What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-02 compared with 2022-11-02 · 115 added, 273 removed, 195 unchanged (67% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the COVID-19 pandemic, industry investment to maintain and increase production capacity was restrained to preserve capital, resulting in underinvestment and supply tightness as demand for petroleum and petrochemical products recovered.

In addition, industry rationalization of refining assets resulted in more than 3 million barrels per day of capacity being taken offline.

Across late 2021 and the first half of 2022, this dynamic, along with supply chain constraints, and a continuation of demand recovery led to a steady increase in oil and natural gas prices and refining margins.

In the first half of 2022, tightness in the oil and natural gas markets was further exacerbated by Russia’s invasion of Ukraine and subsequent sanctions imposed upon business and other activities in Russia.

The price of Brent crude oil and certain regional natural gas indicators increased to levels not seen for several years, and both natural gas realizations and industry refining margins improved to levels well above the 10-year range.

In the third quarter, crude prices moved back within the upper-end of the 10-year range as higher supply slightly exceeded demand.

Natural gas prices rose to record levels in the third quarter, reflecting concerns in Europe about the withdrawal of Russian supply as well as efforts to build inventory ahead of winter.

While natural gas prices recently moderated, they remain well above the 10-year historical range.

In the U.S., prices increased by about 15% driven by higher summer cooling demand and inventory concerns.

Refining margins remained well above the 10-year range due to inflated diesel crack spreads resulting from expensive natural gas and high demand for diesel.

Higher refinery runs and flat demand for gasoline in the U.S.

resulted in refining margins declining from the second quarter.

In contrast, global chemical margins fell below the bottom of the 10-year range reflecting weakening global demand.

Margins in North America and Europe have softened with regional pricing moving closer to global parity as demand and logistics constraints relaxed.

Asia Pacific remained in bottom-of-cycle conditions as COVID-19 restrictions continue to suppress demand in China.

Commodity and product prices are expected to remain volatile given the current global economic uncertainty and geopolitical events affecting supply and demand.

Russia-Ukraine Conflict

In response to Russia’s military action in Ukraine, the Corporation announced in early 2022 that it planned to discontinue operations on the Sakhalin-1 project (“Sakhalin”) and develop steps to exit the venture.

The Corporation’s first quarter results included after-tax charges of $3.4 billion largely representing the impairment of its operations related to Sakhalin (see Note 2 to Condensed Consolidated Financial Statements).

While the Corporation’s affiliate was in force majeure due to the unprecedented impact of global sanctions, it continued to make concerted attempts to engage in good-faith discussions with the Russian government and all Sakhalin-1 partners.

The Corporation remained focused on safety of people, protection of the environment, and integrity of operations.

Effective October 14, with two decrees the Russian government unilaterally terminated the Corporation’s interests in Sakhalin-1, and the project has been transferred to a Russian operator.

While the recent decrees violate the Corporation’s rights in Russia established by the production sharing agreement, and interrupted the exit process the Corporation was working, it did not prevent the safe winding down of operations.

The Corporation’s exit from the venture is expected to result in no future hydrocarbon sales and minimal cash flow impacts for the Corporation’s account in the fourth quarter.

For reference, excluding the impact of impairments and other charges, year-to-date after-tax earnings related to the Corporation’s interest in Sakhalin through the end of the third quarter of 2022 were approximately $0.2 billion, and combined oil and gas production was approximately 34 thousand oil-equivalent barrels per day.

The Corporation's exit from the project results in quantities estimated at 150 million oil-equivalent barrels no longer qualifying as proved reserves, which represents less than one percent of the Corporation's 18.5 billion oil-equivalent barrels of proved reserves at year-end 2021.

The Corporation is complying with all applicable laws and sanctions.

The Corporation holds a 25% interest in Tengizchevroil, LLP (TCO), which operates the Tengiz and Korolev oil fields in Kazakhstan, and holds a 16.8% working interest in the Kashagan field in Kazakhstan.

Oil production from those operations is exported through the Caspian Pipeline Consortium (CPC), in which the Corporation holds a 7.5% interest.

CPC traverses parts of Kazakhstan and Russia to tanker-loading facilities on the Russian coast of the Black Sea.

In the event that Russia takes countermeasures in response to existing sanctions related to its military actions in Ukraine, it is possible that the transportation of Kazakhstan oil through the CPC pipeline could be disrupted, curtailed, temporarily suspended, or otherwise restricted.

In such a case, the Corporation could experience a loss of cash flows of uncertain duration.

For reference, year-to-date after-tax earnings related to the Corporation’s interests in Kazakhstan through the end of the third quarter 2022 were approximately $2.0 billion, and its share of combined oil and gas production was approximately 240 thousand oil-equivalent barrels per day.

European Union Solidarity Contribution

On October 6, European Union (“EU”) Member States formally adopted a European Union Council Regulation for a new tax described as an emergency intervention to address high energy prices.

This regulation imposes a mandatory tax on certain companies active in the crude petroleum, coal, natural gas and refinery sectors.

The regulation requires Member States to levy a minimum 33% tax on in-scope companies’ 2022 and/or 2023 “surplus profits”, defined in the regulation as taxable profits exceeding 120% of the annual average during the 2018-2021 period.

EU Member States are required to implement the tax, or an equivalent national measure, by December 31, 2022.

Depending on the national measures to be adopted by the EU Member States, and the financial years for which these measures would be applicable, the Corporation’s liability, based on currently available public information, could be in excess of $2 billion through the end of 2023.

The actual impact and timing of recognition in the financial statements will depend on the specific provisions of the EU Member States’ measures.

ExxonMobil Product Solutions Reorganization

Effective April 1, 2022, the Corporation streamlined its business structure by combining the Chemical and Downstream businesses into a single business, Product Solutions.

The new business is focused on growing high-value products, improving competitiveness and leading in sustainability.

Product Solutions consists of three operating segments:

• Energy Products:

Fuels, aromatics, and catalysts and licensing

• Chemical Products:

Olefins, polyethylene, polypropylene, and intermediates

• Specialty Products:

Finished lubricants, basestocks and waxes, synthetics, and elastomers and resins

Further information on financial performance related to the new segments is disclosed in Management's Discussion and Analysis and Note 8 to the Condensed Consolidated Financial Statements.

During the first quarter of 2023 the price of crude oil decreased as the global oil market saw higher inventory levels;

however prices remained above the 10-year average (2010-2019).

The increase in inventory levels was followed by an early April announcement from OPEC+ oil producers to further reduce oil output.

Natural gas prices remained above the 10-year range, despite declining significantly in the quarter as milder weather eased demand for natural gas heating, allowing storage levels to increase above historical averages in the United States and Europe.

While moderating slightly from the fourth quarter of 2022, refining margins remained above the 10-year range due to low inventory levels of petroleum products.

While chemical margins remained below the 10-year range due to continued bottom-of-cycle conditions in Asia Pacific, margins in North America improved on lower energy and feed costs.

The Corporation’s first quarter results include after-tax charges of $0.2 billion related to additional European taxes imposed on the energy sector, mainly reflected in the line “Income tax expense (benefit).” The enactment of regulations in late 2022 by European Member States and other countries imposed mandatory taxes on certain companies active in the crude petroleum, coal, natural gas, and refinery sectors.

FUNCTIONAL EARNINGS SUMMARY

Earnings (loss) excluding Identified Items, are earnings (loss) excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $250 million in a given quarter.

The earnings (loss) impact of an Identified Item for an individual segment in a given quarter may be less than $250 million when the item impacts several segments or several periods.

Earnings (loss) excluding Identified Items (non-GAAP) are earnings (loss) excluding individually significant non-operational events with, typically, an absolute corporate total earnings impact of at least $250 million in a given quarter.

The earnings (loss) impact of an identified item for an individual segment may be less than $250 million when the item impacts several periods or several segments.

Earnings (loss) excluding Identified Items does include non-operational earnings events or impacts that are generally below the $250 million threshold utilized for Identified Items.

Management uses these figures to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results.

2 unchanged sentences

Three Months Ended

September 30, 2022 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

March 31, 2023 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

(millions of dollars) U.S.

Earnings (loss) (U.S.

GAAP) 3,110 9,309 3,008 2,811 635 177 306 456 (152) 19,660

1,632 4,825 1,910 2,273 324 47 451 323 (355) 11,430

Identified Items

Impairments — (697) — — — — — — — (697)

Gain/(loss) on sale of assets — 587 — — — — — — — 587

Tax-related items — (158) — (30) — — — — — (188)

Other — 688 — — — — — — 76 764

Earnings (loss) excluding Identified Items 3,110 8,731 3,008 2,811 635 177 306 456 (552) 18,682

Earnings (loss) excluding Identified Items (Non-GAAP)

1,632 4,983 1,910 2,303 324 47 451 323 (355) 11,618

Three Months Ended

September 30, 2021 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

(millions of dollars) U.S.

Earnings (loss) (U.S.

GAAP) 869 3,082 479 50 1,121 907 247 592 (596) 6,750

Identified Items

Severance charges — — — — — — — — (5) (5)

Earnings (loss) excluding Identified Items 869 3,082 479 50 1,121 907 247 592 (591) 6,755

Nine Months Ended

September 30, 2022 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

March 31, 2022 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

(millions of dollars) U.S.

Earnings (loss) (U.S.

GAAP) 9,235 19,043 6,152 4,744 2,030 1,263 784 871 (1,132) 42,990

2,376 2,112 489 (684) 770 636 246 230 (694) 5,480

Identified Items

Impairments — (2,877) — — — — — — (98) (2,975)

Gain/(loss) on sale of assets 299 587 — — — — — — — 886

Tax-related items — — — — — — — — 324 324

Other — (378) — — — — — — — (378)

Earnings (loss) excluding Identified Items 8,936 21,720 6,152 4,744 2,030 1,263 784 871 (1,434) 45,066

Nine Months Ended

September 30, 2021 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total

(millions of dollars) U.S.

Earnings (loss) (U.S.

GAAP) 1,895 7,795 (31) (1,217) 2,923 2,695 689 1,454 (2,033) 14,170

Identified Items

Severance charges — — — — — — — — (48) (48)

Earnings (loss) excluding Identified Items 1,895 7,795 (31) (1,217) 2,923 2,695 689 1,454 (1,985) 14,218

Earnings (loss) excluding Identified Items (Non-GAAP)

2,376 5,367 489 (684) 770 636 246 230 (596) 8,833

References in this discussion to Corporate earnings (loss) mean net income (loss) attributable to ExxonMobil (U.S.

1 unchanged sentence

Unless otherwise indicated, references to earnings (loss);

Upstream, Energy Products, Chemical Products, Specialty Products, and Corporate and Financing segment earnings (loss);

Upstream, Energy Products, Chemical Products, Specialty Products, and Corporate and Financing earnings (loss);

and earnings (loss) per share are ExxonMobil's share after excluding amounts attributable to noncontrolling interests.

Due to rounding, numbers presented may not add up precisely to the totals indicated.

REVIEW OF THIRD QUARTER 2022 RESULTS

ExxonMobil’s third quarter 2022 earnings were $19.7 billion, or $4.68 per diluted share, compared with earnings of $6.8 billion a year earlier.

The increase in earnings was driven by higher Upstream realizations and Energy Products margins as well as increased volume and improved mix.

Capital and exploration expenditures were $5.7 billion, up $1.9 billion from third quarter 2021.

Earnings for the first nine months of 2022 were $43.0 billion, or $10.17 per diluted share, compared with $14.2 billion a year earlier.

Capital and exploration expenditures were $15.2 billion, up $4.5 billion from 2021.

The Corporation distributed $11.2 billion in dividends to shareholders and repurchased $10.5 billion of common stock.

REVIEW OF FIRST QUARTER 2023 RESULTS

ExxonMobil’s first quarter 2023 earnings were $11.4 billion, or $2.79 per share assuming dilution, compared with earnings of $5.5 billion a year earlier.

The increase in earnings was driven by higher Energy Products and Specialty Products margins as well as increased volume and improved mix.

Capital and exploration expenditures were $6.4 billion, up $1.5 billion from first quarter 2022.

Upstream Financial Results

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings (loss) (U.S.

United States 1,632 2,376

9,309 3,082 19,043 7,795

Total 6,457 4,488

3 unchanged sentences

Total (158) (3,255)

Earnings (loss) excluding Identified Items (1)

Earnings (loss) excluding Identified Items (1) (Non-GAAP)

United States 1,632 2,376

8,731 3,082 21,720 7,795

Total 6,615 7,743

Upstream Third Quarter Earnings Factor Analysis

(millions of dollars)

Price – Higher realizations increased earnings by $7,330 million as average natural gas realizations increased 172%, while realizations for crude oil increased 39%.

Volume/Mix – Higher volumes increased earnings by $610 million, reflecting growth in Guyana and Permian and eased curtailments, partly offset by planned and unplanned downtime and divestments.

Other – All other items decreased earnings by $50 million.

Identified Items (1) – 3Q 2022 $580 million gain on the sale of Romania and XTO Energy Canada assets and one-time benefits from tax and other reserve adjustments, partly offset by impairments.

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Upstream Year-to-Date Earnings Factor Analysis

Upstream First Quarter Earnings Factor Analysis

(millions of dollars)

Price – Higher realizations increased earnings by $21,470 million as average realizations for crude oil increased 58% and natural gas realizations increased 167%.

Volume/Mix – Unfavorable volume and mix effects decreased earnings by $90 million, as growth in Guyana and Permian and eased curtailments nearly offset the impacts from the reduced Groningen gas production limit in Netherlands, Russia curtailments, higher downtime including the effects of weather in the first quarter, and lower entitlements due to higher prices.

Other – All other items decreased earnings by $410 million largely due to divestment-related impairments and the absence of prior year one-time tax impacts.

Identified Items (1) – 2022 $(2,380) million loss mainly driven by the first quarter impairment of the Russia Sakhalin-1 project, partly offset by gains on the sale of the U.S.

Barnett Shale, Romania, and XTO Energy Canada assets and one-time benefits from tax and other reserve adjustments.

Price – Price impacts, driven by a 23% decrease in average crude realizations, decreased earnings by $1,750 million.

Volume/Mix – Higher production volumes increased earnings by $620 million.

Advantaged projects growth in Guyana and Permian more than offset the impact from divestments and the Russia expropriation.

Identified Items (1) – 1Q 2022 $(3,255) million loss as a result of the Russia expropriation.

1Q 2023 $(158) million loss from additional European taxes.

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Upstream Operational Results

Three Months Ended

Net production of crude oil, natural gas liquids, bitumen and synthetic oil

(thousands of barrels daily)

United States 820 753

Canada/Other Americas 670 474

Africa 220 257

Australia/Oceania 32 40

Worldwide 2,495 2,266

Net natural gas production available for sale

(millions of cubic feet daily)

United States 2,367 2,777

Canada/Other Americas 94 182

Europe 548 770

Africa 134 58

Asia 3,597 3,340

Australia/Oceania 1,276 1,325

Worldwide 8,016 8,452

Oil-equivalent production (1)

(thousands of oil-equivalent barrels daily)

(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.

Upstream Additional Information

(thousands of barrels daily) Three Months Ended

September 30, 2022 Nine Months Ended

September 30, 2022

March 31, 2023

Volumes reconciliation (Oil-equivalent production) (1)

2021 3,665 3,677

Entitlements - Net Interest (65)

2 unchanged sentences

Divestments (133)

Growth / Demand / Other 120 73

2022 3,716 3,708

Growth / Other 295

(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.

3Q 2022 versus 3Q 2021 - 3.7 million oil-equivalent barrels per day in 3Q 2022 increased 51 thousand oil-equivalent barrels per day from 3Q 2021 reflecting growth in Guyana and Permian, and easing government-mandated curtailments, partly offset by divestments and lower entitlements due to higher prices.

YTD 2022 versus YTD 2021 - 2022 year-to-date production of 3.7 million oil-equivalent barrels per day increased 31 thousand oil-equivalent barrels per day from year-to-date 2021 reflecting growth in Permian and Guyana and easing government-mandated curtailments, partly offset by divestments, lower entitlements due to higher prices, and higher downtime including the effects of weather in the first quarter of 2022.

3.8 million oil-equivalent barrels per day in 1Q 2023 increased 156 thousand oil-equivalent barrels per day from 1Q 2022.

Growth in Guyana and the Permian more than offset the impacts from divestments and the Russia expropriation.

1Q 2023 production also benefited from lower downtime and higher entitlements due to lower prices.

Listed below are descriptions of ExxonMobil’s volumes reconciliation factors which are provided to facilitate understanding of the terms.

10 unchanged sentences

Divestments are reductions in ExxonMobil’s production arising from commercial arrangements to fully or partially reduce equity in a field or asset in exchange for financial or other economic consideration.

Growth, Demand and Other comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable to ExxonMobil.

Growth and Other comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable to ExxonMobil.

Such factors include, but are not limited to, production enhancements from project and work program activities, acquisitions including additions from asset exchanges, downtime, market demand, natural field decline, and any fiscal or commercial terms that do not affect entitlements.

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net production of crude oil, natural gas liquids, bitumen and synthetic oil (thousands of barrels daily)

United States 783 758 771 704

Canada/Other Americas 641 569 558 557

Europe 4 21 4 24

Africa 249 248 243 252

Asia 666 668 698 676

Australia/Oceania 46 49 44 44

Worldwide 2,389 2,313 2,318 2,257

Net natural gas production available for sale

(millions of cubic feet daily)

United States 2,351 2,701 2,607 2,757

Canada/Other Americas 158 184 175 197

Europe 541 343 711 796

Africa 70 53 65 41

Asia 3,304 3,365 3,321 3,465

Australia/Oceania 1,539 1,464 1,460 1,266

Worldwide 7,963 8,110 8,339 8,522

Oil-equivalent production (1)

(thousands of oil-equivalent barrels daily)

3,716 3,665 3,708 3,677

(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.

ENERGY PRODUCTS

1 unchanged sentence

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings (loss) (U.S.

United States 1,910 489

2,811 50 4,744 (1,217)

Total 4,183 (196)

Earnings (loss) excluding Identified Items (1)

Identified Items (1)

United States — —

2,811 50 4,744 (1,217)

Earnings (loss) excluding Identified Items (1) (Non-GAAP)

United States 1,910 489

Total 4,213 (196)

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Energy Products Third Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Higher margins increased earnings by $5,050 million due to improved industry refining margins and positive derivative mark-to-market effects.

Volume/Mix – Favorable volume and mix effects increased earnings by $390 million, driven by increased throughput on strong reliability, improved product yields and lower turnaround activity.

Other – All other items decreased earnings by $150 million.

Energy Products Year-to-Date Earnings Factor Analysis

Due to rounding, numbers presented may not add up precisely to the totals indicated.

Energy Products First Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Higher margins increased earnings by $10,870 million, driven by stronger industry refining margins and favorable derivative mark-to-market effects.

Volume/Mix – Favorable volume and mix effects increased earnings by $1,090 million, mainly as a result of strong reliability and lower scheduled maintenance.

Other – All other items increased earnings by $180 million, primarily due to the absence of terminal conversion impacts in the prior year.

Margins – Higher margins increased earnings by $4,520 million due to stronger industry refining margins, as well as marketing and trading contributions.

Volume/Mix – Favorable volume and mix impacts partly offset by increased scheduled maintenance increased earnings by $150 million.

Other – All other items, including higher maintenance costs, decreased earnings by $260 million.

Identified Items (1) – 1Q 2023 $(30) million loss from additional European taxes.

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Energy Products Operational Results

(thousands of barrels daily) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Refinery throughput

7 unchanged sentences

United States 2,459 2,262

3,058 2,941 2,922 2,825

Worldwide 5,277 5,111

5 unchanged sentences

(1) Data reported net of purchases/sales contracts with the same counterparty.

Due to rounding, numbers presented may not add up precisely to the totals indicated.

CHEMICAL PRODUCTS

1 unchanged sentence

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings (loss) (U.S.

United States 324 770

177 907 1,263 2,695

Total 371 1,405

Earnings (loss) excluding Identified Items (1)

Earnings (loss) excluding Identified Items (1) (Non-GAAP)

United States 324 770

177 907 1,263 2,695

Total 371 1,405

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Chemical Products Third Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Lower margins decreased earnings by $1,090 million, reflecting lower prices and higher feed and energy costs.

Volume/Mix – Lower volumes decreased earnings by $190 million, reflecting softening market conditions.

Other – All other items increased earnings by $60 million, driven by lower expenses and net favorable one-time items, partly offset by unfavorable foreign exchange effects.

Chemical Products Year-to-Date Earnings Factor Analysis

Due to rounding, numbers presented may not add up precisely to the totals indicated.

Chemical Products First Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Lower margins decreased earnings by $2,050 million, reflecting higher feed and energy costs.

Volume/Mix – Flat.

Other – All other items decreased earnings by $280 million, primarily driven by higher project and planned maintenance expenses, and unfavorable foreign exchange effects.

Margins – Weaker industry margins decreased earnings by $570 million.

Volume/Mix – Lower sales decreased earnings by $280 million, reflecting softening market conditions.

Other – All other items decreased earnings by $180 million, driven by higher scheduled maintenance expense.

Chemical Products Operational Results

(thousands of metric tons) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Chemical Products sales (1)

United States 1,561 2,032

3,023 3,007 8,821 9,100

Worldwide 4,649 5,018

3 unchanged sentences

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings (loss) (U.S.

United States 451 246

456 592 871 1,454

Total 774 476

Earnings (loss) excluding Identified Items (1)

Earnings (loss) excluding Identified Items (1) (Non-GAAP)

United States 451 246

456 592 871 1,454

Total 774 476

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Specialty Products Third Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Lower margins decreased earnings by $60 million, primarily related to higher feed and energy expenses.

Volume/Mix – Favorable volume mix effects increased earnings by $20 million, mainly from higher finished lubes sales.

Other – All other items decreased earnings by $40 million.

Specialty Products Year-to-Date Earnings Factor Analysis

Specialty Products First Quarter Earnings Factor Analysis

(millions of dollars)

Margins – Lower margins decreased earnings by $570 million, primarily related to lower industry basestock margins as a result of increased feed costs and energy prices.

Volume/Mix – Higher volume and favorable mix effects increased earnings by $110 million.

Other – All other items decreased earnings by $30 million.

Margins – Improved margins, primarily related to basestocks, increased earnings by $390 million.

Volume/Mix – Unfavorable volume mix effects decreased earnings by $10 million.

Other – All other items, including negative foreign exchange impacts, decreased earnings by $80 million.

Specialty Products Operational Results

(thousands of metric tons) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Specialty Products sales (1)

United States 476 522

1,434 1,424 4,430 4,356

Worldwide 1,940 2,006

3 unchanged sentences

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings (loss) (U.S.

1 unchanged sentence

Identified Items (1)

400 (5) 302 (48)

Earnings (loss) excluding Identified Items (1)

(552) (591) (1,434) (1,985)

Earnings (loss) excluding Identified Items (1) (Non-GAAP)

(1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items.

Corporate and Financing expenses were $152 million for the third quarter of 2022, $444 million lower than the third quarter of 2021, reflecting favorable one-time tax impacts.

Corporate and Financing expenses were $1,132 million for the first nine months of 2022, $901 million lower than 2021, primarily due to favorable one-time tax impacts, lower pension-related expenses and lower financing costs.

Corporate and Financing expenses were $355 million for the first quarter of 2023, $339 million lower than the first quarter of 2022, reflecting lower financing costs and the absence of an identified item associated with the expropriation of the Corporation's interest in Sakhalin-1.

LIQUIDITY AND CAPITAL RESOURCES

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net cash provided by/(used in)

9 unchanged sentences

Proceeds associated with sales of subsidiaries, property, plant & equipment, and sales and returns of investments 854 293

Cash flow from operations and asset sales 27,107 12,109 63,090 31,580

Cash flow from operations and asset sales (Non-GAAP)

17,195 15,081

Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider proceeds associated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities, including shareholder distributions.

Cash flow from operations and asset sales in the third quarter of 2022 was $27.1 billion, an increase of $15.0 billion from the comparable 2021 period primarily reflecting higher earnings.

Cash provided by operating activities totaled $59.2 billion for the first nine months of 2022, $28.2 billion higher than 2021.

Cash flow from operations and asset sales in the first quarter of 2023 was $17.2 billion, an increase of $2.1 billion from the comparable 2022 period primarily reflecting higher earnings.

Cash provided by operating activities totaled $16.3 billion for the first three months of 2023, $1.6 billion higher than 2022.

Net income including noncontrolling interests was $11.8 billion, an increase of $6.1 billion from the prior year period.

The adjustment for the noncash provision of $19.0 billion for depreciation and depletion was up $4.0 billion from 2021.

Changes in operational working capital were immaterial, compared to a contribution of $2.2 billion in the prior year period.

All other items net decreased cash flows by $4.3 billion in 2022 versus a reduction of $0.7 billion in 2021.

The adjustment for the noncash provision of $4.2 billion for depreciation and depletion was down $4.6 billion from 2022.

Changes in operational working capital were a reduction of $0.3 billion, compared to a contribution of $1.1 billion in the prior year period.

All other items net increased cash flows by $0.6 billion in 2023 versus a reduction of $0.9 billion in 2022.

See the Condensed Consolidated Statement of Cash Flows for additional details.

Investing activities for the first nine months of 2022 used net cash of $9.4 billion, an increase of $1.3 billion compared to the prior year.

Investing activities for the first three months of 2023 used net cash of $4.9 billion, an increase of $1.0 billion compared to the prior year.

Spending for additions to property, plant and equipment of $5.4 billion was $1.5 billion higher than 2022.

Proceeds from asset sales were $3.9 billion, which included the recent sale of our Romania Upstream affiliate as well as the sale of XTO Energy Canada.

Net investments and advances were essentially flat with prior year.

Net cash used in financing activities was $25.2 billion in the first nine months of 2022, including $10.5 billion for the purchase of 120.4 million shares of ExxonMobil stock, as part of the previously announced buyback program.

This compares to net cash used in financing activities of $22.5 billion in the prior year, reflecting net debt repayments of $10.8 billion during the first nine months of 2021.

Total debt at the end of the third quarter of 2022 was $45.4 billion compared to $47.7 billion at year-end 2021.

The Corporation's debt to total capital ratio was 19.0 percent at the end of the third quarter of 2022 compared to 21.4 percent at year-end 2021.

The net debt to capital ratio was 7.2 percent at the end of the third quarter, a decrease of 11.7 percentage points from year-end 2021.

The Corporation's capital allocation priorities continue to be investing in advantaged projects, strengthening the balance sheet and paying a reliable dividend.

Proceeds from asset sales were $0.9 billion.

Net investments and advances increased $0.1 billion to $0.4 billion.

Net cash used in financing activities was $8.5 billion in the first three months of 2023, including $4.3 billion for the purchase of 39.3 million shares of ExxonMobil stock, as part of the previously announced buyback program.

This compares to net cash used in financing activities of $6.7 billion in the prior year.

Total debt at the end of the first quarter of 2023 was $41.4 billion compared to $41.2 billion at year-end 2022.

The Corporation's debt to total capital ratio was 16.7 percent at the end of the first quarter of 2023 compared to 16.9 percent at year-end 2022.

The net debt to capital ratio was 4.1 percent at the end of the first quarter, a decrease of 1.3 percentage points from year-end 2022.

The Corporation's capital allocation priorities are investing in competitively advantaged, high-return projects, maintaining a strong balance sheet, and sharing our success with our shareholders through more consistent share repurchases and a growing dividend.

The Corporation distributed a total of $3.7 billion to shareholders in the first three months of 2023 through dividends.

The Corporation has access to significant capacity of long-term and short-term liquidity.

In addition to cash balances, commercial paper continues to provide short-term liquidity, and is reflected in "Notes and loans payable" on the Consolidated Balance Sheet.

Cash and cash equivalents was $30.5 billion at the end of the third quarter of 2022.

The Corporation had undrawn short-term committed lines of credit of $0.5 billion and undrawn long-term committed lines of credit of $0.4 billion as of third quarter 2022.

The Corporation distributed a total of $11.2 billion to shareholders in the first nine months of 2022 through dividends.

Internally generated funds are expected to cover the majority of financial requirements, supplemented by long-term and short-term debt.

The Corporation had undrawn short-term committed lines of credit of $0.4 billion and undrawn long-term committed lines of credit of $1.3 billion as of first quarter 2023.

The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade.

1 unchanged sentence

Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time.

Key criteria for evaluating acquisitions include potential for future growth and attractive current valuations.

Key criteria for evaluating acquisitions include strategic fit, potential for future growth and attractive current valuations.

Acquisitions may be made with cash, shares of the Corporation’s common stock, or both.

1 unchanged sentence

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Income taxes 4,960 2,806

1 unchanged sentence

Total other taxes and duties (1)

7,473 8,572 23,701 24,296

Total 13,055 11,255

(1) Includes “Other taxes and duties” plus taxes that are included in “Production and manufacturing expenses” and “Selli ng, general and administrative expenses”.

Total taxes were $12.7 billion for the third quarter of 2022, an increase of $1.5 billion from 2021.

Total taxes were $13.1 billion for the first quarter of 2023, an increase of $1.8 billion from 2022.

Income tax expense was $5.0 billion compared to $2.8 billion in the prior year reflecting higher commodity prices.

The effective income tax rate of 29 percent compared to 33 percent in the prior year period primarily due to a change in mix of results in jurisdictions with varying tax rates.

Total other taxes and duties decreased by $1.1 billion to $7.5 billion.

Total taxes were $38.1 billion for the first nine months of 2022, an increase of $8.8 billion from 2021.

Income tax expense increased by $9.4 billion to $14.4 billion reflecting higher commodity prices.

The effective income tax rate of 31 percent compared to 32 percent in the prior year period.

The effective income tax rate of 34 percent declined from the 40 percent rate in the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates and one-time impacts in the prior period.

Total other taxes and duties decreased by $0.4 billion to $8.1 billion.

In the United States, the Corporation has various ongoing U.S.

federal income tax positions at issue with the Internal Revenue Service (IRS) for tax years beginning in 2006.

The Corporation filed a refund suit for tax years 2006-2009 in U.S.

federal district court (District Court) with respect to the positions at issue for those years.

On February 24, 2020, the Corporation received an adverse ruling on this suit.

The IRS has asserted penalties associated with several of those positions.

The Corporation has not recognized the penalties as an expense because the Corporation does not expect the penalties to be sustained under applicable law.

On January 13, 2021, the District Court ruled that no penalties apply to the Corporation's positions in this suit.

The Corporation and the government have appealed the District Court's rulings to the U.S.

Court of Appeals for the Fifth Circuit (Fifth Circuit).

On August 3, 2022, the Fifth Circuit ruled adversely to the Corporation on its positions, but confirmed that no penalties apply.

On September 30, 2022, the Fifth Circuit denied the Corporation’s request that the Fifth Circuit reconsider its opinion on one position.

The Corporation and the government now have the right to request that the U.S.

Supreme Court review the Fifth Circuit’s decision.

On March 4, 2022, the Corporation also filed a refund suit for tax years 2010-2011 in District Court with respect to the positions at issue for those years.

The Corporation has not recognized asserted penalties for 2010-2011 as an expense because the Corporation does not expect the penalties to be sustained under applicable law.

Unfavorable resolution of all positions at issue with the IRS would not have a material adverse effect on the Corporation’s operations or financial condition.

CAPITAL AND EXPLORATION EXPENDITURES

(millions of dollars) Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Upstream (including exploration expenses) 4,581 3,879

2 unchanged sentences

Specialty Products 91 23

Other 16 1 17 2

Total 6,380 4,904

Capital and exploration expenditures in the third quarter of 2022 were $5.7 billion, up 49 percent from the third quarter of 2021.

Capital and exploration expenditures in the first nine months of 2022 were $15.2 billion, up 41 percent from the first nine months of 2021.

Capital and exploration expenditures in the first quarter of 2023 were $6.4 billion, up $1.5 billion from the first quarter of 2022.

The Corporation plans to invest in the range of $23 billion to $25 billion in 2023.

4 unchanged sentences

statements of future ambitions and plans;

and other statements of future events or conditions, are forward-looking statements.

Similarly, discussion of future carbon capture, biofuel and hydrogen plans to drive towards net zero emissions are dependent on future market factors, such as continued technological progress and policy support, and represent forward-looking statements.

and other statements of future events or conditions in this report, are forward-looking statements.

Similarly, discussion of future carbon capture, transportation and storage, as well as biofuel, hydrogen, and other plans to reduce emissions are dependent on future market factors, such as continued technological progress, policy support and timely rule-making and permitting, and represent forward-looking statements.

Actual future results, including financial and operating performance;

total capital expenditures and mix, including allocations of capital to low carbon solutions;

cost reductions and efficiency gains, including the ability to offset inflationary pressure;

structural earnings improvement and structural cost reductions and efficiency gains, including the ability to offset inflationary pressure;

plans to reduce future emissions and emissions intensity;

timing and outcome of projects to capture and store CO2, and produced biofuels;

ambitions to reach Scope 1 and Scope 2 net zero from operated assets by 2050, plans to reach net zero Scope 1 and 2 emissions in Upstream Permian Basin unconventional operated assets by 2030, eliminating routine flaring in-line with World Bank Zero Routine Flaring, reaching near-zero methane emissions from its operations, meeting ExxonMobil’s emission reduction goals and plans, divestment and start-up plans, and associated project plans as well as technology efforts, timing and outcome of projects related to the capture, transportation and storage of CO2, and produced biofuels;

changes in law, taxes, or regulation including environmental regulations, trade sanctions, and timely granting of governmental permits and certifications;

timing and outcome of hydrogen projects;

cash flow, dividends and shareholder returns, including the timing and amounts of share repurchases;

the ultimate outcome of contingencies and other estimates of future costs or savings;

future debt levels and credit ratings;

1 unchanged sentence

and resource recoveries and production rates could differ materially due to a number of factors.

These include global or regional changes in the supply and demand for oil, natural gas, petrochemicals, and feedstocks and other market conditions that impact prices and differentials for our products;

These include global or regional changes in the supply and demand for oil, natural gas, petrochemicals, and feedstocks and other market factors, economic conditions, and seasonal fluctuations that impact prices and differentials for our products;

government policies supporting lower carbon investment opportunities such as the U.S.

Inflation Reduction Act or policies limiting the attractiveness of future investment such as the European Solidarity Tax;

Inflation Reduction Act or policies limiting the attractiveness of future investment such as the additional European tax on the energy sector;

variable impacts of trading activities on our margins and results each quarter;

2 unchanged sentences

the ability to access debt markets;

the ultimate impacts of COVID-19, including effects of government responses on people and economies;

the ultimate impacts of COVID-19 or other public health crises, including the effects of government responses on people and economies;

reservoir performance, including variability and timing factors applicable to unconventional resources;

the outcome of exploration projects and decisions to invest in future reserves;

the level and outcome of exploration projects and decisions to invest in future reserves;

timely completion of development and other construction projects;

2 unchanged sentences

government policies and support and market demand for low carbon technologies;

war, and other political or security disturbances;

war, civil unrest, attacks against the company or industry, and other political or security disturbances;

expropriations, seizure, or capacity, insurance or shipping limitations by foreign governments or laws;

10 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the nine months ended September 30, 2022, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2021.

Information about market risks for the three months ended March 31, 2023, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2022.

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-Q

Item 2. Management’s Discussion and Analysis