What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-23 compared with 2021-02-24 · 58 added, 32 removed, 107 unchanged (46% of the section changed)

ExxonMobil’s financial and operating results are subject to a variety of risks inherent in the global oil, gas, and petrochemical businesses.

ExxonMobil’s financial and operating results are subject to a variety of risks inherent in the global oil, gas, and petrochemical businesses, and the pursuit of lower-emission business opportunities.

Many of these risk factors are not within the company’s control and could adversely affect our business, our financial and operating results, or our financial condition.

3 unchanged sentences

This means ExxonMobil’s operations and earnings may be significantly affected by changes in oil, gas, and petrochemical prices and by changes in margins on refined products.

Oil, gas, petrochemical, and product prices and margins in turn depend on local, regional, and global events or conditions that affect supply and demand for the relevant commodity.

Oil, gas, petrochemical, and product prices and margins in turn depend on local, regional, and global events or conditions that affect supply and demand for the relevant commodity or product.

Any material decline in oil or natural gas prices could have a material adverse effect on certain of the company’s operations, especially in the Upstream segment, financial condition, and proved reserves.

3 unchanged sentences

The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on our results.

Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, government austerity programs, trade tariffs, security or public health issues and responses, or currency exchange rate fluctuations, can also impact the demand for energy and petrochemicals.

Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, government regulation or austerity programs, trade tariffs or broader breakdowns in global trade, security or public health issues and responses, or currency exchange rate fluctuations, can also impact the demand for energy and petrochemicals.

Sovereign debt downgrades, defaults, inability to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, and other events or conditions that impair the functioning of financial markets and institutions also pose risks to ExxonMobil, including risks to the safety of our financial assets and to the ability of our partners and customers to fulfill their commitments to ExxonMobil.

Demand reduction due to the COVID-19 pandemic as well as accompanying conditions of oversupply have led to a significant decrease in commodity prices and margins.

Future business results, including cash flows and financing needs, will be affected by the extent and duration of these conditions and the effectiveness of responsive actions that the Corporation and others take, including actions to reduce capital and operating expenses, and actions taken by governments and others to address the COVID-19 pandemic including the ongoing development and distribution of COVID-19 vaccines, and the impact of the pandemic on national and global economies and markets.

The initial phase of the COVID-19 pandemic caused conditions of demand reduction and oversupply to develop rapidly and resulted in significant decreases in commodity prices and margins.

ExxonMobil’s future business results, including cash flows and financing needs, will be affected by the scope and severity of current and future COVID outbreaks;

actions taken by governments and others to address the pandemic and the effects of those actions on national and global economies and markets;

changes in consumer behavior that affect demand for our products;

and the effectiveness of the Corporation’s own responsive actions to protect the safety and well-being of our people.

Other demand-related factors.

5 unchanged sentences

and broad-based changes in personal income levels.

See also “Climate Change and the Energy Transition” below.

Other supply-related factors.

Commodity prices and margins also vary depending on a number of factors affecting supply.

For example, increased supply from the development of new oil and gas supply sources and technologies to enhance recovery from existing sources tend to reduce commodity prices to the extent such supply increases are not offset by commensurate growth in demand.

For example, increased supply from the development of new oil and gas supply sources and technologies to enhance recovery from existing sources tends to reduce commodity prices to the extent such supply increases are not offset by commensurate growth in demand.

Similarly, increases in industry refining or petrochemical manufacturing capacity relative to demand tend to reduce margins on the affected products.

World oil, gas, and petrochemical supply levels can also be affected by factors that reduce available supplies, such as adherence by countries to OPEC production quotas and other agreements among sovereigns, government policies that restrict oil and gas production or increase associated costs, and the occurrence of wars, hostile actions, natural disasters, disruptions in competitors’ operations, logistics constraints or unexpected unavailability of distribution channels that may disrupt supplies.

World oil, gas, and petrochemical supply levels can also be affected by factors that reduce available supplies, such as the level of and adherence by participating countries to production quotas established by OPEC or "OPEC+" and other agreements among sovereigns, government policies, including actions intended to reduce greenhouse gas emissions, that restrict oil and gas production or increase associated costs, and the occurrence of wars, hostile actions, natural disasters, disruptions in competitors’ operations, logistics constraints or unexpected unavailability of distribution channels that may disrupt supplies.

Technological change can also alter the relative costs for competitors to find, produce, and refine oil and gas and to manufacture petrochemicals.

1 unchanged sentence

ExxonMobil’s business results are also exposed to potential negative impacts due to changes in interest rates, inflation, currency exchange rates, and other local or regional market conditions.

Market factors may also result in losses from commodity derivatives and other instruments we use to hedge price exposures or for trading purposes.

Government and Political Factors

13 unchanged sentences

Regulatory and litigation risks.

Even in countries with well-developed legal systems where ExxonMobil does business, we remain exposed to changes in law or interpretation of settled law (including changes that result from international treaties and accords) that could adversely affect our results, such as:

• increases in taxes, duties, or government royalty rates (including retroactive claims);

• price controls;

• changes in environmental regulations or other laws that increase our cost of compliance or reduce or delay available business opportunities (including changes in laws affecting offshore drilling operations, water use, methane emissions, hydraulic fracturing or use of plastics);

• actions by regulators or other political actors to delay or deny necessary licenses and permits or restrict the transportation of our products;

• actions by policy-makers, regulators, or other actors to delay or deny necessary licenses and permits, restrict the availability of oil and gas leases or the transportation of our products, or otherwise require changes in the company's business or strategy that could result in reduced returns;

• adoption of regulations mandating efficiency standards, the use of alternative fuels or uncompetitive fuel components;

4 unchanged sentences

by government enforcement proceedings alleging non-compliance with applicable laws or regulations;

or by state and local government actors as well as private plaintiffs acting in parallel that attempt to use the legal system to promote public policy agendas, gain political notoriety, or obtain monetary awards from the Company.

or by state and local government actors as well as private plaintiffs acting in parallel that attempt to use the legal system to promote public policy agendas (including seeking to reduce the production and sale of hydrocarbon products though litigation targeting the company or other industry participants), gain political notoriety, or obtain monetary awards from the company.

Security concerns.

Successful operation of particular facilities or projects may be disrupted by civil unrest, acts of sabotage or terrorism, cybersecurity attacks, and other local security concerns.

Successful operation of particular facilities or projects may be disrupted by civil unrest, acts of sabotage or terrorism, cybersecurity attacks, the application of national security laws or policies that result in restricting our ability to do business in a particular jurisdiction, and other local security concerns.

Such concerns may require us to incur greater costs for security or to shut down operations for a period of time.

Climate change and greenhouse gas restrictions.

Driven by concern over the risks of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions or production and use of oil and gas.

These include adoption of cap and trade regimes, carbon taxes, trade tariffs, minimum renewable usage requirements, restrictive permitting, increased efficiency standards, and incentives or mandates for renewable energy.

Political and other actors and their agents also increasingly seek to advance climate change objectives indirectly, such as by seeking to reduce the availability of or increase the cost for, financing and investment in the oil and gas sector and taking actions intended to promote changes in business strategy for oil and gas companies.

Depending on how policies are formulated and applied, they could have the potential to negatively affect investment returns, make our products more expensive or less competitive, lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon sources such as natural gas.

Climate Change and the Energy Transition

Net-zero scenarios.

These actions are being taken both independently by national and regional governments and within the framework of United Nations Conference of the Parties summits under which many countries of the world have endorsed objectives to reduce the atmospheric concentration of CO2 over the coming decades, with an ambition ultimately to achieve “net-zero.” Net-zero means that emissions of greenhouse gases from human activities would be balanced by actions that remove such gases from the atmosphere.

Expectations for transition of the world’s energy system to lower emission sources and ultimately net-zero derive from hypothetical scenarios that reflect many assumptions about the future and reflect substantial uncertainties.

The company’s objective to lead in the energy transition, including the company’s announced ambition ultimately to achieve net-zero with respect to emissions from operations where ExxonMobil is the operator, carries risks that the transition, including underlying technologies, policies, and markets as discussed in more detail below, will not develop at the pace or in the manner expected by current net-zero scenarios.

The success of our strategy for the energy transition will also depend on our ability to recognize key signposts of change in the global energy system on a timely basis, and our corresponding ability to direct investment to the technologies and businesses, at the appropriate stage of development, to best capitalize on our competitive strengths.

Greenhouse gas restrictions.

Government actions intended to reduce greenhouse gas emissions include adoption of cap and trade regimes, carbon taxes, trade tariffs, minimum renewable usage requirements, restrictive permitting, increased mileage and other efficiency standards, mandates for sales of electric vehicles, mandates for use of specific fuels or technologies, and other incentives or mandates designed to support transitioning to lower-emission energy sources.

Political and other actors and their agents also increasingly seek to advance climate change objectives indirectly, such as by seeking to reduce the availability or increase the cost of financing and investment in the oil and gas sector and taking actions intended to promote changes in business strategy for oil and gas companies.

Depending on how policies are formulated and applied, such policies could negatively affect our investment returns, make our hydrocarbon-based products more expensive or less competitive, lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon alternatives.

Current and pending greenhouse gas regulations or policies may also increase our compliance costs, such as for monitoring or sequestering emissions.

Alternative energy.

Many governments are providing tax advantages and other subsidies to support transitioning to alternative energy sources or are mandating the use of specific fuels or technologies.

Governments and others are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources.

We are conducting our own research both in-house and by working with more than 80 leading universities around the world, including the Massachusetts Institute of Technology, Princeton University, The University of Texas, and Stanford University in the U.S., and in Singapore with Nanyang Technological Institute and the National University.

Our research projects focus on developing advanced biofuels and hydrogen, carbon capture and storage, breakthrough energy efficiency processes, advanced energy-saving materials, and other technologies in collaboration with our partners including Synthetic Genomics, FuelCell Energy and Global Thermostat.

Our future results may depend in part on the success of our research efforts and on our ability to adapt and apply the strengths of our current business model to providing the energy products of the future in a cost-competitive manner.

See “Operational and Other Factors” below.

Technology and low carbon solutions.

Achieving societal ambitions to reduce greenhouse gas emissions and ultimately achieve net-zero will require new technologies to reduce the cost and increase the scalability of alternative energy sources, as well as technologies such as carbon capture and storage (CCS).

CCS technologies, focused initially on capturing and sequestering CO2 emissions from high-intensity industrial activities, can assist in meeting society’s objective to mitigate atmospheric greenhouse gas levels while also helping ensure the availability of the reliable and affordable energy the world requires.

ExxonMobil has established a Low Carbon Solutions (LCS) business unit to advance the development and deployment of these technologies and projects, including CCS, hydrogen and advanced biofuels, breakthrough energy efficiency processes, advanced energy-saving materials, and other technologies.

The company’s efforts include both in-house research and development and collaborative efforts with leading universities as well as commercial partners involved in advanced lower-emission energy technologies.

Our future results and ability to grow our LCS business and succeed through the energy transition will depend in part on the success of these research and collaboration efforts and on our ability to adapt and apply the strengths of our current business model to providing the energy products of the future in a cost-competitive manner.

Policy and market development.

The scale of the world’s energy system means that, in addition to developments in technology as discussed above, a successful energy transition will require appropriate support from governments and private participants throughout the global economy.

Our ability to develop and deploy CCS and other lower emission energy technologies at commercial scale, and the growth and future returns of LCS and other emerging businesses in which we invest, will depend in part on the continued development of supportive government policies and markets.

Failure or delay of these policies or markets to materialize or be maintained could adversely impact these investments.

Policy and other actions that result in restricting the availability of hydrocarbon products without commensurate reduction in demand may have unpredictable adverse effects, including increased commodity price volatility;

periods of significantly higher commodity prices and resulting inflationary pressures;

and local or regional energy shortages.

Such effects in turn may depress economic growth or lead to rapid or conflicting shifts in policy by different actors, with resulting adverse effects on our businesses.

See also the discussion of “Supply and Demand,” “Government and Political Factors,” and “Operational and Other Factors” in this Item 1A.

Operational and Other Factors

6 unchanged sentences

Project and portfolio management.

The long-term success of ExxonMobil’s Upstream, Downstream, and Chemical businesses depends on complex, long-term, capital intensive projects.

The long-term success of ExxonMobil’s Upstream, Downstream, and Chemical businesses, as well as the future success of LCS and other emerging lower-emission investments, depends on complex, long-term, capital intensive projects.

These projects in turn require a high degree of project management expertise to maximize efficiency.

4 unchanged sentences

manage changes in operating conditions and costs, including costs of third party equipment or services such as drilling rigs and shipping;

prevent, to the extent possible, and respond effectively to unforeseen technical difficulties that could delay project startup or cause unscheduled project downtime;

prevent, to the extent possible, and respond effectively to unforeseen technical difficulties that could delay project start-up or cause unscheduled project downtime;

and influence the performance of project operators where ExxonMobil does not perform that role.

In addition to the effective management of individual projects, ExxonMobil’s success, including our ability to mitigate risk and provide attractive returns to shareholders, depends on our ability to successfully manage our overall portfolio, including diversification among types and locations of our projects and strategies to divest assets.

We may not be able to divest assets at a price or on the timeline we contemplate in our strategies.

5 unchanged sentences

Research and development and technological change.

To maintain our competitive position, especially in light of the technological nature of our businesses and the need for continuous efficiency improvement, ExxonMobil’s research and development organizations must be successful and able to adapt to a changing market and policy environment, including developing technologies to help reduce greenhouse gas emissions.

To maintain our competitive position, especially in light of the technological nature of our businesses and the need for continuous efficiency improvement, ExxonMobil’s technology, research, and development organizations must be successful and able to adapt to a changing market and policy environment, including developing technologies to help reduce greenhouse gas emissions.

To remain competitive we must also continuously adapt and capture the benefits of new and emerging technologies, including successfully applying advances in the ability to process very large amounts of data to our businesses.

4 unchanged sentences

Similarly, we are implementing cost-effective new technologies and adopting new operating practices to reduce air emissions, not only in response to government requirements but also to address community priorities.

We employ a comprehensive enterprise risk management system to identify and manage risk across our businesses.

We also maintain a disciplined framework of internal controls and apply a controls management system for monitoring compliance with this framework.

Substantial liabilities and other adverse impacts could result if our management systems and controls do not function as intended.

Substantial liabilities and other adverse impacts could result if we do not timely identify and mitigate applicable risks, or if our management systems and controls do not function as intended.

Cybersecurity.

ExxonMobil is regularly subject to attempted cybersecurity disruptions from a variety of threat actors including state-sponsored actors.

ExxonMobil is regularly subject to attempted cybersecurity disruptions from a variety of sources including state-sponsored actors.

ExxonMobil’s defensive preparedness includes multi-layered technological capabilities for prevention and detection of cybersecurity disruptions;

2 unchanged sentences

If the measures we are taking to protect against cybersecurity disruptions prove to be insufficient or if our proprietary data is otherwise not protected, ExxonMobil as well as our customers, employees, or third parties could be adversely affected.

We are also exposed to potential harm from cybersecurity events that may affect the operations of third-parties, including our partners, suppliers, service providers (including providers of cloud-hosting services for our data or applications), and customers.

Cybersecurity disruptions could cause physical harm to people or the environment;

12 unchanged sentences

Insurance limitations.

The ability of the Corporation to insure against many of the risks it faces as described in this Item 1A is limited by the capacity of the applicable insurance markets, which may not be sufficient.

The ability of the Corporation to insure against many of the risks it faces as described in this Item 1A is limited by the availability and cost of coverage, which may not be economic, as well as the capacity of the applicable insurance markets, which may not be sufficient.

As noted in Item 1 above, the energy and petrochemical industries are highly competitive.

2 unchanged sentences

Technology and expertise provided by industry service companies may also enhance the competitiveness of firms that may not have the internal resources and capabilities of ExxonMobil or reduce the need for resource-owning countries to partner with private-sector oil and gas companies in order to monetize national resources.

As described in more detail above, our hydrocarbon-based energy products are also subject to growing and, in many cases, government-supported competition from alternative energy sources.

Our reputation is an important corporate asset.

An operating incident, significant cybersecurity disruption, change in consumer views concerning our products, or other adverse event such as those described in this Item 1A may have a negative impact on our reputation, which in turn could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, obtain financing, or could reduce consumer demand for our branded products.

Factors that could have a negative impact on our reputation include an operating incident or significant cybersecurity disruption;

changes in consumer views concerning our products;

a perception by investors or others that the Corporation is making insufficient progress with respect to our ambition to lead in the energy transition, or that pursuit of this ambition may result in allocation of capital to investments with reduced returns;

and other adverse events such as those described in this Item 1A.

Negative impacts on our reputation could in turn make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, obtain financing, attract talent, or could reduce consumer demand for our branded products.

ExxonMobil’s reputation may also be harmed by events which negatively affect the image of our industry as a whole.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors