Exxon Mobil XOM Form 10-Q filing Q2 FY2024

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statement of Income - Three and six months ended June 30, 2024 and 2023 3

Condensed Consolidated Statement of Comprehensive Income - Three and six months ended June 30, 2024 and 2023 4

Condensed Consolidated Balance Sheet - As of June 30, 2024 and December 31, 2023 5

Condensed Consolidated Statement of Cash Flows - Six months ended June 30, 2024 and 2023 6

Condensed Consolidated Statement of Changes in Equity - Three months ended June 30, 2024 and 2023 7

Condensed Consolidated Statement of Changes in Equity - Six months ended June 30, 2024 and 2023 8

Notes to Condensed Consolidated Financial Statements 9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19

Item 3. Quantitative and Qualitative Disclosures About Market Risk 39

Item 4. Controls and Procedures 39

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 40

Item 5. Other Information 40

Item 6. Exhibits 40

Index to Exhibits 41

Signature 42

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF INCOME

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEET

• (millions of dollars, unless noted) June 30, 2024 December 31, 2023
• ASSETS
• Current assets
• Cash and cash equivalents 26,460 31,539
• Cash and cash equivalents – restricted 28 29
• Notes and accounts receivable – net 43,071 38,015
• Inventories
• Crude oil, products and merchandise 19,685 20,528
• Materials and supplies 4,818 4,592
• Other current assets 2,176 1,906
• Total current assets 96,238 96,609
• Investments, advances and long-term receivables 47,948 47,630
• Property, plant and equipment – net 298,283 214,940
• Other assets, including intangibles – net 18,238 17,138
• Total Assets 460,707 376,317
• LIABILITIES
• Current liabilities
• Notes and loans payable 6,621 4,090
• Accounts payable and accrued liabilities 60,107 58,037
• Income taxes payable 4,035 3,189
• Total current liabilities 70,763 65,316
• Long-term debt 36,565 37,483
• Postretirement benefits reserves 10,398 10,496
• Deferred income tax liabilities 40,080 24,452
• Long-term obligations to equity companies 1,612 1,804
• Other long-term obligations 25,023 24,228
• Total Liabilities 184,441 163,779
• Commitments and contingencies (Note 3)
• EQUITY
• Common stock without par value (9,000 million shares authorized, 8,019 million shares issued) 46,781 17,781
• Earnings reinvested 463,294 453,927
• Accumulated other comprehensive income (13,187) (11,989)
• Common stock held in treasury (3,576 million shares at June 30, 2024 and4,048 million shares at December 31, 2023) (228,483) (254,917)
• ExxonMobil share of equity 268,405 204,802
• Noncontrolling interests 7,861 7,736
• Total Equity 276,266 212,538
• Total Liabilities and Equity 460,707 376,317
• The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 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 2023 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.

The Corporation's exploration and production activities are accounted for under the "successful efforts" method.

Note 2. Pioneer Natural Resources Merger

On May 3, 2024, the Corporation acquired Pioneer Natural Resources Company ("Pioneer"), an independent oil and gas exploration and production company. The acquisition included over 850 thousand net acres in the Midland Basin of West Texas and proved reserves in excess of 2 billion oil-equivalent barrels. In connection with the acquisition, we issued 545 million shares of ExxonMobil common stock having a fair value of $63 billion on the acquisition date, and assumed debt with a fair value of $5 billion.

The transaction was accounted for as a business combination in accordance with ASC 805, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the provisional fair values of the assets acquired and liabilities assumed.

Debt Assumed in the Merger

The following table presents long-term debt assumed at closing:

Actual and Pro Forma Impact of Merger

The following table presents revenues and earnings for Pioneer since the acquisition date (May 3, 2024), for the periods presented:

The following table presents unaudited pro forma information for the Corporation as if the merger with Pioneer had occurred at the beginning of January 1, 2023:

The historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the merger and factually supportable. The unaudited pro forma consolidated results are not necessarily indicative of what the consolidated results of operations actually would have been had the merger been completed on January 1, 2023. In addition, the unaudited pro forma consolidated results reflect pro forma adjustments primarily related to conforming Pioneer's accounting policies to ExxonMobil, additional depreciation expense related to the fair value adjustment of the acquired property, plant and equipment, our capital structure, Pioneer's transaction-related costs, and applicable income tax impacts of the pro forma adjustments.

Our transaction costs to effect the acquisition were immaterial.

Note 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.

State and local governments and other entities in various jurisdictions across the United States and its territories have filed a number of legal proceedings against several oil and gas companies, including ExxonMobil, requesting unprecedented legal and equitable relief for various alleged injuries purportedly connected to climate change. These lawsuits assert a variety of novel, untested claims under statutory and common law. Additional such lawsuits may be filed. We believe the legal and factual theories set forth in these proceedings are meritless and represent an inappropriate attempt to use the court system to usurp the proper role of policymakers in addressing the societal challenges of climate change.

Local governments in Louisiana have filed unprecedented legal proceedings against a number of oil and gas companies, including ExxonMobil, requesting compensation for the restoration of coastal marsh erosion in the state. We believe the factual and legal theories set forth in these proceedings are meritless.

While the outcome of any litigation can be unpredictable, we believe the likelihood is remote that the ultimate outcomes of these lawsuits will have a material adverse effect on the Corporation’s operations, financial condition, or financial statements taken as a whole. We will continue to defend vigorously against these claims.

Other Contingencies

The Corporation and certain of its consolidated subsidiaries were contingently liable at June 30, 2024, 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. Where it is not possible to make a reasonable estimation of the maximum potential amount of future payments, future performance is expected to be either immaterial or have only a remote chance of occurrence.

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.

Note 4. Other Comprehensive Income Information

Note 5. Earnings Per Share

Note 6. Pension and Other Postretirement Benefits

Note 7. Financial Instruments and Derivatives

The estimated fair value of financial instruments and derivatives at June 30, 2024 and December 31, 2023, and the related hierarchy level for the fair value measurement was as follows:

At June 30, 2024 and December 31, 2023, respectively, the Corporation had $675 million and $800 million of collateral under master netting arrangements not offset against the derivatives on the Condensed Consolidated Balance Sheet, primarily related to initial margin requirements.

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 June 30, 2024, the Corporation has designated $3.2 billion of its Euro-denominated 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 $237 million and undrawn long-term committed lines of credit of $1,795 million as of second quarter 2024.

Derivative Instruments

The Corporation’s size, strong capital structure, geographic diversity, and the complementary nature of its business segments 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 Condensed Consolidated Statement of Income on a net basis in the line “Sales and other operating revenue" and in the Consolidated Statement of Cash Flows in “Cash Flows from Operating Activities”. 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 June 30, 2024 and December 31, 2023, or results of operations for the periods ended June 30, 2024 and 2023.

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 June 30, 2024 and December 31, 2023, was as follows:

Realized and unrealized gains/(losses) on derivative instruments that were recognized in the Condensed Consolidated Statement of Income are included in the following lines on a before-tax basis:

Note 8. Disclosures about Segments and Related Information

Revenue from Contracts with Customers

Sales and other operating revenue include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in Notes and accounts receivable – net reported on the Balance Sheet also includes both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality, and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it.

Note 9. Divestment Activities

Through June 30, 2024, the Corporation realized proceeds of approximately $1.6 billion and net after-tax earnings of $0.4 billion from its divestment activities. This included the sale of the Santa Ynez Unit and associated facilities in California, certain conventional and unconventional assets in the United States, as well as other smaller divestments.

In 2023, the Corporation realized proceeds of approximately $4.1 billion and recognized net after-tax earnings of approximately $0.6 billion from its divestment activities. This included the sale of the Aera Energy joint venture, Esso Thailand Ltd., the Billings Refinery, certain unconventional assets in the United States, as well as other smaller divestments.

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. In mid-2022, a Nigerian court issued an order to halt transition activities and enter into arbitration with the Nigerian National Petroleum Company. In June 2024, the court order was lifted and arbitration suspended. The closing date and any loss on sale will depend on resolution of the conditions precedent and government approvals.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Second quarter crude prices were essentially unchanged versus the first quarter, near the middle of the 10-year historical range (2010-2019), as the market remains relatively balanced. Natural gas prices declined due to lower demand from milder weather, though remained toward the middle of the 10-year range. Industry refining margins declined from the top of the 10-year range to the lower half of the range, as increased supply more than met record global demand in the second quarter. Chemical margins showed a slight improvement compared to the first quarter of 2024, although margins remained at bottom-of-cycle conditions and well below the 10-year range, as capacity additions outpaced demand growth.

Recent Mergers and Acquisitions

On May 3, 2024, ExxonMobil acquired Pioneer Natural Resources Company (Pioneer), an independent oil and gas exploration and production company. See "Note 2. Pioneer Natural Resources Merger" of the Condensed Consolidated Financial Statements for additional information.

Selected Earnings Factor Definitions

The updated earnings factors introduced in the first quarter 2024 provide additional visibility into drivers of our business results. The company evaluates these factors periodically to determine if any enhancements may provide helpful insights to the market. Listed below are descriptions of the earnings factors:

Advantaged Volume Growth. Earnings impacts from change in volume/mix from advantaged assets, strategic projects, and high-value products.

• Advantaged Assets (Advantaged growth projects). Includes Permian (heritage Permian (1) and Pioneer), Guyana, Brazil, and LNG.
• Strategic Projects. Includes (i) the following completed projects: Rotterdam Hydrocracker, Corpus Christi Chemical Complex, Baton Rouge Polypropylene, Beaumont Crude Expansion, Baytown Chemical Expansion, Permian Crude Venture, and the 2022 Baytown advanced recycling facility; and (ii) the following projects still to be completed: Fawley Hydrofiner, China Chemical Complex, Singapore Resid Upgrade, Strathcona Renewable Diesel, ProxximaTM Venture, USGC Reconfiguration, additional advanced recycling projects under evaluation worldwide, and additional projects in plan yet to be publicly announced.
• High-Value Products. Includes performance products and lower-emission fuels. Performance products (performance chemicals, performance lubricants) refers to products that provide differentiated performance for multiple applications through enhanced properties versus commodity alternatives and bring significant additional value to customers and end-users. Lower-emission fuels refers to fuels with lower life cycle emissions than conventional transportation fuels for gasoline, diesel and jet transport.

Base Volume. Includes all volume/mix factors not included in Advantaged Volume Growth defined above.

Structural Cost Savings. After-tax earnings effect of Structural Cost Savings as defined on page 21, including cash operating expenses related to divestments that were previously in the "volume/mix" factor.

Expenses. Includes all expenses otherwise not included in other earnings factors.

Timing Effects. Timing effects are primarily related to unsettled derivatives (mark-to-market) and other earnings impacts driven by timing differences between the settlement of derivatives and their offsetting physical commodity realizations (due to LIFO inventory accounting).

(1) Heritage Permian basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024.

Earnings (loss) excluding Identified Items

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 in a given quarter 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.

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.

Structural Cost Savings

Structural Cost Savings describes decreases in cash opex excluding energy and production taxes as a result of operational efficiencies, workforce reductions, divestment-related reductions, and other cost-savings measures that are expected to be sustainable compared to 2019 levels. Relative to 2019, estimated cumulative Structural Cost Savings totaled $10.7 billion, which included an additional $1.0 billion in the first six months of 2024. The total change between periods in expenses below will reflect both Structural Cost Savings and other changes in spend, including market factors, such as inflation and foreign exchange impacts, as well as changes in activity levels and costs associated with new operations, mergers and acquisitions, new business venture development, and early-stage projects. Estimates of cumulative annual structural savings may be revised depending on whether cost reductions realized in prior periods are determined to be sustainable compared to 2019 levels. Structural Cost Savings are stewarded internally to support management's oversight of spending over time. This measure is useful for investors to understand the Corporation's efforts to optimize spending through disciplined expense management.

REVIEW OF SECOND QUARTER 2024 RESULTS

ExxonMobil’s second quarter 2024 earnings were $9.2 billion, or $2.14 per share assuming dilution, compared with earnings of $7.9 billion a year earlier. The increase in earnings was mainly driven by improved realizations and increased volumes for advantaged Upstream investments in the Permian and Guyana, partially offset by weaker industry refining margins and higher scheduled maintenance. Capital and exploration expenditures were $7.0 billion, up $0.9 billion from second quarter 2023.

Earnings for the first six months of 2024 were $17.5 billion, or $4.20 per diluted share, compared with $19.3 billion a year earlier. Capital and exploration expenditures were $12.9 billion, up $0.3 billion from the first six months of 2023. The Corporation distributed $8.1 billion in dividends to shareholders and repurchased $8.3 billion of common stock.

UPSTREAM

Upstream Second Quarter Earnings Factor Analysis

(millions of dollars)

Price – Price impacts increased earnings by $1,370 million, driven by an increase in liquids realizations, partly offset by a decrease in natural gas realizations.

Advantaged Volume Growth – Higher volumes from advantaged assets increased earnings by $1,250 million, driven by record production from Guyana, growth in heritage Permian (2), and the Pioneer acquisition.

Base Volume – Higher base volumes increased earnings by $30 million.

Structural Cost Savings – Increased earnings by $210 million.

Expenses – Higher expenses decreased earnings by $340 million, primarily from depreciation.

Other – All other items increased earnings by $130 million, driven by favorable impacts from divestments, partly offset by Pioneer-related transaction costs.

Timing Effects – Less favorable timing effects from derivatives mark-to-market impacts decreased earnings by $170 million.

Identified Items (1) – 2Q 2023 $(12) million loss driven by additional European taxes.

(1) Refer to page 20 for definition of Identified Items and earnings (loss) excluding Identified Items.

(2) Heritage Permian basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024.

Upstream Year-to-Date Earnings Factor Analysis

(millions of dollars)

Price – Price impacts increased earnings by $570 million, driven by an increase in average realizations for crude oil, partially offset by a decrease in average natural gas realizations.

Advantaged Volume Growth – Higher volumes from advantaged assets increased earnings by $1,680 million, driven by record production from Guyana, growth in heritage Permian (2), and the Pioneer acquisition.

Base Volume – Lower base volumes decreased earnings by $400 million, mainly driven by divestments and government-mandated curtailments.

Structural Cost Savings – Increased earnings by $320 million, due to operational efficiencies and divestments.

Expenses – Higher expenses decreased earnings by $510 million, primarily from depreciation.

Other – All other items, including costs related to the Pioneer transaction, decreased earnings by $340 million.

Timing Effects – Less unfavorable timing effects from derivatives mark-to-market impacts increased earnings by $210 million.

Identified Items (1) – 2023 $(170) million loss driven by additional European taxes.

(1) Refer to page 20 for definition of Identified Items and earnings (loss) excluding Identified Items.

(2) Heritage Permian basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024.

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.

ENERGY PRODUCTS

Energy Products Second Quarter Earnings Factor Analysis

(millions of dollars)

Margin – Margins decreased earnings by $860 million, driven by weaker industry refining margins.

Advantaged Volume Growth – Higher volumes from strategic projects increased earnings by $20 million.

Base Volume – Lower base volumes decreased earnings by $500 million, driven by higher scheduled maintenance and divestments.

Structural Cost Savings – Increased earnings by $180 million.

Expenses – Higher expenses decreased earnings by $260 million from higher planned maintenance and turnaround activity.

Other – All other items decreased earnings by $20 million.

Timing Effects – Favorable timing effects from derivatives mark-to-market impacts increased earnings by $90 million.

Identified Items (1) – 2Q 2023 $18 million gain related to European taxes.

(1) Refer to page 20 for definition of Identified Items and earnings (loss) excluding Identified Items.

Energy Products Year-to-Date Earnings Factor Analysis

(millions of dollars)

Margins – Margins decreased earnings by $2,880 million, driven by significantly weaker industry refining margins, which normalized from the historically high levels in early 2023.

Advantaged Volume Growth – Higher volumes from the Beaumont refinery expansion increased earnings by $130 million.

Base Volume – Lower base volumes from divestments and higher scheduled maintenance decreased earnings by $650 million.

Structural Cost Savings – Increased earnings by $320 million due primarily to divestments and maintenance related efficiencies.

Expenses – Higher expenses decreased earnings by $550 million, driven by increased turnaround and higher planned maintenance activity.

Other – All other items increased earnings by $20 million.

Timing Effects – Unfavorable timing effects mainly from derivatives mark-to-market impacts decreased earnings by $570 million.

Identified Items (1) – 2023 $(12) million loss from additional European taxes.

(1) Refer to page 20 for definition of Identified Items and earnings (loss) excluding Identified Items.

CHEMICAL PRODUCTS

Chemical Products Second Quarter Earnings Factor Analysis

(millions of dollars)

Margin – Lower realizations, partially offset by lower energy costs, decreased earnings by $30 million.

Advantaged Volume Growth – High-value product sales growth increased earnings by $120 million.

Structural Cost Savings – Increased earnings by $40 million.

Expenses – Higher expenses, including increased project and maintenance costs, decreased earnings by $140 million.

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

Chemical Products Year-to-Date Earnings Factor Analysis

(millions of dollars)

Margins – Despite weaker global industry margins, overall margins increased earnings by $100 million, driven by North American feed advantage, lower energy costs, and stronger high-value product margins.

Advantaged Volume Growth – Growth in high-value product sales increased earnings by $260 million.

Base Volume – Higher base volumes increased earnings by $120 million, driven by modest demand growth and lower turnaround impacts.

Structural Cost Savings – Increased earnings by $50 million, primarily from operational efficiencies.

Expenses – Higher growth projects spend and maintenance decreased earnings by $150 million.

Other – All other items decreased earnings by $20 million.

SPECIALTY PRODUCTS

Specialty Products Second Quarter Earnings Factor Analysis

(millions of dollars)

Margin – Stronger finished lubes and basestocks margins increased earnings by $100 million.

Advantaged Volume – High-value products volume growth increased earnings by $30 million.

Structural Cost Savings – Increased earnings by $20 million.

Expenses – Higher expenses decreased earnings by $30 million.

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

Specialty Products Year-to-Date Earnings Factor Analysis

(millions of dollars)

Margins – Stronger finished lubes margins increased earnings by $100 million, driven by technology-enabled feed optimization, partially offset by weaker industry basestocks margins.

Advantaged Volume Growth – Additional high-value product sales increased earnings by $20 million.

Base Volume – Higher basestocks sales increased earnings by $30 million.

Structural Cost Savings – Increased earnings by $50 million.

Expenses – Higher expenses, primarily related to new business development, decreased earnings by $80 million.

Other – All other items, primarily unfavorable foreign exchange impacts, decreased earnings by $50 million.

CORPORATE AND FINANCING

Corporate and Financing expenses were $310 million for the second quarter of 2024, $196 million lower than the second quarter of 2023, mainly due to lower financing costs.

Corporate and Financing expenses were $672 million for the first six months of 2024, $189 million lower than 2023, mainly due to lower financing costs, partially offset by Pioneer-related costs.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations and asset sales in the second quarter of 2024 was $11.5 billion, an increase of $0.8 billion from the comparable 2023 period primarily reflecting higher earnings.

Cash provided by operating activities totaled $25.2 billion for the first six months of 2024, $0.5 billion lower than 2023. Net income including noncontrolling interests was $18.1 billion, a decrease of $1.9 billion from the prior year period. The adjustment for the noncash provision of $10.6 billion for depreciation and depletion was up $2.1 billion from 2023. Changes in operational working capital were a reduction of $2.6 billion during the period. All other items net decreased cash flows by $0.9 billion in 2024 versus a contribution of $1.1 billion in 2023. See the Condensed Consolidated Statement of Cash Flows for additional details.

Investing activities for the first six months of 2024 used net cash of $9.4 billion, an increase of $0.2 billion compared to the prior year. Spending for additions to property, plant and equipment of $11.3 billion was $0.5 billion higher than 2023. Proceeds from asset sales were $1.6 billion, a decrease of $0.5 billion compared to the prior year. Net investments and advances decreased $0.1 billion from $0.7 billion in 2023. Cash acquired from mergers and acquistions during the first six months of 2024 was $0.8 billion.

Net cash used in financing activities was $20.5 billion in the first six months of 2024, including $8.3 billion for the purchase of 72.1 million shares of ExxonMobil stock, as part of the previously announced buyback program, and $1.3 billion to repay Pioneer convertible debt. This compares to net cash used in financing activities of $16.7 billion in the prior year. Total debt at the end of the second quarter of 2024 was $43.2 billion compared to $41.6 billion at year-end 2023. The Corporation's debt to total capital ratio was 13.5 percent at the end of the second quarter of 2024 compared to 16.4 percent at year-end 2023. The net debt to capital ratio (1) was 5.7 percent at the end of the second quarter, an increase of 1.2 percentage points from year-end 2023. 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 $8.1 billion to shareholders in the first six months of 2024 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 $0.2 billion and undrawn long-term committed lines of credit of $1.8 billion as of second quarter 2024.

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, low cost of supply, and attractive 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.

(1) Net debt is total debt of $43.2 billion less $26.5 billion of cash and cash equivalents excluding restricted cash . Net debt to capital ratio is net debt divided by net debt plus total equity of $276.3 billion. Total debt is the sum of notes and loans payable and long-term debt, as reported in the consolidated balance sheet.

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 second quarter of 2024, the Corporation entered into two long-term purchase agreements with an estimated total obligation of approximately $3.0 billion. The Corporation assumed take-or-pay obligations of $4.9 billion associated with the Pioneer acquisition that include long-term purchase, gathering, processing, and transportation commitments.

TAXES

Total taxes were $11.6 billion for the second quarter of 2024, a decrease of $0.2 billion from 2023. Income tax expense was $4.1 billion compared to $3.5 billion in the prior year. The effective income tax rate, which is calculated based on consolidated company income taxes and Exxonmobil's share of equity company income taxes, was 34 percent. This increased from the 33 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 decreased by $0.8 billion to $7.5 billion.

Total taxes were $22.6 billion for the first six months of 2024, a decrease of $2.3 billion from 2023. Income tax expense decreased by $0.6 billion to $7.9 billion reflecting lower refining margins. The effective income tax rate of 35 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 decreased by $1.7 billion to $14.7 billion.

CAPITAL AND EXPLORATION EXPENDITURES

Capital and exploration expenditures in the second quarter of 2024 were $7.0 billion, up 14% from the second quarter of 2023.

Capital and exploration expenditures in the first six months of 2024 were $12.9 billion, up 3% from the first six months of 2023. The Corporation anticipates an investment level of approximately $28 billion in 2024. Actual spending could vary depending on the progress of individual projects and property acquisitions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the six months ended June 30, 2024, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2023.

The impacts of price fluctuations on 2024 earnings have been revised to reflect the acquisition of Pioneer on an annualized basis. A $1 per barrel change in the weighted-average realized price of oil would have approximately a $650 million annual after-tax effect on Upstream consolidated plus equity company earnings, excluding the impact of derivatives. Similarly, a $0.10 per thousand cubic feet change in the worldwide average gas realization would have approximately a $155 million annual after-tax effect on Upstream consolidated plus equity company earnings, excluding the impact of derivatives.

Crude oil, natural gas, petroleum product, and chemical prices fluctuate in response to changing market forces. For any given period, the extent of actual benefit or detriment will be dependent on the price movements of individual types of crude oil, results of trading activities, taxes and other government take impacts, price adjustment lags in long-term gas contracts, and crude and gas production volumes. Accordingly, changes in benchmark prices for crude oil and natural gas only provide broad indicators of changes in the earnings experienced in any particular period.

ITEM 4. CONTROLS AND PROCEDURES

As indicated in the certifications in Exhibit 31 of this report, the Corporation’s Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer have evaluated the Corporation’s disclosure controls and procedures as of June 30, 2024. Based on that evaluation, these officers have concluded that the Corporation’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There were no changes during the Corporation’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

In the second quarter of 2024, ExxonMobil started the process of integrating Pioneer into its operations and internal control processes, resulting in some of Pioneer's historical internal controls being superseded by ExxonMobil's internal controls. This integration is expected to continue into 2025.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ExxonMobil has elected to use a $1 million threshold for disclosing environmental proceedings.

On March 9, 2022, XTO Energy, Inc. (XTO) received a Notice of Violation from the United States Environmental Protection Agency (EPA) against XTO regarding certain well pad production facility sites in Butler County, Pennsylvania. The letter did not quantify an associated civil penalty. The EPA alleged violations of certain federal New Source Performance Standards (NSPS) and Pennsylvania’s Title V operating permit regulations. The Department of Justice (DOJ) has proposed a consent decree but a civil action has not been filed. In May 2024, the DOJ demanded a penalty of approximately $5.0 million. XTO is continuing to assess the factual basis of the allegations and proposed penalty and strongly disagrees with the DOJ’s position.

As reported in the Corporation’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024, the State of Texas and the Corporation agreed to settle alleged violations of the Texas Clean Air Act at the Baytown Olefins Plant located in Baytown, Texas upon payment of $2.25 million to the State of Texas. Since then, the Travis County District Court for the State of Texas has approved and entered the settlement, and the Corporation has paid the agreed upon amounts in accordance with the terms therein.

Refer to the relevant portions of Note 3 of this Quarterly Report on Form 10-Q for further information on legal proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the second quarter, the Corporation did not issue or sell any unregistered equity securities.

ITEM 5. OTHER INFORMATION

During the three months ended June 30, 2024, none of the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

See Index to Exhibits of this report.

INDEX TO EXHIBITS

Exhibit Description

10(iii)(b.4) Pioneer Natural Resources Company Second Amended and Restated 2006 Long-Term Incentive Plan.* 31.1 Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Executive Officer. 31.2 Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Financial Officer. 31.3 Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal Accounting Officer. 32.1 Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief Executive Officer. 32.2 Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief Financial Officer. 32.3 Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Accounting Officer. (101) Interactive Data Files (formatted as Inline XBRL). (104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | * Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of the most recent Annual Report on Form 10-K. | |