardized measure data are not intended to replace the historical
cost-based financial data included in the audited financial statements. As such,
many of the data disclosed in this section represent estimates, assumptions and
computations that are subject to continual change as the future unfolds. For
example, significant changes in year-end prices from 1995 to 1996 and the
aquisitions of Ampolex and Tengiz contributed to the higher discounted future
net cash flow amount for 1996. Accordingly, Mobil cautions investors and
analysts that the data are of questionable utility for decision making.
Tables 6 and 7 below set forth the standardized measure of discounted future
net cash flows relating to proved oil and gas reserves, and quantify the causes
of the changes in the standardized measure of the cash flows relating to those
reserves. Since the estimates reflect proved reserves only, they exclude
revenues that could result from unproved reserves that could become productive
in later years.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 6: STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (In millions)
- ------------------------------------------------------------------------------------------------------------------------------------
United States Europe Asia-Pacific
--------------------- -------------------- --------------------
At December 31 1994 1995 1996 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Future cash inflows $22,051 $23,763 $33,036 $16,415 $16,064 $19,869 $13,409 $11,565 $14,416
Future production
costs (9,329) (9,312) (8,125) (5,214) (4,822) (4,374) (2,959) (2,026) (2,196)
Future development
costs (1,775) (1,644) (1,200) (1,131) (1,203) (1,202) (754) (764) (1,030)
Future income
tax expenses (3,120) (3,928) (7,968) (4,883) (5,156) (7,830) (4,541) (3,951) (4,599)
- ------------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 7,827 8,879 15,743 5,187 4,883 6,463 5,155 4,824 6,591
10% annual discount
for estimated timing
of cash flows (3,266) (3,928 (6,919) (1,732) (1,534) (2,091) (2,367) (2,017) (2,578)
- ------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 4,561 4,951 8,824 3,455 3,349 4,372 2,788 2,807 4,013
- ------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) -- -- -- 21 23 35 21 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,561 $ 4,951 $ 8,824 $ 3,476 $ 3,372 $ 4,407 $ 2,809 $ 2,807 $ 4,013
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of standardized measure of discounted future net
cash flows of investees accounted for on the equity method.
</FN>
</TABLE>
<TABLE>
<CAPTION>
TABLE 6 (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 6: STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (In millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Other Areas Total
-------------------- ---------------------
At December 31 1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Future cash inflows $20,206 $24,543 $39,107 $72,081 $75,935 $106,428
Future production
costs (7,315) (8,589) (9,952)(24,817)(24,749) (24,647)
Future development
costs (1,414) (1,866) (5,006) (5,074) (5,477) (8,438)
Future income
tax expenses (7,299) (9,344)(15,536)(19,843)(22,379) (35,933)
- ------------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 4,178 4,744 8,613 22,347 23,330 37,410
10% annual discount
for estimated timing
of cash flows (2,087) (2,252) (3,834) (9,452) (9,731) (15,422)
- ------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows 2,091 2,492 4,779 12,895 13,599 21,988
- ------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
of discounted future
net cash flows of
equity companies(1) 434 460 1,845 476 483 1,880
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,525 $ 2,952 $ 6,624 $13,371 $14,082 $ 23,868
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents Mobil's share of standardized measure of discounted future net
cash flows of investees accounted for on the equity method.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TABLE 7: CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (In millions)
- --------------------------------------------------------------------------------------------------------------------
Year ended December 31 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning of year $ 12,214 $ 13,371 $ 14,082
Changes resulting from:
Sales and transfers of production, net of production costs (5,003) (4,822) (6,571)
Net changes in prices and in development and production costs 559 862 15,191
Extensions, discoveries, additions and purchases, less related costs 864 1,078 2,577
Development costs incurred during the period 1,423 1,925 2,069
Revisions of previous quantity estimates 2,204 731 633
Accretion of discount 2,184 2,406 2,625
Net change in income taxes (1,276) (1,477) (8,135)
Other 202 8 1,397
- --------------------------------------------------------------------------------------------------------------------
End of year $ 13,371 $ 14,082 $ 23,868
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
SUPPLEMENTARY INFORMATION
[Mountain Chart]
YEAR-END MARKET PRICE
PER COMMON SHARE
(Dollars)
OVER THE PAST 10 YEARS, MOBIL'S
STOCK PRICE HAS INCREASED AT
AN ANNUALIZED RATE OF 12%.
[Mountain Chart]
DEBT-TO-CAPITALIZATION RATIO
(In percent)
MOBIL'S DEBT-TO-CAPITALIZATION
RATIO OF 29% PROVIDES FLEXIBIL-
ITY TO INCREASE INVESTMENT
SPENDING WHEN OPPORTUNITIES ARISE.
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY
(In millions, except for per-share amounts) 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 64,456 $ 63,975 $ 67,383 $ 75,370 $ 81,503
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME, EXCLUDING THE EFFECTS OF CHANGE IN
ACCOUNTING PRINCIPLE(S) $ 1,308(1) $ 2,084 $ 2,964(1) $ 2,376 $ 2,964
- ------------------------------------------------------------------------------------------------------------------------------------
SEGMENT EARNINGS:
Petroleum Operations
Exploration & Producing -United States $ 348 $ 363 $ 125 $ (107) 737
-International 1,042 1,289 951 952 1,372
- ------------------------------------------------------------------------------------------------------------------------------------
Total Exploration & Producing 1,390 1,652 1,076 845 2,109
- ------------------------------------------------------------------------------------------------------------------------------------
Marketing & Refining -United States (145) 151 241 226 407
-International 329 554 647 447 506
- ------------------------------------------------------------------------------------------------------------------------------------
Total Marketing & Refining 184 705 888 673 913
- ------------------------------------------------------------------------------------------------------------------------------------
Total Petroleum Operations 1,574 2,357 1,964 1,518 3,022
Chemical 136 44 102 1,164 306
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Earnings 1,710 2,401 2,066 2,682 3,328
Corporate and Other (86) (190) (98) (11) (122)
Net Financing Expense (316) (127) (209) (295) (242)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle(s) 1,308 2,084 1,759 2,376 2,964
Cumulative Effect of Change in Accounting Principle(s) (446)(2) -- (680)(2) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 862 $ 2,084 $ 1,079 $ 2,376 $ 2,964
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE (based on average shares outstanding)
Income Before Change in Accounting Principle(s) $ 3.13 $ 5.07 $ 4.28 $ 5.87 $ 7.38
Net Income $ 2.01 $ 5.07 $ 2.57 $ 5.87 $ 7.38
NET INCOME AS PERCENT OF
Average shareholders' equity 7.8%(1) 12.3% 10.4%(1) 13.5% 16.0%
Average capital employed(3) 6.8%(1) 9.7% 8.4%(1) 10.9% 12.7%
Revenues 2.0%(1) 3.3% 2.6%(1) 3.2% 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SPENDING $ 4,491 $ 3,687 $ 3,927 $ 4,525 $ 7,019
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET POSITION AT YEAR-END
Current assets $ 10,956 $ 11,217 $ 11,181 $ 12,056 $ 12,895
Net properties, plants and equipment 25,075 25,037 25,503 24,850 27,479
Total assets 40,561 40,733 41,542 42,138 46,408
Current liabilities 12,629 12,351 13,418 13,054 15,248
Long-term debt 5,042 5,027 4,714 4,629 4,450
Shareholders' equity 16,540 17,237 17,146 17,951 19,072
Per common share(4) $ 41.06 $ 42.74 $ 42.61 $ 44.71 $ 47.62
- ------------------------------------------------------------------------------------------------------------------------------------
DEBT-TO-CAPITALIZATION RATIO(5) 34% 32% 31% 27% 29%
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING (thousands of shares) 398,517 399,154 397,955 395,444 394,146
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING (thousands of shares, year-end) 398,816 398,168 395,987 394,560 393,794
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS OF COMMON STOCK (year-end) 208,800 200,100 193,900 188,800 185,600
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DIVIDENDS $ 1,276 $ 1,298 $ 1,353 $ 1,434 $ 1,547
As percent of net income less preferred dividends 102%(1) 64% 80%(1) 62% 53%
Per share $ 3.20 $ 3.25 $ 3.40 $ 3.625 $ 3.925
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR-END MARKET PRICE PER COMMON SHARE $ 63 1/8 $ 79 1/8 $ 84 1/4 $ 111 3/4 $ 122 1/4
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes cumulative effect of adopting FAS 106 and 109 ($446 million) in
1992; LCM ($680 million) in 1994.
(2) Accounting changes: FAS 106 and 109 in 1992; LCM in 1994.
(3) Net income plus income applicable to minority interests plus interest
expense, net of tax, divided by the sum of average shareholders' equity,
minority interests and debt.
(4) Shareholders' equity less the effect of the ESOP-related accounts (preferred
stock and unearned employee compensation), divided by the number of common
shares outstanding at year-end.
(5) Total debt divided by the sum of total debt, shareholders' equity and
minority interests.
</FN>
</TABLE>
57
<PAGE>
SUPPLEMENTARY INFORMATION
[Bar Chart]
NET CRUDE OIL AND
NGL* PROVED RESERVES
(Millions of barrels)
LIQUIDS RESERVES INCREASED
PRIMARILY DUE TO THE ACQUISI-
TIONS OF AMPOLEX AND AN INTER-
EST IN THE TENGIZ FIELD.
[Bar Chart]
NET NATURAL GAS
PROVED RESERVES
(Billions of cubic feet)
MOBIL'S NATURAL GAS RESERVES
REPRESENT MORE THAN A 10 YEAR
SUPPLY AT CURRENT PRODUCTION
LEVELS.
<TABLE>
<CAPTION>
FIVE-YEAR OPERATING HIGHLIGHTS (Unaudited)
1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION OF CRUDE OIL AND NGL(1)
(thousands of barrels daily)
United States 311 305 300 282 262
Canada 59 58 57 53 50
Indonesia 94 90 77 77 66
Nigeria 132 169 175 157 209
Norway 102 95 95 91 83
United Kingdom 50 58 70 75 65
Other fully consolidated areas 11 9 33 30 57
Equity companies(2) 57 54 47 45 62
- --------------------------------------------------------------------------------------------------------------------------
Worldwide 816 838 854 810 854
- --------------------------------------------------------------------------------------------------------------------------
NET PRODUCTION OF NATURAL GAS (millions of cubic feet daily)
- --------------------------------------------------------------------------------------------------------------------------
United States 1,641 1,529 1,568 1,439 1,333
Canada 510 492 461 432 416
Germany 351 362 368 404 463
Indonesia 1,654 1,658 1,654 1,542 1,556
United Kingdom 260 390 470 577 618
Other fully consolidated areas 143 135 120 129 161
Equity companies(2) 45 44 29 31 40
- --------------------------------------------------------------------------------------------------------------------------
Worldwide 4,604 4,610 4,670 4,554 4,587
Barrels of oil equivalent (thousands of barrels daily)(3) 837 837 847 826 831
- --------------------------------------------------------------------------------------------------------------------------
TOTAL PRODUCTION (thousands of barrels daily of oil equivalent)(3) 1,653 1,675 1,701 1,636 1,685
- --------------------------------------------------------------------------------------------------------------------------
NET RESERVES OF CRUDE OIL AND NGL (millions of barrels)
United States 1,168 1,116 1,052 986 902
Europe 353 357 401 373 366
Asia-Pacific 227 204 175 103 123
Other fully consolidated areas 1,083 1,132 1,291 1,426 1,538
Equity companies(2) 541 534 525 531 853
- --------------------------------------------------------------------------------------------------------------------------
Worldwide 3,372 3,343 3,444 3,419 3,782
- --------------------------------------------------------------------------------------------------------------------------
NET RESERVES OF NATURAL GAS (billions of cubic feet)
United States 5,971 5,372 5,055 5,061 4,399
Europe 3,508 4,021 4,251 4,188 4,201
Asia-Pacific 6,400 6,058 5,607 4,896 4,071
Other fully consolidated areas 1,824 1,508 1,744 1,784 1,974
Equity companies(2) 103 724 1,018 2,039 2,460
- --------------------------------------------------------------------------------------------------------------------------
Worldwide 17,806 17,683 17,675 17,968 17,105
Barrels of oil equivalent (millions of barrels)(3) 3,236 3,212 3,204 3,261 3,099
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RESERVES (millions of barrels of oil equivalent)(3) 6,608 6,555 6,648 6,680 6,881
- --------------------------------------------------------------------------------------------------------------------------
RESERVES REPLACEMENT PERCENTAGE(3)(4) 69% 91% 115% 105% 133%
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE U.S. SALES PRICE/TRANSFER VALUE(5)
Crude Oil (per barrel) $15.73 $13.54 $12.91 $14.52 $17.40
NGL (per barrel) 11.84 11.25 10.37 9.94 13.16
Natural Gas (per thousand cubic feet)(6) 1.67 2.01 1.72 1.41 2.17
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE INTERNATIONAL SALES PRICE/
TRANSFER VALUE(5)
Crude Oil (per barrel) $19.11 $16.99 $15.66 $16.94 $20.81
Natural Gas (per thousand cubic feet) 2.74 2.62 2.44 2.47 2.66
- --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Natural gas liquids.
(2) Represents Mobil's share of investees accounted for on the equity method.
(3) Natural gas volumes have been converted to oil equivalent barrels and
restated on a BTU basis with 5,503, 5,506, 5,516, 5,510 and 5,519 cubic
feet of gas per barrel in 1992, 1993, 1994, 1995 and 1996, respectively.
(4) Reserves replacement percentage is calculated by dividing the net
adjustments to reserves for the year plus the annual production by the
annual production.
(5) Transfer values are essentially equal to third-party sales.
(6) Prior years' prices restated to reflect current year presentation of
wellhead price.
</FN>
</TABLE>
58
<PAGE>
SUPPLEMENTARY INFORMATION
[Bar Chart]
REFINERY RUNS VS.
PETROLEUM PRODUCT SALES
(Thousands of barrels daily)
REFINERY RUNS AND PRODUCT
SALES CONTINUED TO TREND UP-
WARD, REFLECTING AN EXPAN-
SION OF CAPACITY AND SUCCESS
OF GROWTH PROGRAMS.
[Mountain Chart]
NUMBER OF EMPLOYEES
(At year-end)
IMPLEMENTATION OF RESTRUCTUR-
ING PROGRAMS AND THE EFFECTS
OF ASSETS SALES REDUCED THE
NUMBER OF EMPLOYEES.
<TABLE>
<CAPTION>
FIVE-YEAR OPERATING HIGHLIGHTS (unaudited) (concluded)
1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PETROLEUM PRODUCT SALES(1) (thousands of barrels daily)
United States 999 1,080 1,172 1,286 1,362
Europe 790 810 810 807 827
Asia-Pacific(2) 645 730 777 799 800
Other Areas 310 314 316 330 379
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide 2,744 2,934 3,075 3,222 3,368
- ------------------------------------------------------------------------------------------------------------------------------------
PETROLEUM PRODUCT SALES(1) (millions of dollars)
United States $10,070 $10,181 $10,492 $11,904 $14,254
Europe 15,685 14,555 14,395 15,421 17,008
Asia-Pacific(2) 9,770 10,619 11,466 12,426 13,258
Other Areas 3,551 3,382 3,707 3,974 4,708
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide $39,076 38,737 $40,060 $43,725 $49,228
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE UNITED STATES PRODUCT PRICE (per gallon)(3) 65.6(cent) 61.5(cent) 58.4(cent) 60.4(cent) 68.1(cent)
- ------------------------------------------------------------------------------------------------------------------------------------
REFINERY RUNS (thousands of barrels daily)
United States 796 836 857 895 921
Europe 403 446 420 411 324
Asia-Pacific(4) 529 607 622 657 705
Other Areas 158 163 163 149 183
- ------------------------------------------------------------------------------------------------------------------------------------
Runs for Mobil by Mobil 1,886 2,052 2,062 2,112 2,133
Runs for Mobil by Others 37 20 20 9 9
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Runs for Mobil 1,923 2,072 2,082 2,121 2,142
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICAL SALES BY PRODUCT CATEGORY (millions of dollars)
Petrochemicals $ 1,733 $ 1,608 $ 2,088 $ 2,914 $ 1,876
Films Products 670 580 653 764 766
Chemical Products 59 81 101 115 126
Plastics/Other 1,111 1,139 1,193 1,155 78
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales to trade $ 3,573 $ 3,408 $ 4,035 $ 4,948 $ 2,846
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF EMPLOYEES (year-end)
Petroleum Operations-United States 22,200 21,600 20,300 18,400 13,200
-International 25,800 25,200 25,200 24,300 20,000
Chemical -United States 10,200 9,700 8,100 3,500 2,500
-International 1,900 2,100 1,800 1,600 1,600
Other -United States 3,100 2,800 2,700 2,200 4,400(5)
-International 500 500 400 400 1,300(5)
-----------------------------------------------------------------------------------------------------------------------------------
Total 63,700 61,900 58,500 50,400 43,000
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes supply/other product sales.
(2) Includes primarily Australia, China, Hong Kong, Japan, Malaysia, New Zealand
and Singapore.
(3) Represents the average amount Mobil charges dealers, service stations, etc.
for petroleum products, including gasoline. Excise taxes and other items
included in the "pump" price consumers pay for gasoline are not reflected in
this amount.
(4) Includes Australia, Japan, New Zealand and Singapore.
(5) In 1996, Mobil reorganized its staff support groups, now shown in Other.
</FN>
</TABLE>
Mobil markets autogasoline through over 18,000 retail outlets in over 60
countries. Petroleum product sales (including supply and other sales) have
increased 23% based on daily volume since 1992.
Mobil has 5 refineries in the U.S. that represent about 45% of its worldwide
capacity. Outside the U.S., Mobil has operating interests in 16 crude oil
refineries.
Mobil operates 30 chemical facilities in 11 countries, and chemical sales
extend to more than 100 countries. Mobil is a 50% partner in a complex in Saudi
Arabia that produces polyethylene and ethylene glycol.
59
<PAGE>
SHAREHOLDER INFORMATION
THE TICKER SYMBOL FOR MOBIL on the New York Stock Exchange is MOB.
THE 1997 ANNUAL MEETING for shareholders will be held Thursday, May 8, at
10 a.m. in the Grand Ballroom, Hyatt Regency Reston, Reston, Virginia.
DIVIDEND PAYMENTS on common stock are paid quarterly following declaration by
the Board of Directors. The next four tentative payment dates are: June 10,
1997; September 10, 1997; December 10, 1997, and March 10, 1998.
DIRECT REGISTRATION SYSTEM offers new investors and participating
shareholders another way to register their shares without having a physical
certificate issued. For information call ChaseMellon Shareholder Services at
1-800-648-9291.
MOBIL'S STOCK PURCHASE AND DIVIDEND REINVESTMENT PLAN allows new investors to
buy Mobil common stock for as little as $250 and existing shareholders to
automatically reinvest dividends--both without paying commissions or service
fees. Once enrolled, you can make purchases through monthly cash deposits
ranging from $10 to $7,500. Optional cash deposits are invested weekly. For more
information, request a prospectus on Mobil's Stock Purchase and Dividend
Reinvestment Plan from: ChaseMellon Shareholder Services, L.L.C., Dividend
Reinvestment Services, P.O.Box 750, Pittsburgh, Pennsylvania 15230. Telephone
1-800-648-9291, or visit Mobil's Internet site.
QUESTIONS ABOUT DIVIDEND CHECKS, electronic payment of dividends, stock
certificates, address changes, account consolidation, transfer procedures and
year-end tax information? Write: ChaseMellon Shareholder Services, L.L.C.,
Shareholder Relations, P.O.Box 590, Ridgefield Park, New Jersey 07660. Telephone
1-800-648-9291 (Telecommunications Device for the Deaf 1-800-231-5469).
SHAREHOLDERS OR OTHERS WANTING GENERAL INFORMATION should write: Secretary's
Department, Room 2D915, Mobil Corporation, 3225 Gallows Road, Fairfax, Virginia
22037-0001. Telephone 1-703-846-3898.
PUBLICATIONS AVAILABLE TO SHAREHOLDERS:
Mobil's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission.
1996 Mobil Fact Book, a supplement to the annual report with additional
financial and operating data.
Quarterly Earnings Press Releases.
Meeting our Commitments: Mobil's EHS Performance Report, an account of
Mobil's environmental, health and safety performance (available May 1997).
Mobil in Nigeria and Mobil in Indonesia.
For copies, visit Mobil's Internet Site, call Mobil Publications at
1-800-293-5796, or write: Secretary's Department, Room 2D915, Mobil Corporation,
3225 Gallows Road, Fairfax, Virginia 22037-0001.
ANALYSTS AND INSTITUTIONAL INVESTORS wanting information about Mobil should
write: Investor Relations, Room 2D804, Mobil Corporation, 3225 Gallows Road,
Fairfax, Virginia 22037-0001. Telephone 1-703-846-3955.
AUDITORS: Ernst & Young LLP, Fairfax Square
Tower II, 8075 Leesburg Pike, Vienna, Virginia 22182-2709.
TRANSFER AGENT AND REGISTRAR IN THE U.S.: ChaseMellon Shareholder Services,
L.L.C., Overpeck Centre, 85 Challenger Road, Ridgefield Park, New Jersey 07660.
Telephone 1-800-648-9291 (Telecommunications Device for the Deaf
1-800-231-5469).
TRANSFER AGENT AND REGISTRAR IN CANADA: Montreal Trust Company of Canada, 151
Front Street West, 8th Floor, Toronto, Ontario M5J 2N1, Canada. Telephone
1-416-981-9500. Montreal Trust Company of Canada, Western Gas Tower, 530 8th
Avenue, S.W., Calgary, Alberta T2P 3S8, Canada. Telephone 1-403-267-6800.
BENEFITS AND CONTRIBUTIONS: Information on employee benefits plans is
contained in plan descriptions, annual reports and other materials regularly
furnished to employees under the Employee Retirement Income Security Act of
1974. A statement of charitable contributions by Mobil Foundation Inc. is
prepared annually.
INTERNET ADDRESS: http://www.mobil.com
An important part of the operations covered by this report is carried on by
operating divisions, subsidiaries and affiliates under the direction and
control of their own managements. Except as otherwise indicated by the context,
this report uses such terms as "Mobil," "corporation," "company," "we" and
"our," sometimes for the parent corporation and all such divisions,
subsidiaries and affiliates collectively, and sometimes for one or more of
them. Duplicate mailings of this annual report may be eliminated by sending a
written request to: ChaseMellon Shareholder Services, L.L.C., Shareholder
Relations, P.O. Box 590, Ridgefield Park, New Jersey 07660. Eliminating
duplicate mailings will not affect your dividend, proxy statement or proxy card
mailings.
Mobil Annual Report 1996 is printed on recycled and recyclable paper. *
* Recycled Symbol
60
<PAGE>
BOARD OF DIRECTORS
[Photograph - Page 61]
Heimbold Hoenmans Fites Branscomb Schwartz Swanson
Vallance Renna Johnson Sanford Jacobson
Munro Peters Noto Kaplan
- --------------------------------------------------------------------------------
LEWIS M. BRANSCOMB
Elected 1978, Aetna Professor, Public Policy and Corporate Management, Emeritus,
John F. Kennedy School of Government, Harvard University. Committees: Audit
(Chmn.), Public Issues
DONALD V. FITES
Elected 1990, Chairman and Chief Executive Officer, Caterpillar Inc. Committees:
Management Compensation and Organization, Directors and Board Affairs
CHARLES A. HEIMBOLD JR.
Elected 1995, Chairman and Chief Executive Officer, Bristol-Myers Squibb.
Committees: Audit, Directors and Board Affairs
PAUL J. HOENMANS
Elected 1985, Executive Vice President, Mobil Corporation. Joined Mobil 1954.
Committee: Executive
ALLEN F. JACOBSON
Elected 1988, Former Chairman of the Board and Chief Executive Officer, 3M.
Committees: Directors and Board Affairs (Chmn.), Management Compensation and
Organization
SAMUEL C. JOHNSON
Elected 1981, Chairman of the Board, S. C. Johnson & Son, Inc. Committees:
Management Compensation and Organization, Public Issues (Chmn.)
HELENE L. KAPLAN
Elected 1989, Of Counsel, Skadden, Arps, Slate, Meagher & Flom. Committees:
Audit, Directors and Board Affairs
J. RICHARD MUNRO
Elected 1989, Chairman of the Board, Genentech.
Committees: Management Compensation and Organization, Public Issues
LUCIO A. NOTO
Elected 1988, Chairman of the Board, President and Chief Executive Officer.
Joined Mobil 1962. Committee: Executive (Chmn.)
AULANA L. PETERS
Elected 1992, Partner, Gibson, Dunn & Crutcher. Committees: Audit, Public Issues
EUGENE A. RENNA
Elected 1986, Executive Vice President, Mobil Corporation. Joined Mobil 1968.
Committee: Executive
CHARLES S. SANFORD JR.
Elected 1990, Former Chairman and Chief Executive Officer, Bankers Trust
Company. Committees: Management Compensation and Organization, Directors and
Board Affairs
ROBERT G. SCHWARTZ
Elected 1987, Former Chairman of the Board, President and Chief Executive
Officer, Metropolitan Life Insurance Co. Committees: Management Compensation and
Organization (Chmn.), Public Issues
ROBERT O. SWANSON
Elected 1991, Executive Vice President, Mobil
Corporation. Joined Mobil 1958. Committee: Executive
IAIN D.T. VALLANCE
Elected 1996, Chairman, British Telecommunications plc. Committees: Audit,
Public Issues
MOBIL CORPORATION OFFICERS
LUCIO A. NOTO
Chairman of the Board, President and Chief Executive Officer
PAUL J. HOENMANS
Executive Vice President
EUGENE A. RENNA
Executive Vice President
ROBERT O. SWANSON
Executive Vice President
THOMAS C.DELOACH JR.
Senior Vice President and
Chief Financial Officer
ROBERT F. AMRHEIN
Vice President
ALDIS V. LIVENTALS
Vice President
SAMUEL H. GILLESPIE III
Vice President and General Counsel
WALTER R. ARNHEIM
Treasurer
CHARLES H. DUBOIS
Secretary
M. FRANCES KEETH
Controller
61
<PAGE>
MOBIL CORPORATION
3225 GALLOWS ROAD, FAIRFAX, VIRGINIA 22037-0001
[Artwork BC]
<PAGE>
GRAPHIC APPENDIX LIST - 1996
Front Cover - Drawing of head and upper portion of Mobil Pegasus logo, in red,
fills most of the page. To the right hand side of the page, above
the Pegasus' head, are the words, "Mobil" and "The energy to make
a difference". At the bottom right hand side of the cover are the
words "1996 Annual Report".
Inside front cover - Left Side appearing vertically from bottom of page to top
are enlarged letters -- "Returns to Shareholders". Words
"Average Annual" appear at middle left of page above a
graph.
One Graph - middle left side.
Average annual returns to shareholders, Mobil share--price
appreciation plus reinvested dividends vs. Competitors,
and S&P 500--1 year, 5 years, 10 years.
Center of page appearing from vertically from bottom of
page to top are enlarged letters -- "Highlights" with
"Financial" appearing above a table of "Financial
Highlights".
Upper right side of page "Contents" appearing vertically
from middle to top of page in enlarged letters. Table of
Contents appears to the right.
Page 1 - Top. Enlarged letters, "Mobil: The energy to make a difference."
Photo.
Left column, upper page: Lucio A. Noto, Chairman, President
and Chief Executive Officer
Right side, vertical from bottom to top are enlarged letters --
"Letter to Shareholders."
Page 4 - Left Side appearing from bottom page to top are enlarged letters --
"At a Glance" beside the word "Mobil"
Upper middle is "Red Pegasus" logo in white circle background.
Photo.
Lower right side: Modern, floating production platform.
Page 5 - Photo.
Upper left side. Mobil tanker truck transporting motor fuels.
Photo.
Left middle-page Mobil employees reviewing molecular image on
computer screen.
Page 6 - Enlarged letters -- "Partnerships" vertically from bottom to top of
left margin.
Photo.
Upper middle-page: Mobil-PanEnergy gas marketing venture employees
working in a busy trading room.
Page 7 - Middle-page: Mobil-British Petroleum joint venture logo.
Page 8 - Enlarged letters -- "Growth" vertically from bottom to top of left
margin.
Photo.
Upper middle-page across onto next page: Mobil employees at work on a
drilling platform in Equatorial Guinea.
Page 9 - Lower middle page - Map of West African coast.
Page 10 - Enlarged letters -- "Expansion" vertically from bottom to top of
left margin.
Photo.
Lower right side: A tanker loading Qatar's first LNG exports.
Page 11 - Lower right side: Map of the Arabian Gulf showing the location of
Qatar and the North Field.
Page 12 - Enlarged letters -- "Service" vertically from bottom to top of left
margin.
Middle of Page: Mobil Speedpass advertisement: "The Fastest Way to
Get Gas" Key ring transmitter pictured.
Page 13 - Photo.
Full page: Customers and cashier at Mobil's "On the Run" convenience
store.
Page 14 - Enlarged letters -- "Opportunity" vertically from bottom to top of
left margin.
Photo.
Upper right side across onto next page: An oil field in Venezuela's
Orinoco Oil Belt.
Photo.
Lower middle-page: Map of Venezuela and surrounding countries.
Page 15 - Upper right side: Map of Asia-Pacific Region.
Page 16 - Enlarged letters --"Technology" vertically from bottom to top of left
margin.
Photo.
Center of page: Model of a molecule.
Page 17 - Enlarged letters -- "Commitment" vertically from bottom to top of
right margin.
Center of Page - Mobil environmental logo featuring sun, mountains
and ocean.
Page 18 - Enlarged letters --"Financial" vertically from bottom to top of
right margin.
Page 20 - Two Bar Graphs:
Top
Income of Mobil (millions of dollars) for years 1992 through 1996
(excludes the LCM accounting method change in 1994).
Bottom
Total return to shareholders (per $100 invested on 12/31/91), S&P
500 and Mobil -- share price appreciation plus reinvested dividends
-- for years 1992 through 1996.
Page 21 - One Bar Graph
Annual dividends per share of common stock (dollars) for years 1987
through 1996.
Page 22 - Two Bar Graphs:
Top
Mobil's Upstream Net Income and Operating Earnings, (millions of
dollars) for years 1994 through 1996.
Bottom
U.S. and international net production of oil and gas (thousands of
barrels daily of oil equivalent) for the years 1994 through 1996.
Page 23 - Two Bar Graphs:
Top
Mobil's U.S. and international average crude oil sales prices,
(dollars per barrel) for years 1994 through 1996.
Bottom
Mobil's U.S. and international average natural gas sales prices,
(dollars per thousand cubic feet) for years 1994 through 1996.
<PAGE>
Page 24 - Two Bar Graphs:
Top
Mobil's Downstream Net Income and Operating Earnings, (millions of
dollars) for years 1994 through 1996.
Bottom
Mobil's U.S. and international refinery runs, (thousands of barrels
daily) for years 1994 through 1996.
Page 25 - Two Bar Graphs:
Top
Mobil's U.S. and international Downstream petroleum product sales
volumes, (thousands of barrels daily) for years 1994 through 1996.
Bottom
Mobil's U.S. and international Downstream petroleum product sales
revenues, (millions of dollars) for years 1994 through 1996.
Page 26 - Two Bar Graphs:
Top
Mobil's Chemical segment net income and Operating Earnings, (in
millions of dollars) are presented for years 1994 through 1996.
Bottom
Mobil's Chemical segment net sales to trade, (Petrochemicals and
Other in millions of dollars) are presented for years 1994 through
1996.
Page 30 - Two Bar Graphs:
Top
Total Revenues and Total Costs and Expenses for Mobil (millions of
dollars) for years 1994 through 1996.
Bottom
Mobil's return on average shareholders' equity (in percent) for
years 1994 through 1996 (excludes LCM accounting method change
in 1994).
Page 32 - Two Bar Graphs:
Top
Total Debt of Mobil, U.S. and international (millions of dollars)
for years 1994 through 1996.
<PAGE>
Bottom
Mobil's return on average capital employed (in percent) for years
1994 through 1996 (excludes LCM accounting method change in 1994).
Page 34 - Bar Graph - Top
Proceeds from sales of assets (millions of dollars) for years 1994
through 1996.
Mountain Graph - Bottom
Mobil capital expenditures, exploration expenses and equity
investments (millions of dollars) for years 1994 through 1996.
Page 57 - Two Mountain Graphs:
Top
Year-end Market price per share of common stock (dollars) for years
1986 through 1996.
Bottom
Debt-to-capitalization ratio (in percent) for years 1986 through
1996.
Page 58 - Two Bar Graphs:
Top
Net crude oil and natural gas liquids proved reserves of Mobil
(millions of barrels) for years 1992 through 1996.
Bottom
Net natural gas proved reserves of Mobil (billions of cubic feet) for
years 1992 through 1996.
Page 59 - Bar Graph - Top
Refinery Runs vs. Petroleum Product Sales (thousands of barrels
daily) for years 1992 through 1996.
Mountain Graph - Bottom
Number of Employees (At year-end) for Mobil for years 1992 through
1996, split between Petroleum Operations segment, Chemical segment
and Other.
Page 60 - Enlarged letters appears "Shareholder Information" from bottom to top
of left margin.
Page 61 - Enlarged letters appears "Board of Directors" from bottom to top of
left margin.
Photo
(Inside Back Fifteen-member group photo of Mobil's Board of Directors.
Cover)
Back cover - Drawing of the wings of Mobil Pegasus in red fills most of the
page. Centered above the Pegasus' wings are the words, "Mobil
Corporation," the address, and the telephone number.
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 21
MOBIL CORPORATION
Subsidiaries of the Registrant
- --------------------------------------------------------------------------------
Percentage
of Voting
Securities
Owned by
Organized Immediate
Level under Laws of Parent
- ----- ------------- ----------
1 Mobil Corporation ........................... Delaware
Major Subsidiaries as of December 31, 1996:
2 Mobil Business Resources Corporation......... Delaware 100.00
2 Mobil Equatorial Guinea Inc. ................ Delaware 100.00
2 Mobil Exploration and Development
Venezuela Inc. ............................ Delaware 100.00
2 Mobil Exploration & Producing U.S. Inc. ..... Delaware 100.00
2 Mobil Exploration and Producing North
America Inc. .............................. Nevada 100.00
3 Mobil Investments Canada Inc. ............. Delaware 34.69*
4 Mobil Oil Canada, Ltd. .................. Canada 100.00
3 Mobil Oil Exploration & Producing
Southeast Inc............................ Delaware 100.00
3 Mobil Oil Indonesia Inc. .................. Delaware 100.00
2 Mobil International Finance Corporation ..... Delaware 100.00
3 Mobil Investments Inc. .................... Delaware 100.00
2 Mobil Land Development Corporation .......... Delaware 100.00
2 Mobil Natural Gas Inc. ...................... Delaware 100.00
2 Mobil International Petroleum Corporation ... Delaware 100.00
3 Mobil de Colombia S.A. .................... Colombia 80.07*
3 General Petroleum Company, Inc. ........... New York 100.00
4 Mobil Oil do Brazil (Industria e
Comercio) Ltda. ....................... Brazil 10.00*
4 Mobil Oil Egypt (S.A.E.) ................ Egypt .36*
3 Mobil Chemical International Ltd. ......... Delaware 100.00
3 Mobil Exploration Norway Inc. ............. Delaware 100.00
3 Mobil Oil Abu Dhabi Inc. .................. Delaware 100.00
3 Mobil Oil Aktiengesellschaft .............. Germany 10.00*
4 Mobil Erdgas-Erdoel GMBH ................ Germany 100.00
4 Mobil Marketing Und Raffinerie GMBH ..... Germany 100.00
5 Mobil Beteiligungs-und
Vertriebsgesellschaft MBH ........... Germany 100.00
3 Mobil Oil Cameroun ........................ Cameroun 99.98
3 Mobil Oil Company de Colombia ............. Delaware 100.00
4 Mobil de Colombia S.A. .................. Colombia .06*
3 Mobil Oil Cote d'Ivoire ................... Ivory Coast 100.00
3 Mobil Oil do Brazil (Industria e
Comercio) Ltda. ......................... Brazil 90.00*
3 Mobil Oil East Africa Limited ............. Delaware 100.00
3 Mobil Oil Egypt (S.A.E.) .................. Egypt 99.28*
3 Mobil Oil Francaise ....................... France 99.98
4 Mobil Oil Maroc ......................... Morocco 12.45*
3 Mobil Oil Malaysia Sendirian Berhad ....... Malaysia 100.00
3 Mobil Oil Singapore Pte. Ltd. ............. Singapore 100.00
3 Mobil Petroleum Company Inc. .............. Delaware 100.00
(Level indicates the parent/subsidiary hierarchical relationship.)
(Asterisk indicates 100% ownership held by two or more Mobil subsidiaries.)
- --------------------------------------------------------------------------------
Mobil - 30 -
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 21
MOBIL CORPORATION
Subsidiaries of the Registrant
- --------------------------------------------------------------------------------
Percentage
of Voting
Securities
Owned by
Organized Immediate
Level under Laws of Parent
- ----- ------------- ---------
1 Mobil Corporation (continued)
2 Mobil International Petroleum
Corporation (continued)
3 Mobil Petroleum Company Inc. (continued)
4 Mobil Australia Finance Company Inc. .... Delaware 100.00
4 Mobil de Colombia S.A. .................. Colombia 16.28*
4 Mobil Europe Inc. ....................... Delaware 100.00
4 Mobil Exploration & Producing Australia
Pty Ltd ............................... Australia 100.00
5 Ampolex Limited ....................... Australia 99.76
4 Mobil Holdings (U.K.) Limited ........... Delaware 100.00
5 Mobil Holdings (Europe and Africa)
Limited ............................. Delaware 100.00
6 Mobil Oil Portuguesa, LDA. .......... Portugal 99.98*
5 Mobil Holdings Limited ................ United Kingdom 99.93*
6 Mobil Oil Company Limited ........... United Kingdom 100.00
7 Vacuum Oil Company Limited ........ United Kingdom 98.00*
6 Mobil Trading and Supply Limited .... United Kingdom 99.90*
6 Mobil Data Services Limited ......... United Kingdom 100.00
7 Mobil Services Company Limited United Kingdom .01*
6 Mobil Services Company Limited ...... United Kingdom 99.99*
7 Vacuum Oil Company Limited ........ United Kingdom 2.00*
7 Superior Oil (U.K.) Limited ....... United Kingdom .10*
7 Mobil Trading and Supply Limited .. United Kingdom .10*
7 Mobil Oil Portuguesa, LDA . ....... Portugal .02*
5 Mobil North Sea Limited ............... Delaware 100.00
5 Mobil Oil Hellas A.E. ................. Greece .03*
5 Superior Oil (U.K.) Limited ........... United Kingdom 99.90*
4 Mobil Holdings Benelux Inc. ............. Delaware 100.00
5 Mobil Oil B.V. ........................ The
Netherlands 100.00
6 Mobil Oil, S.A. ..................... Spain 100.00
5 Mobil Oil Hellas A.E. ................. Greece 99.97*
4 Mobil Marine Transportation Limited ..... Canada 100.00
5 Mobil Shipping and Transportation
Company ............................. Liberia 100.00
4 Mobil Oil (Switzerland) ................. Switzerland 100.00
4 Mobil Oil Aktiengesellschaft ............ Germany 90.00*
4 Mobil Oil Australia Limited ............. Australia 100.00
5 Vacuum Oil Company Proprietary
Limited ............................. Australia 100.00
6 Mobil Refining Australia Pty LTD. ... Australia 100.00
4 Mobil Oil Austria Aktiengesellschaft .... Austria 100.00
4 Mobil Oil Egypt (S.A.E.) ................ Egypt .36*
4 Mobil Oil Hong Kong Limited ............. Hong Kong 99.90
4 Mobil Oil Kazakhstan Inc. ............... Delaware 100.00
4 Mobil Oil Maroc ......................... Morocco 87.55*
(Level indicates the parent/subsidiary hierarchical relationship.)
(Asterisk indicates 100% ownership held by two or more Mobil subsidiaries.)
- --------------------------------------------------------------------------------
Mobil - 31 -
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 21
MOBIL CORPORATION
Subsidiaries of the Registrant
- --------------------------------------------------------------------------------
Percentage
of Voting
Securities
Owned by
Organized Immediate
Level under Laws of Parent
- ----- ------------- ---------
1 Mobil Corporation (concluded)
2 Mobil International Petroleum
Corporation (concluded)
3 Mobil Petroleum Company Inc. (concluded)
4 Mobil Oil New Zealand Limited ........... New Zealand 100.00
4 Mobil Oil Qatar Inc. .................... Delaware 100.00
4 Mobil Oil Turk A.S. ..................... Turkey 100.00
4 Mobil Producing Netherlands Inc. ........ Delaware 100.00
4 Mobil Saudi Arabia Inc. ................. Delaware 100.00
4 Mobil Sekiyu Kabushiki Kaisha ........... Japan 100.00
4 Mobil Vietnam Inc. ...................... Delaware 100.00
4 Mobil Yanbu Petrochemical Company Inc. .. Delaware 100.00
4 Mobil Yanbu Refining Company Inc. ....... Delaware 100.00
4 Mobil Petrochemical Sales and Supply
Corporation ........................... Delaware 100.00
3 Mobil Petrochemicals International
Limited ................................. Delaware 100.00
3 Mobil Pipe Line Company ................... Delaware 100.00
3 Mobil Plastics Europe, Inc. ............... Delaware 100.00
4 Mobil Petrochemical Holdings Co. Inc. ... Delaware 100.00
3 Mobil Sales and Supply Corporation ........ Delaware 100.00
4 Mobil Gas Liquids Trading, Inc. ......... Delaware 100.00
2 Mobil Oil Corporation ....................... New York 100.00
3 Mobil Alaska Pipeline Company ............. Delaware 100.00
3 Mobil Chemical Company Inc. ............... Delaware 100.00
3 Mobil Development Nigeria Inc. ............ Delaware 100.00
4 Mobil Producing Nigeria Unlimited ....... Nigeria 50.00*
3 Mobil Exploration and Producing Services
Inc. .................................. Delaware 100.00
3 Mobil Exploration Nigeria Inc. ............ Delaware 100.00
4 Mobil Producing Nigeria Unlimited ....... Nigeria 50.00*
3 Mobil Oil Credit Corporation .............. Delaware 100.00
3 Mobil Oil Nigeria Public Limited Company .. Nigeria 60.00
3 Mobil Oil Refining Corporation ............ Delaware 100.00
3 Mobil Technology Company .................. Delaware 100.00
3 Mobil Rocky Mountain Inc. ................. Delaware 100.00
4 Mobil Investments Canada Inc. ........... Delaware 65.31*
2 Mobil Produccion E Industrialization de
Venezula ................................ Delaware 100.00
2 Mobil Producing Texas & New Mexico Inc. ..... Delaware 100.00
2 Mobil Qatargas Inc. ......................... Delaware 100.00
2 The Superior Oil Company .................... Delaware 100.00
(Level indicates the parent/subsidiary hierarchical relationship.)
(Asterisk indicates 100% ownership held by two or more Mobil subsidiaries.)
- --------------------------------------------------------------------------------
Mobil - 32 -
- -------------------------------------------------------------------------------
Exhibit 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Mobil Corporation of our report dated February 28, 1997, included in the 1996
Annual Report to Shareholders of Mobil Corporation.
Our audits also included the financial statement schedule of Mobil Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 (Nos. 33-18130 and 333-16819) pertaining to the Employees Savings
Plan of Mobil Oil Corporation; Form S-8 (No. 33-5797) pertaining to the 1986
Mobil Incentive Compensation and Stock Option Plan; Form S-3 (No. 33-34133-01)
of the Mobil Oil Corporation Employee Stock Ownership Plan Trust for the
registration of $300,000,000 principal amount of debt securities guaranteed by
Mobil Corporation; Form S-3 (No. 33-43745) for the registration of
$1,500,000,000 of Mobil Corporation Debt Securities; Form S-3 (No. 33-49945) for
the registration of $1,500,000,000 of Mobil Corporation Debt Securities; Form
S-8 (No. 33-48887) pertaining to the 1991 Mobil Incentive Compensation and Stock
Option Plan; Form S-3 (No. 33-50943) pertaining to the Mobil Corporation Stock
Purchase and Dividend Reinvestment Plan for the registration of 5,000,000 shares
of Mobil Corporation Common Stock and related Preferred Share Purchase Rights;
Form S-8 (No. 33-61657) pertaining to the 1995 Mobil Incentive Compensation and
Stock Ownership Plan; Form S-3 (No. 333-13457) for the registration of
$650,000,000 Pass Through Certificates with the applicable underlying payments
guaranteed by Mobil Corporation; and in the related Prospectuses of our report
dated February 28, 1997, with respect to the financial statements incorporated
herein by reference and our report included in the preceding paragraph with
respect to the financial statement schedule included in this Annual Report on
Form 10-K of Mobil Corporation.
/s/Ernst & Young LLP
Ernst & Young LLP
Fairfax, Virginia
March 10, 1997
Mobil - 33 -
MOBIL CORPORATION
I, G. G. GARNEY, Senior Assistant Secretary of MOBIL CORPORATION, a
corporation organized and existing under the laws of the State of Delaware, DO
HEREBY CERTIFY that at a duly constituted meeting of the Board of Directors of
MOBIL CORPORATION held on February 28, 1997, at which meeting a quorum was
present, the following resolution was approved:
RESOLVED, that the Corporation's 1996 Annual Report on Form 10-K in
substantially the form presented at this meeting, be and the same
hereby is approved, and that the officers of the Corporation be and
they and each of them hereby are authorized to sign and file such
Report, including any amendments to such annual report on Form 10-K, on
behalf of the Corporation with the Securities and Exchange Commission,
the New York Stock Exchange and such other exchanges as may be
necessary and appropriate, with such changes or amendments therein, if
any, as may be approved by the officer or officers signing the same,
which changes or amendments are hereby expressly approved.
I further certify that the foregoing resolution is still in full force
and effect.
IN TESTIMONY WHEREOF, I have signed my name and affixed the Corporate
Seal at Fairfax, VA this 12th day of March, 1997.
/s/ G. G. Garney
G. G. Garney
Senior Assistant Secretary
<PAGE>
MOBIL CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
directors and/or officers of Mobil Corporation, a Delaware corporation, hereby
constitutes and appoints WALTER R. ARNHEIM, M. FRANCES KEETH, CHARLES H. DuBOIS
and GORDON G. GARNEY his or her true and lawful attorneys-in-fact and agents to
execute in his or her name and capacity the 1996 annual report on Form 10-K of
this Corporation and any amendments to such annual report with all exhibits
thereto, and any and all documents in connection therewith pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, each of such
persons having full power to act without the others;
AND FURTHER, that each of the undersigned directors and/or officers of
the Corporation hereby grants to said attorneys-in-fact and agents and each of
them, full power and authority to do and perform any and all acts and things
essential and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person in connection with
the proper exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned, as directors and/or officers of
said Mobil Corporation or as individuals, have here- unto set their hands and
seals as of the 28th day of February, 1997.
NAME AND TITLE
/s/ Lucio A. Noto
Lucio A. Noto, Director, Chairman
of the Board, Principal Executive
Officer
NAME AND TITLE
/s/Thomas C. DeLoach, Jr.
Thomas C. DeLoach, Jr., Senior Vice
President, Principal Financial Officer
<PAGE>
-2-
NAME AND TITLE
/s/ M. Frances Keeth
M. Frances Keeth, Controller,
Principal Accounting Officer
NAME AND TITLE
/s/ Lewis M. Branscomb
Lewis M. Branscomb, Director
NAME AND TITLE
/s/ Donald V. Fites
Donald V. Fites, Director
NAME AND TITLE
/s/ Charles A. Heimbold, Jr.
Charles A. Heimbold, Jr., Director
NAME AND TITLE
/s/ Paul J. Hoenmans
Paul J. Hoenmans, Director
NAME AND TITLE
/s/ Allen F. Jacobson
Allen F. Jacobson, Director
NAME AND TITLE
/s/ Samuel C. Johnson
Samuel C. Johnson, Director
NAME AND TITLE
/s/ Helene L. Kaplan
Helene L. Kaplan, Director
NAME AND TITLE
/s/ J. Richard Munro
J. Richard Munro, Director
NAME AND TITLE
/s/ Aulana L. Peters
Aulana L. Peters, Director
<PAGE>
-3-
NAME AND TITLE
/s/ Eugene A. Renna
Eugene A. Renna, Director
NAME AND TITLE
/s/ Charles S. Sanford, Jr.
Charles S. Sanford, Jr., Director
NAME AND TITLE
/s/ Robert G. Schwartz
Robert G. Schwartz, Director
NAME AND TITLE
/s/ Robert O. Swanson
Robert O. Swanson, Director
NAME AND TITLE
/s/ Iain D. T. Vallance
Iain D. T. Vallance, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR YEAR ENDED DECEMBER 31, 1996 10-K
This schedule contains summary financial information extracted from the
December 31, 1996 Form 10-K and Annual Report, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000067182
<NAME> JOYCE NICHOLS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 808
<SECURITIES> 0
<RECEIVABLES> 8,192
<ALLOWANCES> 0
<INVENTORY> 3,017
<CURRENT-ASSETS> 12,895
<PP&E> 55,127
<DEPRECIATION> 27,648
<TOTAL-ASSETS> 46,408
<CURRENT-LIABILITIES> 15,248
<BONDS> 4,450
0
686
<COMMON> 891
<OTHER-SE> 17,495
<TOTAL-LIABILITY-AND-EQUITY> 46,408
<SALES> 80,365<F1>
<TOTAL-REVENUES> 81,503<F1>
<CGS> 47,490
<TOTAL-COSTS> 50,215
<OTHER-EXPENSES> 19,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 455
<INCOME-PRETAX> 6,111
<INCOME-TAX> 3,147
<INCOME-CONTINUING> 2,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,964
<EPS-PRIMARY> 7.30
<EPS-DILUTED> 7.22
<FN>
<F1>SALES AND TOTAL REVENUES INCLUDE $9,236 MILLION OF EXCISE AND
STATE GASOLINE TAXES
</FN>
