Exxon Mobil Corp 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview During the first quarter of 2023, the price of crude oil declined towards the average of the 10-year range (2010-2019), impacted by higher inventory levels, and remained relatively flat during the second quarter. In the third quarter, crude oil prices increased as a result of strong demand, tight inventory levels, and ongoing actions by OPEC+ oil producers to limit supply, which helped mitigate concerns over potential market impacts from a weakening global economy. While natural gas prices remained above the 10-year average they have declined significantly over the first nine months of the year with storage levels increasing above historical averages in the United States and Europe on higher supply and lower demand. During the first half of 2023, refining margins declined on easing supply concerns with stabilization of Russian supply. However, in the third quarter, strong demand for gasoline and distillate combined with low inventories pushed refining margins above the 10-year range. Chemical margins remained well below the 10-year range, as excess supply continued to outpace rising demand. The Corporation’s results for the first nine months included 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. The Corporation tests assets or groups of assets for recoverability on an ongoing basis whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and has a robust process to monitor for indicators of potential impairment across its asset groups throughout the year. As part of its annual planning and budgeting process, the Corporation is currently assessing its portfolio to prioritize assets with the highest future value potential within its broad range of available opportunities while identifying potential asset divestment candidates. This effort includes an ongoing re-assessment of industry and regulatory factors, macroeconomic considerations, and the company’s project execution plans. Depending on the outcome of the planning process, including in particular significant future changes to the Corporation’s current development plans for its long-lived assets or increases in the likelihood of divestments, certain assets groups could be at risk for impairment. This planning process is expected to be completed with required review by the Board of Directors in the fourth quarter. If needed, assessments on an asset-level basis will be completed following this Board review. Recent Mergers and Acquisitions On July 13, 2023, the Corporation announced that it had entered into a definitive agreement to acquire Denbury Inc. The acquisition further accelerates the Corporation’s Low Carbon Solutions opportunities. See Note 10 of the Condensed Consolidated Financial Statements for additional information. On October 11, 2023, the Corporation announced that it had entered into a definitive merger agreement with Pioneer Natural Resources. At close, ExxonMobil’s Permian production volume would more than double to 1.3 million barrels of oil equivalent per day, based on anticipated 2023 volumes. The transaction represents an opportunity to deliver leading capital efficiency and cost performance as well as increase production by combining Pioneer’s large-scale, contiguous, high-quality undeveloped Midland acreage with ExxonMobil’s Permian resource development approach. See Note 11 of the Condensed Consolidated Financial Statements for additional information. 18 FUNCTIONAL EARNINGS SUMMARY 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. The Corporation believes this view provides investors increased transparency into business results and trends and provides investors with a view of the business as seen through the eyes of management. Earnings (loss) excluding Identified Items is not meant to be viewed in isolation or as a substitute for net income (loss) attributable to ExxonMobil as prepared in accordance with U.S. GAAP. Three Months Ended September 30, 2023 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Earnings (loss) (U.S. GAAP) 1,566 4,559 1,356 1,086 338 (89) 326 293 (365) 9,070 Identified Items Tax-related items — (14) — (33) — — — — — (47) Earnings (loss) excluding Identified Items (Non-GAAP) 1,566 4,573 1,356 1,119 338 (89) 326 293 (365) 9,117 Three Months Ended September 30, 2022 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Earnings (loss) (U.S. GAAP) 3,110 9,309 3,008 2,811 635 177 306 456 (152) 19,660 Identified Items Impairments — (697) — — — — — — — (697) Gain/(loss) on sale of assets — 587 — — — — — — — 587 Tax-related items — — — — — — — — 324 324 Other — 688 — — — — — — 76 764 Earnings (loss) excluding Identified Items (Non-GAAP) 3,110 8,731 3,008 2,811 635 177 306 456 (552) 18,682 Nine Months Ended September 30, 2023 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Earnings (loss) (U.S. GAAP) 4,118 13,041 4,794 4,141 1,148 300 1,150 914 (1,226) 28,380 Identified Items Tax-related items — (184) — (45) — — — — — (229) Earnings (loss) excluding Identified Items (Non-GAAP) 4,118 13,225 4,794 4,186 1,148 300 1,150 914 (1,226) 28,609 Nine Months Ended September 30, 2022 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-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 Identified Items Impairments — (3,574) — — — — — — (98) (3,672) Gain/(loss) on sale of assets 299 587 — — — — — — — 886 Tax-related items — — — — — — — — 324 324 Other — 310 — — — — — — 76 386 Earnings (loss) excluding Identified Items (Non-GAAP) 8,936 21,720 6,152 4,744 2,030 1,263 784 871 (1,434) 45,066 References in this discussion to Corporate earnings (loss) mean net income (loss) attributable to ExxonMobil (U.S. GAAP) from the Condensed Consolidated Statement of Income. Unless otherwise indicated, references to 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. 19 REVIEW OF THIRD QUARTER 2023 RESULTS ExxonMobil’s third-quarter 2023 earnings were $9.1 billion, or $2.25 per share assuming dilution, compared with earnings of $19.7 billion a year earlier. The decrease in earnings was driven by lower crude and natural gas prices, and declining industry refining and chemical margins. Capital and exploration expenditures were $6.0 billion, up $0.3 billion from third quarter 2022. Earnings for the first nine months of 2023 were $28.4 billion, or $6.98 per diluted share, compared with $43.0 billion a year earlier. Capital and exploration expenditures were $18.6 billion, up $3.3 billion from 2022. The Corporation distributed $11.1 billion in dividends to shareholders and repurchased $13.1 billion of common stock. UPSTREAM Upstream Financial Results (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Earnings (loss) (U.S. GAAP) United States 1,566 3,110 4,118 9,235 Non-U.S. 4,559 9,309 13,041 19,043 Total 6,125 12,419 17,159 28,278 Identified Items (1) United States — — — 299 Non-U.S. (14) 578 (184) (2,677) Total (14) 578 (184) (2,378) Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 1,566 3,110 4,118 8,936 Non-U.S. 4,573 8,731 13,225 21,720 Total 6,139 11,841 17,343 30,656 Upstream Third Quarter Earnings Factor Analysis (millions of dollars) Price – Price impacts decreased earnings by $5,690 million, driven by a 59% decrease in average natural gas realizations and a 14% decrease in average crude realizations. Volume/Mix – Lower volumes decreased earnings by $150 million, mainly driven by natural gas, partly offset by liquids growth in Guyana and the Permian. Other – All other items increased earnings by $140 million. Identified Items (1) – 3Q 2022 $578 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. 3Q 2023 $(14) million loss driven by additional European taxes. (1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items. 20 Upstream Year-to-Date Earnings Factor Analysis (millions of dollars) Price – Price impacts decreased earnings by $13,850 million, driven by a 40% decrease in average natural gas realizations and a 24% decrease in average realizations for crude oil. Volume/Mix – Favorable volume and mix effects increased earnings by $420 million, driven by higher production from our advantaged projects in Guyana and the Permian. Other – All other items increased earnings by $120 million, largely due to the absence of divestment-related impairments. Identified Items (1) – 2022 $(2,378) million loss as a result of the Russia expropriation, 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. 2023 $(184) million loss driven by additional European taxes. (1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items. 21 Upstream Operational Results Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net production of crude oil, natural gas liquids, bitumen and synthetic oil (thousands of barrels daily) United States 756 783 787 771 Canada/Other Americas 655 641 648 558 Europe 4 4 4 4 Africa 229 249 218 243 Asia 713 666 721 698 Australia/Oceania 40 46 37 44 Worldwide 2,397 2,389 2,415 2,318 Net natural gas production available for sale (millions of cubic feet daily) United States 2,271 2,351 2,328 2,607 Canada/Other Americas 94 158 96 175 Europe 368 541 429 711 Africa 129 70 116 65 Asia 3,528 3,304 3,491 3,321 Australia/Oceania 1,358 1,539 1,303 1,460 Worldwide 7,748 7,963 7,763 8,339 Oil-equivalent production (1) (thousands of oil-equivalent barrels daily) 3,688 3,716 3,709 3,708 (1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels. 22 Upstream Additional Information (thousands of barrels daily) Three Months Ended September 30 Nine Months Ended September 30 Volumes reconciliation (Oil-equivalent production) (1) 2022 3,716 3,708 Entitlements - Net Interest (6) (32) Entitlements - Price / Spend / Other 44 66 Government Mandates (36) (28) Divestments (109) (130) Growth / Other 79 125 2023 3,688 3,709 (1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels. 3Q 2023 versus 3Q 2022 3.7 million oil-equivalent barrels per day in 3Q 2023 decreased 28 thousand oil-equivalent barrels per day from 3Q 2022. Excluding the impacts from entitlements, divestments, and higher government-mandated curtailments, net production grew by 79 thousand oil-equivalent barrels per day driven by Permian and Guyana. YTD 2023 versus YTD 2022 3.7 million oil-equivalent barrels per day in 2023 increased 1 thousand oil-equivalent barrels per day from 2022. Excluding the impacts from entitlements, Russia expropriation, divestments, and higher government-mandated curtailments, net production grew by 125 thousand oil-equivalent barrels per day driven by Permian and Guyana. Listed below are descriptions of ExxonMobil’s volumes reconciliation factors which are provided to facilitate understanding of the terms. Entitlements - Net Interest are changes to ExxonMobil’s share of production volumes caused by non-operational changes to volume-determining factors. These factors consist of net interest changes specified in Production Sharing Contracts (PSCs), which typically occur when cumulative investment returns or production volumes achieve defined thresholds, changes in equity upon achieving pay-out in partner investment carry situations, equity redeterminations as specified in venture agreements, or as a result of the termination or expiry of a concession. Once a net interest change has occurred, it typically will not be reversed by subsequent events, such as lower crude oil prices. Entitlements - Price, Spend and Other are changes to ExxonMobil’s share of production volumes resulting from temporary changes to non-operational volume-determining factors. These factors include changes in oil and gas prices or spending levels from one period to another. According to the terms of contractual arrangements or government royalty regimes, price or spending variability can increase or decrease royalty burdens and/or volumes attributable to ExxonMobil. For example, at higher prices, fewer barrels are required for ExxonMobil to recover its costs. These effects generally vary from period to period with field spending patterns or market prices for oil and natural gas. Such factors can also include other temporary changes in net interest as dictated by specific provisions in production agreements. Government Mandates are changes to ExxonMobil's sustainable production levels as a result of production limits or sanctions imposed by governments. 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 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. 23 ENERGY PRODUCTS Energy Products Financial Results (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Earnings (loss) (U.S. GAAP) United States 1,356 3,008 4,794 6,152 Non-U.S. 1,086 2,811 4,141 4,744 Total 2,442 5,819 8,935 10,896 Identified Items (1) United States — — — — Non-U.S. (33) — (45) — Total (33) — (45) — Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 1,356 3,008 4,794 6,152 Non-U.S. 1,119 2,811 4,186 4,744 Total 2,475 5,819 8,980 10,896 Due to rounding, numbers presented may not add up precisely to the totals indicated. Energy Products Third Quarter Earnings Factor Analysis (millions of dollars) Margins – Weaker industry refining margins and trading-related impacts, including negative derivative mark-to-market effects and other timing effects that were largely non-cash, which were impacted by rising prices in the quarter compared to declining prices in the third quarter last year, decreased earnings by $2,970 million. Volume/Mix – Volume and mix decreased earnings by $50 million, primarily driven by planned maintenance. Other – All other items decreased earnings by $320 million, mainly related to unfavorable foreign exchange impacts and higher maintenance expenses. Identified Items (1) – 3Q 2023 $(33) million loss related to additional European taxes. (1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items. 24 Energy Products Year-to-Date Earnings Factor Analysis (millions of dollars) Margins – Weaker industry refining margins and unfavorable derivative mark-to-market impacts offset by favorable other timing effects, mostly of a non-cash nature, decreased earnings by $1,490 million. Volume/Mix – Favorable volume and mix effects increased earnings by $130 million, mainly driven by start-up of the Beaumont refinery expansion, partially offset by higher scheduled maintenance. Other – All other items decreased earnings by $560 million, primarily due to higher project and maintenance expenses. Identified Items (1) – 2023 $(45) 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, 2023 2022 2023 2022 Refinery throughput United States 1,868 1,742 1,819 1,705 Canada 415 426 407 413 Europe 1,251 1,253 1,217 1,204 Asia Pacific 517 557 515 542 Other 164 187 171 182 Worldwide 4,215 4,165 4,129 4,046 Energy Products sales (2) United States 2,626 2,479 2,610 2,399 Non-U.S. 2,925 3,058 2,887 2,922 Worldwide 5,551 5,537 5,496 5,321 Gasoline, naphthas 2,316 2,335 2,299 2,220 Heating oils, kerosene, diesel 1,834 1,818 1,815 1,766 Aviation fuels 358 365 338 335 Heavy fuels 229 252 224 243 Other energy products 814 767 820 758 (2) 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. 25 CHEMICAL PRODUCTS Chemical Products Financial Results (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Earnings (loss) (U.S. GAAP) United States 338 635 1,148 2,030 Non-U.S. (89) 177 300 1,263 Total 249 812 1,448 3,293 Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 338 635 1,148 2,030 Non-U.S. (89) 177 300 1,263 Total 249 812 1,448 3,293 (1) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items. Due to rounding, numbers presented may not add up precisely to the totals indicated. Chemical Products Third Quarter Earnings Factor Analysis (millions of dollars) Margins – Weaker industry margins decreased earnings by $480 million. Volume/Mix – Improved volume and mix effects, primarily from the growth of performance chemicals, increased earnings by $140 million. Other – All other items decreased earnings by $220 million, primarily due to the absence of favorable tax items. 26 Chemical Products Year-to-Date Earnings Factor Analysis (millions of dollars) Margins – Weaker industry margins decreased earnings by $1,060 million. Volume/Mix – Lower sales decreased earnings by $370 million, reflecting softer demand. Other – All other items decreased earnings by $420 million, primarily driven by higher project and planned maintenance expenses. Chemical Products Operational Results (thousands of metric tons) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Chemical Products sales (1) United States 1,750 1,658 5,036 5,688 Non-U.S. 3,358 3,023 9,570 8,821 Worldwide 5,108 4,680 14,606 14,509 (1) Data reported net of purchases/sales contracts with the same counterparty. 27 SPECIALTY PRODUCTS Specialty Products Financial Results (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Earnings (loss) (U.S. GAAP) United States 326 306 1,150 784 Non-U.S. 293 456 914 871 Total 619 762 2,064 1,655 Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 326 306 1,150 784 Non-U.S. 293 456 914 871 Total 619 762 2,064 1,655 (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 – Weaker basestocks margins more than offset stronger finished lubes margins, decreasing earnings by $120 million. Volume/Mix – Lower sales decreased earnings by $20 million. 28 Specialty Products Year-to-Date Earnings Factor Analysis (millions of dollars) Margins – Stronger finished lubes margins drove increased earnings of $620 million, primarily related to lower feed costs. Volume/Mix – Lower specialty products sales decreased earnings by $130 million, reflecting weaker demand. Other – All other items decreased earnings by $80 million, mainly unfavorable foreign exchange impacts. Specialty Products Operational Results (thousands of metric tons) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Specialty Products sales (1) United States 498 483 1,489 1,594 Non-U.S. 1,414 1,434 4,268 4,430 Worldwide 1,912 1,917 5,758 6,024 (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. CORPORATE AND FINANCING Corporate and Financing Financial Results (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Earnings (loss) (U.S. GAAP) (365) (152) (1,226) (1,132) Identified Items (2) — 400 — 302 Earnings (loss) excluding Identified Items (2) (Non-GAAP) (365) (552) (1,226) (1,434) (2) Refer to Functional Earnings Summary for definition of Identified Items and earnings (loss) excluding Identified Items. Corporate and Financing expenses were $365 million for the third quarter of 2023, $213 million higher than the third quarter of 2022, primarily due to the absence of favorable tax items, partly offset by lower financing costs. Corporate and Financing expenses were $1,226 million for the first nine months of 2023, $94 million higher than 2022, primarily due to the absence of favorable tax items, partly offset by lower financing costs. 29 LIQUIDITY AND CAPITAL RESOURCES (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net cash provided by/(used in) Operating activities 41,687 59,176 Investing activities (13,560) (9,387) Financing activities (24,742) (25,177) Effect of exchange rate changes (77) (950) Increase/(decrease) in cash and cash equivalents 3,308 23,662 Cash and cash equivalents (at end of period) 32,973 30,464 Cash flow from operations and asset sales Net cash provided by operating activities (U.S. GAAP) 15,963 24,425 41,687 59,176 Proceeds associated with sales of subsidiaries, property, plant & equipment, and sales and returns of investments 917 2,682 3,058 3,914 Cash flow from operations and asset sales (Non-GAAP) 16,880 27,107 44,745 63,090 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 2023 was $16.9 billion, a decrease of $10.2 billion from the comparable 2022 period primarily reflecting lower earnings. Cash provided by operating activities totaled $41.7 billion for the first nine months of 2023, $17.5 billion lower than 2022. Net income including noncontrolling interests was $29.3 billion, a decrease of $15.2 billion from the prior year period. The adjustment for the noncash provision of $12.9 billion for depreciation and depletion was down $6.1 billion from 2022. Changes in operational working capital were a reduction of $2.1 billion during the period. All other items net increased cash flows by $1.5 billion in 2023 versus a reduction of $4.3 billion in 2022. See the Condensed Consolidated Statement of Cash Flows for additional details. Investing activities for the first nine months of 2023 used net cash of $13.6 billion, an increase of $4.2 billion compared to the prior year. Spending for additions to property, plant and equipment of $15.7 billion was $3.1 billion higher than 2022. Proceeds from asset sales were $3.1 billion, a decrease of $0.9 billion compared to the prior year. Net investments and advances increased $0.3 billion to $0.9 billion. Net cash used in financing activities was $24.7 billion in the first nine months of 2023, including $13.1 billion for the purchase of 119.4 million shares of ExxonMobil stock, as part of the previously announced buyback program. This compares to net cash used in financing activities of $25.2 billion in the prior year. Total debt at the end of the third quarter of 2023 was $41.3 billion compared to $41.2 billion at year-end 2022. The Corporation's debt to total capital ratio was 16.6 percent at the end of the third quarter of 2023 compared to 16.9 percent at year-end 2022. The net debt to capital ratio was 3.8 percent at the end of the third quarter, an decrease of 1.6 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 $11.1 billion to shareholders in the first nine months of 2023 through dividends. The Corporation has access to significant capacity of long-term and short-term liquidity. 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 $0.5 billion and undrawn long-term committed lines of credit of $0.8 billion as of third quarter 2023. The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses. 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 strategic fit, cost synergies, potential for future growth, and attractive current valuations. Acquisitions may be made with cash, shares of the Corporation’s common stock, or both. Litigation and other contingencies are discussed in Note 3 to the unaudited condensed consolidated financial statements. 30 Contractual Obligations 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. Through the third quarter of 2023, the Corporation has entered into various long-term agreements with an estimated total obligation of approximately $6.9 billion. As of September 30, undiscounted commitments for leases not yet commenced totaled $4.1 billion for operating leases and $2.2 billion for finance leases. TAXES (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Income taxes 4,353 5,224 12,816 14,389 Effective income tax rate 34 % 29 % 34 % 31 % Total other taxes and duties (1) 8,460 7,473 24,883 23,701 Total 12,813 12,697 37,699 38,090 (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 $12.8 billion for the third quarter of 2023, an increase of $0.1 billion from 2022. Income tax expense was $4.4 billion compared to $5.2 billion in the prior year reflecting lower commodity prices. The effective income tax rate of 34 percent increased from the 29 percent rate in the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates. Total other taxes and duties increased by $1.0 billion to $8.5 billion. Total taxes were $37.7 billion for the first nine months of 2023, a decrease of $0.4 billion from 2022. Income tax expense decreased by $1.6 billion to $12.8 billion reflecting lower commodity prices. The effective income tax rate of 34 percent was up compared to the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates. Total other taxes and duties increased by $1.2 billion to $24.9 billion. CAPITAL AND EXPLORATION EXPENDITURES (millions of dollars) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Upstream (including exploration expenses) 4,801 4,081 13,991 11,587 Energy Products 647 590 2,063 1,662 Chemical Products 371 954 1,861 1,809 Specialty Products 111 87 305 166 Other 92 16 348 17 Total 6,022 5,728 18,568 15,241 Capital and exploration expenditures in the third quarter of 2023 were $6.0 billion, up 5% from the third quarter of 2022. Capital and exploration expenditures in the first nine months of 2023 were $18.6 billion, up 22% from the first nine months of 2022. The Corporation expects 2023 capital spending to finish the year at the top end of the guidance of $23 billion to $25 billion. Actual spending could vary depending on the progress of individual projects and property acquisitions. 31 IMPORTANT INFORMATION ABOUT THE PIONEER TRANSACTION AND DENBURY TRANSACTION AND WHERE TO FIND IT In connection with the proposed transaction between Exxon Mobil Corporation (“ExxonMobil”) and Pioneer Natural Resources Company (“Pioneer”) (the “Pioneer Transaction”), ExxonMobil and Pioneer will file relevant materials with the Securities and Exchange Commission (the “SEC”), including a registration statement on Form S-4 filed by ExxonMobil that will include a proxy statement of Pioneer that also constitutes a prospectus of ExxonMobil. A definitive proxy statement/prospectus will be mailed to stockholders of Pioneer. In connection with the proposed transaction between ExxonMobil and Denbury Inc. (“Denbury”) (the “Denbury Transaction”), ExxonMobil and Denbury have filed and will file relevant materials with the SEC. On August 29, 2023, ExxonMobil filed with the SEC a registration statement on Form S-4, as amended (No. 333-274252) to register the shares of ExxonMobil common stock to be issued in connection with the Denbury Transaction. The registration statement, which was declared effective by the SEC on September 29, 2023, includes a definitive proxy statement of Denbury that also constitutes a prospectus of ExxonMobil. Such definitive proxy statement/prospectus was mailed to the stockholders of Denbury on September 29, 2023. This communication is not a substitute for the registration statement, proxy statement or prospectus or any other document that ExxonMobil, Pioneer or Denbury (as applicable) has filed or may file with the SEC in connection with the Pioneer Transaction or the Denbury Transaction (as applicable). BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF EXXONMOBIL, PIONEER AND DENBURY ARE URGED TO READ THE APPLICABLE REGISTRATION STATEMENT, THE APPLICABLE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS (AS APPLICABLE), CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PIONEER TRANSACTION OR THE DENBURY TRANSACTION (AS APPLICABLE) AND RELATED MATTERS. Investors and security holders may obtain free copies of the applicable registration statement and the proxy statement/prospectus (in the case of the Pioneer Transaction, when they become available), as well as other filings containing important information about ExxonMobil, Pioneer or Denbury, without charge at the SEC’s Internet website (http://www.sec.gov). Copies of the documents filed with the SEC by ExxonMobil are and will be available free of charge under the tab “SEC Filings” on the “Investors” page of ExxonMobil’s internet website at www.exxonmobil.com or by contacting ExxonMobil’s Investor Relations Department at investor.relations@exxonmobil.com. Copies of the documents filed with the SEC by Pioneer are and will be available free of charge on Pioneer’s internet website at https://investors.pxd.com/investors/financials/sec-filings/. Copies of the documents filed with the SEC by Denbury are and will be available free of charge on Denbury’s internet website at https://investors.denbury.com/investors/financial-information/sec-filings/ or by directing a request to Denbury Inc., ATTN: Investor Relations, 5851 Legacy Circle, Suite 1200, Plano, TX 75024, Tel. No. (972) 673-2000 or by contacting Denbury’s Investor Relations Department at IR@denbury.com. The information included on, or accessible through, ExxonMobil’s, Pioneer’s or Denbury’s website is not incorporated by reference into this communication. Participants in the Solicitation ExxonMobil, Pioneer, Denbury, their respective directors and certain of their respective executive officers may be deemed to be participants in the solicitation of proxies in respect of the Pioneer Transaction or the Denbury Transaction (as applicable). Information about the directors and executive officers of Pioneer is set forth in its proxy statement for its 2023 annual meeting of stockholders, which was filed with the SEC on April 13, 2023, in its Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 23, 2023, in its Form 8-K filed on May 30, 2023, in its Form 8-K filed on April 26, 2023 and in its Form 8-K filed on February 13, 2023. Information about the directors and executive officers of Denbury is set forth in its proxy statement for its 2023 annual meeting of stockholders, which was filed with the SEC on April 18, 2023, and in its Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 23, 2023. Information about the directors and executive officers of ExxonMobil is set forth in its proxy statement for its 2023 annual meeting of stockholders, which was filed with the SEC on April 13, 2023, in its Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 22, 2023, in its Form 8-K filed on June 6, 2023 and in its Form 8-K filed on February 24, 2023. Additional information regarding the participants in the proxy solicitations and a description of their direct or indirect interests, by security holdings or otherwise, is (or, in the case of the Pioneer Transaction, will be) contained in the applicable proxy statement/prospectus and will be contained in other relevant materials filed with the SEC when they become available. No Offer or Solicitation This communication is for informational purposes and is not intended to, and shall not, constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. 32 FORWARD-LOOKING STATEMENTS Statements related to outlooks; projections; descriptions of strategic, operating, and financial plans and objectives; statements of future ambitions and plans; 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 of ExxonMobil, its affiliates or companies it is seeking to acquire, 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; 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; 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, including completion of the Denbury acquisition and produced biofuels; changes in law, taxes, or regulation including environmental and tax 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; future debt levels and credit ratings; business and project plans, timing, costs, capacities and returns; 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 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 additional European taxes on the energy sector; variable impacts of trading activities on our margins and results each quarter; actions of competitors and commercial counterparties; the outcome of commercial negotiations, including final agreed terms and conditions; the ability to access debt markets; the ultimate impacts of 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 level and outcome of exploration projects and decisions to invest in future reserves; timely completion of development and other construction projects; final management approval of future projects and any changes in the scope, terms, or costs of such projects as approved; government regulation of our growth opportunities; 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; opportunities for potential acquisitions, investments or divestments and satisfaction of applicable conditions to closing, including timely regulatory approvals; the capture of efficiencies within and between business lines and the ability to maintain near-term cost reductions as ongoing efficiencies; unforeseen technical or operating difficulties and unplanned maintenance; the development and competitiveness of alternative energy and emission reduction technologies; the results of research programs and the ability to bring new technologies to commercial scale on a cost-competitive basis; and other factors discussed under Item 1A. Risk Factors of ExxonMobil’s 2022 Form 10-K. Actions needed to advance ExxonMobil’s 2030 greenhouse gas emission-reductions plans are incorporated into its medium-term business plans, which are updated annually. The reference case for planning beyond 2030 is based on the Company’s Energy Outlook research and publication. The Outlook is reflective of the existing global policy environment. The Energy Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050. As future policies and technology advancements emerge, they will be incorporated into the Outlook, and the Company’s business plans will be updated accordingly. Forward-looking and other statements regarding environmental and other sustainability efforts and aspirations are not an indication that these statements are material to investors or requiring disclosure in our filing with the SEC. In addition, historical, current, and forward-looking environmental and other sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future, including future rule-making. The report is provided under consistent SEC disclosure requirements and should not be misinterpreted as applying to any other disclosure standards. The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports. 33 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information about market risks for the nine months ended September 30, 2023, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2022.