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Executives

David S. Rosenthal - Vice President, Investor Relations and Secretary

Analysts

Faisel Khan - Citigroup

Paul Cheng - Barclays Capital

Evan Calio - Morgan Stanley

Mark Flannery - Credit Suisse

Douglas Terreson - ISI Group

Mark Gilman - The Benchmark Company

Robert Kessler - Simmons & Company International

Pavel Molchanov - Raymond James

Paul Sankey - Deutsche Bank Securities

Neil McMahon - Sanford Bernstein

Exxon Mobil Corp. (XOM) Q3 2009 Earnings Call October 29, 2009 11:00 AM ET

Operator

Good day and welcome to this Exxon Mobil Corporation Third Quarter 2009 Earnings Conference Call. Today's call is being recoded.

At this time for opening remarks, I would like to turn the conference over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

David S. Rosenthal

Good morning. And welcome to ExxonMobil's teleconference and webcast on our third quarter 2009 financial and operating results.

As you are aware from this morning's press release, ExxonMobil's third quarter earnings performance was solid. Despite, commodity prices remaining well below the levels of a year ago and continued weakness, economic weakness, our operating performance was strong and we achieve the successful startup of four major project.

As a result of our long-term focus and financial strength, we remain committed to investing in our portfolio of advantage projects through the business cycle.

Before we go further, I would like to draw your attention to our cautionary statement. Please note that estimates, plans and expectations are forward-looking statements. Actual results including resource recovery, volume growth and project outcomes could differ materially due to factors I discussed and factors noted in our SEC filings. Please see factors affecting future results and the Form 8-K refurnished this morning, which are available through the Investors Section of our website. Please also see the frequently used terms that supplements to this mornings press release and a 2008 financial and operating review on our website. This material defines key terms I will use today shows ExxonMobil's net interest and specific projects and includes our SEC Regulation G disclosure.

Now, I am pleased to turn your attention to the third quarter results. ExxonMobil's third quarter 2009 earnings were $4.7 billion a reduction of $10.1 billion from the third quarter of 2008 reflecting a sharp reduction in commodity prices and weaker demand.

Third quarter 2008 earnings included a gain of $1.6 billion on the sale of our German gas transportation business and the charge of a $170 million per interest related to the Valdez litigation.

Excluding special item, third quarter 2009 earnings of $4.7 billion, were down $8.7 billion from 2008. Earnings per share excluding special items were $0.98, down $1.60 from a year ago.

During the third quarter of 2009, ExxonMobil distributed a total of $6 billion to shareholders, including dividends of $2 billion and share purchases to reduce shares outstanding of $4 billion. Again, demonstrating our commitment to return cash to shareholders.

I would now like to share our business line results and some of them of the milestones we have achieved since the last earnings call. First in the Upstream, ExxonMobil and our joint venture partner Qatar Petroleum continue to progress the Ras Laffan 3, and Qatargas 2 liquefied natural gas projects.

During the quarter, Ras Laffan 3, Train 6 and Qatargas 2, Train 5 both achieved startup. Each train is designed to produce 7.8 million tons of L&G per year and production is increasing to full capacity. Operationally, the trains are performing well. These trains joined Qatargas 2, Train 4 as the three largest LNG production trains and service anywhere in the world.

We expect a complete Ras Laffan 3, Train 7 in late 2009. With gas expected to flow into the facility before year-end and first LNG shortly thereafter. Combined the four trains associated with the Qatargas 2 and Ras Laffan 3 projects will supply about 5 billion cubic feet of gas and 300,000 barrels of liquids per day into the global market, and contribute significant long plateau production volumes to our portfolio for decades to come.

The Qatar LNG projects demonstrate ExxonMobil's industry leading project management capability. The integration of innovative technology and our ability to deliver significant value to our partners, resource owners and shareholders.

In September, The Adriatic LNG regasification terminal offshore Italy received its first LNG cargo and began supplying the Italian gas grid. The terminal is the first offshore gravity-based structure in the world for unloading, storing and regasifying LNG.

At full operational capacity, the terminal will be able to deliver 775 million cubic feet of natural gas per day into the Italian market. Including Qatargas 2, Train 4 and 5 and Ras Laffan 3, Train 6 in Qatar, the South Hook LNG receiving terminal in the UK, the Adriatic LNG Terminal in Italy, Piceance Phase 1 in the U.S. and Spherion in Norway. We have completed seven major project startups to date in 2009.

In addition, the Al Khaleej Gas-Phase Two project in Qatar is on-schedule to startup by year-end. AKG Phase Two will have the capacity to supply over 1.25 billion cubic feet of natural gas per day to meet Qatar's growing domestic demand.

Also during the quarter, ExxonMobil and are joint venture partners approved the development plan for the Gorgon project. The project includes three chain, each with a capacity to produce 5 million tons of LNG per year.

First LNG sales are targeted for 2014 with additional domestic gas supply in 2015. The approval follow the execution of sales and purchase agreements with PetroChina International Company Limited and Petronet LNG Limited of India for ExxonMobil's equity share of LNG in the project. And although, Exxon Mobil celebrated 15 years of safe and successful operations in Block 15. The single largest producing Block in the country. The Block surpassed $1 billion barrels in cumulative production in September and broadly produces over 600,000 barrels of oils per day.

Since 1994, nearly 5 billion oil equivalent barrels have been discovered in block 15. Also during the quarter, ExxonMobil completed drilling and casing of the surface sections of two wells at Point Thomson in Alaska, after reaching targeted surface section debt. Preparations to resume drilling this winter are on-schedule with more than 80 barge loads of equipment and material delivered to the site since May-July.

Moving to exploration. Exxon Mobil spread it's first Deepwater Wildcat well offshore Libya in contract area 20 and operations there are ongoing. In the Gulf of Mexico, we completed an Appraisal well at the Deepwater Hadrian discovery, located in Keithley Canyon and commenced operations on a second well to help delineate the potential of this field.

In Asia-Pacific, the West Aquarius rig completed operations on the Sultan-1 Wildcat well offshore Indonesia. We are currently analyzing the results from this well. The rig has been moved and is now operating on our first Deepwater Wildcat well in the Philippines.

Turning to our unconventional gas opportunities. We continued evaluation work on our extensive acreage position in the Horn River Basin in Canada. Following our successful drilling campaign last winter, we have begun a second comprehensive multi-well program, beginning with our first horizontal well in the play.

In Hungry, testing operations continued in order to assess tight-gas play opportunities in the Mako Trough and we are evaluating the results gathered so far. We are also planning further testing operations in Békés Basin.

In Germany, we continue to gather coordinated to further assess the shale gas potential of the Lower Saxony Basin.

In addition, in the states of our Lower Saxony and Northline West Friesland (ph). We have acquired licenses covering approximately 2 million net acres in a perspective Coal-bed Methane Play. We will begin a core whole drilling program there next year.

We have also established a significant onshore acreage position in Poland, where we believe there are significant shale gas potential. Most recently, we were awarded the Whitney license (ph) in the Fudlacy basin (ph), which brought our total net acreage to over 1 million acres. Initial work programs will begin next year.

These additional unconventional gas resource acquisitions demonstrate ExxonMobil's commitment to gain early access to diverse high quality resources globally.

Turning now to the Upstream operating results. Upstream earnings in the third quarter excluding special items were $4 billion, down $5.3 billion from the third quarter of 2008.

Upstream after-tax unit earnings in the third quarter of 2009 were $11.82 per barrel. Sharply lower crude oil prices and weaker natural gas realizations in all regions reduced earnings by $4.9 billion. Worldwide crude oil realizations were down $46 per barrel and natural gas realizations were down $5.16 per Kcf from third quarter 2008.

Volume and mix effects increased earnings by $330 million. Other effects decreased earnings by $750 million, due to higher activity related operating including increased exploration expense as well as lower gains from asset sales and negative foreign exchange effects.

All equivalent volumes increased nearly 3% from the third quarter of last year, driven by major project ramp ups.

Entitlement volumes effects including price and spend impacts and PSE net interest reductions, increased volumes by 31,000 barrels per day, while OPEC quota effects reduced volumes by 73,000 barrels per day.

Excluding the impact of entitlement effects OPEC quotas and divestments production was up 4.5%. Major project ramp ups in Qatar, the U.S and Kazakhstan combining with lower maintenance activity more than offset natural field decline.

Liquids production increased 2% or 45,000 barrels per day from the third quarter of last year. Excluding the impact of entitlement effects, OPEC quotas and divestments. Liquids production was up over 5%. The increase was driven by major project ramp ups in the U.S., Kazakhstan and Qatar and lower maintenance activity.

Gas volumes increased 4% or 309 million cubic feet per day from the third quarter of 2008. New project volumes in Qatar and the U.S. combined with positive entitlement effects more than offset natural field decline.

Turning now to the sequential comparison, versus the second quarter of 2009, Upstream earnings increased $200 million. Overall, realizations were higher reflecting increased crude oil prices, partly offset by lower natural gas realizations. Volume and mix effects were positive. Other effects decreased earnings by $440 million primarily due to the absence of the offshore California lease litigation settlement, higher activity related operating expenses and lower gains from asset sales.

All equipment volumes were essentially flat with the second quarter. Liquids production decreased 11,000 barrels per day primarily due to negative entitlement effects partly offset by a lower schedule maintenance activities.

Natural gas production was up 1% as new project volumes in Qatar more than offset natural field decline. For further data on regional volumes, please refer to the press release and the IR supplement.

Moving now to the Downstream. We continue to progress projects that drive both cost efficiencies and emissions reductions. For example, we recently completed commission in activities for project to improve energy efficiency at our Kawasaki refinery in Japan.

The new and modified facilities will generate additional power from refinery gas streams, reducing demand on the existing steam and power systems.

During the quarter, ExxonMobil continued to demonstrate our technology leadership through new product endorsements and automotive and industrial applications. In July, Mobil 1, the world's leading fully synthetic motor oil was selected as the factory and service fuel motor oil for the new 2010 Chevy Camaro SS.

In September, our Mobil SHC lubricants were approved for second drill applications in Winergy gearboxes featured in GE 1.5 megawatt wind turbines. These are further examples of ExxonMobil's dedication to formulating products that provide exceptional equipment protection in some of the most extreme applications.

Finally in refining, we continued our activities to optimize refinery operations by expanding our crude flexibility. This quarter ExxonMobil ran 24 crudes that were new to individual refineries.

Turning now to Downstream operating results. Downstream earnings in the third quarter were $325 million, down $2.7 billion from the third quarter of 2008. Lower margins decreased earnings by $2.6 billion due to weaker industry refining margins and negative price finalization effects.

Other effects decreased earnings by $90 million. Sequentially, third quarter Downstream earnings decreased by $190 million. Margin effects increased earnings by 40 million, reflecting higher marketing margins partly offset by lower refining margins.

Volume and mix effects increased earnings by $140 million, including favorable refining optimization impacts. Other factors decreased earnings by 370 million, primarily due to lower gains from asset sales.

Turning to our chemical business. In August, r joint venture in Fujian Province, China, announced the startup of the chemical units in the new integrated refining a petrochemical complex. The startups included an Ethylene Steam Cracker, Polyethylene and Polypropylene units and Aromatics facilities. This world scale facility will further position ExxonMobil to help lead the growing demand for chemical products in the Asia-Pacific region.

In July, our Beaumont chemical plant received its eight Voluntary Protection Program STAR award from the U.S Occupational Safety and Health Administration. STAR status, the highest designation awarded by OSHA indicates that our facility has achieved injury rates below the industry national average and has demonstrated the exemplary safety and health management systems.

Beaumont joins many of our other facilities in the Voluntary Protection Program. For example, our synthetics plant in Edison New Jersey, celebrated 25 years of participation in the program and is working toward it's seventh STAR recognition.

These achievements demonstrate ExxonMobil's unwavering commitment to the higher standards of safety, security, help and environmental care.

Turning now to chemical operating results. Third quarter chemical earnings were $876 million, down 210 million from the third quarter of 2008. Weaker margins reduced earnings by $170 million reflecting lower realizations. Volume and mix effects increased earnings by $30 million, primarily due to the absence of the U.S. hurricane impacts, other effects reduced earnings by $70 million, including adverse foreign exchange impacts.

Sequentially, third quarter chemical earnings increased by $510 million. Stronger margins increased earnings by $410 million, due to higher realizations and the benefits of advantage suite talks (ph).

Positive volume and mix effects increased earnings by $70 million, primarily due to lower turnaround impact. Other effects were positive $30 million.

Turning now to our corporate and financing segment. Corporate and financing expenses excluding special items were $483 million, an increase of 412 million from the same period a year ago, primarily due to lower interest income reflecting both a reduced a cash balance and lower interest rates.

The effective tax rate for the third quarter was 50%. At the end f the third quarter, our cash balance was $12.5 billion and debt was about $9.5 billion. The corporation distributed $6 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding. Of that total $4 billion was distributed to purchase shares in excess of dilution, reducing the number of shares outstanding by 1.2%. Share purchases to reduce shares outstanding are expected to be $2 billion in the fourth quarter of 2009.

CapEx in the third quarter was $6.5 billion, a decrease of 5% from third quarter 2008, reflecting favorable foreign exchange effects. Year-to-date, CapEx was just under $19 billion and excluding the impact of the stronger U.S. dollar, CapEx was up about 1%. We continue to invest in robust projects through the business cycle to help meet global demand for crude oil, natural gas and finished products.

In summary, these results reflect the strength of Exxon Mobil's integrated business model. We remain confident there our long-term perspective, financial strength, discipline investment approach and constant focus on operational excellence will continue to deliver superior results and positions as well for the future.

I would now be happy to take your questions.

Question-and-Answer Session

Operator

Thank you, Mr. Rosenthal. [Operator Instructions:]. We'll have our first question from Faisel Khan with Citigroup.

Faisel Khan - Citigroup

Good morning.

David Rosenthal

Good morning. How are you?

Faisel Khan - Citigroup

All Right, thank you very much. Just had a question on you're the cost in your Upstream business. I know you talked about the prepared remarks that the other respect from third quarter '08, third quarter '09 as a result of higher cost, and I think lower asset sales. Can you talk about what's going on with your efforts for cost reduction, given the reduction in commodity prices in the Upstream business?

David Rosenthal

Sure, I'll be happy to. First, I'll note that on the other items in the third quarter '09 versus third quarter '08 earnings and that 750 million, there is really about three main items about a third of that is from lower gains from assets sales year-on-year about a third does reflect increased operating expenses and that's really activity driven and then the other third really reflects the impact of foreign exchange effects.

If we look at our OpEx in the quarter. OpEx is coming in about as we expected this year. We continue to take a very long-term approach to operating expense management in the business. Just like we do with other aspects of our investment including like the investment plan and other aspects our business. And so when we look at operating expense, we really look at it not on a quarter-to-quarter basis, but how we're doing across the full year and even more so in the longer-term.

And as we look over a long period of time throughout the business cycle both in the upsides and in the downsides because again we don't ever allow the business to really get out of control on the upside, when prices and margins are high. We're not out hiring extra people and adding layers of OpEx under our cost structure and therefore when things turn down as they inevitably do, when -- we don't find ourselves in a position of having to make a dramatic changes, restructuring, reorganizations et cetera.

So, the other part that we're trying to do also is manage OpEx within the overall context of profitability and return on capital employ again throughout a long business cycle.

So, continuing the focus on the long-term but also looking at how we're doing year-to-date. If we look at how we're doing through the first nine months of the year, our total operating expense is down about 11% or $6 billion, certainly energy prices have contributed to that decrease as well as some favorable ForEx. But we have seen about $1 billion of efficiencies through our cost management efforts and of course some of that's been partly offset by new business activity and really the high level of activity and startups and ramp ups that we have ongoing.

But again, looking across the long period of time, we're very pleased with the results of our ongoing focus on OpEx management and how we're doing that so far this year.

Faisel Khan - Citigroup

Great. Thanks. The one last question.

David Rosenthal

Sure

Faisel Khan - Citigroup

On the U.S. Downstream business that continues it is very difficult environment. What is your plans to either rationalize that businesses, on the way it perform or resuscitated to a profit level.

David Rosenthal

We certainly hit the nail on the head on the refining business. We are in a very challenging environment in the refining business. Its not the first time that that we're seeing an environment that we're operating in although the severity and the depth of the downturn this year is pretty dramatic.

We're really focusing today on all of those things that we can control in our circuit. We're very pleased to have very large scale complex refineries. We are managing those across the circuit, taking advantage of our global integrated supply organization and the ability to move feedstocks around the world and then used those feedstocks combined with the integration with our chemical business to really squeeze out every last dollar or margin we can with the molecules that we're feeding into the system.

So it's a challenging environment. We're working everything we can. We're pleased with our things so progressing but it's a long-term business and again we're just we're staying focused everyday on those things that we do and do well, taking advantage of some of the structural benefits that we have and working on three way through what is truly challenging environment.

Faisel Khan - Citigroup

Great. Thank you.

Operator

We'll have our next question from Paul Cheng with Barclays Capital.

Paul Cheng - Barclays Capital

Hey, good morning.

David Rosenthal

Good morning, Paul. How are you?

Paul Cheng - Barclays Capital

Very good. Based on the U.S. Upstream, can you have us understand that. I think you mentioned that part of the sequential comparison, the 440 million is the lesser asset sales gain, can you tell us that how much is the asset sales gain in the second quarter. I think, third quarter is a pretty clean number. Don't have much of a asset sales gain on those. Right?

David Rosenthal

Right. But, well when we look at the U.S. on a sequential basis, the real impact there is what I mentioned in my opening remarks is really the absence of an offshore California Lease Settlement that we had last quarter, really nothing on assets sales.

Paul Cheng - Barclays Capital

Okay. How much is that, I'm sorry. 440.

David Rosenthal

No. Its about half of that. It's about $200 million.

Paul Cheng - Barclays Capital

I'm sorry. And what's the rest of that 440.

David Rosenthal

Well, it's a number of items that are offsetting the favorable lease settlement. We do see some increased operating expenses and some higher activity but nothing else really major to speak of individually.

Paul Cheng - Barclays Capital

Looking at our cost in both Upstream and Downstream, and look at I think in the second quarter you do have some one-off benefit value settlement offshore some asset sales key.

Third quarter is a pretty clean number, right. I mean we don't have much of the assets gain getting on laws and in illegal provision or I would take that both tax impact apparently OpEx.

David Rosenthal

I would say from that perspective third quarter operating expense on absolute basis is pretty clean.

Paul Cheng - Barclays Capital

Okay. Last question on, don't know whether you will be able to make any comment about. I think there is some speculation, we made you guys to cost for their dollar assets and if not directly on them. If you would be able to give us some idea in terms of the event that you're looking at some asset acquisitions. What is the criteria to mix the piece of asset will be interested and what is the most important?

David Rosenthal

As I'm sure you can appreciate just as a matter of course, we don't comment on speculation and rumors that arrowed in the market. But certainly, we are actively looking around the world as we always are looking for new resource opportunities and certainly opportunities were weak and then take that quality resource added to some of our strengths project management and development for example and create an advantage project. So we're out there all the time, we're looking at all resource opportunities and all geographies of the world. And when we find the type of resource that again allows us to apply our strengths to really develop and bring online an advantage project. We will actively pursue those resources.

Paul Cheng - Barclays Capital

Can I sneak in one final one. Any comment you can make in terms of what a return you need for a resource base like that in order for you to pursue?

David Rosenthal

Look I wouldn't comment on any specific commercial parameters of any opportunities that we have around the world. But certainly, we are interested in Iraq and we're continuing to have dialogue with the Iraqis again with the focused on how well first opportunities match up with our strengths and those discussions are ongoing. But, I really wouldn't have any specific comments related to commercial terms.

Paul Cheng - Barclays Capital

Okay, thanks.

David Rosenthal

Thank you, Paul.

Operator

We'll have our next question from Evan Calio with Morgan Stanley.

Evan Calio - Morgan Stanley

Good morning. Guys. Thanks for taking my call.

David Rosenthal

Good morning, Evan.

Evan Calio - Morgan Stanley

How are you doing? My first question relates to the European volumes and may be generally the terms of those contract structures. It has been increasing discussion on Russia in the 2010, whereby they intend to be more forceful within terms of their take or pay contracts.

Can you give us any general characterization of the percentage of your production that's under long-term contracts or any flex characteristic within those contracts as we try to understand that market?

David Rosenthal

If you're referring to the general market in Europe obviously there is a number of contractual arrangements in Europe as its typical in the industry with some contracts tied to term prices, tied to oil markets et cetera. And as you see today currently spot prices for gas that is being bought and sold in the European hubs is below that as many of these long-term take or pay contracts. So a lot of customers throughout the industry are optimizing around those spread.

But as we look at over the market, we really don't expect a lot of changes in the structure of that market. We're certainly from an ExxonMobil perspective. Very pleased with our own situation and if we look broader globally we still see a big demand for long-term contracts to support folks based needs tied to long-term industry. So again as you look quarter-to-quarter, you look at the volatility in what's going on in any of the commodity markets.

I think it's important that we don't get too excited over short-term changes or people looking down the road a quarter or two. As we look structurally across our business, again we're pleased with how we're sitting and really don't see a whole lot of change in the near-term.

Evan Calio - Morgan Stanley

Okay, that's good. Question really to chemicals, I mean. Very strong quarter. Higher margins showing the value of integrating and can you breakdown first of all your sense of attribution between what's lower feed cost structure then net-to-net gas versus higher pricing, would you be really going forward ?

David Rosenthal

Well, I'm glad you've mentioned the strong results we had in the third quarter in our chemical business. Particularly, when you're looking sequentially quarter-on-quarter where earnings rough fair amount. And yes, in the margins we did see about $400 million of improvement quarter-on-quarter. There are some higher realizations in there but I have to tell you that bulk of what we're seeing there is the benefits of advantage feedstocks. In particular for example if you look at our U.S. business, we are really taking advantage of our ability to run gas for example right into our Gulf Coast Steam Crackers and that's providing a nice advantage for us in the business.

So you're right. There is some realizations, but the main the driver here is feedstock flexibility and integration with our refining complex.

Evan Calio - Morgan Stanley

Okay, great. Thank you.

David Rosenthal

Thank you.

Operator

Our next question comes from Mark Flannery with Credit Suisse.

Mark Flannery - Credit Suisse

Good morning.

David Rosenthal

Good morning, Mark.

Mark Flannery - Credit Suisse

Downstream result in the U.S. as least to remember. Can you give us an idea of the split between refining and marketing so you get a notion here quite how bad this timing is and maybe you could do that little quickly international.

David Rosenthal

When we look at Downstream earnings, third quarter of '09 versus third quarter of '08, you see that large $2.6 billion impact on our overall earnings from margin effects, I can tell you that is an industry refining margin story and really everything else that's in there is pretty minor.

I'll also say we saw some negative price finalization effects in there. If you look quarter-on-quarter, those total about $700 million negative was about 500 of that in the U.S. and so that was certainly a driver quarter-on-quarter for those results.

Mark Flannery - Credit Suisse

Okay. I guess this my second question also in the Downstream. Are you sparing any significant capacity at the moment other than the U.S. or Europe, either on distillation end or further inside the refineries that SEC will focus on that?

David Rosenthal

Yeah. As we look across our global refining circuit, I can tell you that, that our conversion units are essentially full. We do see some minor sparing here and there consistent with our overall -- with the overall market dynamics that we're seeing, including weak demand and low margins.

What I think it's important to note, the markets well supplied, we do continue again to see our benefits of our integration with chemicals and we're running all of those complexes on a general interest basis again to optimize the feed slides going into the circuit and than optimizing the products slides coming out the backend.

But, if you look at sparing in terms of our overall global capacity, the amounts are very small and really we're focused on running our refineries really consistent both with our commitment to operational excellent and again our drive to squeeze every last dollar of margin we can and out of the barrel of feedstock.

Mark Flannery - Credit Suisse

Great. Thank you very much.

David Rosenthal

Thank you.

Operator

Our next question comes from the Doug Terreson with ISI Group

Douglas Terreson - ISI Group

Good morning, David.

David Rosenthal

Good morning. How are you?

Douglas Terreson - ISI Group

I'm doing fine. So, I just wanted to clarify. You mentioned that your operating clause were lower by about 11% year-to-date and so, did you refer to the Upstream only, was that a total company operating cost number.

David Rosenthal

No, it was a total when we look across the whole integrated business and we look at total operating expense.

Douglas Terreson - ISI Group

And so, do you have any segmentation as to how that might divide for ExxonMobil between energy and non-energy related costs?

David Rosenthal

I don't have any specific. I can tell you the bulk of it is energy, the lower energy prices that we've seen and we've been able to bring those home to the bottom-line.

Douglas Terreson - ISI Group

Okay. But there was a positive contribution from non-energy?

David Rosenthal

Oh, sure. ForEx, yes.

Douglas Terreson - ISI Group

Okay.

David Rosenthal

Yes, ForEx is another contribution, but it's not quite as big.

But again also we did as a result of our ongoing OpEx management program see about $1 billion in efficiency, so far this year.

Douglas Terreson - ISI Group

Okay. Also in Indonesia and specifically then in Europe, they're have been commentary that the old objectives maybe pushed out. So, just wanted to see if you could get an update if there is one on the development status there and were not there any changes on your end as it relates performance expectations or timings or anything else on that project?

David Rosenthal

Sure, as you know that's -- is a very important project for us. That project is progressing and we continue to progress that project with no major changes in that schedule or what we're going on. There are certain challenges as we progress to the project but I can tell you that full development is progressing and we're pleased with the progress. And as you probably are aware, we have started up early production already and we're working hard to progress to full production startup.

Douglas Terreson - ISI Group

Okay. Thanks a lot.

David Rosenthal

Thank you

Operator

Our next question comes from Mark Gilman with Benchmark Company.

Mark Gilman - The Benchmark Company

David, good morning.

David Rosenthal

Good mooning, Mark. How are you?

Mark Gilman - The Benchmark Company

Good, thanks. To help us as we monitor the ramp up of the mega trends in Qatar. Can you give us what kind of the production we saw from the three rains that were up in the third quarter oil and gas? And then I have a follow-up.

David Rosenthal

Sure. Let me give you an update on Qatar trains through the end of the third quarter. As we look at the Qatargas Train 4, which is the train we started out in the first quarter of the year. That train is up to full capacity, it's running flat out.

As we look at Train 6, which started up earlier in this quarter, that train is also up to full rate now. And as we look to Qatargas 2, Train 5, that train is about two-thirds capacity, but it's ramping up and should be reaching full rate literally, eminently. So, as we're progressing on here.

Those three trains are all running well and performing well and as you know each of those is about 1.2 billion cubic feet a day and about 80,000 barrels a day of liquids gross. But, I think the real key to this is the true success story with how we've been able to crank these trains up and get them running and quickly ramp them up to full capacity.

Mark Gilman - The Benchmark Company

Okay. But David with respect to the gas price realization that you report outside of Europe. I guess its kind of been embedded in your overseas natural gas price realization. How was the gas price for the LNG projects reflected is that include an LNG realization or is that just a sealed realization which would include some specify transfer price?

David Rosenthal

And that's actually question Mark and that realization represents really the LNG realization that we get as the final destination into the market. We don't have transfer prices between the various components of the integrated Qatar value train and so when we report realizations, those are the realizations that we're achieving in the marketplace.

Mark Gilman - The Benchmark Company

Hey, just one final, if I could sneak it in. It looks to me if there was a fairly significant working capital liquidation in the third quarter. I'm guessing around $1 billion. Can you verify that or give me a better number?

David Rosenthal

I'm sure, let's talk about working capital. If you look at working capital just in the third quarter, during the third quarter, the change in working capital was flat. Now when you compare that to last years change in working capital, yeah there was a fairly significant positive impact on our cash flows.

Mark Gilman - The Benchmark Company

Great. Thanks, David.

David Rosenthal

Thanks.

Operator

We'll have our next question from Robert Kessler with Simmons & Company.

Robert Kessler - Simmons & Company International

Good morning, David.

David Rosenthal

Good morning, Robert. How are you this morning?

Robert Kessler - Simmons & Company International

Good, thanks. Couple of small items if you don't mind Piceance production on average in the quarter, what did you guys reach there and how is it production today? And then let's not be too much to ask from the mighty ExxonMobil in terms of size but Horn River that first horizontal well, any comments on initial rates of production from that well.

David Rosenthal

Sure, I'll be happy to answer both of those questions. Piceance is

come along very well. Its ramping up as expected and I think today we're producing about a 130 Mcfe in part of their. As we look at the Horn River, we are -- after our very successful program last year, we are ramping up a program for this year. We're currently drilling our first quarter horizontal well but we won't have any results to talk about until in the next year.

Robert Kessler - Simmons & Company International

Okay. Thanks very much.

David Rosenthal

Thank you.

Operator

(Operator Instructions). Our next question will come from Pavel Molchanov with Raymond James.

Pavel Molchanov - Raymond James

Thanks for taking my question. First on the company's biofuel strategy. In addition to the synthetic genomics investment I guess it could be 600 million potentially. Are there any other biofuel developments that you're considering or currently progressing less?

David Rosenthal

Lets talk about the biofuels program. As we look at a range of things that we're working on, in the alternative energy space. Of course, we have our ongoing G-set program, where we have a number of investments that we're working on with them in whole alternative energy space.

As we look specifically to biofuels. Yes, we recently announced partnership with synthetic genomics looking at LG is our biggest trust right now and we're very excited about this opportunity. And right, if things progress along as we expect, we're looking at spending $600 million in that business.

Pavel Molchanov - Raymond James

That's great. And then second question on a very different topic. You did asked quite a bit about your dividend policy that always had a yield that's generally below that pretty much any of other integrated. But how do you think about that and would you ever consider making one-time dividend adjustment to bring up the yield to be more inline within majors?

David Rosenthal

Yeah. When we look at dividend policy its really a part of our overall strategy of cash management as we talked before. As we look at our cash flows we are finding a very, very aggressive and robust investment plan first. We are committed continuing to deliver dividends that are growing overtime to our shareholders, dividends that they can count on. And I wouldn't see as deviating format in any form that you might mention. Again its part of an overall strategy returning cash to shareholders and we're very comfortable with the structure we have in place and really the total distributions that we've been able to deliver to our shareholders.

Pavel Molchanov - Raymond James

Its great. Appreciate it.

David Rosenthal

Thank you.

Operator

And we'll have our next question from Paul Sankey with Deutsche Bank.

Paul Sankey - Deutsche Bank Securities

Hello David.

David Rosenthal

Good morning, Paul. How are you today?

Paul Sankey - Deutsche Bank Securities

Very good. Thank you. David can you give your CapEx a little bit. There's a number things that firstly, the guidance that you gave, I'm sure your recall with the rounds eyeballing at $28 billion to the year, of which about 24 billion would be in the Upstream.

If I look at your numbers here for the year for '09, obviously, you've actually kind of more or less flattened down between up in chemicals but both very much inline with the guidance you gave. But really maturity behind on your Upstream CapEx and within that interestingly up CapEx in the U.S. Could you just talk a little bit more about why that so much lower than the guidance. Thanks.

David Rosenthal

Yeah, Paul. I'd be happy to provide you an update on our CapEx program for the year. As we look out across the balance of the year and what we've been able to achieve so far this year. We are expecting the 2009 full year CapEx to the inline with 2008 and that put us on-track for another record year.

As we look out of the investment plan and what we're seeing relative to the guidance we gave in March. There are couple of factors that are noteworthy. The first of which is it looks like we're going to be able capture about $600 million in cost savings. And we're real pleased with this, you might recall we talk back in March that there tends to be a lag cost come down in the industry and how hard we were going to work to push that lag out of the system. And I'm pleased to report again as we look we think we're going to get six or so $100 million out of that.

I think some of the other things that we've seen relative to that number is really the pace of some of the government approvals on long large projects and some of the permitting processes have gone a little slower than we expected and that's moved things out just a little bit.

But, I have to tell you from our perspective, we believe it's very important our all aspects of a project to get things right at the front-end and that's everything from design, selection and concept, front-end engineering. But also all of our relationships with the rest of the parties with regards to approvals and permits, just to make sure we're all on the same page and everything is squared away, before we start putting steel in the ground.

Other effects that we've seen kind of across the Board. There have been some additional timing and pace impacts with regard to projects that are operated by others as they deal with some of their own constraints. But I would leave you with this morning is that all of project are progressing, nothing has been taken down or cancelled. Nothing have been taken off the table. We remained focused on the long-term investment plan that we've cabled with you in the past and there is no change to our long-term investment strategy. We're full speed ahead and I have to tell you when we look a cost our slight of investments and the projects that are progressing. We're pretty happy with how things are moving and the fact that we're still on pace for another record year.

Paul Sankey - Deutsche Bank Securities

All right, thanks. The number was about 26 billion of CapEx to last year.

David Rosenthal

Yeah. That's about what it was last year and we'd expect to be inline with that, I mean, I can't give you a specific number as a very large investment plan and a lot of moving parts but I think rationally speaking that's probably a big number.

David Rosenthal

Operator could you...? Thank you.

Paul Sankey - Deutsche Bank Securities

Okay, that's great. And if we just go back to even then you still was really 3 billion below the guidance that you gave for the year, if you do 26 and your telling me that 600 million was cost savings, both cost savings that we're thinking all Upstream?

David Rosenthal

The vast majority of that is in the Upstream, yes.

Paul Sankey - Deutsche Bank Securities

And if I keep digging, what is it?

David Rosenthal

I don't have the split with me Paul, by just looking at the ratio of where we're spending all of our investment dollars. All -- and if not all, certainly the vast majority of that will be in the Upstream.

Paul Sankey - Deutsche Bank Securities

Drilling cost...

David Rosenthal

All right. Thank you very much.

Paul Sankey - Deutsche Bank Securities

David.

David Rosenthal

Sure.

Paul Sankey - Deutsche Bank Securities

That's what I was saying, is it drilling cost so?

David Rosenthal

Oh, No its kind of across the board, I don't have any real specific breakdowns on specific aspects of the program, of course we're seeing savings really in all parts of the business.

Paul Sankey - Deutsche Bank Securities

Okay. And then it would be the basic government approval part. Would that be what another billion or so against the 3 billion that I'm trying to rationalize.

David Rosenthal

I don't have a specific number associated with that. That's just one of the factors again. There are lot of factors, a lot of moving parts but that's some impact, I think again, I think the real key is the fact that all of the projects that we've talked to you about in the past, they are progressing and no changes in how those things are looking.

Paul Sankey - Deutsche Bank Securities

Is this -- when you were guiding towards at the Analysts Meeting towards your annual spending that you're anticipating to rise that we've seen in U.S., I mean is that very much inline with what you saw happened or you accelerated activity.

David Rosenthal

No, I think the CapEx levels that we're seeing in the U.S. are pretty much on-track with our expectations.

Paul Sankey - Deutsche Bank Securities

Okay. If I could just get one very specific one, U.S. re-gas terminal. Could you just update us on when you expect to bring gas in U.S. in next year. Thanks.

David Rosenthal

Sure. We would expect to see that in 2010, somewhere around mid-year.

Paul Sankey - Deutsche Bank Securities

Yeah. Okay, thanks a lot.

David Rosenthal

All right. Thank you, Paul.

Operator

Our next question will come from Neil McMahon with Sanford Bernstein.

Neil McMahon - Sanford Bernstein

Hello. Few questions. First just looking at your Upstream earnings, probably a question both on our realizations and also on some cost. And how many of your potential business lines or realization are associated for price lags in the quarter? I run this general idea of earnings and did you see the DD&A uplift specifically in your Upstream business from any startup there -- any of that LNG plants both re-gas and liquid fraction.

David Rosenthal

Sure. Let me hit both of those as we look at our realizations, we really don't have any specifics with regards to the question you asked in terms of how much is lagged and how much isn't. If we look at on the expense side as you would expect what the ramp up of our large projects that are coming online. We have seen some of course increase in OpEx related to that and certainly consistent with the rest of industry when you look at the high levels of CapEx that we've seen over the last few years. We've seen some increase in D and D rates, but nothing out of the ordinary.

Neil McMahon - Sanford Bernstein

Okay. Just a question really going to the Qatar and not actually LNG its probably when they compensates. Could you give us any color on where the compensates are actually going. Like how much maybe being used locally and any refineries or in chemical plants and how much to sort of getting exported it and what you're doing with it. And what the sort of rough price you're getting for that relative to liquids?

David Rosenthal

Sure, Neil. When we look at the liquids that are being produced, those liquids are being exported in the global markets. I wouldn't delineate or choose any one particular geographic location. But they are all going into export. And in terms of pricing, they're going out at market prices.

Neil McMahon - Sanford Bernstein

Just a last real quick one for me. You've got your share buybacks dropping into the fourth quarter at least that's your guidance at 3 billion in this quarter. Given the rise in oil and gas prices as that was seen, but maybe you could give us some comments behind that one. Surely your cash flow should be increasing if nothing else into that sort of environment in the fourth quarter.

David Rosenthal

Sure Neil. When we look at the pace of the share buyback program, I'd make a couple of comments for you. First I wouldn't read too much in the quarterly changes. We are always evaluating our cash flows as we look at the business on a quarter basis and really it's all designed to maintain our deliberate discipline management of our capital structure. And the only thing I'd probably point out that's noteworthy is that we're still the only company in the industry that has a buyback program underway.

Neil McMahon - Sanford Bernstein

Great. Thanks.

David Rosenthal

We probably have time for just one more question.

Operator

And that final will come from Mark Alkon (ph) with Citigroup.

Unidentified Analyst

Apologizes. Just a follow-up question.

David Rosenthal

No problem. What can I do for you?

Unidentified Analyst

On -- you've mentioned the price realization -- price finalization impacts, I think you talked about the FX impacts too. Can you just be more specific sequentially quarter-over-quarter, what the price finalization and FX impacts for cost of business?

David Rosenthal

If we look at -- if we look first at the price finalization impact sequentially -- in total if you look sequentially, there are only about a $100 million positive generally about half of that in U.S. and half overseas.

Unidentified Analyst

Great. Thanks. And FX?

David Rosenthal

If we look at our foreign exchange impacts. Again if you're looking, lets look at both comparative periods. If you look third quarter '09 versus third quarter '08 that total for the company was about $100 million positive. And then if you look sequentially the total its about $100 million negative.

Unidentified Analyst

Great, appreciate it. Thank you very much.

David Rosenthal

Great. Thank you.

Operator

And that concludes the questions-and-answer session. I'd like to turn the conference back over to Mr. Rosenthal for concluding remarks.

David Rosenthal

Thank you very much. In summary, ExxonMobil results reflects solid, financial and operating performance during the period of challenging market conditions.

The first nine months of 2009 were marked by continued global economic weakness, resulting in lower demand and volatile commodity prices and margins. In the near-term, it is difficult to predict the timing of global economic recovery. However, ExxonMobil's long-term orientation enables us to invest through the cycle to develop advantaged, new capacity to meet demand growth and maximize shareholder value.

A lot of thank you for your time and your questions this morning.

Operator

And that concludes today's conference. Thank you for your participation.

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Source: Exxon Mobil Q3 2009 Earnings Call Transcript
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