Exxon Mobil Corp 10-Q

Item 1. Financial Statements EXXON MOBIL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (millions of dollars) Three Months Ended March 31, 2022 2021 Revenues and other income Sales and other operating revenue 87,734 57,552 Income from equity affiliates 2,538 1,473 Other income 228 122 Total revenues and other income 90,500 59,147 Costs and other deductions Crude oil and product purchases 52,388 32,601 Production and manufacturing expenses 10,241 8,062 Selling, general and administrative expenses 2,409 2,428 Depreciation and depletion (including impairments) 8,883 5,004 Exploration expenses, including dry holes 173 164 Non-service pension and postretirement benefit expense 108 378 Interest expense 188 258 Other taxes and duties 7,554 6,660 Total costs and other deductions 81,944 55,555 Income (loss) before income taxes 8,556 3,592 Income taxes 2,806 796 Net income (loss) including noncontrolling interests 5,750 2,796 Net income (loss) attributable to noncontrolling interests 270 66 Net income (loss) attributable to ExxonMobil 5,480 2,730 Earnings (loss) per common share (dollars) 1.28 0.64 Earnings (loss) per common share - assuming dilution (dollars) 1.28 0.64 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements. 3 EXXON MOBIL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (millions of dollars) Three Months Ended March 31, 2022 2021 Net income (loss) including noncontrolling interests 5,750 2,796 Other comprehensive income (loss) (net of income taxes) Foreign exchange translation adjustment 741 149 Postretirement benefits reserves adjustment (excluding amortization) 105 168 Amortization and settlement of postretirement benefits reserves adjustment included in net periodic benefit costs 93 378 Total other comprehensive income (loss) 939 695 Comprehensive income (loss) including noncontrolling interests 6,689 3,491 Comprehensive income (loss) attributable to noncontrolling interests 359 146 Comprehensive income (loss) attributable to ExxonMobil 6,330 3,345 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements. 4 EXXON MOBIL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (millions of dollars) March 31, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents 11,074 6,802 Notes and accounts receivable – net 42,142 32,383 Inventories Crude oil, products and merchandise 18,074 14,519 Materials and supplies 4,103 4,261 Other current assets 1,862 1,189 Total current assets 77,255 59,154 Investments, advances and long-term receivables 46,329 45,195 Property, plant and equipment – net 212,773 216,552 Other assets, including intangibles – net 18,414 18,022 Total Assets 354,771 338,923 Liabilities Current liabilities Notes and loans payable 4,886 4,276 Accounts payable and accrued liabilities 63,501 50,766 Income taxes payable 3,672 1,601 Total current liabilities 72,059 56,643 Long-term debt 42,651 43,428 Postretirement benefits reserves 18,255 18,430 Deferred income tax liabilities 19,533 20,165 Long-term obligations to equity companies 2,875 2,857 Other long-term obligations 22,872 21,717 Total Liabilities 178,245 163,240 Commitments and contingencies (Note 3) Equity Common stock without par value ( 9,000 million shares authorized, 8,019 million shares issued) 15,879 15,746 Earnings reinvested 393,779 392,059 Accumulated other comprehensive income ( 12,914 ) ( 13,764 ) Common stock held in treasury ( 3,806 million shares at March 31, 2022 and 3,780 million shares at December 31, 2021) ( 227,529 ) ( 225,464 ) ExxonMobil share of equity 169,215 168,577 Noncontrolling interests 7,311 7,106 Total Equity 176,526 175,683 Total Liabilities and Equity 354,771 338,923 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements. 5 EXXON MOBIL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (millions of dollars) Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net income (loss) including noncontrolling interests 5,750 2,796 Depreciation and depletion (including impairments) 8,883 5,004 Changes in operational working capital, excluding cash and debt 1,086 1,953 All other items – net ( 931 ) ( 489 ) Net cash provided by operating activities 14,788 9,264 Cash flows from investing activities Additions to property, plant and equipment ( 3,911 ) ( 2,400 ) Proceeds from asset sales and returns of investments 293 307 Additional investments and advances ( 417 ) ( 349 ) Other investing activities including collection of advances 90 87 Net cash used in investing activities ( 3,945 ) ( 2,355 ) Cash flows from financing activities Additions to short-term debt — 5,781 Reductions in short-term debt ( 2,098 ) ( 10,849 ) Additions/(reductions) in debt with three months or less maturity 1,366 1,003 Cash dividends to ExxonMobil shareholders ( 3,760 ) ( 3,720 ) Cash dividends to noncontrolling interests ( 60 ) ( 52 ) Changes in noncontrolling interests ( 94 ) 53 Common stock acquired ( 2,067 ) ( 1 ) Net cash used in financing activities ( 6,713 ) ( 7,785 ) Effects of exchange rate changes on cash 142 27 Increase/(decrease) in cash and cash equivalents 4,272 ( 849 ) Cash and cash equivalents at beginning of period 6,802 4,364 Cash and cash equivalents at end of period 11,074 3,515 Supplemental Disclosures Income taxes paid 1,798 855 Cash interest paid Included in cash flows from operating activities 319 405 Capitalized, included in cash flows from investing activities 187 151 Total cash interest paid 506 556 Noncash right of use assets recorded in exchange for lease liabilities Operating leases 240 265 Finance leases 656 — The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements. 6 EXXON MOBIL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (millions of dollars) ExxonMobil Share of Equity Common Stock Earnings Reinvested Accumulated Other Comprehensive Income Common Stock Held in Treasury ExxonMobil Share of Equity Non-controlling Interests Total Equity Balance as of December 31, 2020 15,688 383,943 ( 16,705 ) ( 225,776 ) 157,150 6,980 164,130 Amortization of stock-based awards 202 — — — 202 — 202 Other ( 6 ) — — — ( 6 ) 53 47 Net income (loss) for the period — 2,730 — — 2,730 66 2,796 Dividends - common shares — ( 3,720 ) — — ( 3,720 ) ( 52 ) ( 3,772 ) Other comprehensive income (loss) — — 615 — 615 80 695 Acquisitions, at cost — — — ( 1 ) ( 1 ) — ( 1 ) Dispositions — — — 4 4 — 4 Balance as of March 31, 2021 15,884 382,953 ( 16,090 ) ( 225,773 ) 156,974 7,127 164,101 Balance as of December 31, 2021 15,746 392,059 ( 13,764 ) ( 225,464 ) 168,577 7,106 175,683 Amortization of stock-based awards 138 — — — 138 — 138 Other ( 5 ) — — — ( 5 ) 14 9 Net income (loss) for the period — 5,480 — — 5,480 270 5,750 Dividends - common shares — ( 3,760 ) — — ( 3,760 ) ( 60 ) ( 3,820 ) Other comprehensive income (loss) — — 850 — 850 89 939 Acquisitions, at cost — — — ( 2,067 ) ( 2,067 ) ( 108 ) ( 2,175 ) Dispositions — — — 2 2 — 2 Balance as of March 31, 2022 15,879 393,779 ( 12,914 ) ( 227,529 ) 169,215 7,311 176,526 Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Common Stock Share Activity Issued Held in Treasury Outstanding Issued Held in Treasury Outstanding (millions of shares) (millions of shares) Balance as of December 31 8,019 ( 3,780 ) 4,239 8,019 ( 3,786 ) 4,233 Acquisitions — ( 26 ) ( 26 ) — — — Dispositions — — — — 1 1 Balance as of March 31 8,019 ( 3,806 ) 4,213 8,019 ( 3,785 ) 4,234 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements. 7 EXXON MOBIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Financial Statement Preparation These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation's 2021 Annual Report on Form 10-K. In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. Prior data has been reclassified in certain cases to conform to the current presentation basis. The Corporation's exploration and production activities are accounted for under the "successful efforts" method. 2. Russia In early March, in response to Russia’s military action in Ukraine, the Corporation announced that it plans to discontinue operations on the Sakhalin-1 project (“Sakhalin”) and develop steps to exit the venture. In light of this, and given the considerable uncertainties surrounding the ongoing operation and future cash-flow generating capability of Sakhalin, an impairment assessment was required, and management determined that the carrying value of the asset group was not recoverable. As a result, the Corporation’s first quarter earnings include after-tax charges of $ 3.4 billion largely representing the impairment of its operations related to Sakhalin. On a before-tax basis, the charges amounted to $ 4.6 billion, substantially all of which is reflected in the line captioned “Depreciation and depletion (including impairments)” on the Condensed Consolidated Statement of Income. The Corporation's exit from the project would result in quantities estimated at 150 million oil-equivalent barrels no longer qualifying as proved reserves, which represented less than one percent of the Corporation's 18.5 billion oil-equivalent barrels of proved reserves at year-end 2021. The assessment of fair value required the use of Level 3 inputs and assumptions that are based on the views of a likely market participant. As of March 31, the pool of market participants for Russia-based upstream assets was assessed as extremely limited. In arriving at a fair value for its interest in Sakhalin, the Corporation considered, among other things, the current state of sanctions, the regulatory environment within Russia, the statements and actions of potential market participants, and the range and risks of future cash flows that a market participant might consider. Given these significant uncertainties, the likelihood of a third-party market participant agreeing to engage in a transaction for the Corporation’s interest in Sakhalin, as of March 31, was judged to be remote. 8 3. Litigation and Other Contingencies Litigation. A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. For purposes of our contingency disclosures, “significant” includes material matters, as well as other matters which management believes should be disclosed. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a material adverse effect upon the Corporation's operations, financial condition, or financial statements taken as a whole. Other Contingencies. The Corporation and certain of its consolidated subsidiaries were contingently liable at March 31, 2022, for guarantees relating to notes, loans and performance under contracts. Where guarantees for environmental remediation and other similar matters do not include a stated cap, the amounts reflect management’s estimate of the maximum potential exposure. These guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. March 31, 2022 Equity Company Obligations (1) Other Third-Party Obligations Total (millions of dollars) Guarantees Debt-related 1,152 145 1,297 Other 830 6,379 7,209 Total 1,982 6,524 8,506 (1) ExxonMobil share Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. The operations and earnings of the Corporation and its affiliates throughout the world have been, and may in the future be, affected from time to time in varying degree by political developments and laws and regulations, such as forced divestiture of assets; restrictions on production, imports and exports; price controls; tax increases and retroactive tax claims; expropriation of property; cancellation of contract rights and environmental regulations. Both the likelihood of such occurrences and their overall effect upon the Corporation vary greatly from country to country and are not predictable. 9 4. Other Comprehensive Income Information ExxonMobil Share of Accumulated Other Comprehensive Income Cumulative Foreign Exchange Translation Adjustment Postretirement Benefits Reserves Adjustment Total (millions of dollars) Balance as of December 31, 2020 ( 10,614 ) ( 6,091 ) ( 16,705 ) Current period change excluding amounts reclassified from accumulated other comprehensive income (1) 88 158 246 Amounts reclassified from accumulated other comprehensive income — 369 369 Total change in accumulated other comprehensive income 88 527 615 Balance as of March 31, 2021 ( 10,526 ) ( 5,564 ) ( 16,090 ) Balance as of December 31, 2021 ( 11,499 ) ( 2,265 ) ( 13,764 ) Current period change excluding amounts reclassified from accumulated other comprehensive income (1) 661 102 763 Amounts reclassified from accumulated other comprehensive income — 87 87 Total change in accumulated other comprehensive income 661 189 850 Balance as of March 31, 2022 ( 10,838 ) ( 2,076 ) ( 12,914 ) (1) Cumulative Foreign Exchange Translation Adjustment includes net investment hedge gain/(loss) net of taxes of $ 79 million and $ 191 million in 2022 and 2021, respectively. Amounts Reclassified Out of Accumulated Other Comprehensive Income - Before-tax Income/(Expense) Three Months Ended March 31, 2022 2021 (millions of dollars) Amortization and settlement of postretirement benefits reserves adjustment included in net periodic benefit costs (Statement of Income line: Non-service pension and postretirement benefit expense) ( 120 ) ( 484 ) Income Tax (Expense)/Credit For Components of Other Comprehensive Income Three Months Ended March 31, 2022 2021 (millions of dollars) Foreign exchange translation adjustment ( 22 ) ( 53 ) Postretirement benefits reserves adjustment (excluding amortization) ( 40 ) ( 58 ) Amortization and settlement of postretirement benefits reserves adjustment included in net periodic benefit costs ( 27 ) ( 106 ) Total ( 89 ) ( 217 ) 10 5. Earnings Per Share Three Months Ended March 31, 2022 2021 Earnings per common share Net income (loss) attributable to ExxonMobil (millions of dollars) 5,480 2,730 Weighted average number of common shares outstanding (millions of shares) 4,266 4,272 Earnings (loss) per common share (dollars) (1) 1.28 0.64 Dividends paid per common share (dollars) 0.88 0.87 (1) The calculation of earnings (loss) per common share and earnings (loss) per common share – assuming dilution are the same in each period shown. 6. Pension and Other Postretirement Benefits Three Months Ended March 31, 2022 2021 (millions of dollars) Components of net benefit cost Pension Benefits - U.S. Service cost 179 225 Interest cost 129 139 Expected return on plan assets ( 140 ) ( 180 ) Amortization of actuarial loss/(gain) 39 61 Amortization of prior service cost ( 7 ) ( 6 ) Net pension enhancement and curtailment/settlement cost 37 298 Net benefit cost 237 537 Pension Benefits - Non-U.S. Service cost 150 195 Interest cost 160 130 Expected return on plan assets ( 213 ) ( 258 ) Amortization of actuarial loss/(gain) 47 108 Amortization of prior service cost 12 15 Net pension enhancement and curtailment/settlement cost — 12 Net benefit cost 156 202 Other Postretirement Benefits Service cost 40 49 Interest cost 55 56 Expected return on plan assets ( 3 ) ( 5 ) Amortization of actuarial loss/(gain) 3 19 Amortization of prior service cost ( 11 ) ( 11 ) Net benefit cost 84 108 11 7. Financial Instruments and Derivatives Financial Instruments. The estimated fair value of financial instruments at March 31, 2022 and December 31, 2021, and the related hierarchy level for the fair value measurement was as follows: March 31, 2022 (millions of dollars) Fair Value Level 1 Level 2 Level 3 Total Gross Assets & Liabilities Effect of Counterparty Netting Effect of Collateral Netting Difference in Carrying Value and Fair Value Net Carrying Value Assets Derivative assets (1) 6,886 2,890 — 9,776 ( 7,888 ) ( 60 ) — 1,828 Advances to/receivables from equity companies (2)(6) — 2,631 5,491 8,122 — — 435 8,557 Other long-term financial assets (3) 1,152 — 1,049 2,201 — — 165 2,366 Liabilities Derivative liabilities (4) 7,459 3,940 — 11,399 ( 7,888 ) ( 632 ) — 2,879 Long-term debt (5) 40,367 76 2 40,445 — — ( 140 ) 40,305 Long-term obligations to equity companies (6) — — 2,969 2,969 — — ( 94 ) 2,875 Other long-term financial liabilities (7) — — 886 886 — — 53 939 December 31, 2021 (millions of dollars) Fair Value Level 1 Level 2 Level 3 Total Gross Assets & Liabilities Effect of Counterparty Netting Effect of Collateral Netting Difference in Carrying Value and Fair Value Net Carrying Value Assets Derivative assets (1) 1,422 1,523 — 2,945 ( 1,930 ) ( 28 ) — 987 Advances to/receivables from equity companies (2)(6) — 3,076 5,373 8,449 — — ( 123 ) 8,326 Other long-term financial assets (3) 1,134 — 1,058 2,192 — — 181 2,373 Liabilities Derivative liabilities (4) 1,701 2,594 — 4,295 ( 1,930 ) ( 306 ) — 2,059 Long-term debt (5) 44,454 88 3 44,545 — — ( 2,878 ) 41,667 Long-term obligations to equity companies (6) — — 3,084 3,084 — — ( 227 ) 2,857 Other long-term financial liabilities (7) — — 902 902 — — 58 960 (1) Included in the Balance Sheet lines: Notes and accounts receivable - net and Other assets, including intangibles - net (2) Included in the Balance Sheet line: Investments, advances and long-term receivables (3) Included in the Balance Sheet lines: Investments, advances and long-term receivables and Other assets, including intangibles - net (4) Included in the Balance Sheet lines: Accounts payable and accrued liabilities and Other long-term obligations (5) Excluding finance lease obligations (6) Advances to/receivables from equity companies and long-term obligations to equity companies are mainly designated as hierarchy level 3 inputs. The fair value is calculated by discounting the remaining obligations by a rate consistent with the credit quality and industry of the company. (7) Included in the Balance Sheet line: Other long-term obligations. Includes contingent consideration related to a prior year acquisition where fair value is based on expected drilling activities and discount rates. At March 31, 2022 and December 31, 2021, respectively, the Corporation had $ 1,347 million and $ 641 million of collateral under master netting arrangements not offset against the derivatives on the Consolidated Balance Sheet, primarily related to initial margin requirements. 12 The Corporation may use non-derivative financial instruments, such as its foreign currency-denominated debt, as hedges of its net investments in certain foreign subsidiaries. Under this method, the change in the carrying value of the financial instruments due to foreign exchange fluctuations is reported in accumulated other comprehensive income. As of March 31, 2022, the Corporation has designated $ 5.0 billion of its Euro-denominated long-term debt and related accrued interest as a net investment hedge of its European business. The net investment hedge is deemed to be perfectly effective. The Corporation had undrawn short-term committed lines of credit of $ 10.7 billion and undrawn long-term committed lines of credit of $ 0.6 billion as of first quarter 2022. Derivative Instruments. The Corporation’s size, strong capital structure, geographic diversity and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the Corporation’s enterprise-wide risk from changes in commodity prices, currency rates and interest rates. In addition, the Corporation uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. Commodity contracts held for trading purposes are presented in the Consolidated Statement of Income on a net basis in the line “Sales and other operating revenue.” The Corporation’s commodity derivatives are not accounted for under hedge accounting. At times, the Corporation also enters into currency and interest rate derivatives, none of which are material to the Corporation’s financial position as of March 31, 2022 and December 31, 2021, or results of operations for the periods ended March 31, 2022 and 2021. Credit risk associated with the Corporation’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The Corporation maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity. The net notional long/(short) position of derivative instruments at March 31, 2022 and December 31, 2021, was as follows: March 31, December 31, 2022 2021 (millions) Crude oil (barrels) 91 82 Petroleum products (barrels) ( 37 ) ( 48 ) Natural gas (MMBTUs) ( 101 ) ( 115 ) Realized and unrealized gains/(losses) on derivative instruments that were recognized in the Consolidated Statement of Income are included in the following lines on a before-tax basis: Three Months Ended March 31, 2022 2021 (millions of dollars) Sales and other operating revenue ( 2,535 ) ( 512 ) Crude oil and product purchases ( 26 ) 1 Total ( 2,561 ) ( 511 ) 13 8. Disclosures about Segments and Related Information Three Months Ended March 31, 2022 2021 Earnings (Loss) After Income Tax (millions of dollars) Upstream United States 2,376 363 Non-U.S. (1) 2,112 2,191 Downstream United States 685 ( 113 ) Non-U.S. ( 353 ) ( 277 ) Chemical United States 819 715 Non-U.S. 535 700 Corporate and Financing (1) ( 694 ) ( 849 ) Corporate total 5,480 2,730 (1) Results for 2022 include charges of $ 3.3 billion in non-U.S. Upstream and $ 0.1 billion in Corporate and Financing associated with the Corporation's interest in Sakhalin-1. (See Note 2 to Condensed Consolidated Financial Statements) Sales and Other Operating Revenue Upstream United States 2,656 1,885 Non-U.S. 6,343 3,094 Downstream United States 25,356 16,078 Non-U.S. 43,609 28,613 Chemical United States 3,982 3,091 Non-U.S. 5,781 4,887 Corporate and Financing 7 ( 96 ) Corporate total 87,734 57,552 Intersegment Revenue Upstream United States 6,191 3,323 Non-U.S. 10,835 6,817 Downstream United States 8,261 3,953 Non-U.S. 9,503 5,381 Chemical United States 2,863 1,950 Non-U.S. 2,213 1,231 Corporate and Financing 57 57 14 Geographic Three Months Ended March 31, Sales and Other Operating Revenue 2022 2021 (millions of dollars) United States 31,994 21,054 Non-U.S. 55,740 36,498 Total 87,734 57,552 Significant Non-U.S. revenue sources include: (1) United Kingdom 7,548 2,943 Canada 6,995 4,258 France 4,356 2,782 Singapore 4,322 3,435 Belgium 2,836 1,989 Italy 2,836 1,865 (1) Revenue is determined by primary country of operations. Excludes certain sales and other operating revenues in Non-U.S. operations where attribution to a specific country is not practicable. 9. Divestment Activities In February 2022, the Corporation signed an agreement with Seplat Energy Offshore Limited for the sale of Mobil Producing Nigeria Unlimited. The agreement is subject to certain conditions precedent and government approvals. If these are attained, the transaction would be expected to close no earlier than mid-year 2022. The agreed sales price is subject to interim period adjustments from January 1, 2021 to the closing date, and has potential for further adjustments based on commodity prices and production levels. Assuming a mid-2022 closing date and based on currently available information, the Corporation expects to recognize a loss of approximately $ 500 million when and if the potential divestment ultimately meets held-for-sale criteria under ASC 360, following the resolution of certain conditions precedent noted above. Following the end of the first quarter, the Corporation executed an agreement for the sale of ExxonMobil Exploration and Production Romania, consisting of certain unproved Upstream assets, to Romgaz S.A. The transaction is anticipated to close mid-year 2022, and the Corporation expects to recognize a gain on the sale of approximately $ 300 million. 15 EXXON MOBIL CORPORATION