- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission file number 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, VA. 22037-0001
(Address of principal executive offices) (Zip Code)
(703) 846-3000
Registrant's telephone number
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 .
The number of shares outstanding of the registrant's common stock, all of
which comprise a single class with a $1.00 par value, as of October 29, 1999,
the latest practicable date, was 777,099,238.
------------------------------------------------------------
MOBIL CORPORATION
Form 10-Q
Quarterly Report
September 30, 1999
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Statement of Income for the
Three and Nine Months Ended
September 30, 1998 and 1999 .................. 1
Consolidated Balance Sheet at December 31, 1998
and September 30, 1999 ....................... 2
Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1998 and 1999 3
Segment Information ............................ 4
Notes to Condensed Consolidated Financial
Statements ................................... 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition .......... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................ 20
Item 2. Changes in Securities ............................ 21
Item 3. Defaults Upon Senior Securities .................. 21
Item 4. Submission of Matters to a Vote of Security
Holders ........................................ 21
Item 5. Other Information ................................ 21
Item 6. Exhibits and Reports on Form 8-K ................. 21
SIGNATURE .................................................. 22
EXHIBIT INDEX .............................................. 23
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges .................................... 24
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per-share amounts)
For the Three Months|For the Nine Months
Ended Sept 30,|Ended Sept 30,
--------------------|------------------
1998 1999 | 1998 1999
--------- ------- |-------- -------
Revenues |
Sales and services (a) ................ $12,878 $16,127 | $39,289 $42,084
Income from equity affiliates ......... 204 177 | 385 380
Income from asset sales, interest |
and other ........................... 404 49 | 675 318
------- ------- | ------- -------
|
Total Revenues ...................... 13,486 16,353 | 40,349 42,782
------- ------- | ------- -------
Costs and Expenses |
Crude oil, products and operating |
supplies and expenses ............... 8,261 10,663 | 24,738 26,896
Exploration expenses .................. 185 122 | 356 343
Selling and general expenses .......... 854 906 | 2,727 2,658
Depreciation, depletion and amortization 633 627 | 1,853 1,824
Interest and debt discount expense .... 227 95 | 350 254
Taxes other than income taxes (a) ..... 2,486 2,707 | 7,217 7,847
Income taxes .......................... 331 545 | 1,252 1,059
------- ------- | ------- -------
Total Costs and Expenses ............ 12,977 15,665 | 38,493 40,881
------- ------- | ------- -------
Net Income .............................. $ 509 $ 688 | $ 1,856 $ 1,901
======= ======= | ======= =======
|
Net Income Per Common Share ............. $ 0.64 $ 0.87 | $ 2.33 $ 2.41
======= ======= | ======= =======
Assuming Dilution ..................... $ 0.63 $ 0.85 | $ 2.28 $ 2.36
======= ======= | ======= =======
Dividends Per Common Share .............. $ 0.57 $ 0.57 | $ 1.71 $ 1.71
======= ======= | ======= =======
|
|
|
- -------------- |
|
(a) Includes excise and state gasoline |
taxes of .......................... $ 1,429 $ 1,538 | $ 4,323 $ 4,512
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 1 -
<PAGE>
MOBIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In millions)
Dec. 31, Sept. 30,
ASSETS 1998 1999
------- -------
Current Assets
Cash and cash equivalents ................................ $ 714 $ 960
Accounts and notes receivable ............................ 5,518 6,463
Inventories .............................................. 1,911 2,029
Prepaid expenses and other current assets ................ 520 502
Deferred income taxes .................................... 68 76
------- -------
Total Current Assets ................................... 8,731 10,030
Investments and Long-Term Receivables ...................... 8,490 8,591
Properties, Plants and Equipment ........................... 48,681 50,072
Less: Accumulated Depreciation, Depletion and Amortization . 23,954 24,899
------- -------
Net Properties, Plants and Equipment ....................... 24,727 25,173
Deferred Charges and Other Assets .......................... 806 808
------- -------
Total Assets ........................................... $42,754 $44,602
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt .......................................... $ 3,982 $ 5,428
Accounts payable ......................................... 3,707 4,580
Accrued liabilities ...................................... 2,943 2,426
Income, excise, state gasoline and other taxes payable ... 1,986 2,036
Deferred income taxes .................................... 328 394
------- -------
Total Current Liabilities .............................. 12,946 14,864
Long-Term Debt ............................................. 3,719 3,804
Reserves for Employee Benefits ............................. 2,060 1,984
Accrued Restoration, Removal and Environmental Costs ....... 1,011 1,007
Deferred Credits and Other Noncurrent Obligations .......... 1,021 770
Deferred Income Taxes ...................................... 3,254 3,061
Minority Interest in Subsidiary Companies .................. 373 97
------- -------
Total Liabilities ...................................... 24,384 25,587
------- -------
Shareholders' Equity
Preferred stock (ESOP-related) -- shares issued and
outstanding: 164,986 at December 31, 1998 and
159,984 at September 30, 1999 .......................... 641 622
Unearned employee compensation and benefit
plan trust ............................................. (668) (309)
Common stock -- $1.00 par value; shares authorized:
1,200,000,000; shares issued: 897,947,485 at
December 31, 1998 and 900,882,293 at September 30, 1999 898 901
Capital surplus .......................................... 1,649 1,735
Earnings retained in the business ........................ 20,534 21,061
Accumulated other nonowners' equity ...................... (1,058) (1,041)
Common stock held in treasury, at cost -- shares:
117,414,000 at December 31, 1998 and
123,834,292 at September 30, 1999 ...................... (3,626) (3,954)
------- -------
Total Shareholders' Equity ............................. 18,370 19,015
------- -------
Total Liabilities and Shareholders' Equity ................. $42,754 $44,602
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 2 -
<PAGE>
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
For the Nine Months
Ended Sept. 30,
-------------------
1998 1999
------- -------
Cash Flows from Operating Activities
Net Income ......................................... $ 1,856 $ 1,901
Adjustments to reconcile to net cash from
operating activities:
Depreciation, depletion and amortization ....... 1,853 1,824
Deferred income taxes .......................... (141) (107)
Earnings less than distributions from
equity affiliates ............................ 98 43
Exploration expenses (includes noncash
charges: 1998-$18; 1999-$55) ................ 356 343
Gain on sales of properties, plants and
equipment and other assets ................... (179) (56)
Increase in working capital items .............. (139) (633)
Other, net ..................................... (49) (44)
------- -------
Net Cash from Operating Activities ................... 3,655 3,271
------- -------
Cash Flows from Investing Activities
Capital and exploration expenditures ............... (3,206) (2,630)
Proceeds from sales of properties, plants and
equipment and other assets ....................... 705 85
Payments attributable to investments and
long-term receivables ............................ (381) (493)
------- -------
Net Cash Used in Investing Activities ................ (2,882) (3,038)
------- -------
Cash Flows from Financing Activities
Cash dividends ..................................... (1,375) (1,374)
Proceeds from borrowings having original
terms greater than three months .................. 961 1,970
Repayments of borrowings having original
terms greater than three months .................. (821) (1,880)
Increase in other borrowings ....................... 1,286 1,475
Increase/(decrease)in minority interest ............ 24 (276)
Proceeds from issuance of common stock ............. 71 89
Purchase of common stock for treasury .............. (468) -
------- -------
Net Cash (Used in) Provided by Financing Activities .. (322) 4
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ................................... (15) 9
------- -------
Net Increase in Cash and Cash Equivalents ............ 436 246
Cash and Cash Equivalents - Beginning of Period ...... 820 714
------- -------
Cash and Cash Equivalents - End of Period ............ $ 1,256 $ 960
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 3 -
<PAGE>
MOBIL CORPORATION
SEGMENT INFORMATION
(In millions)
For the Three Months|For the Nine Months
Ended Sept. 30,| Ended Sept. 30,
-------------------| ------------------
1998(1) 1999 | 1998(1) 1999
-------- ------- | -------- ------
Revenues by Segment |
|
Exploration & Producing-- Third Party ..$ 1,211 $ 1,567 |$ 4,286 $ 4,309
-- Intersegment.. 747 1,092 | 2,074 2,571
Marketing & Refining -- Third Party .. 11,459 14,066 | 33,818 36,544
-- Intersegment.. 89 270 | 440 564
Chemical -- Third Party .. 592 688 | 1,954 1,835
-- Intersegment.. 90 87 | 236 226
Corporate and Other...................... 224 32 | 291 94
Intersegment Elimination ................ (926) (1,449)| (2,750) (3,361)
------ ------- |------- -------
|
Total Revenues ...................... $13,486 $16,353 |$40,349 $42,782
======== ======= |======= =======
(1) Prior year data reclassified to conform with current year presentation.
INVESTMENT SPENDING
(In millions) For the Three Months | For the Nine Months
Ended Sept. 30, | Ended Sept. 30,
|
Capital and Exploration Expenditures 1998 1999 | 1998 1999
----- ----- | ----- -----
|
Exploration & Producing - U.S. ..... $ 89 $ 64 | $ 361 $ 212
- Intl. .... 793 615 | 2,059 2,000
|
Marketing & Refining - U.S. ..... 95 69 | 258 165
- Intl. .... 85 47 | 198 121
|
Chemical ............................ 92 15 | 188 78
|
Other ............................... 44 12 | 142 54
------ ------ | ------ -----
Total Capital and Exploration |
Expenditures.................... $1,198 $ 822 | $3,206 $2,630
------ ------ | ------ ------
|
Cash Investments in Equity Companies 235 114 | 587 558
------ ------ | ------ ------
Total Investment Spending ........... $1,433 $ 936 | $3,793 $3,188
====== ====== | ====== ======
- ------------------------------ |
Memo: |
Exploration Expenses charged |
to income, included above |
- U.S. ... $ 44 $ 20 | $ 93 $ 68
- Intl. .. 141 102 | 263 275
------ ------ | ------ ------
Total Exploration Expenses ...... $ 185 $ 122 | $ 356 $ 343
====== ====== | ====== ======
Note: Results of operations by segment are presented on page 8.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 4 -
<PAGE>
MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statements
The condensed consolidated financial statements of Mobil Corporation (Mobil)
included herein are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Although certain
information normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted,
Mobil believes that the disclosures are adequate to make the information
presented not misleading. The condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements, the notes
thereto and the financial statement schedule included or incorporated by
reference in Mobil's Annual Report on Form 10-K for its fiscal year ended
December 31, 1998.
The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of management, are necessary
for a fair presentation. The results for interim periods are not necessarily
indicative of trends or of results to be expected for a full year.
2. Changes In Nonowners' Equity
The components of changes in nonowners' equity, net of related tax for the
three months and nine months ended September 30, 1998 and 1999, respectively,
are as follows:
- --------------------------------------------------------------------------------
(In millions) Three Months | Nine Months
Ended Sept. 30,| Ended Sept. 30,
-------------- --------------
1998 1999 | 1998 1999
------ ------ | ------ ------
Net Income ................................ $ 509 $ 688 | $1,856 $1,901
Foreign currency translation adjustments .. 74 (174) | (99) (17)
----- ----- | ----- -----
Changes in nonowners' equity .............. $ 583 $ 514 | $1,757 $1,884
===== ===== | ===== =====
MOBIL - 5 -
<PAGE>
3. Supplementary Cash Flow Data
The table below details the components of the line "Increase in working
capital items" which is shown in the Consolidated Statement of Cash Flows on
page 3. The impact of changes in foreign currency translation rates has been
removed from these amounts. Therefore, these amounts do not agree with the
differences that could be derived from the Consolidated Balance Sheet amounts
shown on page 2.
----------------------------------------------------------------------
(In millions) For the Nine Months
Ended Sept. 30,
--------------------
1998 1999
Changes in Working Capital Items
(Increases)/decreases
Accounts and notes receivable ................. $ 674 $ (915)
Inventories ................................... (183) (85)
Prepaid expenses and other current assets ..... (176) 11
Accounts payable .............................. (741) 834
Accrued liabilities ........................... 88 (511)
Income, excise, state gasoline and
other taxes payable ......................... 199 33
------- --------
Increase in working capital items ............. $ (139) $( 633)
======= ========
4. Net Income per Share
(In millions, except for per-share amounts; number of shares in thousands)
For the Three Months
Ended September 30,
--------------------
1998 1999
----- -----
Net Income .............................................. $ 509 $ 688
Less: dividends on preferred stock ...................... 13 12
------- -------
Adjusted net income applicable to common shares ......... $ 496 $ 676
======= =======
Weighted average number of basic common shares
outstanding ........................................... 780,708 775,839
======= =======
Net income per common share ............................. $ 0.64 $ 0.87
======= =======
Net Income .............................................. $ 509 $ 688
Less: additional contribution to ESOP ................... 1 1
------- -------
Adjusted net income applicable to common shares ......... $ 508 $ 687
======= =======
Weighted average number of basic common shares
outstanding ........................................... 780,708 775,839
Issuable on assumed exercise of stock options ........... 10,954 15,184
Assumed conversion of preferred stock ................... 16,733 16,037
------- -------
Total .............................................. 808,395 807,060
======= =======
Net income per common share -- assuming dilution ........ $ 0.63 $ 0.85
======= =======
MOBIL - 6 -
<PAGE>
4. Net Income per Share (concluded)
(In millions, except for per-share amounts; number of shares in thousands)
For the Nine Months
Ended September 30,
--------------------
1998 1999
----- -----
Net Income .............................................. $ 1,856 $ 1,901
Less: dividends on preferred stock ...................... 38 36
------- -------
Adjusted net income applicable to common shares ......... $ 1,818 $ 1,865
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,461 774,953
======= =======
Net income per common share ............................. $ 2.33 $ 2.41
======= =======
Net Income .............................................. $ 1,856 $ 1,901
Less: additional contribution to ESOP ................... 4 4
Less: Stock Appreciation Rights compensation
(expense) income ................................ 4 (3)
------- -------
Adjusted net income applicable to common shares ......... $ 1,848 $ 1,900
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,461 774,953
Issuable on assumed exercise of stock options ........... 11,390 14,207
Assumed conversion of preferred stock ................... 16,863 16,182
------- -------
Total .............................................. 809,714 805,342
======= =======
Net income per common share -- assuming dilution ........ $ 2.28 $ 2.36
======= =======
5. Exxon Mobil Merger
The U.S. Federal Trade Commission continues its review of the proposed merger
involving Mobil and Exxon Corporation ("the companies").
On September 29, 1999, the European Commission approved the merger. As a
condition of its approval, the Commission required the companies to divest
certain assets and operations. Assets and operations which Mobil will be
required to divest include Mobil's 28-percent interest in the German joint
venture fuels marketing company, Aral; its 30-percent interest in the BP/Mobil
joint venture fuels business in Europe; and its Dutch gas trading company,
MEGAS.
MOBIL - 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
REPORTED EARNINGS Third Quarter | First Nine Months
(In millions) _____________ Incr./ |_________________ Incr./
(Decr.) | (Decr.)
1998 1999 | 1998 1999
---- ---- ----- ---- ----
Exploration & Producing |
-- United States ...........$ 9 $ 141 $ 132 | $ 133 $ 246 $ 113
-- International ........... 147 374 227 | 648 1,001 353
----- ----- ----- | ------ ------ ------
Total Exploration & Producing .. 156 515 359 | 781 1,247 466
----- ----- ----- | ------ ------ ------
|
Marketing & Refining |
-- United States ........... 179 123 (56) | 459 411 (48)
-- International ........... 183 91 (92) | 622 414 (208)
----- ----- ----- | ------ ------ ------
Total Marketing & Refining...... 362 214 (148) | 1,081 825 (256)
----- ----- ----- | ------ ------ ------
|
Chemical ....................... 41 50 9 | 166 80 (86)
|
Corporate and Financing (a)..... (50) (91) (41) | (172) (251) (79)
----- ----- ----- | ------ ------ ------
|
Net Income .....................$ 509 $ 688 $ 179 | $1,856 $1,901 $ 45
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
OPERATING EARNINGS Third Quarter | First Nine Months
(Adjusted for Special Items) _____________ Incr./ |_________________ Incr./
(In millions) (Decr.) | (Decr.)
1998 1999 | 1998 1999
---- ---- ----- ---- ----
Exploration & Producing |
-- United States ...........$ 38 $ 141 $ 103 | $ 162 $ 246 $ 84
-- International ........... 92 374 282 | 593 882 289
----- ----- ----- | ------ ------ ------
Total Exploration & Producing .. 130 515 385 | 755 1,128 373
----- ----- ----- | ------ ------ ------
|
Marketing & Refining |
-- United States ........... 179 123 (56) | 459 411 (48)
-- International ........... 197 91 (106) | 659 414 (245)
----- ----- ----- | ------ ------ ------
Total Marketing & Refining...... 376 214 (162) | 1,118 825 (293)
----- ----- ----- | ------ ------ ------
|
Chemical ....................... 41 50 9 | 166 80 (86)
|
Corporate and Financing (a)..... (50) (74) (24) | (172) (207) (35)
----- ----- ----- | ------ ------ ------
Income Excluding Special Items.. 497 705 208 | 1,867 1,826 (41)
|
Special Items (table on page 9) 12 (17) (29) | (11) 75 86
----- ----- ----- | ------ ------ ------
Net Income .....................$ 509 $ 688 $ 179 | $1,856 $1,901 $ 45
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
(a) Corporate and Financing includes corporate administrative expenses, net
financing expense (interest expense less interest income) and other items.
-------------------------------------------------------------------------------
MOBIL - 8 -
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ITEMS Third Quarter | First Nine Months
(In millions) |
1998 1999 | 1998 1999
---- ---- | ---- ----
|
Deferred Tax Benefit .............. $ - $ - | $ - $ 141
Exxon Mobil Merger-Related Costs .. - (17) | - (44)
Asset Impairment/Write-off ........ - - | - (22)
Asset Sales ....................... 55 - | 55 -
U.S. Federal Royalty Settlement ... (29) - | (29) -
Restructuring ..................... (14) - | (37) -
----- ----- | ----- -----
Total Special Items ............... $ 12 $ (17) | $ (11) $ 75
===== ===== ===== =====
- --------------------------------------------------------------------------------
CONSOLIDATED RESULTS OVERVIEW
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Consolidated third quarter net income was $688 million, an increase of $179
million from the $509 million reported in the third quarter of 1998. Assuming
dilution, earnings per common share for the third quarter of 1999 were $0.85,
compared with $0.63 for the third quarter of 1998. Included in this year's third
quarter net income was a special charge of $17 million for costs related to the
proposed Exxon Mobil merger. Last year's third quarter net income included net
special benefits of $12 million, as the gain on a European upstream asset sale
more than offset charges related to a U.S. federal royalty settlement and
implementation costs associated with the BP European downstream alliance.
Excluding special items from both periods, third quarter 1999 operating earnings
of $705 million were $208 million higher than the $497 million earned in the
same period last year.
Overall, industry fundamentals helped earnings. Worldwide crude oil and
natural gas prices were up significantly, although margins in refining and
marketing, especially in Mobil's international markets, came under severe
pressure. Earnings also benefited from lower exploration expenses, Mobil's
continuing focus on cost reduction initiatives and other performance improvement
programs. Overall, per barrel operating expenses were down 6% on a year-to-date
basis. However, Mobil's results were negatively impacted by a significant amount
of unscheduled downtime in our U.S. refinery operations.
The Upstream benefited from higher worldwide crude oil and natural gas prices
and lower exploration and operating expenses. These benefits were offset
somewhat by a decline in production versus the third quarter of last year. The
effects of higher liquids volumes from the key growth areas in Eastern Canada
(Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project)
were more than offset by the impact on natural gas volumes of anticipated
contractual reductions in Indonesia and natural field declines in mature areas.
In the Downstream, Mobil's U.S. earnings declined as a result of lower
industry margins impacting both fuels and lubes operations. Also, unscheduled
refinery downtime hurt earnings by about $40 million. All the problems that
caused the downtime have been rectified. In the international area, earnings
declined as industry refinery margins weakened in the face of product oversupply
and marketing margins eroded as product prices lagged the increase in crude
prices and competitive pressures continued to prevail in several markets.
However, lower expenses and ongoing self-help programs helped offset some of the
effects of the deterioration in industry fundamentals.
MOBIL - 9 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
In Chemical, earnings were slightly improved, reflecting higher polyethylene
margins and lower expenses. Earnings benefited from improved performance at the
recently expanded Beaumont olefins plant.
Worldwide crude oil and natural gas prices have continued to improve. However,
worldwide refining and marketing margins remain depressed, as do margins for
much of Mobil's petrochemicals business. Industry fundamentals continue to be
unpredictable in the near term.
Worldwide revenues in the third quarter of 1999 of $16,353 million were
$2,867 million higher than revenues in the third quarter of 1998, reflecting the
effects of higher worldwide average crude oil and natural gas prices. These
increases were offset somewhat by the effects of lower overall sales volumes.
Crude oil, products and operating supplies and expenses increased by $2,402
million to $10,663 million, primarily due to higher petroleum prices worldwide
slightly offset by lower volume-related expenses. Taxes other than income taxes
increased $221 million to $2,707 million, mainly due to the effects of higher
sales volumes in the U.S. and Japan. Income tax expense increased $214 million
to $545 million, mainly due to a shift in earnings from downstream to upstream
operations which have a higher effective tax rate.
FIRST NINE MONTHS 1999 COMPARED WITH FIRST NINE MONTHS 1998
Mobil's net income for the first nine months of 1999 was $1,901 million,
compared with $1,856 million for the same period in 1998. This year's net income
included a $141 million special deferred tax benefit related to our upstream
operations in Indonesia offset somewhat by special charges of $44 million for
costs related to the proposed Exxon Mobil merger and $22 million for the
write-off of an upstream property in Venezuela. Last year's net income
included net special charges of $11 million as gains on asset sales were more
than offset by a U.S. federal royalty settlement and implementation costs for
the Mobil-BP downstream European alliance.
Excluding special items, operating earnings for the first nine months of
$1,826 million were down $41 million, or 2%, from the comparable period in 1998.
The decline was primarily due to lower downstream integrated margins in all
major markets, weak petrochemicals margins and lower upstream production. The
impacts of these negative factors were mostly offset by the favorable effects of
higher crude prices and lower operating expenses.
Nine month 1999 revenues of $42,782 million were $2,433 million higher than
revenues in the same period of 1998 primarily due to the effects of higher
average worldwide crude oil and natural gas prices.
Crude oil, products and operating supplies and expenses increased by $2,158
million to $26,896 million, primarily due to higher worldwide crude oil and
natural gas prices, partially offset by lower volume-related expenses. Taxes
other than income taxes increased $630 million to $7,847 million, mainly due to
the effects of higher sales volumes in the U.S. and Japan. Income tax expense
decreased $193 million to $1,059 million, mainly due to a deferred tax benefit
of $141 million related to recovery of exploration expenses incurred in prior
years.
MOBIL - 10 -
<PAGE>
Exploration and Producing
Exploration and Producing
Selected Operating Data Third Quarter First Nine Months
Incr./ Incr./
(Decr.) Decr.)
--------- --------
1998 1999 Vol. % 1998 1999 Vol. %
---- ---- ---- ---- ---- ---- ----- ---
Net Crude Oil and NGL |
Production (TBD) - U.S. .. 236 239 3 1 | 239 242 3 1
- Intl. . 685 720 35 5 | 681 713 32 5
----- ----- ----- | ----- ----- -----
Total .................... 921 959 38 4 | 920 955 35 4
===== ===== ===== | ===== ===== =====
Net Natural Gas |
Production (MMCFD)- U.S. .. 1,091 868 (223)(20)| 1,111 878 (233)(21)
- Intl.(a) 3,035 2,785 (250) (8)| 3,226 2,948 (278) (9)
----- ----- ----- | ----- ----- -----
Total .................... 4,126 3,653 (473)(11)| 4,337 3,826 (511)(12)
===== ===== ===== | ===== ===== =====
TOTAL NET PRODUCTION (TBDOE).. 1,669 1,621 (48) (3)| 1,706 1,648 (58) (3)
===== ===== ===== | ===== ===== =====
- -------------------------------------------------------------------------------
(a) Year-to-date production reflects a downward restatement of Indonesia first
quarter 1998.
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Exploration and Producing net income was $515 million in the third quarter of
1999 versus last year's $156 million. This year's net income did not include any
special items while last year's included a special benefit of $55 million for a
European asset sale offset by a charge of $29 million for a U.S. federal royalty
settlement. Excluding special items, this year's operating earnings of $515
million were $385 million higher than last year's $235 million.
In the United States, operating earnings of $141 million increased $103
million as higher crude oil and natural gas prices and lower operating and
exploration expenses were only partially offset by the impact of lower natural
gas production.
International operating earnings of $374 million were $282 million higher,
primarily reflecting increases in crude oil and natural gas prices and lower
exploration expenses. These benefits were partly offset by the impact of lower
production. The favorable effects of higher volumes from the key growth areas in
the North Sea (Aasgard and Beryl area fields), Qatar (RasGas Train 1), Eastern
Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL
project) were more than offset by the impacts of contractual reductions in
Indonesia and natural field declines in mature areas.
FIRST NINE MONTHS 1999 COMPARED WITH FIRST NINE MONTHS 1998
Exploration and Producing net income of $1,247 million for the first nine
months of 1999 was $466 million higher than last year's. The increase was mainly
due to higher worldwide crude oil prices, lower operating expenses and a $141
million deferred tax benefit related to the recovery of exploration expenses
incurred in prior years. The effects of higher crude prices were offset somewhat
by lower production. The effects of higher liquids volumes from the key growth
areas in Eastern Canada (Hibernia), Equatorial Guinea, Kazakhstan (Tengiz) and
Nigeria (Oso NGL project) were more than offset by the impact on natural gas
volumes of anticipated contractual reductions in Indonesia and natural field
declines in mature areas.
MOBIL - 11 -
<PAGE>
Marketing and Refining
Marketing and Refining
Selected Operating Data Third Quarter First Nine Months
Incr./ Incr./
(Decr.) (Decr.)
-------- -------
1998 1999 Vol. % 1998 1999 Vol. %
----- ----- --- -- ----- ----- --- --
Petroleum Product
Sales (TBD)(a) - U.S. ... 1,486 1,532 46 3 | 1,434 1,512 78 5
- Intl.(b) 2,001 1,896 (105) (5)| 1,960 1,937 (23) (1)
----- ----- --- | ----- ----- ---
Total .................. 3,487 3,428 (59) (2)| 3,394 3,449 55 2
===== ===== === | ===== ===== ===
|
Refinery Runs (TBD) |
- U.S. ... 869 766 (103)(12)| 903 783 (120)(13)
- Intl.(b) 1,246 1,153 (93) (7)| 1,259 1,243 (16) (1)
----- ----- --- | ----- ----- ---
Total .................. 2,115 1,919 (196) (9)| 2,162 2,026 (136) (6)
===== ===== === | ===== ===== ===
(a) Includes supply/other sales
(b) Includes Mobil's share for the European alliance with BP.
- --------------------------------------------------------------------------------
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Marketing and Refining net income was $214 million in the third quarter of
1999 versus $362 million for the same period last year. There were no special
items recorded in the third quarter of 1999; however, the third quarter of 1998
included special charges of $14 million for implementation costs related to the
Mobil-BP European alliance. Excluding special items, operating earnings of $214
million were $162 million lower than in 1998.
Operating earnings in the United States were $123 million, $56 million lower
than last year's, reflecting the unfavorable impacts of lower industry margins,
including compressed lube margins, and significantly higher refinery downtime.
This quarter's results benefited from higher gasoline trade sales, which were up
about 4%.
International earnings of $91 million were $106 million lower than in 1998. In
Asia-Pacific and Europe, earnings were lower, mainly due to a continued
deterioration in marketing and refining margins. Overall, earnings benefited
from lower expenses, performance initiatives and improved refinery performance;
however, these were not enough to offset the deterioration in industry
fundamentals.
FIRST NINE MONTHS 1999 COMPARED WITH FIRST NINE MONTHS 1998
Marketing and Refining net income was $825 million for the first nine months
of 1999 compared with last year's net income of $1,081 million. Excluding $37
million of special charges in 1998 for implementation costs related to the
Mobil-BP European alliance, operating earnings of $825 million were $293 million
lower than in the same period last year. Earnings were lower due to the effects
of lower international refining and marketing margins offset somewhat by
benefits from performance initiatives.
MOBIL - 12 -
<PAGE>
Chemical
THIRD QUARTER AND FIRST NINE MONTH COMPARISONS OF 1999 WITH 1998
Chemical net income of $50 million for this year's third quarter was $9
million higher than last year's. In the first nine months of 1999, Chemical net
income was $80 million compared with $166 million in the same period last year.
The decrease in both periods reflects lower paraxylene margins, partly offset by
the effect of lower operating expenses.
Corporate and Financing
THIRD QUARTER AND FIRST NINE MONTH COMPARISONS OF 1999 WITH 1998
Corporate and Financing net expense was $91 million in the third quarter of
1999 compared with $50 million in the same period last year. For the first nine
months of 1999, Corporate and Financing net expense was $251 million, $79
million higher than last year. The increase is mainly due to higher interest
expense net of interest income related to an increase in average net debt
balances.
DISCUSSION OF FINANCIAL CONDITION
Total current assets as of September 30, 1999 were $10,030 million, an
increase of $1,299 million from December 31, 1998. Accounts and notes receivable
increased $945 million to $6,463 million, primarily due to the effects of higher
prices.
Total debt of Mobil and its subsidiaries was $9,232 million, $1,531 million
higher than at year-end 1998, reflecting increased capital expenditures and
working capital requirements. The debt-to-capitalization ratio was 33% at
September 30, 1999, up from 29% at year-end 1998.
Accounts payable increased $873 million primarily due to higher purchase
prices for crude oil.
Shareholders' equity rose $645 million during the first nine months of 1999
primarily due to an increase of $527 million in earnings retained in the
business and an increase in capital surplus of $86 million.
Total investment spending for the third quarter of 1999 was $936 million, a
decrease of $497 million from the comparable period last year due to a lower
overall capital budget and timing of expenditures. For the first nine months of
1999, worldwide investment spending was $3,188 million, compared with $3,793
million for nine months of 1998.
Return on average capital employed for the twelve-month period ended
September 30, 1999 was 7.2%, compared with 7.7% for the calendar year 1998.
Return on average shareholders' equity was 9.2% for the twelve-month period
ended September 30, 1999, compared with 9.0% for the calendar year 1998.
Whenever external financing is needed, Mobil and its subsidiary companies have
ready access to multiple capital markets, including significant bank credit
lines.
MOBIL - 13 -
<PAGE>
DISCUSSION OF FINANCIAL CONDITION - continued
Operating Environment in Certain Producing Areas
Several of the countries where Mobil has investments, especially those in
which Mobil has significant exploration and/or producing activities, are subject
to political and economic uncertainties. Two such countries are Indonesia and
Nigeria. In recent months, civil unrest has occurred in Indonesia's Aceh
Province and at Eket, Mobil's onshore base in southern Nigeria. Throughout this
period, Mobil's production and operations have remained unaffected. Mobil
continues to monitor developments in each of these countries closely.
In the third quarter, Mobil's production from the Arun and other fields and
facilities in the Aceh Province of Indonesia averaged 956 million cubic feet per
day of natural gas and 19 thousand barrels per day of condensate and liquefied
petroleum gas. Also in the third quarter, Mobil's production from southern
Nigeria, all offshore, averaged 270 thousand barrels per day of crude oil and
natural gas liquids.
Restructuring
In 1998, Mobil implemented new restructuring programs in Australia and New
Zealand, and in Latin America, to integrate regional fuels and lubes operations.
Mobil recorded a provision of $50 million ($41 million after tax). The balance
in the reserve at September 30, 1999 was $13 million. The reduction was due to
cash outlays.
In 1997, Mobil and BP announced that their European alliance would implement
a major restructuring of its lubricant oil refining business. Mobil recorded
reserves in 1997 of $86 million ($82 million after tax). The amount remaining in
the reserve at September 30, 1999 was $24 million. The reduction was due to cash
outlays.
Also during 1997, Mobil initiated two major cost savings initiatives in
Asia-Pacific, one in Japan in response to the deregulated business environment
and the other in Australia. At that time, Mobil recorded reserves of $172
million ($107 million after tax). The amount remaining in the reserves at
September 30, 1999 was $21 million. The reduction was due to cash outlays.
Year 2000 Project
Mobil is engaged in a company-wide effort (Project) to address the issues that
are likely to arise if computer programs and embedded computer chips are unable
to properly recognize dates in and after the year 2000. The Project is focused
on three main areas: the information technology (IT) systems in Mobil's
computers and computer software, including those that are linked to the systems
of third parties; the non-IT systems embedded in equipment that controls or
monitors Mobil's operating assets; and Mobil's business relationships with third
parties (referred to herein as external agents). The thrust of the Project is to
address those of Mobil's IT systems, non-IT systems and relationships with
external agents which Mobil judges to be materially important to Mobil. These
systems or relationships, referred to herein as materially important, are those
whose failure for year 2000 reasons would likely: put the safety of individuals
at risk; lead to damage to property or the environment; put in jeopardy the
value of Mobil's name or intellectual property; or trigger a significant adverse
consequence to Mobil's financial performance or condition.
MOBIL - 14 -
<PAGE>
Year 2000 Project--continued
Project work dealing with IT systems and Project work dealing with non-IT
systems has the following three phases: (1) inventory and assessment:
inventorying all of Mobil's systems (including those that are linked to third
parties), identifying those of Mobil's systems that are not year 2000 compliant,
and making judgments as to which of Mobil's systems (both compliant and
non-compliant) would likely be materially important; (2) strategy and planning:
developing strategies and plans for (a) remediating, upgrading or replacing all
non-compliant systems (except those whose failure would, in Mobil's judgment,
have an insignificant impact on Mobil's operations) and (b) testing all systems
judged to be materially important, and estimating the costs of implementing
these strategies and executing these plans; and (3) execution: implementing the
strategies and executing the plans.
Project work dealing with relationships with external agents has the following
three phases: (1) inventory and assessment: inventorying Mobil's relationships
with external agents and making judgments as to which of those relationships
would likely be materially important; (2) communication and evaluation: sending
letters and questionnaires to those external agents whose relationships are
judged to be materially important to elicit information about the plans and
actions of those external agents to achieve timely year 2000 readiness, and
evaluating the information so obtained; and (3) follow up: contacting external
agents with whom Mobil has already communicated to obtain further assurance that
such external agents will achieve timely year 2000 readiness.
Additional Project work, discussed below, involves identifying scenarios
involving failures for year 2000 reasons of materially important IT and non-IT
systems or materially important relationships with external agents and
developing contingency plans for mitigating the impact of such failures.
The inventory and assessment and the strategy and planning phases of the work
dealing with IT systems are complete. The execution phase of this work involves
both application and infrastructure repair and systems upgrades and
replacements. Application and infrastructure repair involves: the remediation
and testing of non-compliant code; the remediation, replacement and testing of
computing infrastructure and telecommunications devices; and the upgrading and
testing of end user applications. The application and infrastructure repair
work, which is being performed by both Mobil personnel and third parties
specializing in resolving year 2000 issues, was essentially complete as of
September 30, 1999. The systems upgrade and replacement work consists of the
implementation of a major integrated enterprise software system in North America
(which would have been implemented regardless of year 2000 considerations) and
numerous other systems. This work is complete.
The inventory and assessment and the strategy and planning phases of the work
dealing with non-IT systems are complete. The execution phase of this work, much
of which is being performed by the vendors of the products involved, was
essentially complete as of September 30, 1999, with minor work remaining that
affects less than 1% of the controls inventory. This remaining work is either
work whose timing must be coordinated with plant operations or work to install
new upgrades from vendors or to change upgrades previously provided by vendors.
The inventory and assessment phase of the work dealing with relationships with
external agents is complete. The communication and evaluation phase of this work
is also complete,with all external agents whose relationships Mobil judges to be
MOBIL - 15 -
<PAGE>
Year 2000 Project--continued
materially important having been contacted as of March 31, 1999. The follow-up
phase of this work (which includes contacting again those external agents from
whom responses have not yet been received and developing contingency plans
relating to those external agents whose responses raise issues or who do not
respond) is being undertaken by the business continuity and contingency planning
teams referred to below under "Risks and Contingency Plans." The work of these
teams will continue through the end of 1999.
Cost
The costs associated with the Project (all on a pre-tax basis) are being spent
over a three-year period. There are two categories of these costs: (1) costs
that are being incurred solely to achieve year 2000 compliance and (2) costs
that are being incurred to install new systems that improve business
functionality and in many cases concurrently provide year 2000 compliance.
Mobil estimates that the costs to be incurred solely to achieve year 2000
compliance will total approximately $175 million (which amount includes about $5
million for contingencies which will only be spent if unforeseen repairs are
required in early 2000) of which the costs of dealing with IT systems are
expected to be about $158 million and the costs of dealing with non-IT systems
are expected to be about $17 million (the costs of dealing with relationships
with external agents are expected to be minimal). As of September 30, 1999,
about $160 million of the total costs estimated to be incurred solely to achieve
year 2000 compliance had been expended.
Mobil estimates that the costs to be incurred for new systems that improve
business functionality and in many cases concurrently provide year 2000
compliance will total approximately $275 million, and as of September 30, 1999,
about $270 million of these costs had been expended, of which about $95 million
was expensed and approximately $175 million was capitalized.
The estimate of total Project costs has been reduced by approximately 3% from
the prior estimate to reflect efficiencies and actual experience in completing
project work over the past several months. Bookings of Project expenditures tend
to lag completion of Project work, so that the percentages of the total
estimated costs that have actually been expended are lower than the percentages
of the Project work that have actually been completed.
All Project costs are being funded with cash flows from operations. The $175
million which Mobil estimates will be expended solely to achieve year 2000
compliance represents less than 15% of Mobil's estimated total IT budget for the
period covered by the Project. This entire amount is being expensed as it is
incurred. Of the $275 million which Mobil estimates will be expended on new
systems that improve business functionality and in many cases concurrently
provide year 2000 compliance, approximately $100 million is being expensed and
approximately $175 million is being capitalized.
As a result of the Project, certain IT projects to improve business
functionality have been reprioritized and accelerated while other such IT
projects have been deferred. As a consequence, expenditures during the period
covered by the Project on IT systems that will improve business functionality
will actually be greater than the expenditures that would have been made on such
systems had there been no Project. Accordingly, the deferral of IT work due to
the Project will not have a material adverse effect on Mobil's results of
operations or financial condition.
MOBIL - 16 -
<PAGE>
Year 2000 Project--continued
Risks and Contingency Plans
The failure or failures for year 2000 reasons of materially important systems
or relationships with external agents could have a material adverse effect on
Mobil's results of operations, liquidity and/or financial condition. For
example, if, for year 2000 reasons, a utility company were to be unable to
supply electricity to a Mobil refinery for an extended period, the refinery
would have to be shut down for that period, which could result in substantial
losses of production, sales and income. Mobil believes that the Project work
described above dealing with materially important IT systems and non-IT systems
will, when completed, serve to reduce very substantially the risk that such
systems will fail for year 2000 reasons. Mobil has no way of ensuring, however,
that external agents whose relationships with Mobil are judged to be materially
important (e.g., utilities, telecommunications providers and transportation
providers) will be timely year 2000 compliant.
The failure or failures of systems for year 2000 reasons could also give rise
to liability to third parties. Mobil has not yet attempted to assess the
potential for such liability, and hence cannot say whether such liability
presents a material risk independent of the risk that such failure or failures
could have a material adverse effect on Mobil's results of operations, liquidity
and/or financial condition.
To minimize the risks associated with the year 2000 issue referred to in the
second preceding paragraph, Mobil has undertaken a significant effort (1) to
identify scenarios involving possible failures for year 2000 reasons of
materially important systems and relationships with external agents and (2) to
develop contingency plans for mitigating the impact of these scenarios. This
effort was substantially complete as of September 30, 1999.
Mobil operates a portfolio of diverse businesses which have facilities and
operations throughout the world and are managed regionally. Mobil believes that
the most reasonably likely worst case scenarios, should they occur, will be
encountered at facilities or operations located in one or more of these regions.
Accordingly, a risk-based contingency planning process was developed for
execution by each business unit in its unique operating environment, focusing on
its business-specific risks. Contingency planning project leaders were trained
in the process during the first six weeks of 1999. Under their leadership, teams
in the business units have essentially completed the development and
implementation of business continuity and contingency plans. Mobil has also
adapted its existing crisis response model to encompass failures for year 2000
reasons of materially important systems or relationships with external agents,
and has undertaken several exercises to validate the model in the context of
Year 2000 crisis response. Final implementation of contingency plans and
additional exercises to validate the crisis response model in the business units
will take place in the fourth quarter of the year.
The work described in the preceding paragraph is focused on risks, scenarios
and contingency plans involving materially important systems and relationships
with external agents. There are, however, an almost infinite number of
additional risk which are simply not assessable and for which, therefore,
contingency plans cannot be developed. These are the risks of failure for year
2000 reasons of one or more systems or relationships with external agents which,
individually, Mobil does not judge to be materially important but whose failure
could trigger a cascade of other failures for year 2000 reasons, the combination
of which could be materially important or could prevent Mobil from implementing
MOBIL - 17 -
<PAGE>
Year 2000 Project--concluded
contingency plans it has developed. Such a combination of failures could also
have a material adverse effect on Mobil's results of operations, liquidity
and/or financial condition.
Forward-Looking Statements Relating to the Year 2000
The foregoing discussion about the year 2000 issue includes a number of
forward-looking statements, which are based on Mobil's best assumptions and
estimates as of the date hereof. These include, without limitation, statements
concerning: Mobil's estimated timetables for completing the not-yet-completed
phases of the Project work; Mobil's estimates of the percentages of the work
that remains to be performed to complete such phases; Mobil's estimated
timetable for identifying scenarios involving possible failures for year 2000
reasons of materially important systems and relationships with external agents
and the development and implementation of contingency plans for mitigating the
impacts of these scenarios; and Mobil's estimates of the costs of (1) completing
the not-yet-completed phases of the Project and (2) identifying possible year
2000 failure scenarios and developing and implementing contingency plans for
mitigating the impacts of these.
Actual results could differ materially from the estimates expressed in such
forward-looking statements, due to a number of factors. These factors, which are
not necessarily all the key factors that could cause such differences, include
the following: Mobil's failure to judge accurately which of Mobil's systems and
relationships with external agents are materially important; Mobil's inability
to obtain and retain the staff and third-party assistance necessary to complete
the not-yet-completed phases of the Project in accordance with Mobil's estimated
timetables; the inability of such staff and third parties (1) to locate and
correct all non-year 2000 compliant computer code in materially important
systems and test such corrected code and (2) to install and test upgrades or new
systems containing year 2000-compliant computer code, all in accordance with
Mobil's estimated timetables; unforeseen costs of completing Project work;
Mobil's inability or failure to identify significant year 2000 issues not now
contemplated; and the failure of external agents to achieve timely year 2000
readiness.
Forward-Looking Statements
Written reports and oral statements made from time to time by Mobil contain
"forward-looking statements." Forward-looking statements can be identified by
the fact that they do not relate strictly to historical or current facts and by
their use of words such as "goals," "expects," "plans," "believes," "estimates,"
"forecasts," "projects," "intends" and other words of similar meaning. Such
statements are likely to address Mobil's earnings, return on capital employed,
capital expenditures, debt-to-capitalization ratio, dividend increases, project
implementation, production growth, reserve replacement, sales growth and expense
reductions. They are based on management's then-current information,
assumptions, plans, expectations, estimates and projections about the petroleum
and chemical industries. However, such statements are not guarantees of future
performance, and actual results and outcomes may differ materially from what is
expressed depending on a variety of factors, many of which are outside Mobil's
control.
MOBIL - 18 -
<PAGE>
Forward-Looking Statements--concluded
Among the factors that could cause actual outcomes or results to differ
materially from what is expressed in these forward-looking statements are
changes in the demand for, supply of, and market prices of crude oil, refined
products, natural gas and petrochemicals; changes in refining margins and
marketing margins; success in partnering, in implementing oil, natural gas and
petrochemical projects, and in implementing internal plans; reliability of
operating facilities; effects of environmental regulations; success of
commercial negotiations; and domestic and international political and economic
conditions.
MOBIL - 19 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. 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 cleanup 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.
In July, 1999, Mobil Oil Corporation agreed in principle with the U.S.
Department of Justice (the "DOJ") and the U.S. Environmental Protection Agency
(the "EPA") to settle previously-reported allegations that the operations of
Mobil Oil Corporation's Torrance, California refinery had violated provisions of
the Clean Air Act, the Clean Water Act, the Emergency Planning and Community
Right to Know Act and the Comprehensive Environmental Response, Compensation and
Liability Act. The DOJ and the EPA had originally sought a penalty of $2.5
million; in the settlement, which is subject to the negotiation and signing of a
Consent Decree, Mobil Oil Corporation agreed to pay a civil penalty of $500,000
and to spend an additional $1 million on various supplemental environmental
projects.
In a media briefing on September 14, 1999, the Chair of the Environmental
Protection Agency of South Australia (the "EPASA") indicated that the EPASA was
considering a legal action against Mobil Refining Australia Pty Ltd ("MRA") in
respect of an oil spill on June 28, 1999 at MRA's refinery at Port Stanvac,
Australia. If such an action were to be brought, it would probably be brought
under the Pollution of Waters by Oil and Noxious Substances Act 1987 (South
Australia) (the "Pollution Act"). The maximum penalty for violation of the
Pollution Act is (AU) $200,000.
The foregoing proceedings are not of material importance in relation to
Mobil's accounts and are described in compliance with SEC rules requiring
disclosure of such proceedings 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
MOBIL - 20 -
<PAGE>
Item 1. Legal Proceedings--concluded.
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 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
The following exhibits are filed with this report:
12. Computation of Ratio of Earnings to Fixed Charges
27. Financial Data Schedule (electronic only)
Reports on Form 8-K.
Mobil filed the following Current Reports on Form 8-K during and subsequent
to the end of the Third quarter:
Date of 8-K Description of 8-K
October 25, 1999 Submitted a copy of the Mobil News Release issued
October 25, 1999, reporting Mobil's estimated earnings
for the Third quarter of 1999.
MOBIL - 21 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT MOBIL CORPORATION
BY
/S/ STEVEN L. DAVIS
NAME AND TITLE Steven L. Davis, Controller;
Principal Accounting Officer
DATE November 12, 1999
MOBIL - 22 -
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
- ------- ----------------
12. Computation of Ratio of Earnings Electronic
to Fixed Charges
27. Financial Data Schedule Electronic
MOBIL - 23 -
<PAGE>
Exhibit 12.
MOBIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
Nine
Months
Ended
Year Ended December 31, Sept. 30,
------------------------------------------ --------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
Income Before Change in
Accounting Principle ... $1,759 $2,376 $2,964 $3,272 $1,704 $1,901
Add:
Income taxes ............. 1,919 2,015 3,147 3,093 1,356 1,059
Portion of rents
representative of
interest factor ........ 340 368 376 346 317 238
Interest and debt
discount expense ....... 461 467 455 428 451 254
Earnings (greater) less
than distributions from
equity affiliates....... (40) (51) 153 (59) 329 43
------ ------ ------ ------ ------ ------
Income as Adjusted ....... $4,439 $5,175 $7,095 $7,080 $4,157 $3,495
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest and debt
discount expense ....... $ 461 $ 467 $ 455 $ 428 $ 451 $ 254
Capitalized interest ..... 37 47 78 101 74 78
Portion of rents
representative of
interest factor ........ 340 368 376 346 317 238
------ ------ ------ ------ ------ ------
Total Fixed Charges ...... $ 838 $ 882 $ 909 $ 875 $ 842 $ 570
====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges .......... 5.3 5.9 7.8 8.1 4.9 6.1
====== ====== ====== ====== ====== ======
Note:
For the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and the nine
months ended September 30, 1999, Fixed Charges exclude $37 million, $28 million,
$24 million, $29 million, $25 million and $21 million, respectively, of interest
expense attributable to debt issued by the Mobil Oil Corporation Employee Stock
Ownership Plan Trust and guaranteed by Mobil.
MOBIL - 24 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ARTICLE 5 FINANCIAL DATA SCHEDULE (FDS) FOR PERIOD ENDED SEPTEMBER 30, 1999 10-Q
This schedule contains summary financial information extracted from the
September 30, 1999 Form 10-Q, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 960
<SECURITIES> 0
<RECEIVABLES> 6,463
<ALLOWANCES> 0
<INVENTORY> 2,029
<CURRENT-ASSETS> 10,030
<PP&E> 50,072
<DEPRECIATION> 24,899
<TOTAL-ASSETS> 44,602
<CURRENT-LIABILITIES> 14,864
<BONDS> 3,804
0
622
<COMMON> 901
<OTHER-SE> 17,492
<TOTAL-LIABILITY-AND-EQUITY> 44,602
<SALES> 42,084 <F1>
<TOTAL-REVENUES> 42,782 <F1>
<CGS> 26,896
<TOTAL-COSTS> 28,720
<OTHER-EXPENSES> 8,190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> 2,960
<INCOME-TAX> 1,059
<INCOME-CONTINUING> 1,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,901
<EPS-BASIC> 2.41
<EPS-DILUTED> 2.36
<FN>
<F1> SALES AND TOTAL REVENUES INCLUDE $4,512 MILLION OF EXCISE AND STATE
GASOLINE TAXES
</FN>
</TABLE>
