Document 6mjmbpwzv18QQLMpE3Yrnbk4

E^ON CORPORATION JUM 1 5 1990 Exxqn Corporation 1251 ^venue of the Americas New-York, New York 10020-1198 Telephone: (212) 333-6900 Contents__________ Divisions and affiliated companies of Exxon Corporation operate in the United States and 79 other countries.Their principal business is energy, involving exploration for and production of crude oil and natural gas, manufacturing of petroleum products, transportation and sale of crude oil, natural gas and petroleum products, and exploration for and mining and sale of coal. Exxon Chemical Company is a major manufacturer and marketer of petrochemicals. Exxon is also engaged in exploration for and mining of minerals in addi tion to coal. Exxon conducts extensive research programs in support of these businesses. The terms corporation, company, Exxon, our, and its, as used in this report, sometimes refer not only to Exxon Corporation or to one of its divisions but collectively to all of the companies affiliated with Exxon Corporation or to any one or more of them. The shorter terms are used merely for convenience and simplicity. Highlights 1 Letter to the shareholders 2 Review of the year 4 Financial section 19 Directors, officers and regional and operating organizations 44 Reports Available to Shareholders A financial and statistical supplement to this report, covering a ten-year period Form 10-K, an annual report for 1987 as filed with the Securi ties and Exchange Commission A summary of Exxon's progress in the employment of minori ties and women in its U.S. work force and of its purchases from minority-owned businesses Dimensions 87, a report on Exxon's 1987 contributions in the public interest Dividend Reinvestment Plan Annual Meeting of Shareholders The annual meeting of shareholders of the corporation will be held atThe Kiel Opera House, 1416 Market Street, St. Louis, Missouri, on Thursday, May 19,1988, at 10:00 a.m. St. Louis time. Transfer Agent Stock certificates may be transferred at the following transfer agent's office: Morgan Shareholder Services Trust Company 30 West Broadway New York, New York 10007-2192 A brochure is available on Exxon's Dividend Reinvestment Plan. It explains how shareholders may increase their in vestment in the stock of the corporation without fees or service charges. Requests for reports, other publications and information about company operations should be addressed to: Exxon Corporation Shareholder Services 1251 Avenue of the Americas New York, New York 10020-1198 or telephone collect (212) 338-6900 Inquiries regarding the Dividend Reinvestment Plan, dividend payments, stock transfer requirements, address changes and account consolidations should be addressed to:I_____ Morgan Shareholder Services Trust Company Post Office Box 7600 Church Street Station New York, New York 10249-7600 Telephone (212) 587-6472 IMHI Highlights COVER: Steeljacket ofa production platform, shown under construction at the Barry Beach Marine Tbrminal inAustralia, ' teas installed in 1987 an the Exxon-operated Bream oilfield in Bass Strait. Setting sun silhouettes oil worker and drilling rig (right) at a producing oil field in Californiab San Joaquin Valley, one of several properties Exxon acquired with the pur chase ofCeleron Oil & Gas Company. Celeron was among the major 1987 acquisitions which made a substantial contribution to the company's oil and gas reserves. Financial 1986* 1987 Net income billions ofdollars Net income per share Dividends per share Shareholders' equity per share Return on average shareholders' equity percent Return on average capital employed percent Revenue billions ofdollars Net income to revenue percent Capital and exploration expenditures billions ofdollars Research and development costs millions ofdollars $ 5.4 $ 3.71 $ 1.80 $22.30 17.5 14.2 $ 76.6 7.0 $ 7.2 $ 616 $ 4.8 $ 3.43 $ 1.90 $24.38 14.7 11.9 $ 83.3 5.8 $ 7.1 $ 524 Operating Net liquids production thousands ofbarrels daily Refinery crude oil runs thousands ofbarrels daily Petroleum product sales thousands ofbarrels daily Natural gas production available for sale millions ofcubicfeet daily Chemical revenue millions ofdollars 1,796 ` 1,835 3,032 2,981 4,043 4,043 5,329 - 5,227 $7,021 $8,335 'Per share amounts adjusted to reflectAugust 1987two-for- one stock split. See Note 5, page 31. I Letter to the Shareholders L. G. RcrnA Exxon's financial results in 1987 were generally strong, particularly in view of the continuing volatility and uncertainty in energy markets. The year ended with fourth quarter earnings higher than any of the preceding six quarters, although net income for the full year, $4.8 billion, was down 9.7 percent from the near record level of 1986. Exxon's exploration and production business results, which were depressed by low crude oil prices in 1986, made a strong recov ery in 1987, due to increased liquids production, higher prices, and lower operating costs. Our liquid reserve additions in 1987 equalled 114 per cent of our production. Vfe also achieved a second consecutive year of record earnings from our chem icals business.These gains, how ever, did not fully offset the squeeze on profit margins in our down stream refining and marketing business where the increased cost of crude oil could not be fully re covered in product selling prices. Our chemical sales increased 19 percent in 1987, benefiting from strong worldwide demand and productivity improvements in our plants. Exxon's margins improved, and most of our chemical units ran at or near capacity during the year. Among Exxon's other business segments, the adverse effect of lower coal prices was largely offset by in creased earnings from copper mining and electric power generation in Hong Kong. During the year, our shareholders approved a two-for-one stock split, the dividend was in creased and per share earnings of $3.43 turned out to be among the highest in recent years. We also repurchased 58 million Exxon shares. Thus, 1987 was a rewarding year for share holders, despite a volatile financial climate. Since 1986 had been the year for restructur ing our worldwide organization, 1987 became a year for testing the new structure. It turned out to be a tough test, but the new organization produced the benefits we had anticipated. We confirmed that we could operate quite profit ably with oil prices well below what they were in the first half of the decade. We demon strated that we could reduce our costs and operate more effectively without impairing our traditional strengths--something we will not forget in a higher price environment. We esti mate that this organizational efficiency added $375 million to our 1987 net incomeThese efficiencies will remain in place and further benefits will accrue in future years. Finally, the restructured organization has given us the greater flexibility and shorter response time needed to seize and profit from rapidly emerg ing opportunities during these uncertain times. All considered, these 1987 results were satis fying and confirmed that our underlying busi nesses and our new organizational structure are sound and that we are well-positioned for the future. Exxon's ability to maintain superior corporate performance derives from certain funda mental strengths. Wfe have a very latge natural resource base diversified throughout the worid. Exxon also has a strong marketing presence, coupled with highly efficient manufacturing facilities in the petroleum and chemical busi nesses. A range of Exxon-developed technol ogies serves to keep us in the forefront of the industry; some of them are highlighted in the new Research andTechnology section of this report Our sound financial position is attested by one of the strongest balance sheets in industry. And, most importantly, we have the capable services of our dedicated employees located in 80 countries. Our ongoing challenge is to develop oppor tunities to utilize these underlying strengths to maximize shareholder values. Vfe are pur suing that challenge in a number of ways. In exploration and production, we are being appropriately selective in targeting our efforts, due to the difficult supply and demand situ ation. Although oil prices are about half of what they were in 1985, there are a number of opportunities which can be aggressively pur sued in a lower price environment, so we are focusing on those. Exxon is also adding to its oil and gas reserves through attractively priced acquisitions--some 450 million oil equivalent barrels last year for about $1.8 billion. Mean while, we are continuing to invest in enhanced recovery technologies to ensure that we get all the oil that can be economically produced from maturing fields. 0S99S3 L. R. Raymond In refining and marketing, we are continuing to invest in those markets where we are com petitive and have the opportunity to achieve^ satisfactory profitability. As product markets evolve, we are continuing to upgrade existing refinery facilities to convert lower-grade products and feedstocks into more profitable transportation fuels, lubricants and specialty products. Further, we are prepared to disinvest where careful analysis persuades us that a particular business environment is unfavorable In chemicals, we are well-posi tioned in an industry with good growth prospects. Our strategies emphasize quality, higher valueadded products, and services tai lored to our customers' needa Facilities that have been operating at or near capacity are being ex panded through an ongoing pro gram of low-cost capacity addi tions. We are also broadening our range of participation to additional chemical markets through care fully selected new investments and acquisitions. In coed and minerals, we are con tinuing with the development of our resources. Our aim in these very competitive businesses is to ensure that our operations are among the most cost-efficient in their industries. In 1987, Exxon's capital and exploration spending in support of these strategies totaled $7.1 billion. At this stage, our plans call for expenditures of about $6.5 billion in 1988. How ever, to the extent that attractive acquisitions are available, additional funds will be spent again this year. Looking beyond 1988, the outlook for con tinuing volatility in oil prices suggests that the years immediately ahead are likely to remain difficult. Our ability to convert change into opportunity will be constantly tested. But knowing that we can continue to compete suc cessfully in a low energy price environment gives us the confidence to maintain our focus on longer-term strategies, while taking advan tage of near-term opportunities. As we see it, some time in the decade of the 1990s world crude oil supply_and.demand should become better balanced and prices will rise: In this environment, our extensive inven tory of heavy oil, remote gas and presently noncommercial resources will become more economic to produce, thereby providing us with a very large investment portfolio in the future. Beyond these resources, we also have sizeable coal and oil shale holdings that will provide the basis for synthetic fuels produc tion. Vtfe have already developed improved, sec ond generation synthetic fuel technologies that could be utilized with real crude oil prices in the $30 to $35 a barrel range. And we are pur suing research leads that we expect will lower the cost of synthetics still further. Vfe believe that our investment program cou pled with our research and development efforts position us favorably to take full advantage of the profitable opportunities that lie ahead and will further enhance our position in the industry. Vfe wish to thank our customers for their business and to commend our employees for their effective efforts in helping to convert an other challenging year for the industry into a successful one for Exxon. Our thanks, also, to our shareholders, whose ongoing support con tributes greatly to Exxon's underlying strength and stability. FOR THE BOARD OF DIRECTORS 'February29,1988 L G. F1AWL. Chairman L R. RAYMOND, President 02093* REVIEW OF THE YEAR On board the semisubmersible rig Ocean Bouncy, a crew drills a wildcat well in Block 202/9, 45 miles northwest ofOrkney in the UK. North Sea. Exxon was the operatorfor the venture with KTZ and Enterprise Oil. Functional and geographic analysis of results Earnings After Income Taxes 1986 1987 Average Capital Employed 1986 1987 Petroleum and natural gas millions ofdollars Exploration and production United States $ 698 $1,319 $12,796 $12,691 Foreign 2,362 2,448 6,005 7,965 Refining and marketing United States 478 32 2,697 2,865 Foreign 1.456 457 7,377 8,355 Total petroleum and natural gas 4,994 4,256 28,875 31,876 Chemicals United States 247 374 1,703 1,743 Foreign 223 376 1,935 2,205 Coal and minerals 12 (38) 1,906 2,032 Hong Kong power generation 132 162 1,128 1,254 Other operations 70 74 2,482 1,743 Corporate and financing (551) (404) 1,090 568 Restructuring* 233 40 -- -- Net income/Capital employed $5,360 $4,840 $39,119 $41,421 *Includes provisions tor sale, shuicown. discontinuance orreorganization ofmajoroperating units. improved upstream results, record year in chemicals were more than offset by lower downstream margins and absence oflarge 1986 gainsfrom assets sales. World crude oil prices were moderately stronger, with the average price of about $18 a barrel exceeding the 1986 level by 25 per cent despite some weakening late in 1987. But the resulting improvement in explora tion and production earnings was more than offset by a decline in refining and marketing earnings from the very high levels of the previous year. Refined product margins were severely depressed for most of 1987, as product price increases ran well behind increases in the cost of crude oil supplies for Exxon refineries--in contrast to 1986, when crude oil prices dropped sharply during the first half while product prices remained relatively firm. Chemical earnings reached a record high for the second consecutive year, reflecting stronger sales volumes and margins in most chemical business lines. Cost savings attributable to the 1986 corporate reorganization helped results in all operations. 4 Petroleum and Natural Gas Exploration and Production BUSINESS PROFILE --Exploration and Production Earnings United States Foreign Total Average capital employed United States Foreign Total Capital and exploration expenditures United States Foreign Total Research and development costs Return on average capital employed United States Foreign Total Net production and supplies--liquids Net production United States Foreign Proportional interest in production of equity companies of other non-consolidated companies Oil sands production--Canada Total v Natural gas production available for sale Net production United States Foreign Proportional interest in production of equity companies Total 1986 1987 millions ofdollars 698 2,362 3,060 1,319 2,448 3,767 12,796 6.005 18,801 12,691 7,965 20,656 2,275 2,326 4,601 144 1,758 3,346 5,104 135 percent 5.5 39.3 16.3 10.4 30.7 18.2 thousands of barrels daily 761 756 953 990 25 25 32 1,796 27 28 34 1,835 millions of cubicfeet daily 1,919 1,501 1,698 1,658 1,909 5,329 1,871 5,227 Net liquids production millions ofbarrels daxly 2\ Foreign production United States production Higher crude oil prices lifted upstream earnings. Lower costs, increased pro duction, contributed to gains. Exxon's earnings from exploration and production operations were up by 23 per cent, as crude oil prices recovered from the depressed levels of mid-1986. Natural gas realizations were lower, largely because European gas contracts were indexed to petroleum product prices of earlier periods. US. upstream earnings rose 89 percent, buoyed by higher crude oil prices and cost savings resulting from reduced drilling activity and lower exploration expenses. The gain came despite reduced natural gas prices and a 12 percent drop in'gas sales, reflecting intense competition-rn the US. market Upstream earnings outside the US. rose modestly, due to higher crude oil prices and increased liquids and gas pro duction. Foreign gas sales rose 3 percent on higher market demand. Worldwide, Exxon's production of crude oil and natural gas liquids rose 2 percent, mainly on the strength of production in creases at Canadian heavy oil properties and in Australia. US. liquids production was essentially unchanged, as new Alaskan production compensated for the continued decline in the lower 48 states with the depletion of mature fields. Reserve additions replaced 114 percent of the liquids produced during 1987. The com pany removed 7.8 trillion cubic feet of un developed gas reserves in Alaska from its reserves count because of Uncertainty about when a transportation system will be built to move the gas to market Exxon remains confident that these high-quality resources will ultimately be developed. Excluding this revision, gas reserve addi tions replaced 1987 production. Major acquisitions included producing and exploration properties in the.U-S., Canada, Australia. With purchases totaling $1.8 billion, Exxon acquired approximately 450 million barrels of proved and probable oil-equiva lent reserves in the United States, Canada and Australia, along with promising exploration acreage. The purchase of Celeron Oil & Gas Com pany from t-he Goodyear Tire & Rubber Company added significant reserves in California The Celeron properties include tracts in the onshore South Belridge and Midway-Sunset fields with average 1987 production of 14,400 net barrels of oil a day and a 27 percent interest in the offshore San Miguel field where development is un der way, as well as offshore acreage with exploration potential.. Imperial purchased the assets of Sulpetro Limited and the shares of its affiliate Sulbath Exploration Limited.The main assets of the companies include oil and gas reserves and exploration acreage in western Canada. Current daily gross production from these properties is about 90 million cubic feet of natural gas and 6,000 barrels of liquids. Acquisition of Delhi Petroleum Propri etary Ltd. established Exxon in the Cooper-Eromanga basin, the largest onshore producing area in Australia The omsc Crude oil and natural gas liquids reserves billions ofbarrets 9 8 purchase contributed net daily production of about 15,000 barrels of liquids and 75 mil lion cubic feet of natural gas, and added about 21 million net acres which have addi In the United Kingdom, the Exxon/Shell joint venture made significant gas discov eries in the southern sector of the North Sea Appraisal drilling on northern sector j tional exploration potential. Blocks 2U/I3a and 211/26 identified potentially commercial oil fields at both Exxon upgraded exploration acreage and locations. In Norwegian waters, an encour drilling program. aging oil discovery was made adjacent to l The company continued to upgrade its in ventory of exploration acreage to concen Snorre. (Exxon interest: approximately 8 percent). trate on the most economically attractive In the Yemen Arab Republic, the Exxon/ 1983 1984 1985 1986 1987 areas. An active program of identifying promising new areas resulted in the acqui Hunt Oil joint operation discovered oil at two locations near the big Alif field, where a Other Europe United States sition of more than 25 million acres in the United States, Canada, Australia, Colombia, France, Norway, the Netherlands, West Ger many, Indonesia and the United Kingdom. major producing project is under way. Exxon participated in several oil and gas discoveries in the Netherlands and Wfest Germany, and made smaller finds in Exxon drilled 184 exploration wells com Canada, France, Indonesia and Australia Producing capital and exploration expenditures pared with 246 in the previous year, reflecting the emphasis on selectivity. Important discoveries made in eleven countries. Exxon has a 25 percent interest in an oil find at the Yaguara field in south-central Colombia, where appraisal drilling con tinues. In the Gulf of Mexico, a discovery was made at Viosca Knoll Block 825 (Exxon in terest: 50 percent), located in 1,700 feet of Key government permits grantedfor expansion ofSanta Ynezproduction offsouthern California. water off the Mississippi delta Evaluation is After lengthy delays, permits were obtained still under way at the prospect, which is for further development of Exxon's Santa near the Block 956 deepwater oil and gas Ynez unit in the Santa Barbara Channel. discovery made by Exxon in 1986. The key permits for land use and air qual ity were received from Santa Barbara county agencies, the State Lands Commis sion and the California Coastal Commis sion. Receipt of these permits will enable Other Europe UnitedStates Exxon to build onshore crude oil treatment and storage facilities to replace the treating and storage vessel which now handles prod uction from the Hondo platform. At year-end, construction was virtually completed on steel jackets for two new plat forms at Santa Ynez. The jackets will be installed in 1989, with production start-up Man-made island in the scheduled for 1992. Arctic Ocean accommo datesfacilities at the Ehidicottfield, where oil production started up in 1987. Prefabricated modu lar structures are the larg est ever transported to the Further north off California, the Irene platform started up in April on the Point Pedernales field (Exxon interest: 31 per cent). Gross production from the field aver aged approximately 20,000 barrels a day in the latter part of the year. Arctic; causeway carries pipeline connecting to the trans-Alaska pipeline on the mainland. Exxon has a 21 percent share ofthe operation., which was pro ducing at a rate of 115.000 6 barrels a day at year-end. 020337 Total number of net wells drilled 1983 1984 1985 1986 1987 Foreign UnrtedStates Endicott start-up meritedfirst continuous oil production in Arctic offshore. Crude oil production began in October on two man-made gravel islands at the Endicott field, located 25 miles offshore and about 15 miles east of Prudhoe Bay on Alaska's North Slope The $1.1 billion Endicott project, in which Exxon has a 21 percent interest, includes an aboveground pipeline which carries oil to the mainland via a causeway to connect with the TransAlaska Pipeline System at Prudhoe Bay. Endicott exceeded its planned production level and was producing 115,000 barrels a day by year-end. It ranks among the top 10 U.S. oil fields, and is the first oil field in continuous production in the Arctic Ocean. A 272-mile pipeline teas built across the Yemen Arab Republic to bring Aliffield crude to the Red Sea coastfor export. This was one ofthe largest con struction projects in the country's modem history. The pipeline is part ofthe Exxon/Hunt Oiljoint operation which produces all of Yemen's crude oil. Expansion plans announced to increase Canadian oil sands production by 47 percent. Imperial announced plans to further ex pand its staged development of heavy oil re sources at Cold Lake, Alberta The existing project, which produces heavy oil or bitu men by injecting steam into buried oil sands and pumping heated oil to the sur face, involved drilling some 1400 wells and produced at an average rate of 80,000 bar rels a day in 1987. Completion of a facility debottlenecking project will increase daily output to 95,000 barrels in 1988. The com pany will spend $240 million on facilities for four new stages, including a central plant and 500 wella Bitumen production from expanded facilities is expected to reach 139,000 barrels a day by 1991. Clusters ofproduction uells such as this one are a distinctivefeature ofa stag'd project to recover bitumen, a type of very heavy oil, at Canadas Cold Lake, where Imperial Oil Limited, an Exxon, affiliate, has recently announced a major expansion. Steam gener ated at a central plant is brought to production pads through insulated lines, shown at right, and is injected into deposits 1,500feet belowground. After weeks ofsteam injec tion, the heated bitumen is liquid enough to be pumped to the surface. four platforms started up in North Sea. ment with the government Gross produc Contract signedfor gas sales. tion at year-end exceeded 100,000 barrels a In the central sector of the U.K. North Sea, production began from the Clyde field (Exxon interest: 24.5 percent). At year-end, the field was producing 47,000 barrels of oil day (Exxon share: 37 percent), and further increases are anticipated in 1988. Tbtal reserves of the fields are estimated to be greater than 400 million barrels. a day together with small amounts of gas. In the southern sector, the Exxon/Shell joint venture started up gas production Development continued in Australians Bass Strait. platforms at Leman F and G and at Inde In Bass Strait, where Exxon shares own fatigable N. A sales contract was signed for ership of producing properties with Broken daily delivery to British Gas of 25 million Hill Proprietary Company, Ltd., a platform cubic feet of gas from the North Valiant jacket was placed on the Bream field. Pro field. Construction began on a two-plat duction is scheduled to begin in 1988 and is form complex for this gas field, in which anticipated to peak at 15,000 barrels a day Exxon has a 125 percent interest. in the early 1990s. Plans were announced In the Norwegian sector, the Snorre field, for a small platform to develop the Whiting Natural gas reserves where Exxon has a co-operator role with field and for subsea satellite wells to develop trillions Gj'cubic feet 60 ( Saga Petroleum, was declared commercial, and government review of the proposal to develop the field is under way. A1984 the Seahorse and Thrwhine fields. Together, these developments are expected to peak at 19,000 barrels a day. discovery at Brage was declared a commer cial oil field (Exxon share: 16 percent). Mew platforms installed in Malaysia. 40 Exxon net oil production in Malaysia Crude oil shipments beganfrom Yemen reached a record 111,000 barrels a day with project. the continued development of the Guntong, 20 in December, tankers began loading crude Tabu and Palas fields. Development drilling oil at the Red Sea terminus of a 272-mile began from two new satellite platforms pipeline serving the Alif and Azal oil fields installed on the Guntong field off the east 0 1983 1984 1985 1986 1987 in the interior of the Yemen Arab Republic. The pipeline was built by the Exxon .'Hunt coast, bringing the total number of plat forms operated by Exxon in Malaysia to 21. SHS Other HI Europe 8 H UnitedStates Oil joint operation whicr. is operating the fields under a production-sharing agree j Construction began on th ree platforms for ; the Sei igi field, the nations largest oi 1 field. mmm Refining and Marketing BUSINESS PROFILE--Refining and Marketing (including International Marine)________19861987 Earnings ^ millions ofdollars United States 478 32 Foreign 1,456 457 Total 1,934 489 Average capital employed United States 2,697 2,865 Foreign 7.377 8.355 Total 10,074 11,220 Capital expenditures United States 501 409 Foreign 1.044 _ 849 Total 1,545 1,258 Research and development costs 107 101 Return on average capital employed United States Foreign Total percent 17.7 19.7 19.2 1.1 5.5 4.4 Petroleum product sales United States Foreign Total Refinery crude oil runs United States Foreign Total thousands of barrels daily ' 1,106 1,057 2,937 2,986 4,043 4,043 1,080 1,952 3,032 1,026 1,955 2,981 Average worldwide marine capacity Owned vessels Chartered vessels Total millions of deadweight tons 8.7 8.1 1.5 1.1 10.2 9.2 Margin squeeze reduced downstream, earnings by 75 percent. Impact most severe in US., Europe. Earnings from refining and marketing operations dropped sharply from the high levels of the previous year, as product mar gins were squeezed by higher crude oil prices combined with intense competition and continued overcapacity in the Fhdustry. The lag between changes in crude oil prices and changes in product prices, which helped downstream results in 1986, had the opposite effect in 1987, particularly in the first half of the year. U.S. earnings were hard hit, dropping by $446 million to $32 million. Margins were also under severe pressure in continental European markets, despite weakening of the U.S. dollar which reduced local currency costs foccrude supplies. Overall sales volumes were flat. Sales of motor gasoline, lubes and specialties were ahead of 1986 levels, but sales of heavy fuel oil were down, reflecting Exxon's continu ing withdrawal from this business as the company adds facilities to upgrade fuel oil into more valuable products. Upgrading projects under way in UK., Singapore refineries. Other plants boosted octane capability. The company announced major upgrading projects at two of its refineries. In the United Kingdom, a $130 million Residfiner will be built at the Fawley refinery to up grade heavy fuel oil for further processing into more valuable light products. The 22,000-barrel-a-day unit will reduce the crude runs needed to produce a given vol ume of gasoline and other light products. At its Singapore refinery, Exxon is adding a $75 million, 35,000-barrel-a-day thermal cracking/visbreaking unit, which also converts less valuable heavy products, for which demand is declining, into light prod ucts such as jet fuel, diesel and naphtha Both units are scheduled to start up in 1989. Exxon committed over $145 million dur ing the year to upgrade refining operations to meet increasing demand for lead-free and higher-octane motor gasoline Invest ments included an isomerization project at Baton Rouge, Louisiana and new reformers at Augusta Italy, and at Port Dickson, Malaysia An affiliated refinery at Kawasaki, Japan, which currently must import com ponents to make 100 octane fuel for the Japanese market (the equivalent of 94 octane in the US.), will add a unit in 1988 to permit the manufacture of these components. As part of a continuing program to restructure refining operations in line with changes in the market, Exxon sold its 100,000-barrel-a-day refinery at Hamburg, West Germany. Nero products included 93 octane un leaded premium gasoline in US. markets. New gasolines, diesel fuels and motor oils were introduced in several countries, as Exxon marketing prbgrams emphasized improved product qualities. The company introduced 93 octane Exxon Supreme in the United States to meet the 9 (ttMM needs of the growing number of high-com pression and octane-sensitive automobiles on the nation's roads. The new fuel puts Exxon among US. industry leaders in the octane rating of its unleaded premium mo tor gasoline. Exxon Supreme was available in most major East and Gulf Coast markets at year-end. It complements Exxon USA's other gasoline offerings, which include 87 octane Exxon Regular unleaded in all mar kets and 89 octane Exxon Plus unleaded in most major East and Gulf Coast markets. Exxon USA introduced several new spe cialty oil products, including Busgard,a motor oil specifically formulated for the en gines that power most U.S. bus fleets, and Zerice Supreme, a refrigeration oil for the commercial refrigeration market. Sign at this Exxon service station in Houston heralds the 93 octane Exxon Supreme unleaded gas oline which was intro duced in most major East and GulfCoast markets in 1987. The station exemplifies the latest architecture and design features being extended throughout Exxon's world wide retail chain. Motorists canfill market baskets as well asfuel tanks when stopping at Exxon service stations with convenience stores like this Esso Shop in Bath, England. Increas ingly in evidence in Exxon's uorldwide retail chain, such shops sell conveniencefood and sundries in addition to 10 xutomotue products. Exxon entered the quick-lube business. Imperial acquired the Canadian assets of Mr. Lube Limited, which has operated a successful quick-lube franchise business in Canada for the past 12 years and has a chain of some 50 outlets, about half of them associated with Esso service stations. Exxon USA formed a joint venture with Mr. Lube International to develop 12 to 18 pilot outlets in the United States during 1988 under the name Mr. Lube US. Exxon's French affiliate entered the field by opening three test units in Bordeaux under the name Lubexpress. The outlets feature Exxon or Esso-branded motor oils in this fast-growi ng segment of the consu mer motor oi i market. Refining capacity and ievel of crude runs 4 1983 1984 1985 1986 1987 ------- Levelofcrude runs Foreign capacity UnitedStates capacity Petroleum product saies volumes Pvrcrtu ofsoUsvolumest n ihelfnxudSiaus 28 27 28 | 27 | 26 miliums of barrels daily 4 3 2 1 0 1983 1984 1985 1986 1987 Heavy fuels Specialtyproducts Home heating oils, kerosene, diesel oils MU Aviation fuels. gasoline, naphthas Retail automation gains included credit/ debit card in US. marlcet, pan-Suropean card. Exxon USA became the only US. oil com pany to offer a debit feature on its regular credit card, allowing Exxon card holders to authorize payment for purchases directly from their bank accounts and thereby qual ify for cash discounts without sacrificing the convenience of a card. The payment option has been offered to all active card holders and is available to new applicants as well. Customers use personal identification numbers to ensure the security of trans actions and get written receipts for their records. Electronic processing equipment which accepts Exxon cards and selected bank debit cards has been installed in more than 3,600 company-owned service stations. Exxon introduced a pan-European credit card for truckers, whose trips often cross one or more national boundaries. Custom ers can use the card to charge fuel pur chases on the Continent from Norway to Italy. Expansion ofconvenience stores continued. Construction of more shops brought the total of convenience stores installed at new or modernized Exxon service stations to more than 4,000 worldwide Exxon USA now has more than 300 Exxon Shops. Affiliates continued to add new shops in Europe, and Exxon established its first C-stores in Latin America and the Far East. Units were opened in Puerto Rico, Chile, Guatemala, Panama, the island of Guadeloupe, Austra lia and Singapore--all offering a wide vari ety of fast foods and other convenience products as well as automotive products. More tankers activatedfor international service. Exxon took three large crude carriers (two VLCC's and the 508,000 dwt ULCC Esso Atlantic) out of layup and into operation, in response to increased demand for crude oil transportation capacity. This left oftly three of the company's 20 large crude carriers still in layup, the lowest level in five years. The second of two new US.-flagged VLCC's was delivered to Exxon USA for Alaska ser vice Three smaller ships were sold in 1987, reducing the Exxon fleet to 72 vessels at year-end. Computerised systems monitor activitiesfrom order to delivery at new fuels terminal opened in Purjleet, England. Sys temsfor bottom loading of road tankers andfor vapor recovery bring con siderable savings as well as environ mtoual benefits- Chemicals BUSINESS PROFILE--Chemicals Earnings United States Foreign Total Average capital employed United States Foreign Total Capital expenditures United States Foreign Total Research and development costs Return on average capital employed United States Foreign Total 19861987 mUlicms ofdollars 247 374 223 376 470 750 1,703 1,935 3,638 1,743 2,205 3,948 114 135 163 163 277 298 131 147 percent 14.5 11.5 12.9 21.5 17.1 19.0 Chemical earnings set recordfor second straight year on higher sales and margins. Exxon Chemical earnings increased by 60 percent over the record 1986 level, as strong worldwide demand lifted chemical sales volumes and improved margins. The results reflected the expanding world economy as well as the reduction of excess capacity in the petrochemical industry in recent years. All three of the company's Business Groups achieved higher sales, and business was strong both in the United States and in foreign markets. The company's US. earn ings rose 51 percent to $374 million. Foreign earnings were up 69 percent to $376 mil lion, including benefits from favorable one time tax adjustments. Chemicals revenue Percent oftojalnvemieinthsUniiedStatex 43 45 46 45 46 billions ofdollars Basic Chemicals boosted US. ethylene capacity. Canadianfertiliser plant started up. The olefins plant at Baytown,Tfexas, in creased its ethylene production capacity by 90,000 tons a year, amounting to a 7 percent increase in Exxon Chemical's US. capacity for producing this basic building block pet rochemical. The increase was achieved pri marily through efficiency improvements which did not require major investment The Basic Chemicals Group has started other low-cost programs to meet growing ethylene demand with existing plants. Major periodic plant turnarounds, which involved extensive inspection and mainte nance work, were successfully carried out during the year without interruption in customer supply at the olefins operations in Fife, Scotland; Fawley, England; and Baytown. New long-term phosphate fertilizer sales contracts in western Canada resulted in the start-up of an idle sulfuric acid plant at the fertilizer complex in Redwater, Alberta, bringing phosphate operations to capacity. Polymers Group strengthened marketing, announced capacity expansions, started up new ventures. Industry sector marketing groups were strengthened to better serve international customers. Computer-aided design capabil ity for plastic components was added in the appliance and automotive sectors. Applications technical service labs were expanded in both the US. and Europe. Plans were announced for a 20 percent expansion of low-density polyethylene capacity in the US. and Belgium and a 50 percent expansion of the polypropylene plant at Baytown, all to come onstream before 1990.The moves come at a time when the polyethylene and polypropylene busi nesses are particularly strong, with Exxon's capacity fully utilized throughout the year. The first commercial production of a family of high-performance polymers known as ionomers began at Cologne, West Germany, and start-up of a similar unit at Antwerp, Belgium, was announced for 1988, supporting Exxon Chemical's plans to be come Europe's leading supplier of ethylenebased sealing and bonding materials for packaging applications. Exxon Chemical and Mitsubishi Petro chemical formed a joint venture in the Basic Chemicals Polymers 12 Performance Products 029961 At Notre Dame de Gravenchon, France, Exxon Chemical's SOCABU affiliate is installing new, state-of-the-art computer controlsfor expanded and more efficient manu facture ofhigher quality butyl rubber. The year 1987marked the 50th anniversary ofthe inven tion ofbutyl by Exxon scientists. The material remains widely used today in inner tubes, tire liners and sidewalls, as well as other applications. U.S., called Mytex, to produce performanceengineered polypropylene compounds for the automotive and appliance industries. In Japan.ajoint venture calledTonex was formed withTonen Sekiyu Kagaku to man ufacture and market Exxon Chemical's line of high-quality tackifying resins for the adhesives market. Chemical intermediates paced Perfor mance Products Group sales. Oilfield supplyfirm acquired. Sales were at record highs in the vinyl intermediates business, which serves the flexible polyvinyl chloride industry. Volume records were also set by the company's newly enlarged line of specialty organic acids, chemical intermediates used in paint making and other applications. Exxon Chemical introduced the new Exx-print line of fluids custom-made for the printing ink industry, as part of its strategy to differentiate its products in the marketplace. Sales of specialty performance fluids rose 17 percentdue to new and higher quality product grade developments. The company purchased the assets of NL Treating Chemicals (NLTC), a division of NL industries, inc,, which supplies specialty chemicals and services for oil and gas pro duction, pipeline and drilling operations. Integration of NLTC with Exxon Chemical's Energy Chemicals division creates one of the worid's major suppliers of oil production chemicals, with NLTC's sales and applica tions expertise supplementing Exxon Chemical's strengths in manufacturing and technology. The Callaway Chemicals unit began construction of a new plant in Shreveport, Louisiana, to serve the pulp and paper industry in that region. 13 wiiati Coai/Minera!s/Hong Kong Power BUSINESS PROFILE--Coal and Minerals Eamings/(loss) Coal Minerals Total Average capital employed Coal Minerals Total Capital and exploration expenditures Coal Minerals Total Coal recoverable reserves Coal production Minerals recoverable reserves-- contained metal Copper Zinc Minerals production Copper Zinc 1986 1987 millions ofdollars 25 (59) (13) 21 12 (38) 1,524 382 1,906 1,637 395 2,032 309 89 81 40 390 129 millions ofmetric tons 9,516 8,493 27 30 thousands ofmetric tons 12,670 4,084 79 1 12,654 4,213 101 14 BUSINESS PROFILE--Hong Kong Power Generation Earnings Average capital employed Capital expenditures millions ofdollars 132 1,128 258 162 1,254 187 Generating capacity (MW) 5,018 5,455 Coal production reached a new high. The company's total coal output reached 30 million metric tons for the first time, spurred by record production in the US. mines and continued growth in Colombia Production at the Cerrejon project, in which Exxon is operator of a joint venture with the Colombian government, increased by 50 percent to an annual rate of 7.6 mil lion metric tons as output continued to grow toward design capacity of 15 million metric tons. Most of the coal went to Euro pean markets, although there were also significant sales in the Far East Coal earnings depressed despite increased production and improved productivity. Despite a profit in U.S.coal operations, higher expenses related to the Cerrejon mine in Colombia and weakness in the steam coal market worldwide combined to produce a loss in the coal segment. Coal prices were depressed by weak demand growth and excess mine capacity in both U.S. and international markets. Capital expenditures are winding down as the Cerrejon project nears completion. Pro duction expenses, including significantly higher depreciation charges, rose despite a 30 percent reduction in unit cash costs. Exxon's 1987 coal produc tion grew by 13 percent to a record 30 million metric tons, with the Rawhide (opposite page) and Caballo surface mines near Gillette, Wyoming, ac countingfor two-thirds of the output. Coal-fired tur-' bines (right) drivefour 350-megawatt generators at the Castle Peak "A" sta tion power plant operated in Hong Kong by China Light & Power Company. Exxon continues to finance expansion ofthe plant, in which it holds a majority interest. Record earnings in the power business reflect the expan sion ofelectric generating capacity. Higher prices, expanded production, led to solid profits in Chilean copper operations. Compania Minera Disputada reported record operating earnings, reflecting a re covery in the world copper market as well as a 30 percent increase in production from the company's two mines. Copper prices rose sharply in the second half of the year, due to tighter supplies resulting from a recent upsurge in demand growth coupled with reductions in the industry's producing capacity over the past decade E Soldado mine doubled capacity. Development study under way at Australian property Completion of a two-year expansion pro gram at El Soldado underground mine in Chile doubled the mine's annual copper production capability to 70,000 metric tons. Initial output from the expansion, which came onstream at midyear ahead of schedule and under budget, was above expectations. The company began a study assessing development of a zinc/copper deposit at Golden Grove in Western Australia, in which Exxon holds a 35 percent egtiity interest. Hong Kang expansion ahead ofschedule. Earnings increased by 23 percent. The expansion of electricity generating facilities operated in Hong Kong by China Light & Power Company continued ahead of schedule to keep pace with growing demand. The third of four 677-megawatt generators planned for the Castle Peak "B" station cameonstream just after year-end. Exxon holds a majority interest in the generating facilities. A 23 percent increase in earnings reflected Exxon's increasing investment in power generation in the Crown Colony. 02096S IS Research and Technology iResearcfi^eTidtngt Tux> 1,200-foot steel towers will be placed on barges and tawed across the Pacific to be installed as thejackets ofnew pro duction platforms at Exxanb Santa Ynezunit offsouthern California, lb preparefor the voyage, Exxonput a 1/50 scale ' larittsiasy t model in a test tank at Escondido, California, and subjected it to a "slamming test"--a simu lation ofthe seaforces likely to impose stresses rs- on the structures during the torn Based on test results, engineers rein forced various parts ofthe jackets to minimize the chances ofdamage en route. ... ^ . ' :'., . _ v .- ..nfft'&jfip! !< *ijrei&!} r t-jiff)- Ssf^gfjgiss* (<W/\ - T^ijyy i ia'iu i-V-S* c: t;j7[';~vS'ty '-. rr.* H. : '{ I'fT j"( \k V'iv'- tlirTCi'i ViVlySSa (%%&} *!?'> :-' rTl itej 'i't):* 11{$ ;Cr&>'. *'< *TV :jVi<VK un'Vii-fut.i ,,v;',v ft-. *.< ttiirt '?i*v:: jjtyJ; :it`*j *'*>1:'\ t/treiiVf.u *: ,`i^c.^i^{,rti.t ti >> 'illfi :i|J*1^4f-ff> TTf *'iy Vtft *.>)>tie<ui:2V fyi^` :VtV`^\- ** fciitVii v*yiu i Tr? -w:w *T;iW* rtYrTU i*Se f*trfn ^ fci>^i|fhV {^Rg|i^:i ;,vstetalai*v?^l8f>**Sj^g^ Tli? -Vjg&nrgf Jjgpuagj ------------- ----------------- nlllgf 16 greater. E^onlias&'tablisKMMief '. -feasibility'of comDliant pilea-toweraesigiis^ tmm% msmmmmm Equal Employment Opportunity/Contributions At the chemical engineer ing Laboratory ofthe New Jersey Institute of Technology, Professor Deran Hanesian and stu dent Tibor Pavieszek use an infrared analyzer to study a mass transfer problem involving the con centration ofammonia in a column ofair. The ana lyzer and other equipment were purchased by NJIT with a general support grantfrom the Exxon Education Foundation under the Foundation's special program to aid universities and schools doing research and train ing infields important to the petroleum and chem ical industries. Women ami minorities madefurther gains. The percentage of minorities in Exxon's U.S. work force increased from 21.9 percent to 22.6 percent and the percentage of women grew from 24.4 to 25 percent, in spite of an overall reduction in the number of US. employees. At year-end, minorities held 10.3 percent of managerial jobs compared with 10.2 per cent a year earlier. Minority representation in professional jobs declined from 11.4 per cent to 11.3 percent. Managerial jobs held by women rose from 8.2 percent to 87 percent, while womens share of professional jobs increased from 18.6 percent to 18.8 percent. Grants to nonprofit organizations totaled $52 million, including $40 million in the United States. Exxon contributed $40 million to a wide variety of organizations and programs in the United States, while affiliates abroad contributed $12 million in countries where they operate. Support for education accounted for 53 percent of the US. total, including $19.6 mil lion in grant payments by the Exxon Educa tion Foundation. Of thatamount, $4 mil lion was awarded through the Foundation's Research andTraining Program. Research andTraining grants support college and university departments, schools and pro grams that are particularly successful in research and in training students in scientific, technical and business fields important to the petroleum and chemical industries. They also support efforts, at both the college and precollege levels, to im prove minority access to the business and engineering professions. Some 23 percent of US. contributions went to health, welfare and community ser vices. These included a $625,000, five-year grant to the National Urban League to sup port the Education Initiative, a program carried on by the League's 111 local affiliates to improve the educational prospects of minority youth in urban school systems. A $30,000 grant was made to the Fund for Aging Services to develop a model mental health curriculum, that can be used nation ally, which will provide seniors with the knowledge and skills to cope with the changes that accompany growing older. Another health grant was the $200,000 final installment on Exxon's $400,000 pledge to the Occupational Physicians Scholarship Fund; the grant aims to allevi ate the shortage of properly trained and skilled physicians in industry by awarding scholarships to prepare medical school graduates for careers in occupational medicine. An $85,000 grant to the World Wildlife Fund supports its conservation activities in Colombia The work includes development of a 1.2-million-acre nature reserve as a viable habitat for endangered species. A14 percent share of U.S. contributions went to support the arts and public tele vision programming, while 10 percent went to public information and policy research. 18 FINANCIAL SECTION Financial Review Financial Summary Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Balance Sheet Statement of Income Statement of Shareholders' Equity Statement of Funds Provided and Utilized Report of Independent Accountants Notes to Consolidated Financial Statements Supplemental Information on Oil and Gas Exploration and Production Activities x Quarterly Information Operating Summary page 20 21-25 26 27 27 28 29 29-36 37-41 42 43 Financial Review Financial Summary Sales and other operating revenue Petroleum and natural gas Chemicals Coal and minerals Hong Kong power generation Other and eliminations Total sales and other operating revenue Farnings from equity interests and other revenue Revenue Earnings Petroleum and natural gas Exploration and production Refining and marketing Total petroleum and natural gas Chemicals Coal and minerals Hong Kong power generation Other operations Corporate and financing Restructuring Hawkins provision Net income Net income per share* Cash dividends per share* Net income to average shareholders' equity (percent) Net income to total revenue (percent) Working capital Ratio of current assets to current liabilities Property, plant and equipment, less allowances Total additions to property, plant and equipment Total assets Exploration expenses, including dry holes Research and development costs Long-term debt Total debt Fixed charge coverage ratio (SEC definition) Debt to capital (percent) Shareholders' equity Shareholders' equity per. share* Average number of shares outstanding (thousands)* Number of shareholders at year-end (thousands) Wages, salaries, and employee benefits Number of employees at year-end (thousands) Reflects August 1987 two-for-one stock split. See Note 5, page 31. 1983 $ 83,622 6,392 387 566 2.480 93,447 1.287 S 94,734 1984 1985 1986 (millions of dollars) 85,415 6,870 424 608 2.556 95,873 1.415 97,288 81,399 6,670 465 586 2.500 91,620 1,249 92.869 65,477 6,079 542 637 2.252 74,987 1.568 76.555 1987 73,197 7,177 594 699 416 82,083 1.252 83,335 $ 4,079 1.055 5,134 270 (20) 71 11 (412) (76) -- $ 4.978 4,789 345 5,134 430 (9) 88 58 (31) (142) -- 5.528 4,937 807 5,744 249 18 90 11 (510) (187) (545) 4.870 3,060 1.934 4,994 470 12 132 70 (551) 233 -- 5.360 3,767 489 4,256 750 (38) 162 74 (404) 40 -- 4.840 $ 2.89 $ 1.55 17.2 5.3 3.39 1.675 19.0 5.7 3.23 1.725 16.8 5.2 3.71 1.80 17.5 7.0 3.43 1.90 14.7 5.8 $ 3,556 1.24 1,974 1.13 (1,734) 0.91 1,100 1.07 95 1.01 $ 40,868 $ 7,124 $ 62,963 42,7767,842 63,278 48,262 8,844 69,160 49,289 5,402 69,484 53,434 5,787 74,042 $ 1,408 $ 692 1,365 736 1,495 681 1,231 616 818 524 $ 4,669 $ 5,536 9.5 15.3 5,105 6,382 9.7 17.5 4,820 7,909 9.6 20.6 4,294 7,878 8.8 19.0 5,021 7,885 8.5 18.2 $ 29,443 $ .17.40 1,722,798 889 28,851 18.42 1 ,632,338 839 29,096 19.91 1,508,186 785 32,012 22.30 1,445,317 740 33,626 24.38 1 ,411,950 732 $ 5,849 151 5,550 148 5,381 144 5,553 102 4,646 100 0299ft Management's Discussion and Analysis of Financial Condition and Results of Operations Review of 1987 Results Net income--major change* from 1986 tueomotdornn 1987 net income of $4,840 million, $3.43 per share, com pared to $5,360 million, $3.71 per share, in 1986. World crude oil prices firmed moderately during most of 1987, with some weakening in evidence Jate in the year. As a result, Exxon's average crude realizations were stronger than in 1986, and this factor, together with operating cost reductions, resulted in higher earnings from exploration and production operations. In addition, earnings from chemicals operations established an all-time record, reflecting stronger sales volumes and margins in most businesses. However, earnings from refining and marketing operations were significantly below 1986, when unusually strong mar gins were in evidence for much of the year. Refined product margins were severely depressed during most of 1987 be cause increased supply costs were only partly recovered through higher product prices. All operations benefited from sizable cost savings attrib utable to the 1986 corporate reorganization. Revenue totaled $83,335 million, up 9 percent from $76,555 million in 1986, the result of higher petroleum prod uct realizations, strong chemicals sales, and foreign ex change translation effects. The absence of $2.0 billion of revenues associated with operations divested in 1986, pri marily Reliance Electric, partly offset these increases. Crude oil and product purchases of $34,331 million rose 19 percent above 1986, chiefly reflecting higher 1987 crude price levels worldwide. Combined operating and selling, general, and adminis trative expenses of $14.9 billion rose $0.5 billion. Aside from foreign exchange translation effects (estimated at close to $1 billion) and one-time restructuring gains ($0.5 billion) credited against 1986 expenses, such costs would have been lower, reflecting cost reduction measures and the ab sence of costs incurred by operations divested in 1986. Refining andmarketing Foreign Exploration andproduction Petroleum andnaturalgas -1.2 -0.9 -0.6 -0.3 0.0 0.3 0.6 0.9+ Return on average shareholders' equity was 14.7 percent in 1987. Return on average capital employed, which includes debt, was 11.9 percent. % Petroleum and Natural Gas Exploration and Production Earnings from U.S. exploration and production operations rose $621 million to $1,319 million, mainly on the strength of higher crude prices-and cost savings. However, natural gas prices and volumes were lower in the intensely competitive U.S. market. Net liquids production in the U.S. was essen tially unchanged as field declines in the lower-48 states off set increased Alaskan production. Earnings from foreign operations of $2,448 million rose $86 million. Higher average crude prices and increased liq uids and natural gas production were the major positive factors. Liquids production increased substantially in Can ada, up 13 percent, and Australia, up 11 percent. Natural gas realizations, while rising toward the end of 1987, aver aged below 1986 for the year as a whole. Exploration expenses declined $413 million to $818 mil lion, indicative of reductions in activity which began in 1986 as the industry environment changed. Revenue and costs Earnings per share and net income Exxon's returns Refining and Marketing Earnings from U.S. refining and marketing operations were $32 million compared to earnings of $478 million last year. Earnings from foreign refining and marketing operations fell $999 million to $457 million. Both the U.S. and foreign re duction resulted from lower margins in the first three quar ters of 1987 in comparison to the very strong results in 1986; fourth quarter margins were higher than in the pre vious year. Worldwide product sales volumes were un changed at 4,043 thousand barrels per day (kbd). Chemicals Earnings from chemicals operations totaled $750 million, up $127 million in the U.S. and $153 million abroad. Strong de mand and tight industry production capacity in key sectors boosted sales volumes and margins in major markets, both in the U.S. and abroad. Foreign earnings also benefited from one-time tax adjustments. Other Coal and minerals operations posted a loss of $38 million compared to a $12 million profit in the prior year. Principal factors were higher expenses related to the new Colombian coal mine and weakness in the international steam coal market. Favorable effects from expanded Chilean copper operations and an improved copper market provided a partial offset. Earnings from Hong Kong power operations reached $162 million, an increase of $30 million, reflecting increased investment in expanded plant generating capacity. Corporate and Financing Corporate and financing charges of $404 million compared to $551 million in 1986. Debt-related foreign exchange gains and elimination in 1987 of tax reserves related to certain for eign operations were partly offset by lower levels of capital ized interest and smaller gains from securities transactions. Review of 1986 Results' 1986 net income of $5,360 million was $490 million, 10 per cent, higher than in 1985. Net income per share was $3.71, up 15 percent. The larger percentage increase was influ enced by treasury share purchases as average shares outstanding were reduced 4 percent. 1986 was a highly unsettled year in world oil markets. Crude prices dropped precipitously during the first quarter, and surplus capacity and excess supplies were in evidence during much of the year. Despite the unfavorable environ ment, Exxon net income reached a record $3.71 per share in 1986. Refining and marketing results were especially strong during the first half, and chemicals results were good throughout the period. All businesses benefited from steps taken in recent years to streamline operations. For the full year, these factors in combination compensated for the slippage in exploration and production earnings result ing from weak crude prices. Revenue totaled $76,555 million, down 18 percent from $92,869 million in 1985 chiefly due to the lower price levels for crude, natural gas, and derived products. A 5 percent drop in natural gas sales volumes and absence of sales volumes of divested operations further reduced revenue. The impact of the weaker dollar on the translation of foreign currency revenues partly compensated for these factors. Crude oil and product purchases of $28,876 million dropped 35 percent below the prior-year level primarily due to the sharp decline in crude oil prices. Operating and selling, general, and administrative costs in total were down $87 million. The decline reflected savings related to prior restructuring and other efficiency steps, as well as 1986 one-time restructuring gains compared to net charges in 1985. The weakening of the dollar led to increased costs in dollar terms, as local currency costs translated into higher dollar equivalents.* Restructuring Restructuring gains of $40 million in 1987 from several as set disposals compared to a gain of $233 million in 1986. The previous year's gains arose from the sale of Reliance Electric, the New York office building and Danish refining and marketing operations; charges associated with the corporate reorganization provided a partial offset. *Per share amounts adjusted to reflect August 1987 two-for-one stock split. See Note 5, page 31. mm :? Petroleum and Natural Gas Reduced losses from minerals operations traced primarily Exploration and Production to lower exploration and development activity. Earnings from exploration and production operations in the Earnings from Reliance Electric operations, prior to the U.S. were $698 million, a $1,413 million reduction from 1985. sale of this business at year-end 1986, rose to $61 million in Lower crude and natural gas realizations were primarily 1986, an increase of $31 million, attributable to improved responsible for the decline. The lower realizations were only markets for k,ey product lines and operating cost savings partly offset by reduced operating expenses. Liquids pro from restructuring steps taken in prior years. duction was fractionally lower than in 1985. Natural gas Earnings from Hong Kong power generation of $132 mil production available for sale was down 8 percent reflecting lion were up $42 million as a result of increased investment reduced demand. in generating plant. Earnings from foreign exploration and production oper ations fell $464 million to $2,362 million as a result of lower Corporate and Financing crude prices. Partial offsets were provided by a number of Corporate and financing charges increased by $41 million. factors, including higher crude production and stronger nat $160 million of U.S. federal excise taxes on the recapture of ural gas results owing to the weaker dollar. Earnings bene excess assets from major U.S. pension funds was partly fited from increased crude production in the North Sea, offset by a $109 million gain from the sale of certain long Canada, and Malaysia. Crude production in total grew 9 term U.S. government securities. percent; natural gas production available for sale was down v 5 percent. Results were also favorably affected by the res Restructuring toration to income of $160 million representing provisions 1986 net income included net gains of $233 million, after made in prior years for possible additional liabilities associ tax, associated with restructuring, as the corporation ated with foreign operations; these provisions are no continued to pursue a vigorous program of divesting low longer required. return operations, implementing work force reductions, and Exploration expenses were $1,231 million, down $264 mil reorganizing into more effective operating units. Significant lion, 18 percent, reflecting sharp curtailments in activity gains were realized in 1986 from the sale of Reliance brought about by the unfavorable industry environment. Electric ($270 million) and the New York office building ($258 million). Also reflected in 1986 were $319 million of Refining and Marketing one-time costs associated with the corporate reorgan Earnings from U.S. refining and marketing operations rose ization and personnel reductions. In contrast, 1985 net in $249 million to $478 million, primarily on the strength of come included $187 million in net charges for restructuring. higher margins. Total sales volumes of 1,106 kbd were down 2 percent. Excluding heavy fuel oil, U.S. sales were up 2 percent. Earnings in 1985 included $67 million in last-in, first-out (LIFO) inventory gains. Impact of Inflation and Changing Prices Earnings from foreign refining and marketing operations The general rate of inflation in most major countries of amounted to $1,456 million, an increase of $878 million over operations has been relatively low in recent years, and the 1985. Lower crude prices and the weaker dollar reduced associated impact on costs has been countered by cost local raw material costs more rapidly than product prices reductions from efficiency and productivity improvements, fell, resulting in stronger margins. Total foreign sales vol as well as organizational streamlining. Costs for drilling and umes of 2,937 kbd were essentially even with 1985 levels. development services have actually declined from levels Excluding heavy fuel oil, sales were up 2 percent. LIFO gains prevailing several years ago as a result of industry-wide of $38 million were included in 1986 compared to $224 cutbacks in activity induced by lower crude oil prices and million in 1985. surplus natural gas supplies. The sharp decline in crude oil prices in 1986, in combina Chemicals tion with the wide fluctuations which followed, have had Earnings from chemical operations totaled $470 million, up significant effects on the company's operations. The $221 million, including increases of $124 million and $97 mil impacts on earnings from exploration and production oper lion from U.S. and foreign sources, respectively. Improved ations, refining and marketing operations, and chemical demand for chemical products and lower petrochemical operations have been varied, and have, at times, tended to feedstock costs were the primary reasons. J>e offsetting. Other Earnings from coal operations dropped to $25 million from $39 million a year earlier. Higher costs associated with the foreign coal business outweighed improved U.S. results and higher worldwide volumes. 0297 Taxes Provision for worldwide income, excise, and other taxes and duties of $23.5 billion in 1987 increased $2.1 billion, or 10 percent. Income tax expense, both current and deferred, was $2.7 billion compared to $3.2 billion in 1986. The effective income tax rate declined from-42 percent to 41 percent. Excise taxes and other taxes and duties increased by a combined $2.6 billion, 14 percent, traceable primarily to foreign exchange translation effects, as well as increased levies by some countries. In reporting 1987 income taxes in this report, the com pany continued to apply the accounting practice which has been required in past years. In late December, 1987 the Financial Accounting Standards Board issued a new guide line, FAS-96, which permits a new practice for 1987 and requires the new practice no later than 1989. The company expects to adopt the new practice in 1988 or 1989. If FAS96 had been implemented for 1987, the effect would have been to decrease net deferred tax balances and increase both net income and shareholders' equity by amounts possibly in excess of $1 billion. The company's liquidity and cash flow would not have been affected. Provision for worldwide income, excise and other taxes and duties of $21.4 billion in 1986 was the same as in 1985. Income tax expense, both current and deferred, was $3.2 billion compared to $4.7 billion in 1985, and the effective income tax rate dropped from 52 percent in 1985 to 42 per cent in 1986. The primary reason was the decline in earn ings from relatively higher taxed exploration and production operations. Excise taxes increased $0.2 billion. Other taxes and duties increased $1.4 billion, representing an increase of $2.0 billion abroad and a decline of $0.6 billion in the U.S. The overseas increase was traceable to the weaker dollar and increased levies by some countries as product prices fell. The domestic decline was primarily the result of lower wind-fall profits tax triggered by the decline in crude prices. U.S. tax legislation increased 1986 tax expense by $210 million, reflecting excise taxes on the recapture of excess assets from major U.S. pension funds and loss of invest ment tax credits. The overall impact on future results is not estimated to be substantial in relation to worldwide cash flow and earnings, aside from a one-time impact on earnings associated with future adoption of FAS-96, as previously described. Capital and Exploration Expenditures In 1987 capital and exploration expenditures totaled $7.1 billion, down 1 percent from the $7.2 billion spent in 1986. Three major oil and gas acquisitions totaling $1.8 billion were completed in 1987, acquiring producing properties in the United States, Canada, and Australia, along with promising exploration acreage. Excluding these acquisitions, capital and exploration expenditures for ongoing activities were down 25 percent from`1986 to $5.3 billion. While improved cost effectiveness and some reduction in activity were factors, the main reason for the lower spending level was the completion of several large projects in 1986. Exploration and production expenditures, excluding the major acquisitions, were $3.3 billion versus $4.6 billion in 1986. The reduction was due mostly to lower project spend ing, with the 1986 completion of the large natural gas project in LaBarge, Wyoming, and reduced spending in Alaska. Spending in 1987 included acquisition of acreage, exploratory and development drilling, and enhanced oil recovery projects. Spending continued on major projects under way in Alaska, offshore California, Cold Lake, Alberta, the North Sea, Malaysia, and the Yemen Arab Republic. Refining and marketing expenditures of $1.3 billion fell $0.3 billion from 1986. These expenditures were primarily for efficiency improvements and upgrading of refinery units, and continued modernization of retail marketing outlets. Energy-related investments were 93 percent of world wide expenditures, predominantly in oil and natural gas. Chemicals expenditures of $0.3 billion accounted for an additional 4 percent of total spending. Geographically, expenditures in the U.S. accounted for one-third of total spending, or $2.4 billion. In Europe and the Eastern Hemisphere, expenditures were $1.7 billion and $1.6 billion, respectively. Spending in Canada and other Western Hemisphere areas totaled $1.4 billion. Taxes Capital and exploration expenditures Capital and exploration expenditures by (unction 12- Minerals andothers Chemicals Energy processing and marketing 24 Energy resource development billions otdollars mm Liquidity and Capital Resources rates in 1986 by replacing $950 million of relatively high In 1987, funds from operations and other sources, before cost long-term debt with lower cost long- and short-term financing, totaled $9.8 billion, down $2.6 billion from 1986 issues. due to lower levels of net income and lower other funds from Funds utilized included additions to plant of $5.4 billion, operations. The major sources of funds were net income of down $3.4 billion from 1985. Dividend payments to Exxon $4.8 billion and depreciation and depletion, of $4.2 billion. shareholders aj $1.80 per share were $2.6 billion, 49 per Other sources provided a net of $0.8 billion. This included cent of net income. During 1986, $0.8 billion was spent to the $1.3 billion collection of interest bearing notes from the acquire shares of stock for the treasury, down $1.9 billion 1986 sale of Reliance Electric and other companies. from 1985. The payment for the Hawkins judgment in Total balance sheet debt of $79 billion was unchanged February 1986 required $2.1 billion. reflecting reductions in short-term debt offset by increases The excess of funds provided over funds utilized in long-term debt. Funds utilized totaled $11.1 billion. Addi increased cash and marketable securities $1.3 billion to tions to plant consumed $5.8 billion. Dividend payments to $3.8 billion at year-end 1986. Exxon shareholders at $1.90 per share totaled $2.7 billion, Net working capital of $1.1 billion was up $2.8 billion. This 55 percent of net income. $2.5 billion was spent to pur was primarily attributable to settlement of 1985 obligations chase shares for the treasury. and the 1986 sale of Reliance. The lower crude price envi The excess of funds utilized over funds provided reduced ronment of 1986 did not have a major impact on working cash and marketable securities $1.3 billion to $2.5 billion at capital, as the resulting decrease in accounts payable the end of 1987. was roughly offset by declines in accounts receivable and Net working capital declined $1.0 billion to $0.1 billion prepaid taxes, the latter related to inventory valuation reflecting primarily the drawdown in cash and marketable differences in foreign taxing jurisdictions. securities. The ratio of debt to capital was 19.0 percent in 1986 The ratio of debt to capital (short- and long-term debt compared to 20.6 percent in 1985. plus shareholders' equity plus minority interest) was 18.2 percent in 1987 compared to 19.0 percent in 1986. In 1986, funds from operations and other sources, before financing, totaled $12.4 billion compared to $11.9 billion in 1985. The major sources of funds in 1986 were net in come of $5.4 billion and depreciation and depletion of $4.4 billion. Recapture of surplus pension assets provided $1.6 *** *** The corporation maintained its strong financial position and flexibility to meet future financial needs. Although the corporation accesses financial markets from time to time, internally generated funds cover the majority of its financial requirements. billion. Net proceeds from divestments (sales of the New York office building, Reliance Electric, Danish refining and marketing operations and other smaller interests) provided $0.7 billion in 1986. Total balance sheet debt of $7.9 billion remained essen tially unchanged as $0.5 billion of net additions in short term debt offset a similar net reduction in long-term borrow ings. Exxon continued to take advantage of lower interest Funds provided Funds utilized Total short- and long-term debt 10- Net increase in debt Net reduction m debt Funds provided before financing btltionsofdollars 0 Other Share purchases-- net Dividends Additions to plant billions ordollars O' Exxon Pipeline Company debt, primarily for trans-Alaska pipeline Other U.S dollardebt Foreign currency debt billions ofdollars 0 25 02097* Consolidated Balance Sheet Assets Current assets Cash Marketable securities Notes and accounts receivable, less estimated doubtful amounts Inventories Crude oil, products and merchandise Materials and supplies Prepaid taxes and expenses Total current assets Investments and advances Property, plant and equipment, at cost, less accumulated depreciation and depletion Other assets, including intangibles Total assets Liabilities Current liabilities Notes and loans payable Accounts payable and accrued liabilities Income taxes payable Total current liabilities Long-term debt Annuity reserves and accrued liabilities Deferred income tax credits Deferred income Equity of minority shareholders in affiliated companies Total liabilities Shareholders' equity Capital stock without par value (authorized 2 billion shares, 1,813 million issued*) Earnings reinvested Cumulative foreign exchange translation adjustment Capital stock held in treasury, at cost (378 million shares in 1986, 434 million shares in 1987*) Total shareholders' equity Total liabilities and shareholders' equity The information on pages 29 through 36 is an integral part of these statements. * Reflects August 1987 two-for-one stock split. See Note 5, page 31. E^ON CORPORATION Dec. 31, 1986 Dec. 31. 1987 (millions of dollars) $ 2,908 908 6,784 3,603 948 1.169 16,320 2,778 49,289 1.097 $69,484 $ 1,911 620 6,278 4,200 972 1,410 15,391 3,822 53,434 1.395 $74,042 $ 3,584 9,515 2.121 15,220 4,294 5,121 10,828 466 1.543 37,472 2,822 37,322 (196) (7.936) 32.012 $69,484 $ 2,864 10,248 2.184 15,296 5,021 5,902 11,863 560 1.774 40,416 2,822 39,476 1,750 (10,422) 33,626 $74,042 02997? Consolidated Statement of Income EXON CORPORATION Revenue Sales and other operating revenue, including excise taxes Earnings from equity interests and other revenue - Costs and other deductions Crude oil and product purchases Operating expenses Selling, general and administrative expenses Depreciation and depletion Exploration expenses, including dry holes Interest expense Hawkins provision* Income taxes Excise taxes Other taxes and duties Income applicable to minority interests Net Income 1985 $91,620 1.249 92.869 44,536 9,702 4,824 4,274 1,495 627 948 4,688 4,947 11,719 239 87.999 $ 4.870 1986 (millions of dollars) $74,987 1.568 76.555 1987 $82,083 1.252 83.335 28,876 9,209 5,230 4,415 1,231 614 -- 3,196 5,09$ 13,076 249 71.195 $ 5,360 34,331 9,315 5,621 4,239 818 451 -- 2,703 5,667 15,084 266 78.495 $ 4.840 Per share** $3.23 $3.71 Results for 1985 include a provision of $948 million, or $545 million net of income taxes, related to the Hawkins field unit litigation. Consolidated Statement of Shareholders' Equity $3.43 Capital stock** Authorized--2 billion shares without par value Issued at end of year Earnings reinvested At beginning of year Net income for year Dividends ($1,725 per share in 1985, $1.80 in 1986 and $1.90 in 1987**) At end of year Cumulative foreign exchange translation adjustment At beginning of year Change during the year At end of year Capital stock held in treasury, at cost** At beginning of year Acquisitions Dispositions At end of year Shareholders' equity At end of year Shares outstanding at end of year** 1985 Shares Dollars 1986 Shares Dollars (millions) 1987 Shares Dollars 1.813 $ 2.822 1.813 $ 2.822 1.813 $ 2.822 32,302 4,870 (2,607) 34.565 34,565 5,360 (2.603) 37.322 37,322 4,840 (2.686) 39.476 (1,818) 669 (1.149) (1,149) 953 ..(196) (196) 1.946 1.750 (247) (108) 3 " .1352) (4,455) (2,748) 61 (7.142) (352) (29) 3 (3Z8) (7,142) (867) 73 (7.936) (378) (7,936) (58) (2,566) 2 80 (434) (10.422) -- -*" $29,096 1.461 $32,012 1.435 $33,626 1.379 The information on pages 29 through 36 is an integral part of these statements. Reflects August 1987 two-for-one slock split. See Note 5, page 31. oam Consolidated Statement of Funds Provided and Utilized Funds from operations Net income Accruing to Exxon shareholders Accruing to minority interests Costs charged to income not requiring funds Depreciation and depletion Deferred income tax charges/(credits) Annuity and accrued liability provisions Dividends received which were in excess of/(less than) equity in current earnings of equity companies Funds provided from operations Funds from other sources, excluding financing activities Sales of property, plant and equipment Reversion of surplus pension assets All other decreases/(increases) in long-term items-net Changes in working capital, excluding cash and debt Reduction/(increase)-Notes and accounts receivable -Inventories -Prepaid taxes and expenses Increase/(reduction)-Accounts payable -Income taxes payable Funds from other sources, excluding notes and loans payable, cash and marketable securities Funds provided before financing Funds from /(used in) financing activities Additions to long-term debt Reductions in long-term debt Net additions/(reductions) in notes and loans payable Funds from/(used in) financing activities Total funds provided, excluding cash items Utilization of funds Additions to property, plant and equipment Cash dividends to Exxon shareholders Cash dividends to minority interests Acquisition of Exxon shares-net Payment of Hawkins judgment Funds utilized Increase /(decrease) in cash and marketable securities The information on pages 29 through 36 is an integral part of these statements. 28 E*QN CORPORATION 1985 1986 (millions of dollars) 1987 $ 4,870 239 4,274 1,174 190 49) 10.698 288 - (140) (161) (94) (677) 2,514 (502) 1.228 11,926 429 (714) 1.812 1,527 13,453 8,844 2,607 131 2,687 14.269 $ (8161 $ 5,360 249 4,415 (413) (41) (522) 9.048 $ 4,840 266 4,239 110 353 18 9.826 356 1,600 . 1,300 743 245 1,389 (1,775) (520) 3.338 12.386 336 -- (776) 506 (621) (241) 733 63 -- 9,826 1,036 (1,562) 495 (31) 12.355 1,520 (793) __1ZQ) 7 9,833 5,402 2,603 145 794 2.069 11.013 $ 1.342 5,787 2,686 159 2,486 -- 11,118 $ (1.285) Dwm Report of Independent Accountants To the Shareholders of Exxon Corporation In our opinion, the consolidated financial statements appearing on pages 26 through 36 present fairly the financial posi tion of Exxon Corporation and its subsidiary companies at December 31,1986 and 1987, and the results of their oper ations and the changes in their financial position for each of the three years in the period ended December 31, 1987, in conformity with generally accepted accounting principles consistently applied. Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. 153 East 53rd Street New York, New York February 29, 1988 Notes to Consolidated Financial Statements The accompanying consolidated financial statements and the supporting and supplemental material are the respon sibility of the management of Exxon Corporation. Accounting principles underlying the financial statements are generally accepted in the United States. The financial statements are consistent with the guidelines of the International Accounting Standards Committee with minor exceptions. 1. Summary of accounting policies Principles of consolidation The consolidated financial statements include the accounts of those significant sub sidiaries owned directly or indirectly more than 50 percent. Amounts representing the corporation's percentage inter est in the underlying net assets of less than majority-owned companies in which a significant equity ownership interest is held are included in "Investments and advances." The corporation's share of the net income of these .companies is included in the consolidated statement of income caption "Earnings from equity interests and other revenue." Investments in all other companies, none of which is sig nificant, are included in "Investments and advances" at cost or less. Dividends from these companies are included in income as received. Marketable securities Marketable securities are stated at the lower of cost or market. unit of production method or the straight-line method. Unit of production rates are based on oil, gas'and other mineral . reserves estimated to be recoverable from existing facili ties. The straight-line method of depreciation is based on estimated asset service life taking obsolescence into consideration. Maintenance and repairs are expensed as incurred. Major renewals and improvements are capitalized, and the assets replaced are retired. The corporation's exploration and production activities are accounted for under the "successful efforts" method. Under this method, costs of productive wells and develop ment dry holes, both tangible and intangible, as well as productive acreage are capitalized and amortized on the unit of production method. Costs of that portion of un developed acreage likely to be unproductive, based largely on historical experience, are amortized over the period of exploration. Other exploratory expenditures, including geophysical costs, other dry hole costs and annual lease rentals, are expensed as incurred. Income taxes Income taxes are reported on the basis of the deferral method. Financial Accounting Standard No. 96--Accounting for Income Taxes, issued in December 1987, requires an asset and liability approach. Exxon will adopt the new standard in 1988 or 1989, as permitted under the transition rules. Inventories Crude oil, products and merchandise inven tories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method-LlFO). Costs include applicable purchase costs and operating expenses, but not general and administrative expenses or research and development-costs. Inventories of materials and supplies are valued at cost or less. Property, plant and equipment Depreciation, depletion and amortization, based on cost less estimated salvage value of the asset, are primarily determined under either the Foreign currency translation The "functional currency" for translating the accounts of the majority of foreign refining, marketing and chemical operations is the local currency. Local currency is also used for exploration and production operations that are relatively self-contained and integrated within a particular country, such as in Australia, Canada, "the United Kingdom, Norway and continental Europe. The IJ.S. dollar is used for operations in highly inflationary econ omies and in some exploration and production operations, primarily in Malaysia and the Middle East. 29 2. Miscellaneous financial information Cash included time deposits of $2,362 million at the end of 1986 and $1,444 million at the end of 1987. Marketable securities at year-end 1986 were carried at cost, which was $1 million less than their fair market value. At year-end 1987, marketable securities were carried at their fair market value, which was $5 million below cost. Estimated doubtful notes and accounts receivable were $151 million at the end of 1986 and $164 million at the end of 1987. Accumulated depreciation and depletion totaled $28,602 million at the end of 1986 and $32,785 million at the end of 1987. Research and development costs totaled $681 million in 1985, $616 million in 1986 and $524 million in 1987. Aggregate foreign exchange transaction gains included in determining net income totaled $82 million, $67 million and $267 million for 1985, 1986 and 1987, respectively. Interest capitalized in 1985,1986 and 1987 was $371 million, $431 million and $111 million, respectively. Net income included $316 million in 1985 attributed to the sale of relatively low-cost crude and products obtained from drawdowns of LIFO inventory quantities. In 1986 and 1987 net income included a $25 million gain, and a $3 million loss, respectively; attributable to the combined effects of LIFO inventory accumulations and drawdowns. The aggre gate replacement cost of inventories was estimated to ex ceed their LIFO carrying values by $2,745 million and $3,107 million at December 31, 1986 and 1987, respectively. 3. Investments and advances Components of investments and advances were: In less than majority-owned companies Carried at equity in underlying assets Investments Advances Carried at cost or less Long-term receivables and miscellaneous investments at cost or less Total Dec. 31, 1986 Dec. 31. 1987 (millions of dollars) $1,997 46 2,043 154 2,197 581 $2,778 $2,445 452 2,897 118 3,015 807 $3,822 4. Equity company information The summarized financial information below includes those less than majority-owned companies for which Exxon's share of net income is included in consolidated net income (see Note 1, page 29). These companies are primarily engaged in natural gas production and distribution in the Netherlands and West Germany, as well as refining and marketing operations in Japan. 1985 Total Exxon share Total revenues Includes sales to companies in the Exxon consolidation which amounted to 15% in 1985,12% in 1986 and 16% in 1987 $29,669 $8,653 1986 Total Exxon share (millions of dollars) $21,851 $6,647 1987 Total Exxon share $27,395 $8,306 Net income before income taxes Less: Related income taxes Net income $ 3,169 (1.415) $ 1,754 $1,400 (604) $ 796 $ 4,007 -L1.794) $ 2,213 $1,802 (695) $1,107 $3,444 (1.618) $1,826 $1,427 (622) $ 805 Current assets Property, plant and equipment, less accumulated depreciation Other long-term assets Total assets Short-term debt Other current liabilities Long-term debt Other long-term liabilities Advances from shareholders Net assets $ 9,340 7,359 2,256 18,955 2,183 6,699 2,805 3,148 45 $ 4,075 $2,986 2,930 776 6,692 700 2,500 992 1,076 45 $1,379 $ 8,265 10,289 2.330 20,884 1,931 5,643 3,230 4,249 46 $ 5.785 $2,518 3,935 799 7,252 573 2,030 1,125 1,481 46 $1,997* Includes $882 million in 1986 and $713 million in 1987 of liabilities guaranteed by consolidated affiliates. $10,591 12,493 3.031 26,115 2,225 6,552 4,167 5,106 905 $7,160 $3,338 4,804 1.005 9,147 760 2.295 1,397 1,798 452 $2,445* mm 5. Capital On August 13, 1987, authorized capital stock was increased from one billion shares without par value to two billion shares without par value and the issued shares were split on a two-for-one basis. All capital stock data and per share amounts presented in this report have been adjusted for the stock split. At December 31, 1986 and 1987, there were 1,813 million shares issued. Of the issued shares, 378 million shares at year-end 1986 and 434 million shares at year-end 1987 were held in treasury at a net cost of $7,936 million and $10,422 million, respectively. During 1986 and 1987, the company acquired for the treasury 29 million shares at a cost of $867 million and 58 million shares at a cost of $2,566 million, respectively. In 1986 and 1987, 3 million shares for $73 million and 2 million shares for $80 million, respectively, were utilized in connection with stock options exercised, bonuses and stock appreciation rights under incentive programs. 6. Long-term debt At December 31, 1987, long-term debt consisted of $3,169 million due in U.S. dollars and $1,852 million representing the U.S. dollar equivalent at year-end exchange rates of amounts payable in foreign currencies. These amounts ex clude that portion of long-term debt, totaling $595 million, which matures within one year and is included in current liabilities. Long-term borrowings at year-end 1986 and 1987 are summarized below, with weighted average interest rates for 1987 in parentheses. Dec. 31, 1986 Dec. 31,1987 Exxon Corporation Floating rate pollution-control revenue bonds-due 2012-2024 Other obligations-due 1989-1999 (millions o( dollars) $ 390 20 $ 389 30 410 419 Exxon Pipeline Company 5.5% marine terminal revenue bonds- due 2007 814% guaranteed debentures-due 2001 Other obligations-due 1997-2025 161 173 122 161 169 122 456 452 Other consolidated subsidiaries Capitalized lease obligations* United States dollars Other currencies United States dollars (6.6%) British pounds (9.0%) Canadian dollars (5.2%) Hong Kong dollars (7.8%) French francs (8.9%) Italian lire (8.2%) Norwegian kroner (11.0%) Other currencies (6.2%) 262 243 1,611 709 253 238 38 19 16 39 178 256 2,120 826 414 244 37 36 9 30 3,428 4,150 Total long-term debt $4,294 $5,021 At an average imputed interest rate of 10.2% in 1986 and 10.1% in 1987. The amounts of long-term debt maturing, together with sinking fund payments required, in each of the four years after December 31, 1988, in millions of dollars, are: 1989-$661; l990-$347; 1991-$219; 1992-$195. During 1984, an affiliate issued at a discount $1,800 mil lion of zero coupon notes due in 2004. The affiliate received $199 million as proceeds from these notes. No payment of interest is provided for by zero coupon notes. During 1986 and 1987, $557 million and $97 million (face amount), respectively, of these notes were purchased in the open market with $1,146 million remaining and payable to note holders at maturity. At December 31, 198fr and 1987, these notes were included in the United States dollars category of other consolidated subsidiaries as follows: Dec. 31, 1986Dec. 31, 1987 Principal ._ Less unamortized discount (millions of dollars) $1,243 $1,146 (1,069) (967) Total $ 174 $ 179 During 1982, an affiliate issued,at a discount $771 million of deferred interest debentures due in 2012. There will be no payment of interest on the debentures prior to maturity. At maturity, the holder of each debenture will be entitled to a payment of interest of $730 in addition to the $270 principal amount of the debentures. At December 31,1986 and 1987, these debentures were included in the United States dollars category of other consolidated subsidiaries as follows: Principal Less unamortized discount Total (millions of dollars) $ 771 $ 771 (644) (639) $ 127 $ 132 Deferred interest $ 51 $ 66 In 1982, debt totaling $515 million was removed from the balance sheet as a result of the deposit of U.S. Government securities in irrevocable trusts. The principal and interest of the securities deposited with the trustee were sufficient to fund the scheduled principal and interest payments of these Exxon debt issues. In 1987 the corporation placed an additional $172 million of government securities in the trusts. As a result of an improved matching of maturity elates between the government securities in the trusts and the corresponding Exxon debt, the addition of $172 milliocLof government securities permitted the removal of $240 million of debt from the balance sheet, and 1987 net income was increased by $40 million after tax. The balance of outstanding debt in these trusts at year-end 1987 was $704 million. 31 mm 7. Annuity benefits Exxon and many of its affiliates have defined benefit retire ment plans which cover substantially all of their employees. Plan benefits are generally based on years of service and employees' compensation during their last years of employ ment. Benefits are paid from funds^previously provided to trustees and insurance companies, or are paid directly by the corporation or its affiliates and charged against book reserves. Contributions to plans are made in accordance with local laws and tax regulations. As of year-end 1987, ap proximately 70 percent of the funded assets for U.S. plans and approximately 55 percent of the funded assets for for eign plans were invested in equity securities. The remainder was in fixed income securities. In the company's principal U.S. plan, covering most U.S. employees, funds were provided to an insurance company to cover accrued obligations through August 12,1986. After making the necessary arrangements with the insurance company and satisfying other legal requirements, on August 13, 1986, the company withdrew $1.6 billion of surpl. from funded assets. Charges to consolidated income for the cost of annuity plans were $115 million, $239 million and $184 million for the years 1985, 1986, and 1987, respectively. Net pension cost/(credit), annuity plans status and rate assumptions for 1986 and 1987 are detailed below: Annuity plans net pension cost/(credit) 1986 U.S. Plans 1987 Foreign Plans 1986 1987 (millions of dollars) Cost of benefits earned during the year Interest cost on benefits earned in prior years Actual return on plan assets Deferred gains/(losses) on plan assets Amortization of actuarial (gains)/Iosses and prior-service cost Net pension enhancement costs and curtailment/settlement gains Net pension cost/(credit) for the year $ 114 395 (880) 396 (93) (37) $ (105) $ 81 330 (178) (165) (78) (23) $ (33) $ 114 277 (265) 78 -- 140 $ 344 $ 11C 340 (180 (59 (12 18 $ 217 Annuity plans status Dec. 31, 1986 Estimated amount of assets required to provide funds for future payment of: Projected benefits based on employment service to date and present pay levels Vested Non-vested Accumulated benefit obligation Additional amounts related to projected pay increases Projected benefit obligation Assets dedicated for pension benefits Funded assets (market values) Company assets (book reserves) Total dedicated assets Assets in excess of projected benefit obligation Consisting of-- Unrecognized net gain/(loss) at transition to FAS-87 Unrecognized actuarial gain/(loss) since transition Unrecognized prior-service costs incurred since transition $3,112 152 3,264 523 3.787 3,608 1.435 5.043 $1,256 $ 849 407 -- Assumed long-term rate of return on plan assets (percent) Assumed year-end discount rate for projected benefit obligation (percent) Assumed long-term rate of compensation increase (percent) 10.0 9.0 6.5 32 Dec. 31. 1987 Dec. 31. 1986 (millions of dollars) Dec. 31, 1987 $2,976 135 3,111 430 3.541 3,375 1,389 4.764 $1,223 $ 820 474 (71) 10.0 10.0 6.5 $2,859 207 3,066 836 3.902 2,459 1.585 4.044 $ 142 $ 122 32 (12) 4.0-12.0 4.0-11.0 2.0-11.0 $3,515 184 3,699 997 4.696 2,882 1.861 4.743 $ 47 $ 120 67 (140 4.0-12.0 4.0-12.0 4.0-12.0 8. Other post-employment benefits In addition to providing annuity benefits, the company and many of its affiliates provide certain health care and life insurance benefits for retired employees. Employees may become eligible for these benefits if they retire with annuitant status. These benefits are pravided primarily through payments to insurance companies, based on the benefits paid during the year. The company recognizes the cost of providing these benefits by expensing the annual insurance premiums, which were $78 million in 1985, $90 million in 1986 and $94 million in 1987. 9. Additional working capital data Consolidated notes and accounts receivable include: Dec. 31, 1986 Dec. 31. 1987 (millions of dollars) Trade, less reserves of $136 million and $144 million $4,344 $5,143 Reliance/Gilbarco notes receivable 1,250 -- Other, less reserves of $15 million and $20 million 1.190 $6,784 1.135 $6,278 Notes, loans, accounts payable and accrued liabilities include: Dec. 31, 1986 Dec. 31, 1987 Bank loans Commercial paper Long-term debt due within one year Other (millions of dollars) $ 647 $ 1,167 2,550 1,026 362 595 25 76 Total notes and loans payable 3.584 2.864 Trade payables Obligations to equity companies Accrued taxes other than income taxes Other 5,623 302 1,595 1.995 6,172 415 1,587 2,074 Total accounts payable and accrued liabilities 9.515 10,248 $13,099 $13,112 Unused lines of credit for short-term financing available at December 31,1987, totaled approximately $5,700 million. 10. Litigation Claims for substantial amounts have been made against Exxon and^certain of its consolidated subsidiaries in pend ing lawsuits, the outcome of which will not be materially important in relation to the consolidated financial position of the corporation in the opinion of its general counsel. 11. Leased facilities At December 31,1987, the corporation and its consolidated subsidiaries held non-cancelable operating charters and leases covering tankers, service stations and other proper ties for which minimum lease commitments were as follows: Minimum commitment after reduction for related rental Income Related rental income Tankers Other 1988 1989 1990 1991 1992 1993 and beyond (millions of dollars) $71 $257 37 190 20 137 10 94 7 74 31 376 $33 34 27 21 14 92 Net rental expense for 1985,1986 and 1987 totaled $1,193 million, $961 million and $782 million, respectively, after being reduced by related rental income of $93 million, $101 million and $82 million, respectively. Minimum rental expense totaled $1,254 million in 1985, $1,021 million in 1986 and $818 million in 1987. 12. Dispositions During 1986, the corporation completed a number of asset dispositions, including the sale of Reliance Electric Com pany and other companies managed by Reliance, and the corporation's interest in the Exxon Building in New York City. The impact from these two dispositions was to in crease 1986 net income by $528 million. 13. Investment in property, plant and equipment Investment Dec. 31,1986 Less accumulated depreciation and depletion Petroleum and natural gas Exploration and production Refining and marketing Total petroleum and natural gas Chemicals Other Total ' $28,213 10,978 39,191 3,433 6,665 $49,289 ' Additions--1987 United States $' 1.391 405 U796 135 95 $ 2,026 Foreign Total (millions of dollars) $ 2,417 865 3,282 135 344 S 3,761 $ 3,808 1.270 5,078 270 439 $ 5,7.87 ' Investment Dec 31, 1987 At cost Less accumulated depreciation and depletion $ 49,712 21,752 71,464 . 6,541 8.214 $ 86,219 $ 30,485 12,409 42,894 3,720 6.820 $ 53,434 33 14. Other contingencies million in 1987. The exercise of SARs releases the The corporation and certain of its consolidated subsidiaries corporation from the obligation of providing stock under the were contingently liable at December-31, 1987, for $1,245 option at the option price. million for guarantees primarily relating to notes, loans and Changes that occurred during 1987 in options outstand performance under contracts. This includes $596 million ing are summarized below. representing guarantees of foreign excise taxes and cus 1973 plan 1978 plan 1983 plan toms duties of other companies, entered into as a normal business practice, under reciprocal arrangements. Not Outstanding at (number of shares)* included in this figure are guarantees by consolidated affili December 31. 1986 140,376 6.352,856 16,710,770 ates of $713 million representing Exxon's share of obliga Granted at $40.00 tions of certain equity companies, as shown in Note 4. average per share -- -- 4,901,450 Additionally, the corporation and its affiliates have numer Less: Exercised 54,796 598,948 564,546 ous long-term sales commitments in their various business Expired -- -- 122,400 activities, all of which are expected to be fulfilled with Surrendered 85.580 1.512,022 1.742.900 no adverse consequences material to the corporation's con Outstanding at solidated financial position. December 31, 1987 -- 4.241,886 19.182.374 The operations and earnings of the corporation and its affiliates throughout the world have been and may in the future be affected from time to time in varying degree by Available for grant after December 31, 1987 None None 1,267,750 political developments and laws and regulations, such as The average option price per share of the options out forced divestiture of assets; restrictions on production, standing at December 31, 1987, for the plans was $28.29*. imports and exports; price controls; tax increases and retro The effect on reported earnings per share from the active tax claims; expropriation of property; cancellation of assumed exercise of stock options outstanding at year-end contract rights; and pollution controls. Both the likelihood 1985, 1986 or 1987 would be insignificant. of such occurrences and their overall effect upon the cor poration vary greatly from country to country and are not 16. Bonus plan predictable. The 1983 Incentive Program makes provision for grants of bonuses in respect of each of the five years beginning 15. Stock option plans with 1983 which are not to exceed 3 percent of the amount The 1983 Incentive Program makes provision for the grant by which net income in a given year exceeds 6 percent of of options on a maximum of 26,000,000 shares' of cor capital invested (as defined in the plan). Bonuses may be poration stock over the five-year period ending May 31, granted to eligible employees of the corporation and of 1988. As under earlier plans, options may be granted at those affiliates at least 95 percent owned. Bonuses may be prices not less than 100 percent of market value on the granted in cash, shares of the corporation's stock or earn date of grant. Options granted are exercisable after one ings bonus units, which are rights entitling the grantee to year of continuous employment following date of grant. receive on the settlement date, with certain limitations, an The 1983 plan permits granting stock appreciation rights amount of cash equal to the corporation's cumulative earn (SARs) to holders of options under present and past plans, ings per share as reflected in its quarterly earnings state which allows them to surrender exercisable options in ments as initially published, commencing with earnings for exchange for shares of the corporation's stock having an the first full quarter following the date of grant to aggregate market value, at the time of surrender, equal to and including the last full quarter preceding the date of the difference between the option price and market value settlement. Bonuses other than units may be paid in cash of shares covered by surrendered options, or to receive or shares of the corporation's stock in full at the time of such difference in cash to the extent provided in the SARs. grant, deferred to retirement or a later date, or paid in Outstanding options were 23,204,002* and 23,424,260* annual installments. Any unpaid amounts are subject to shares at December 31, 1986 and 1987, respectively. All of certain forfeiture provisions contained in the plan. the December 31, 1986 outstanding options had SARs Grants in cash and shares of the corporation's stock are attached; of the December 31, 1987 outstanding options, charged to earnings in the year of grant. Amounts earned 20,284,060* had SARs attached. In anticipation of settle under earnings bonus units are accrued as they occur. ment of such SARs at market value of the shares covered Total charges to earnings in 1985, 1986 and 1987 were $33 by the options to which they are attached, $76 million was million, $31 million and $29 million, respectively, reflecting charged to earnings in 1985, $90 million in 1986 and $80 grants substantially less than the maximum permitted. Reflects August 1987 two-for-one slock split. See Note 5. page 31. 34 OtMM I 17. Income, excise and other taxes United States 1985 Foreign Total Income taxes Federal or foreign-current $ 609 -deferred-net 534. U. S. tax on foreign operations 62 State 1,205 29 Total income tax expense Excise taxes Other taxes and duties* 1,234 1,264 1,713 Total $4,211 $ 2,857 597 -- 3,454 -- 3,454 3,683 10.006 $17,143 $ 3,466 1,131 62 4,659 29 4,688 4,947 11.719 $21,354 1986 United Stales Foreign Total (millions of dollars) $ 124 680 24 828 99 927 1,319 1.090 $3,336 $ 1,846 423 -- 2,269 -- 2,269 3,780 11.986 $18,035 $ 1,970 1,103 24 3,097 99 3,196 5,099 13.076 $21,371 United States 1987 Foreign Total $ 514 337 (75) 776 41 817 1,368 861 $3,046 $ 1,983 (97) -- 1,886 -- 1,886 4,299 14.223 $20,408 $ 2,497 240 (75) 2,662 41 2,703 5,667 15.084 $23,454 Reconciliation between income tax expense and a theoretical U. S. tax computed by applying a rate of 46 percent to earnings before income taxes in 1985 and 1986 and 40 percent in 1987: Earnings before Federal and foreign income taxes United States Foreign Total 1985 $2,627 6,902 $9,529 1986 (millions of dollars) 1987 $2,150 6.307 $8,457 $2,159 5.343 $7,502 Theoretical tax $4,383 Adjustments for foreign taxes in excess of/(less than) theoretical U. S. tax U.S. tax on foreign operations --current 279 27 --deferred 35 U.S. investment tax credit Other U.S. (229) 164 Federal and foreign income tax expense $4,659 $3,890 (632) 18 6 (119) (66) $3,097 $3,001 (251) 55 (130) (20) 7 $2,662 Effective income tax rate, including income taxes of equity companies and state income taxes: 1985 1986 1987 United States Foreign Total 44.4 54.8 52.1 (percent) 40.6 42.6 42.1 40.9 40.7 40.7 Exxon's share of income taxes of equity companies included above totaled $604 million in 1985, $695 million in 1986 and $622 million in 1987, essentially all in the foreign area. Net deferred income tax expense, above, represents the sum of tax effects related to timing differences, generally between amounts reportable currently for tax purposes and related amounts included in earnihgs for financial reporting, as follows: Tax effects of timing differences for: 1985 1986 1987 (millions of dollars) Depreciation $ 684 $ 316 $ 235 Inventories 253 656 (45) Intangible development costs 95 ' (48) (102) Reversion of surplus pension assets -- (736) -- Hawkins provision (353) 353 -- Other 452 562 152 Net deferred income taxes $1,131 $1,103 $ 240 Tax effects of timing differences for: Depreciation Inventories Intangible development costs Other United States $ 325 (7) (140) 159 1987 Foreign $ (90) (38) 38 (7) Total $ 235 (45) (102) 152 Net deferred income taxes $ 337 $ (97) $ 240 ' Income taxes do not include $44 million, $38 million and $21 million in 1985,1986 and 1987, respectively, of state franchise taxes which are based on income. Possible taxes, beyond those provided, on remittances of undistributed earnings of subsidiary companies, after giving consideration to amounts which are reinvested in definitely, are not expected to be material. `Includes U. S. "windfall profit" tax of $540 million in 1985:1986 and 1987 amount^ were not significant. Also includes, in 1986, $160 million of taxes related to the reversion of surplus U.S. pension fund assets. --_ 35 v tfSMBf 18. Distribution of earnings and assets Segment 1985 Petroleum ChemicaJs Sales and operating revenue Non-affiliated Intersegment Total Operating profit Add/(deduct): Income taxes Minority interests Earnings of equity companies Intersegment adjustments Corporate and financing Restructuring Hawkins provision Earnings Identifiable assets Depreciation and depletion Additions to plant $81,399 3,090 $84,489 $10,463 $6,670 1,262 $7,932 $ 385 (5,326) (194) (118) (5) 848 (14) (47) -- (43) (545) $ 5.156 $52,884 1 -- (19) -- $ 230 $5,337 3,496 7,448 234 286 Corporate total $91,620 -- $91,620 $10,956 (5,408) (268) 832 -- (510) (187) 1545) $ 4.870 $69,160 4,274 8,844 1986 Chem- Petroleum icals Corporate total (millions of dollars) $65,477 1.918 $67,395 $ 7,117 $6,079 942 $7,021 $ 817 (3,038) (181) (331) (13) 1,163 1 (67) _ (187) -- ' $ 4.807 $51,327 (4) -- (58) -$ 412 $5,508 3.762 4,131 287 257 $74,987 -- $74,987 $ 8,288 (3,476) (286) 1,152 -- (551) 233 -- $ 5.360 $69,484 4,415 5,402 Petroleum 1987 Chem- icals Corporate total $73,197 2.441 $75,638 $ 6,274 $7,177 1,158 $8,335 $1,087 $82,083 -- $82,083 $ 7,630 (2,599) (169) (354) (15) 820 35 (70) 20 -- $ 4.276 $ 57,572 (3) -- -- -- $ 750 $6,285 (2.972) (309) 855 -- (404) 40 -- $ 4.840 $ 74,042 3,658 276 4,239 5,078 270 5,787 Geographic 1985 1986 1987 Petroleum and chemicals United States Other Western Hemisphere Eastern Hemisphere Other/eliminations Corporate total Petroleum and chemicals United States Other Western Hemisphere Eastern Hemisphere Other/eliminations Corporate total Petroleum and chemicals United States Other Western Hemisphere Eastern Hemisphere Other/eliminations Corporate total Sales and other operating revenue Non-affiliated Interarea Total (millions of dollars) $25,319 14,397 48,353 3.551 $91,620 $ 904 287 918 (2,109) -- $ 26,223 14,684 49,271 1.442 $91,620 Earnings $ 1,918 473 2,995 (516) $ 4.870 Identifiable assets $28,160 7,367 22,682 10,951 $69,160 $ 17,439 12,054 42,063 3.431 $ 74.987 $ 771 200 789 (1.760) -- $ 18,210 12,254 42,852 1,671 $ 74.987 $ 1,309 379 3,531 141 $5,360 $26,095 6,671 24,069 12,649 $69,484 $ 18,700 12,640 49,034 1.709 $82,083 $1,129 291 408 (1.828) -- $19,829 12,931 49,442 (119) $82,083 $1,725 384 2,917 (186) $4,840 $26,115 8,051 29,691 10.185 $74,042 Transfers between business activities or areas are at estimated market prices. omtf Supplemental Information on Oil and Gas Exploration and Production Activities This section provides historical revenue, cost, operating earnings and reserve information regarding Exxon's oil and gas exploration and production operations during 1985, 1986 and 1987. In the company's opinion, the information on earnings below, oil and gas reserves, pages 38 and 39, and costs incurred and capitalized costs, page 40, provides more relevant information to assist in an evaluation of oil and gas operations than the information on standardized measure of discounted future net cash flows required by the Financial Accounting Standards Board (FASB), shown on page 41. Earnings Year 1985 Revenue Less costs: Production costs* Exploration expense Depreciation, depletion and amortization expense Related income tax Earnings from own production Proportional interest in earnings of equity companies Other earnings** Total earnings from exploration and production Year 1986 Revenue Less costs: Production costs* Exploration expense Depreciation, depletion and amortization expense Related income tax Earnings from own production Proportional interest in earnings of equity companies Other earnings** Total earnings from exploration and production Year 1987 Revenue Less costs: Production costs* Exploration expense Depreciation, depletion and amortization expense _ Related income tax Earnings from own production Proportional interest in earnings of equity companies Other earnings** Total earnings from exploration and production Total Worldwide United States $17,967 5,902 1,462 2.847 7,756 4.085 3,671 578 688 $ 4.937 $8,107 2.707 966 1,705 2.729 1.175 1,554 -- 557 $2,111 * Other Western Canada Hemisphere Middle East Europe and Africa (millions of dollars) $1,041 $ 98 $5,108 $ 30 376 44 113 508 228 280 -- 14 $ 294 23 35 44 (4) 1 (5) -- 4 $_m 708 257 712 3,431 2,088 1,343 551 95. $1,989 18 58 16 (62) 3 (65) 14 3 $(48) Australia and Far East $3,583 2,070 102 257 1,154 590 564 13 15 $ 592 $10,707 3,812 1,206 2.964 2,725 1,076 1,649 806 605 $ 3.060 $4,338 1,619 656 1.666 397 167 230 -- 468 $ 698 $ 755 300 70 121 " 264 109 155 -- ____(1) $ 154 $ 62 $3,499 14 48 18 (18) 2 (20) -- _(2) $ig) 793 300 795 1,611 553 1,058 609 139 $1,806 $ 62 37 70 27 (72) 'S (77) 195 5 $123 $1,991 1,049 62 337 543 240 303 2 ____(4) $ 301 $12,180 3,810 806 2.918 4,646 1,888 2,758 486 523 $ 3.767 $4,860 1,529 333 1.505 1,493 487 1,006 -- 313 $1,319 $ 965 268 48 145 504 209 295 -- (46) $ 249 $ 80 14 30 20 -16 11 5 -- $3,762 856 204 896 1,806 691 1,115 458 190 $1,763 $ 82 31 64 38 (51) 12 (63) 16 58 $ 11 $2,431 1,112 127 314 878 478 400 12 17 $ 429 Revenue Year 1985 -Sales to third parties Sales to consolidated affiliates Year 1986-Sales to third parties Sales to consolidated affiliates Year 1987-Sales to third parties Sales to consolidated affiliates $ 7,042 10,925 5,250 5,457 5,983 6,197 $1,674 6,433 1,242 3,096 ' 1,037 3,823 $ 293 748 126 629 195 770 $ 98 -- 62 -- 80 -- $2,354 2,754 2,334 1,165 2,901 861 $ 18 12 42 20 54 28 $2,605 978 1,444 547 1,716 715 * Includes taxes other than income taxes. Specifically included are U.S. "windfall profit" tax: $540 million (1985), not significant in 1986 and 1987, and Australian excise tax: $1,653 million (1985), $749 million (1986), $818 million (1987). ** Includes earnings related to transportation of oil and gas, sale of supplies from other sources, oil sands operations and technical services agree ments, and reduced by minority interests. Oil and Gas Reserves* The following information describes changes during the years and balances of oil and gas reserves at year-end 1985, 1986 and 1987. The definitions used are those developed by the Department of Energy for its FinanciaJ Reporting System and adopted by the FASB. Proved reserves are the estimated quantities of oil and gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and oper ating conditions (that is, at year-end prices and costs). They include some reserves which may or may not be producible within the lives of existing agreements. In some cases, substantial new investments in additional wells and related facilities will be required to recover these proved reserves. Proved reserves include 100 percent of each majorityowned affiliate's participation in proved reserves and Exxon's ownership percentage of the proved reserves of equity companies, but exclude royalties and quantities due others when produced. Gas reserves exclude the gaseous equivalent of liquids expected to be removed from the gas on leases, at field facilities and at gas processing plants. These liquids are included in net proved reserves of crude oil and natural gas liquids. Crude oil and natural gas liquids Net proved developed and undeveloped reserves Beginning of year 1985 Revisions of previous estimates Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1985 Revisions of previous estimates Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1986 Revisions of previous estimates Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1987 Net proved developed reserves (included above) Beginning of year 1985 End of year 1985 End of year 1986 End of year 1987 Total Worldwide 6,474 168 141 86 467 (603) 6,733 249 25 31 100 (626) 6,512 178 172 56 353 (637) 6,634 3,924 4,536 4,889 4,876 United States 2,715 92 43 63 90 (281) 2,722 92 21 30 40 (278) 2,627 81 109 56 37 (276) 2,634 2,030 2,082 2,100 2.071 Other Western Canada Hemisphere Middle East Europe and Africa (millions of barrels) 909 (6) -- 19 187 (42) 1,067 93 1 -- 9 (60) 1,110 (34) 24 -- 240 (68) 1,272 24 1,764 16 -- ---- --4 -- 112 ID (152) 33 1,728 1 (28) ---- --1 31 ID 067) 30 1,535 9 117 ---- ---- 9 34 ID 061) 41 1,525 18 -- 98 -- -- _Q) 115 27 -- -- 9 __3) 148 (15) -- -- 18 __(6) 145 530 ' 21 597 3 860 23 841 17 1,092 24 809 128 1,103 27 792 143 Australia and Far East 1,044 6_6 -- 78 ' 020) 1,068 64 3 -- 38 (HD 1,062 20 39 -- 15 (119) 1,017 743 713 736 740 Proportional interest in proved reserves of equity companies End of year 1985 End of year 1986 End of year 1987 96 124 117 -- -- -- 75 -- -- 19 -- 70 -- -- 19 -- 66 -- 21 35 32 Proportional interest in proved reserves of other non-consolidated affiliates End of year 1985 End of year 1986 End of year 1987 497 -- -- -- -- 497 __ 488 -- -- -- -- 488 -- 478 -- -- -- -- 478 -- Oil sands reserves End of year 1985 End of year 1986 End of year 1987 242 -- 242 -- __ -- __ 230 -- 230 -- ---- __ 217 -- 217 -- ---- -- Worldwide net proved developed and undeveloped reserves (including non-consolidated and oil sands) End of year 1985 End of year 1986 End of year 1987 38 See footnote on page 39. 7,568 7,354 7.446 2.722 2.627 2.634 1.309 1,359 1.508 33 1.803 30 1,605 41 1.591 612 1.089 636 1.097 623 1.049 U269S9 Net proved developed reserves are those volumes which are expected to be recovered through existing wells with existing equipment and operating methods. Undeveloped reserves are those volumes which are expected to be recovered as a result of major future investments to drill new wells, to recomplete existing wells and/or to install facilities to collect and deliver the production from existing and future wells. For year-end 1987 reporting, the company has elected to remove 7.8 trillion cubic feet of Prudhoe Bay natural gas reserves from the proved undeveloped category. Although geologically identified, these reserves are excess to local consumption and require a transportation system to addi tional markets. This change reflects no lessening of efforts to achieve timely development of this important resource, which the company is confident will occur in the future. Reserves attributable to certain oil and gas discoveries in the U.S., Canada, Colombia, the U.K., the Netherlands, Norway, France, Germany, the Yemen Arab Republic, Chad, Malaysia, Australia, Thailand, Indonesia and China were not considered proved as of year-end 1987 due to geological, technological or economic uncertainties and therefore are not included in the tabulation. Crude oil and natural gas liquids and natural gas pro duction quantities shown are the net volumes withdrawn from Exxon's oil and gas reserves. The natural gas quan tities differ from the quantities of gas delivered for sale by the producing function as reported on page 43 due to volumes consumed or vented and inventory changes. Such quantities amounted to approximately 192 billion cubic feet in 1985, 202 billion cubic feet in 1986, and 214 billion cubic feet in 1987. Natural gas Net proved developed and undeveloped reserves Beginning of year 1985 Revisions of previous estimates Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1985 Revisions of previous estimates Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1986 Revisions of previous estimates' Purchases of minerals in place Improved recovery Extensions and discoveries Production End of year 1987 Net proved developed reserves (included above) Beginning of year 1985 End of year 1985 End of year 1986 End of year 1987 Total Worldwide 29,785 130 49 26 1,242 (1.509) 29,723 576 38 2 540 (1,449) 29,430 (7,183) 1,057 9 488 (1.436) 22,365 23,160 24,010 16,846 17,215 United States 17,884 45 49 18 840 (874) 17,962 441 4 2 379 (818) 17,970 (7,788) 51 9 254 (735) 9,761 16,194 16,483 9,292 8,579 Other Western Canada Hemisphere \ Middle East Europe and Africa (billions of cubic feet) 1,279 144 --s 8 54 __ (2) 1,433 29 33 -- 23 (55) 1,463 17 491 -- 14 (66) 1,919 213 26 -- -- 4 (28) 215 14 _ -- 12 J23) 218 1 -- -- 7 (25) 201 - 7,688 (204) -- 342 (447) 7,379 153 -- 80 (438) 7,174 593 -- -- 117 (476) 7,408 3 -- -- -- -- JD 2 1 -- -- -- JD 2 -- -- -- -- JD 1 1,100 1,244 1,258 1,566 157 3,568 152 3,995 148 4,071 115 4,552 3 2 2 1 Australia 'and Far East 2,718 119 -- -- 2 (107) 2,732 (62) 1 46 (114) 2,603 (6) 515 -- 96 (133) 3,075 2,138 2,134 2,075 2,402 Proportional interest in proved reserves of equity companies End of year 1985 End of year 1986 End of year 1987 17,079 16,867 16,439 ---- -- 165 -- 170 -- 16.982 -- 16,558 -- 16,137 -- 97 " 144 132 Worldwide net proved developed and undeveloped reserves End of year 1985 46,802 End of year 1986 46,297 End of year 1987 38.804 17,962 17,970 9,761 1,433 1,628 2,089 215 24,361 218 23,732 201 23,545 2 2,829 2 2.747 1 3,207 These and other tables, as noted, in this report do not include reserve, supply, cost and other data relating to Exxon's interest in the Arabian American Oil Company (Aramco) because the government of Saudi Arabia prohibits the .disclosure of confidential information under a, directive issued by the Minister of Petroleum and Mineral Resources bearing Number 1030/Z. During 1980, the government acquired the beneficial interest in substantially all of Aramco's assets and operations. However, Aramco continues to have access to a significant volume of Saudi Arabian crude oil. Oil and Gas Exploration and Production Costs in Canada and to including accumulated provisions for This table summarizes capitalized costs at December 31, site restoration costs, all as required by the FASB in State 1986 and 1987 and certain costs incurred in oil and natural ment No. 19. gas producing activities during 1985, 1986 and 1987. The amounts reported as costs incurred in property The amounts shown for net capitalized costs are $3,015 acquisition, exploration and development activities include million less at year-end 1986 and $3;240 million less at year both capitalized costs and costs charged to expense end 1987 than the amounts reported as investments in prop during the year. erty, plant and equipment for exploration and production Costs incurred in 1986 were $3,792 million, down 45 per in Note 13, on page 33, due to excluding from the capital cent from 1985 mainly due to lower activity caused by ized costs certain transportation and research assets and sharply lower worldwide prices. Costs incurred in 1987 were assets relating to the oil sands operations of Syncrude up $822 million due to acquisition activity. Total Worldwide United States Capitalized costs As of December 31,1986 Property (acreage) costs Proved Unproved Total property costs Producing assets Support facilities Incomplete construction Total capitalized costs Accumulated depreciation, depletion, amortization and valuation provisions Net capitalized costs Proportional interest of net capitalized costs of equity companies As of December 31,1987 Property (acreage) costs Proved Unproved Total property costs Producing assets Support facilities Incomplete construction Total capitalized costs Accumulated depreciation, depletion, amortization and valuation provisions Net capitalized costs Proportional interest of net capitalized costs of equity companies $ 2,854 2.993 5,847 31,463 1,280 2,799 41,389 16.191 $25,198 $ 1.101 $ 4,189 2,200 6,389 35,623 1,510 3.077 46,599 19.354 $27,245 $ 1,407 $ 2.109 2.783 4,892 18,544 500 812 24.748 9.819 $14,929 -- $ 3,097 1,702 4,799 19,073 582 639 25,093 10,411 $14,682 -- Costs incurred in property acquisition, exploration and development activities During 1985 Property acquisition costs $ 1,217 $ 689 Exploration costs 1,746 1.108 Development costs 3.961 2.599 Total $ 6.924 $ 4.396 Proportional interest of costs incurred by equity companies $ 209 During 1986 Property acquisition costs Exploration costs Development costs Total $ 210 1,137 2.445 $ 3.792 $ 106 491 1,350 $ 1.947 Proportional interest of costs incurred by equity companies During 1987 Property acquisition costs Exploration costs Development costs Total $ 249 $ 1,421 804 2.389 $ 4.614 -- $ 690 333 668 $ 1.691 Proportional interest of costs incurred by equity companies 40 $ 245 -- Other Western Canada Hemisphere (millions of dollars) Middle East Europe and Africa $ 103 143 246 2,073 87 224 2,630 810 $1,820 -- $ 414 241 655 2,538 95 331 3.619 981 $2,638 -- $3 -- 3 277 22 8 310 235 $ 75 -- $ 20 28 48 7.929 226 1,184 9,387 3.864 $5,523 $1,053 -- -- -- $295 39 18 352 268 $ 84 -- $ 24 38 62 10,515 296 1.316 12,189 5.741 $6,448 $1,352 $519 1 520 198 52 152 922 102 $820 -- $361 2 363 229 55 331 978 159 $819 -- $ 14 61 446 $ 521 -- $2 70 173 $ 245 -- $ 385 40 455 $ 880 ~ ___ $ 42 26 $ 68 -- __ $ 48 21 $ 69 _ $ 37 22 $ 59 -- ___ $ 351 592 $ 943 $ 189 _ $ 382 532 $ 914 $ 229 $4 257 512 $ 773 $ 224 $506 75 55 $636 -- $8 81 158 $247 " _ $ 75 184 $259 -- Australia and Far East $ 100 38 138 2,442 393 419 3,392 1,361 $2,031 $ 48 $ 293 217 510 2,973 443 442 4,368 1.794 $2,574 $ 55 $8 109 243 $ 360 $ 20 $ 94 65 211 $ 370 $ 20 $ 342 62 548 $ 952 $ 21 (I8MSI Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves The standardized measure of discounted future net cash do not give effect to events which have occurred since the flows of proved oil and gas reserves is computed by year-end dates. applying year-end average prices and production costs, As noted on page 37, the company does not believe statutory tax rates enacted at year-end and a discount fac this information provides the most meaningful information tor of 10 percent per year. Accordingly, year-end projections on the results of oil and gas operations. As of December 31,1985 Future cash inflows from sales of oil and gas Future production and development cash costs Future income tax expenses Future net cash flows Effect of discounting net cash flows at 10% Standardized measure of discounted future net cash flows As of December 31,1986 Future cash inflows from sales of oil and gas Future production and development cash costs Future income tax expenses Future net cash flows Effect of discounting net cash flows at 10% Standardized measure of discounted future net cash flows As of December 31,1987 Future cash inflows from sales of oil and gas Future production and development cash costs Future income tax expenses Future net cash flows Effect of discounting net cash flows at 10% Standardized measure of discounted future net cash flows Total Worldwide $217,131 84.562 63.843 68,726 37,904 $ 30.822 $121,527 65,411 21.809 34,307 17.898 $ 16.409 ' $124,555 67,678 23.061 33,816 14.902 $ 18.914 United States $ 100,950 37,476 27.999 35.475 21,193 $ 14,282 $ 51,444 22,770 8,916 19,758 11.161 $ 8,597 $ 43,389 20,341 6.935 16,113 7.182 $ 8,931 Other Western Canada Hemisphere (millions of dollars) Middle East Europe and Africa $22,793 8,222 6.823 7,748 4,409 $403 188 40 175 43 $65,257 27,788 20,581 16,888 7.984 $2,996 948 955 1,093 605 $ 3.339 $132 $ 8,904 $ 488 $13,251 7,661 2.596 2,994 1.611 $ 1.383 $203 113 -- 90 17 $ 73 $36,676 22.767 6.547 7,362 3.093 $ 4,269 $2,153 923 600 630 266 $ 364 $15,958 9,549 3,153 3,256 1.806 $ 1.450 $455 144 94 217 55 $42,688 26,371 8.077 8,240 ' 3.545 $162 $ 4,695 $2,429 537 672 1,220 307 $ 913 Australia and Far East $24,732 9,940 7.445 7,347 3.670 $ 3.677 $17,800 11,177 3.150 3,473 1,750 $ 1.723 $19,636 10,736 4.130 4,770 2.007 $ 2,763 Proportional interest in the standardized measure of discounted future net cash flows related to proved reserves of equity and other non-consolidated companies* At December 31,1985 At December 31, 1986 At December 31, 1987 $ 5,696 3,993 4,300 ---- -- $ 91 -- 128 -- $ 5,442 $ 165 -- 3,715 136 -- 3,956 134 $ 89 51 82 Change in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves--Consolidated Affiliates In 1985, the standardized measure increased $873 million, mainly reflecting the value of reserves added during the year and the effects of lower income taxes. Value of reserves added during the year due to extensions, discoveries, other additions and improved recovery, less related costs Changes in value of previous-year reserves due to: Sales and transfers of oil and gas produced during the year, net of production costs Development costs incurred during the year Net change in prices and costs Revision of previous reserves estimates Accretion of discount Other changes Net change in income taxes Total change in the standardized measure during the year rf '' In 1986, the standardized measure decreased $14,413 mil lion primarily due to lower worldwide crude prices, partially offset by lower taxes. In 1987, the standardized measure increased by $2,505 million due principally to higher prices for crude oil and . natural gas. 1985 1986 1987 (millions of dollars) $ 3.916 $ 1,208 $ 1,869 (12,065) 4,205 (3,252) 831 6,268 (1.210) 2.180 $ 873 (6,892) 2,184 (36.064) 281 6,137 (585) 19.318 $(14,413) (8,103) 2,610 5.560 (171) 2.548 319 (2.127) S 2,505 *See footnote on page 39. 0WW2 Quarterly Information First Quarter Summarized financial information Sales and other operating revenue (millions) $21,700 Gross profit (millions)* $ 8,759 Net income (millions) $ .1,710 Net income per share** S 1.18 Dividends per share** $ .45 Stock prices** High Low $28,563 $24,188 Second Quarter 1986 Third Quarter Fourth Quarter 17,732 7,631 1,115 .77 .45 16,953 7,812 1,055 .73 .45 18,602 8.285 1.480 1.03 .45 30.813 35.625 37.063 27.063 28.750 32.750 Year First Quarter Second Quarter 1987 Third Quarter Fourth Quarter 74,987 32,487 5,360 3.71 1.80 $19,072 $ 7,619 $ 1,070 $ .75 $ .45 19,895 8,260 1,150 .81 .45 21.658 9,278 1,065 .75 .50 21,458 9,041 1,555 1.12 .50 37.063 $44,500 24.188 $35,063 47.125 42.125 50.375 45.125 50.000 30.875 Year 82,083 34,198 4,840 3.43 1.90 50.375 30.875 The price range of Exxon stock is based on the Composite Tape of the several U.S. exchanges where Exxon stock is traded. The principal market where Exxon stock (xon) is traded is the New York Stock Exchange, although the stock is traded on most major exchanges in the United States, as well as on the Tokyo, London and other foreign exchanges. At February 11,1988, there were 735,033 holders of record of Exxon stock. On January 27,1988, the corporation declared a $0.50 dividend per share payable March 10,1988. Gross profit equals sales and other operating revenue less estimated costs associated with products sold. Reflects August 1987 two-for-one stock split. See Note 5, page 31. Exxon Dividends, Share Price and Return to a Shareholder Adjusted for General Inflation The first two charts below depict historical information as shown by the bars, while the solid line plots trends in average 1987 dollars (adjustments made using the U.S. CPl-U). These charts have been adjusted to reflect the August 1987 two-forone stock split. See Note 5, page 31. The return to a shareholder from holding Exxon stock is shown on the third chart for various periods prior to year-end 1987. The before-tax returns are shown on both an unadjusted basis (blue bar) and adjusted for general inflation, as measured by the U.S. CPI-U (gray bar). Dividends to Exxon shareholders do/lars persham Exxon share price aoiltrs tfytw-eocf Return to a shareholder from holding Exxon stock percentpet year Yeats hetd to 12/31/87 0HS93 Operating Summary Net production of crude oil and natural gas liquids Net production United States Canada Other Western Hemisphere Europe Middle East and Africa Australia and Far East Total consolidated affiliates Proportional interest in production of equity companies Proportional interest in production of other non-consolidated companies Oil sands production-Canada Worldwide Refinery crude oil runs United States Canada Other Western Hemisphere Europe Middle East and Africa Australia and Far East Worldwide 1983 1984 1985 1986 (thousands of barrels daiy) 1987 781 90 14 370 5 267 1,527 32 25 23 1,607 778 93 16 412 4 310 1,613 21 23 21 1,678 768 116 18 417 T 330 1.652 20 19 29 1,720 761 164 18 458 a 304 1.714 25 25 32 1,796 756 188 19 441 16 326 1 746 27 28 34 1.835 958 378 341 1,135 5 449 3,266 1,021 365 295 1,111 4 424 3,220 1,054 344 98 1,003 '5 399 2,903 1,080 332 87 1.112 6 415 3,032 1,026 351 86 1,116 -5 397 2,981 Petroleum product sates Aviation fuels Gasoline, naphthas Home heating oils, kerosene, diesel oils Heavy fuels Specialty products Total \ 316 -t,344 1,280 681 464 4,085 312 1,380 1,349 685 466 4,192 326 1,397 1,343 539 477 4,082 317 1,434 1,340 . 447 505 4,043 338 1,460 1,316 405 524 4,043 United States Canada Other Western Hemisphere Europe Other Eastern Hemisphere ` Worldwide 1,146 393 436 1,566 544 4,085 1,149 407 400 1,684 552 4; 192 1,123 404 377 1,629 549 4,082 1,106 396 380 1,636 525 4,043 1,057 430 388 1,634 534 4,043 Natural gas production available for sale Net production United States Canada Other Western Hemisphere Europe Middle East and Africa Australia and Far East Total consolidated affiliates Proportional interest in production of equity companies Worldwide Tanker capacity, owned and chartered Pipeline throughput )perating statistics other than pipeline throughput include 100 percent of oper> itions of majority-owned affiliates; for other companies, gas and crude production iclude Exxon's ownership percentage, and crude runs include quantities irocessed for Exxon. N (millions of cubic feet daily) 2,345 181 70 851 -- 225 3,672 1,956 5,628 2,485 168 70 1,069 -- 215 4,007 1.911 5,918 2,085 141 69 1,086 1 231 3,613 2,048 5,661 1,919 142 54 1,058 1 246 3,420 1,909 5,329 1,698 128 61 1,179 1 289 3,356 1,871 5,227 (thousands of deadweight tons, daily average) 15,820 13,540 12,720 10,152 9,218 (thousands of barrels daily) 2,600 2,694 2,933 2,791 2,680 Pipeline throughput represents quantities delivered for Exxon by all companies in which a stock interest is held. Net production excludes royalties and quantities due others when produced, whether payment is made in kind or cash, < OttMt . Directors Officers William A. ArxJres____ J. F. Bennett_________ Randolph W. Bromery. J. G. Clarke. Jess Hay__ William R. HowelL SirHector Laing__ Philip E. Lippincott D. S. MacNaughton____ Margaret L. A. MacVicar. Donald K. Mclvor. Bert Phillips_____ L G. Rawl________________ L R. Raymond___________ Charles R. Sitter__________ Otto Wolffvon Amerongen. Committees of the Board RetiredChairman of the Executive Committee. Dayton Hudson Corporation [retailing] Senior Vice President Commonwealth Professorof Geophysics. University of Massachusetts at Amherst President, Geoscience Engineering Corporation Senior Vice President Chairman ofthe Boardand Chief Executive Officer. Lomas & Nettleton Financial Corporation [mortgage banking, insurance and other financial services] Chairman ofthe BoardandChief Executive Officer, J. C. Penney Company, Inc. [department stores and catalog chain] Chairman, United Biscuits (Holdings) pic (food and confectionary products; restaurants] Chairman, President and Chief Executive Officer, Scott Paper Company [sanitary paper, printing and publishing papers, forestry operations] Chairman ofthe Executive Committee, HealthTrust, Inc (hospital ownership] Dean for Undergraduate Education, Professorof Physical Science, andCecil and IdaGreen ProfessorofEducation, Massachusetts Institute ofTechnology Senior Vice President RetiredChairman ofthe Board. Clark Equipment Company [material handling and construction equipment, axles and transmissions] Chairman of the Board and Chief Executive Officer President Senior Vice President Chairman ofthe Supervisory Board, Otto Wolff AG [iroaand steel, machinery and metallurgical products] Audit Committee B. Phillips (Chairman), M. L. A. MacVicar (Vice Chairman), W. R. Howell, H. Laing, D. S. MacNaughton Board Advisory Committee on Contributions J.G. Clarke (Chairman), R. W. Bromery (Vice Chairman), W. A. Andres, J. Hay, P. E. Lippincott Board Compensation Committee D. S. MacNaughton (Chairman), W.R. Howell (Vice Chairman), W. A. Andres, P.E. Lippincott, B. Phillips Executive Committee L. G. Rawl (Chairman), L R. Raymond (Vice Chairman), R. W. Bromery, W. R. Howell, B. Phillips Finance Committee L G. Rawl (Chairman), L R. Raymond (Vice Chairman), J. F. Bennelt ,, y Nominating Committee L. G. Rawl (Chairman). R. W. Bromery. J. Hay, H. Laing, M. LA. MacVicar L. G. Rawl_______ L a Raymond-- J. F. Bennett_____ J.G. Clarke--------D. K. Mclvor______ C.R. Sitter_______ E. R. Cattarull^___ T. A. Kirkley______ R. J. Kruizenga___ a S. Lombard-----H. E. McBrayer-- T. J. McDonagh-- W.B. Nobles. Jr__ S. J. Reso________ E. A. Robinson___ a A. Schroder____ D.E. Smiley---------- D. Steine_________ W. D. Stevens_____ T.H.Tiedemann, Jr. Chairman ofthe Board andChief Executive Officer President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Vice President--Corporate andPublic Affairs andSecretary Vice President Vice President--Corporate Planning Vice President andGeneralCounsel Vice President Vice President--Medicine and Environmental Health Vice President-information Systems and Central Services Vice President Vice President andTreasurer Vice President andGerreralTax Counsel Vice President--Washington Office Vice President andController Vice President Vice President--Human Resources Chief Executives, Regional and Operating Organizations DIVISIONS OF EXXON CORPORATION T. A. Kirkley H. E. Mc8rayer W. B. Nobles, Jr. S. J. Reso-----------------------------W. D. Stevens_________________ President, Exxon CoalandMinerals Company President, Exxon Chemical Company GeneralManager, Exxon Central Services President, Exxon Company, International . . President, Exxon Company, U.SA. AFFILIATED COMPANIES D. R. Clair President, Exxon Research and Engineering Company A. R. Haynes Chairman of the Board, Imperial Oil Limited F.M. Perkins President, Exxon Production Research Company 44 020995