Executives
Henry Hubble - VP of IR and Secretary
Analysts
Daniel Barcelo - Banc of America Securities
Doug Terreson - Morgan Stanley
Nikki Decker - Bear Stearns
Doug Leggate - Citigroup
Neil McMahon - Sanford Bernstein
Michael LaMotte - JP Morgan
John Herrlin - Merrill Lynch
Paul Cheng - Lehmann Brothers
Mark Gilman - Benchmark Company
Paul Sankey - Deutsche Bank
Mark Flannery - Credit Suisse
ExxonMobil Corporation (XOM) Q3 2007 Earnings Call November 1, 2007 11:00 AM ET
Operator
Good day everyone and welcome to this ExxonMobil Corporation Third Quarter 2007 Earnings Call. Today’s call is being recorded. At this time for opening remarks, I would like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. Henry Hubble. Please go ahead sir.
Henry Hubble
Thank you. Good morning and welcome to ExxonMobil’s teleconference and webcast on our third quarter 2007 financial and operating results.
As you are aware from this morning’s press release we had another good quarter as the fundamentals of our business remained strong. Our integrated business model, long standing commitment to the integrity of our operations and disciplined approach to prudently invest and meet long-term demand growth continue to position the company to benefit from robust industry conditions.
Before we go further, I’d like to draw your attention to our cautionary statement. Please note that estimates, plans, and projections are forward-looking statements. Actual results, including resource recoveries, volume growth, and project outcomes could differ materially due to factors I discuss and factors noted in our SEC filings.
Please see factors affecting future results and the Form 8-K we furnished this morning, which are available through the Investors section of our website.
Please also see the frequently used terms, the supplements to this morning's press release and the 2006 financial and operating review on our website.
This material defines key terms I will use today, shows ExxonMobil’s net interest in specific projects and includes our SEC Regulation G disclosure.
Now I’m pleased to turn your attention to the third quarter.
ExxonMobil’s third quarter net income and normalized earnings were $9.4 billion, down $1.1 billion from 2006 record third quarter results primarily due to lower Downstream and chemical margins. Earnings per share were $1.70 reflecting continued strong earnings performance and the benefits of our ongoing share purchase program.
Before I discuss specific business results, I’d like to discuss some of our recently achieved milestones.
In the Upstream, the Ormen Lange deepwater natural gas project off the coast of Norway began production this quarter. At full production, the development will produce more than 2 billion cubic feet of gas per day.
The gas will be exported through the world's longest sub-sea pipeline, approximately 750 miles to the UK.
First production was also achieved this quarter from the ExxonMobil operated Marimba North project offshore Angola. The project was completed ahead of schedule and within budget. This is the first tie-back development to the Kizomba A infrastructure to cost effectively develop new capacity by utilizing existing field facilities. The project will develop 80 million barrels of oil and have peak production capacity of 40,000 barrels per day.
On October 12, gas deliveries from the Statfjord Late Life Project started up via the Tampen Link pipeline in the Norwegian North Sea. This project will increase ultimate recovery from the field by 360 million oil equivalent barrels and extend field life up to 2020.
Peak production is expected to reach 360 million cubic feet of gas per day and 70,000 barrels of crude and condensate per day.
These three startups, together with the projects, which began production earlier this year, RasGas Train 5 in Qatar, Waddenzee in the Netherlands, and Rosa offshore Angola bring our 2007 to date major product startups to six.
In exploration, we had several notable milestones this quarter. ExxonMobil was awarded two exploration licenses, offshore of western Greenland further enhancing our strong portfolio of Arctic exploration opportunities.
The West Disko Block 4 and Block 6 together cover over 6 million acres and are in 150 to 1,300 feet of water.
In the recent central Gulf of Mexico lease sale, ExxonMobil was the high bidder for 13 offshore blocks in the Gulf of Mexico totaling over 70,000 acres.
Also this quarter together with our partners we made a new discovery in the ultra-deep MTPS block 100 miles off the coast of the Republic of the Congo. The Cassiopée discovery well was drilled to a depth of approximately 10,000 feet and tested at 5,600 barrels of oil per day.
ExxonMobil interest in the block is 30%. These milestones continue to reflect the geographic diversity and strength of our industry leading Upstream portfolio.
In the Downstream, our feed diversification activities continued this quarter. We ran 34 crudes that were new to individual refineries and three that were new to ExxonMobil. We also maintained focus on our margin enhancement strategy which includes increasing the contribution from our refining operations through reliability improvements and effective technology deployment while incrementally adding to our crude and conversion processing capacity.
Also in the third quarter Q3, ExxonMobil launched our fuels marketing joint venture in the Fujianprovince of China, with our partners, Sinopec and Saudi Aramco. This venture, which is part of our fully integrated Fujian project, covers retail and wholesale sales of gasoline, diesel, and other petroleum products.
ExxonMobil’s investments in the Fujian refining, petrochemical and fuels marketing joint ventures demonstrate our commitment to advantage strategic downstream and chemical investments to meet growing demand around the world.
In our chemical business, ExxonMobil announced that we will build a second world scale petrochemical project at our integrated refining and chemical facility in Singapore.
The new project will include a 1 million ton per year ethylene steam cracker, polyethylene, polypropylene, especially elastomer and benzene units and expansions to our exiting oxoalcohol and paraxylene units.
ExxonMobil will construct a 220 mega watt cogeneration unit as part of the overall investment.
This project with the expected startup in 2011 will be key to meeting the growing demand for ExxonMobil chemical products in Asia.
The project will employ ExxonMobil’s’ latest proprietary technologies enabling a broad range of feed stocks to be processed and converted into premium products.
In the quarter, we also announced our investment to expand the paraxylene and benzene production facilities at our Rotterdam Aromatics plant by 25 and 20% respectively.
The new production unit will employ ExxonMobil’s proprietary PxMax technology, which increased paraxylene production and improves process efficiency.
ExxonMobil chemical also began commercial production of butyl rubber at the Notre Dame de Gravenchon facility using proprietary breakthrough technology. This technology improves energy efficiency and enables significant capacity increases at existing facilities.
The integration of these new projects into our existing refining and chemical operations are further examples of our strategy to develop and rapidly deploy differentiated technologies and selectively invest in advantage projects to capture the full benefits of integration across all ExxonMobil operations.
Turning now to the business line results. Upstream earnings in the third quarter were$ 6.3 billion, down $200 million from the third quarter of 2006.
Improved crude realizations were more than offset by reduced natural gas realizations, higher expenses, including the impact of major project startups and lower property sales.
Worldwide crude realizations were $71.46 per barrel, up $6.32 from the third quarter 2006.
Upstream after-tax unit earnings in the third quarter of 2007 at $17.47 per barrel were in line with last year.
In total, oil equivalent volumes were down 2% from the third quarter of 2006.
As you are aware, on September 6th, ExxonMobil filed a request for arbitration with the InternationalCenter for Settlement of Investment Disputes following the expropriation of assets in Venezuela in June.
Excluding Venezuela volume effects, as well as entitlement divestment and quota impacts, production was actually up 3% in the third quarter. That increase was driven by increased volumes from major project ramp-ups in Russia, West Africa, and Qatar, which more than offset natural field decline.
Turning to liquids production, volumes fell by 111,000 barrels per day, or 4% from the same quarter last year, primarily due to entitlement effects in Africa and the absence of Venezuela volumes.
Venezuela accounted for about 40% of the reduction.
Natural field decline was offset by project related increases in Russia and West Africa.
Gas volumes were up 163 million cubic feet per day from last year, as higher production in Qatar primarily due to the startup of RasGas Train 5 more than offset naturalized fuel decline in mature areas.
Now turning to the sequential comparison.
Versus the second quarter of 2007, Upstream earnings increased by nearly $350 million, higher realizations were partially offset by lower liquids production and seasonally lower natural gas demand.
Liquids production decreased 5% including the impact of entitlement effects in Africa and the absence of Venezuela volumes.
Natural gas production was down 5% primarily due to lower volumes in Europe reflecting seasonally lower demand, divestment effects, and scheduled maintenance.
For further data on regional volumes please refer to the press release and IR supplement.
Now turning to the Downstream results. Third quarter Downstream earnings were $2 billion, down approximately $735 million from record results in the third quarter of 2006. Lower margins reduced earnings by $610 million with decreases in refining and fuels marketing margins partially offset by improved lubes marketing margins.
Volume mix effects increased earnings by $120 million, as we benefited from our continued focus on feed stock flexibility, capacity utilization, and product optimization.
These more than offset the impact of the higher plant turn around activity.
Other items reduced earnings by $250 million reflecting increased maintenance activity and the absence of positive tax effects in third Quarter 2006.
Sequentially, Q3 earnings decreased by almost $1.4 billion, due to markedly lower refining margins. Volume mix effects were positive $110 million due to lower planned maintenance in the US and refinery optimization activities.
Other factors reduced earnings by $240 million, primarily the absence of positive impact from the Inglestadt divestment in the second quarter.
Third quarter chemical earnings were $1.2 billion. Earnings were down $150 million versus the record third quarter 2006 as higher feed stock costs more than offset increased realizations.
Positive mix effects benefited earnings by $30 million. Other factors increased earnings by $65 million, including positive tax effects.
Sequentially, third quarter chemicals earnings increased by $190 million versus the second quarter of 2007. Improved margins benefited earnings by $110 million, while volume mix effects were negative $35 million.
Other impacts increased earnings by $115 million, including positive tax effects.
Turning now to our corporate and financing segment. The corporation recorded third quarter expenses of $92 million in the corporate and financing segment, unchanged from the third quarter of 2006.
The effective tax rate for the third quarter was 46%. The corporation distributed almost $9 billion to shareholders in the third quarter, through dividends and share purchases to reduce shares outstanding.
During the quarter, ExxonMobil purchased $7 billion in shares, in excess of dilution, reducing the number of shares outstanding by 1.5% and further demonstrating our ongoing commitment to return cash to our shareholders.
CapEx in the third quarter was $5.4 billion, an increase of 7.5% from the third quarter 2006.
At the end of the third quarter our cash balance was $36 billion and debt was $9 billion.
In summary, these results highlight the fundamental strength of our business; our ability to deliver superior operational performance and continue to grow our integrated capabilities while continuing to position ourselves for future demand growth and create value for our shareholders.
That concludes my prepared remarks and I would now be happy to take your questions.
Question-and-Answer Session
Operator
Thank you Mr. Hubble. The question and answer session will be conducted electronically. (Operator Instructions).
We will take our first question from Dan Barcelo with Banc of America. Please go ahead.
Dan Barcelo - Banc of America
Yes, good morning Henry. Regarding one of your comments about the redistribution of cash to shareholders, you mentioned the $7 billion rate in the third quarter. Are you able to provide any color into the fourth quarter and into ‘08 at this point? And then the second question, I’ll just lay them out now, it was on the production side; could you just run through, you gave good detail on the entitlement effects, could you just reiterate the effects? In particular, I’m looking at oil in West Africa, just for this quarter; what was that impact specifically over there?
Henry Hubble
Well as you know unless we are making a change, we don’t provide forward guidance on our share repurchases. We’ve been at the $7 billion here, last quarter, and for the -- for about the last year.
On the other question on the volume side and the specific entitlement effects associated in Africa. You see the African volumes were down, basically due to entitlement effects. There the new project volumes there have been performing well and they have more than offset natural field decline, but that’s really what you are seeing and that’s really, as you look at the entitlement effects, as you know, some of that production comes from production sharing contracts, and in some of the PSCs, the net entitlement is reduced with cumulative production or profitability thresholds are reached.
And you know, as you think about this, the impacts are larger with the strong crude prices that we’ve seen. But frankly when you step back from it, I mean the, earnings are better and the overall financial performance of these projects are better with the higher [project]. All of the projects in the area are performing well, so that really is the impact, its entitlement effects.
Dan Barcelo - Banc of America
Okay, Thank you
Operator
We will take our next question with Doug Terreson from Morgan Stanley please go ahead
Doug Terreson - Morgan Stanley
Good morning Henry.
Henry Hubble
Hi Doug.
Doug Terreson - Morgan Stanley
Okay, so I want to ask the entitlement question too.
Henry Hubble
Alright.
Doug Terreson - Morgan Stanley
And this is really kind of a clarification. When you said, at least I think you said that production rose about 3% before considering entitlement effects. Were you referring to the global base of production rather than specific geographical region or did you even say that? Could you kind of…?
Henry Hubble
That was a global comment.
Doug Terreson - Morgan Stanley
Okay.
Henry Hubble
If you look at on an OEB basis we were down 2% on the -- this year versus last year third quarter. About 1% of that effect was associated with Venezuela
Doug Terreson - Morgan Stanley
Okay.
Henry Hubble
And then there is about 3.5 that are associated with entitlements and then you also have some other the smaller effects in quotas and divestments. But when you take those effects out, that is the 3%. When you look at -- basically, that is coming from the projects and projects that are coming on faster than rates of decline. So, that is what you see there
Doug Terreson - Morgan Stanley
Okay. And while we are on the subject of Africa, could you provide an update on the profile in Chad, investment profile in Chad and any update that you might have there?
Henry Hubble
I don’t have anything specific, on Chad. There is, we are continuing with our project. Our 2007 drilling program is basically complete at this point. There is nothing really specific to highlight there.
Doug Terreson - Morgan Stanley
Okay. Great, thanks a lot
Henry Hubble
Okay.
Operator
We will take our next question with Nikki Decker with Bear Stearns. Please go ahead
Nikki Decker - Bear Stearns
Good morning Henry
Henry Hubble
Hi Nikki
Nikki Decker - Bear Stearns
Just getting back to the Africa volumes, taking entitlement effects into account, is it reasonable to expect thought from this phase that Africa volumes might rise due to new production on block 15 and 17 in Angola and also in Nigeria?
Henry Hubble
Well, as we bring on new projects, they do of course add to that capacity, but as you go forward, and that’s really the effect that we are seeing here is that at these higher prices, the prices that we are seeing today -- I don’t know what those future effects are going to be. What happens is you -- as you have these higher prices, of course, you are recovering your costs faster you are recovering -- you have more profit barrels to share but you are doing that with less barrels.
And so overall we are very pleased with the projects and they are performing very well but we do see less volumes associated with them. Our focus is, though on the returns associated with those projects. Of course, it means better performance not just for us, but for our host governments as well. And we’ve got a good slate of projects, and a good pipeline of projects coming along. So we feel confident about the future but that’s the impact that we are seeing in the quarter.
Nikki Decker - Bear Stearns
Okay thanks. And for my second question I’d like to switch to the Downstream. Your competitors have been talking about the difficulty in capturing margins relative to properties. Your Downstream results were somewhat consistent with the industry. Maybe, if you could, Henry, quantify the benefit of your feed stock flexibility and perhaps comment on year-over-year marketing results?
Henry Hubble
If you look at the margin impacts that we had in the quarter, we are down over $600 billion off of what were very strong third quarter ’06 performance. The bulk of that is in refining, I guess if you look at that it's about two-thirds or a little better. And then the balance was in marketing. If I think about our overall capability in this area though, we have strong margins capture. The programs that we have with, in particular, the molecule management technology that we have to help capture the, investments that we’ve made over many years in high conversion refining capacity, allow us to continue to take advantage of the high clean/dirty spreads that are out there and the process crude processing flexibility that we have.
So we are constantly going after new crudes that are either advantaged for our processing capabilities and the molecule management technology, both on the planning standpoint as well as real time operations. That really help us manage both on a molecular basis how to maximize profitability in the refining units as well as our chemical plants when we have those integrated facilities. It's really, we think, a unique advantage in the industry
Nikki Decker - Bear Stearns
Okay, that’s great. Thanks Henry.
Henry Hubble
Thanks
Operator
We will take our next question from Doug Leggate with Citigroup. Please go ahead.
Doug Leggate - Citigroup
Thank you. Good morning Henry.
Henry Hubble
Hi Doug
Doug Leggate - Citigroup
Henry I’m going to flog this Africa horse a little bit more I’m afraid
Henry Hubble
Okay
Doug Leggate - Citigroup
When we look at the actual volumes obviously we are down about 120 million barrels per day year over year, a little less than that. Oil prices on average were only up $5. Have we moved out of cost recovery, in any significant way, year-over-year in that region?
Henry Hubble
Yeah, as you know, they are made up of individual of both components, cost recovery as well as profit sharing, and because we have number of different projects, they all have different arrangements, they have different points of recovery. That effect is going on and you also have just the impacts from the higher prices. So yes, there are impacts that are associated with those entitlements and cost recovery is a piece of that. And again, I think the real key here though, is there is no question that these projects are performing better than, certainly, when we approved them. It worked better for us and better for the host governments because of: one, the projects are performing well. They were delivered at lower costs than we originally anticipated, they came in on schedule, and they’ve basically been performing well. But one of the consequences of the higher prices is there are less barrels
Doug Leggate - Citigroup
I guess I’ll follow one related to that, so if oil prices stayed let's assume at Q3 average level, new projects coming on, we would expect these volumes to remain at that kind of level in Africa. Third quarter you are going to have continuing impacts,
Henry Hubble
I mean, you are going to have continuing impacts, but I’m not going to get into forward projection on what that will be. We will give… We will go through and give an update at our Analysts Meeting and that will reflect another year of higher prices and the impacts associated with that in the projections that we have going forward.
Doug Leggate - Citigroup
Okay, I guess a final one from me. And I guess this classifies as my second question. If we look at your capture in the Upstream you always show this chart of realized prices versus your net income per barrel. It did appear to move off of the line quite a bit this time, suggesting that something else is going on. You mentioned higher expenses in the press release, can you maybe just try and quantify if it was that or maybe the lack of property sales, if that was a meaningful issue this quarter. So help us understand a little bit why that capture rate appears to have deteriorated this quarter
Henry Hubble
Yeah, if you look at the other earnings effects and that’s really what really what can impact that or also contributes to it, there where. The biggest single factor is higher expenses; which is over half of the total. A lot of that higher is both cash and non-cash but a big piece associated with non-cash associated with the new projects that we started up.; so you are seeing higher depreciations associated with those.
In terms of the balance we did see some positive earnings impacts from asset sales in 2006 that were higher than what we had in this quarter so the absence of those on a relative basis caused some of that decline. And we also had some negative Forex effects in there, there is about $80 million associated with that. So those were the big factors. But again, as you point out, if you look at the absolute level of net income per barrel, it is strong and I think that really is the best reflection of the overall performance of the portfolio. When you think about all of the things that go into, the quality, projects, the quality of the project management, the performance of those projects, cost control. All of that basically ends up being reflected in that very strong net income per barrel number that we have in the industry
Doug Leggate - Citigroup
Great thanks a lot, Henry
Operator
We will take out next question with Neil McMahon with Sanford Bernstein
Neil McMahon - Sanford Bernstein
Good morning guys.
Henry Hubble
Hi Neil.
Neil McMahon - Sanford Bernstein
Just two questions as you allow? The first question, really, just an update on your wildcat exploration that has been going on this year, maybe first on the Columbia well you are drilling in the Caribbean? And second anything further on the Orphan Basin offshore, north of Newfoundland. And then for the second question, if you look at your US oil and liquids production, year-over-year it hasn’t gone down very much at all. And I’m wondering if that is due to a reduction in any land sales there, or are you actually doing something more dramatic in terms of investing onshore US?
Henry Hubble
Let me just first hit -- in Colombia the Tayrona block, we are drilling our first well, the Araza I and really I’d want to refer any other questions to Petrobras who is the operator of that.
The other piece, I guess, was associated with the Orphan. We are still progressing the technical work. We are looking to drill the next well next year. We have drilled the Great Barasway well there and we are evaluating that data and we will decide what the next prospect will be. Then, if you look at the volumes associated with the US, on the year-on-year, basically, the net impact there has been essentially improved reliability, a piece of that, no big story. Some of that was associated with the Alaska operations, as you may recall. But basically, we have a good continuing work program there and that’s the net effect of it all.
Neil McMahon - Sanford Bernstein
Okay, so that’s mainly an Alaska effect that’s [something like]...
Henry Hubble
That’s a piece of it, yes.
Neil McMahon - Sanford Bernstein
Okay thanks.
Henry Hubble
Yes
Operator
We will take our next question from Michael LaMotte with JP Morgan. Please go ahead
Michael LaMotte - JP Morgan
Thanks. Good morning Henry.
Henry Hubble
Hi
Michael LaMotte - JP Morgan
I was hoping you could shed a little light on heavy oil and EOR opportunities in the Middle East, in particular the chatter about your involvement in Kuwait on the heavy oil side.
Henry Hubble
Yes. You know, I can’t say a lot there. They have a number of heavy oil prospects in Kuwait. There are studies going on, we are very interested in participating in that. We are participating in studies there at this point. But I really, you know, but if you are looking for more specific on that, I think KOC is probably the right people to talk to on that one.
Michael LaMotte - JP Morgan
Okay, maybe I can ask the question a little differently then. If I understand the talk around them at this point, there are TSA agreements that would not allow you or an operator to actually book reserves. In the past, you tended to shy away from that kind of contract. I am curious as to sort of maybe a change in the way of strategic thinking.
Henry Hubble
There is nothing you know. Yes, I have no comment on that. The studies are still underway. There has been no decisions made. It is way premature to decide how this is going to be worked. So, I just really can’t add anything to that. Again if you want to get some specifics on how KOC is thinking about it then I think that is the right place to start.
Michael LaMotte - JP Morgan
Okay. And then second question, getting back to this entitlement issue, I know it is early coming into year end. But any thought on impact on reserves associated with entitlement changes?
Henry Hubble
Well, we will go through and update that again with our early or first quarter release on that. So I really can’t give you anything at this point. All of the impacts will be reflected in those outlooks.
Michael LaMotte - JP Morgan
Okay. Thanks Henry
Henry Hubble
Yes.
Operator
We will take our next question from John Herrlin with Merrill Lynch. Please go ahead.
John Herrlin - Merrill Lynch
Yes, thanks.
Henry Hubble
Hi John.
John Herrlin - Merrill Lynch
In Europe, your gas sales were kind of low and you mentioned earlier that it was seasonal and also asset sales.
Henry Hubble
Yes
John Herrlin - Merrill Lynch
Was it mainly seasonal? Can you give us a kind of a split?
Henry Hubble
In Europe the biggest piece was associated with, if you look at the sequential piece, the combined effect was effect of some net based client. The higher maintenance, divestments were the next biggest piece, and then was a lower seasonal demand. So if you take a look at the demand piece, it is about fifty of that.
John Herrlin - Merrill Lynch
Okay, taking that to oil since those volumes were down a bunch too, was that also maintenance related or decline?
Henry Hubble
Well, if you look at, looking on year on year or sequentially?
John Herrlin - Merrill Lynch
Sequentially in Europe.
Henry Hubble
Okay let me look at that. Yes, it’s basically the bulk of it is field decline there in the period. Then you have some that’s a big effect. It’s a mature area, and that’s the effect you are seeing.
John Herrlin - Merrill Lynch
Okay that’s fine. Getting back to Kuwait, I will try the question a different way or a different question.
Henry Hubble
Okay.
John Herrlin - Merrill Lynch
You had success obviously with Upper Zakum, I am not familiar with the geology for what you are looking at. Are these carbonates?
Henry Hubble
They are heavy oil deposits. I am not familiar with the specifics of the field there.
John Herrlin - Merrill Lynch
Okay. And then revisiting West Africa again, you probably won’t want to do this, but could you perhaps break down the entitlement effects by EG, Angola and Nigeria, or not possible?
Henry Hubble
I don’t think it’s appropriate to break those down.
John Herrlin - Merrill Lynch
All right. That's fine. I appreciate it, thank you.
Operator
We will take our next question from Paul Cheng with Lehmann Brothers. Please go ahead.
Paul Cheng - Lehmann Brothers
Hey Henry, good morning. I have to apologize first because I came in late so you may have already covered in your prepared remarks. Did you break down what is the FX tax on inventory or asset sales gains or loss on those items in the third quarter versus the second quarter?
Henry Hubble
No I haven’t. But the Forex impact. If you look at the net impact for the third quarter they were pretty small. Like $14 million something in that range, quite small. We are kind of naturally hedged. We see some negative impacts in the Upstream. We see positive impacts in Downstream in chemicals that basically offset that.
Paul Cheng - Lehmann Brothers
All right. Can you break down by division and force?
Henry Hubble
Upstream is about, as I mentioned about 80 negative and then the bulk of the offsetting was in chemicals.
Paul Cheng - Lehmann Brothers
Right. I am talking about sequentially from the second quarter level. Is the 80 still a good number? I thought
Henry Hubble
Yes, that's pretty close. And the same, the net effect for total there, when you look at it sequentially there was less offset. Not much offset from the Downstream chemicals part of business. So that kind of carried through to the bottom line.
Paul Cheng - Lehmann Brothers
So, it’s about 80 million that's sequentially? Right?
Henry Hubble
That’s correct in total.
Paul Cheng - Lehmann Brothers
In total?
Henry Hubble
Right.
Paul Cheng - Lehmann Brothers
How about any tax adjustment? Or inventory gain or loss? Market sales?
Henry Hubble
We are in a LIFO basis, and we don't take any, have any inventory effects during the year.
Paul Cheng - Lehmann Brothers
How about price finalization?
Henry Hubble
Price finalization, if you look at an absolute basis we had about 50 million. Now you look, again? Talking sequential?
Paul Cheng - Lehmann Brothers
Yes.
Henry Hubble
Yes, so about 50 million in the US on an absolute basis, 65 total and then if you look at the Delta it was like 30 in total.
Paul Cheng - Lehmann Brothers
I presume that, that is a positive, right?
Henry Hubble
Excuse me, I’m sorry. In the third quarter of '07 the absolute level is all negative. So, it is about 65 million negative. If you look at the change it was positive relative to the prior, to the second quarter, but quite small.
Paul Cheng - Lehmann Brothers
Right. And do you indicate that one of the reason about your perhaps a little but lower unit profitability in terms of the capture rate comparing to the third quarter of last year, is that you have lesser after-sales gain. So, how big is the asset sales gain and on an absolute level?
Henry Hubble
I don’t have a breakdown. The two big factors we had in the absence of sales was associated with the Carson Creek in Canada and then we had some sales in France last year that were, but I don't have a total for you there. Those were the two that were kind of the absence of those two. And basically mature areas.
Paul Cheng - Lehmann Brothers
I understand about last year I am talking about in this year third quarter?
Henry Hubble
Right. In this third quarter, we didn’t have a whole lot in there that was a little bit we had in the south North Sea sale, associated with gas. And that was it.
Paul Cheng - Lehmann Brothers
And the second question would be the Piceance basis?
Henry Hubble
Paul, well maybe you ought to come back at the end I think that is more than two.
Operator
(Operator Instructions). And we will take our next question from Mark Gilman with The Benchmark Company.
Mark Gilman - Benchmark Company
Hi, Henry good morning.
Henry Hubble
Hi Mark, how are you?
Mark Gilman - Benchmark Company
Good thank you I hope you are as well. I wanted to ask about the Statfjord Late Life and the Offshore project. My assumption on these projects, Henry, is that we will not see volumes actually rising as a result of these projects. But rather in both cases they represent the ability to forego what would otherwise be declines. Marimba vis-à-vis Kizomba A and Statfjord obviously facilities and fields currently in production, is that an accurate assumption in both cases?
Henry Hubble
Pretty much. You're basically trying to maintain the capacity of full utilization of the facilities that you have there so that's what you see from those developments for the most part.
Mark Gilman - Benchmark Company
Okay and one other one, if I could, just, one more whack at this entitlement issue from a different angle.
Henry Hubble
Yes.
Mark Gilman - Benchmark Company
Henry, there are basically two kinds of entitlement issues, that impact on reported production. One is just a simple and rather straightforward cost recovery issue. The other is a more permanent, in terms of life of field. Change in splits associated either with cumulative returns or cumulative production thresholds and/or cost recovery factors. I’m assuming that what we are dealing with here is primarily the latter. And is therefore not something that in a difference price environment is likely to change as we go forward. Is that assumption accurate?
Henry Hubble
Well, I’m not going to break out the split for you here. You have both effects, but they are both in a continuing basis. And again it’s going to depend on how crude prices evolve from here.
Mark Gilman - Benchmark Company
Okay. Thank you, Henry.
Operator
And we’ll take our next question from Paul Sankey with Deutsche Bank. Please go ahead.
Paul Sankey - Deutsche Bank
Hi, Henry. I had a three part Middle East question, but I’m not going to go there on QA. So, let’s move on to Upper Zakum. You’ve got pretty significant downtime I believe right now. Could you just quantify how long that’s going to be out for, and what sort of impact that will have on Q4?
Henry Hubble
I don’t have anything right at the tips of my fingers. Let’s see if I can get you something on that. I really don’t have any specific data on that at this point.
Paul Sankey - Deutsche Bank
But you didn’t turn around there?
Henry Hubble
You probably ought to ask Zadco on that.
Paul Sankey - Deutsche Bank
Okay. I’ll leave it on that one then, obviously. The second part was about start-ups in Qatar next year. Can you just update us on when do you expect those two major projects to be delivering?
Henry Hubble
As we had laid out in our earlier plans. We’re expecting those, the start-up of the Qatargas II Train 4 in 2008, and the RasGas Train 6 also scheduled for start-up in 2008, expecting one about mid-year, and the other closer to the end of the year; the end of the year. It’s the same as the F&O.
Paul Sankey - Deutsche Bank
Okay, that answers that one. We had a couple of slightly non-answers there upfront. What final one, I’ll throw in one final one. Can you quantify the extent to which disposable impacted your Downstream numbers. It’s noticeable particularly in Europe, but also to an extent in Asia, you had lower throughputs and sales in both those regions. Thanks.
Henry Hubble
Yeah. The big impact in Europe is Inglestadt, and both on a year-on-year comparisons that you have there. And then, there’s ongoing on the part sales. We have ongoing high grating that we’ve got going on pretty much around the world. Big piece of that happened in Africa, some of South America, but there’s also high grating that’s going on in the other portfolios, as well. And then, Can, you also have impacts that are associated with turnarounds that are also impacting some of the numbers.
Paul Sankey - Deutsche Bank
Any barrel numbers you can give me on that?
Henry Hubble
If you look at, let me just look if I have something here. If you look at the totals, or the Downstream, we’re down on the petroleum product sales as you know, about 1%, and that basically, if you look at, you’ve got, well, I don’t have a breakdown. Basically, US, if you look on a third quarter '06 versus third quarter '07, throughput wise, which we were up. And basically that’s improved reliability, and that was almost all that.
Then if you look at the turnaround impact in Asia Pacific, that was Singapore, and Japan, the total of that was about the level you see, the 116 that’s in the numbers. So those were the two impacts there.
Paul Sankey - Deutsche Bank
That’s on the throughput, then we just take Inglestadt out of the Europe number.
Henry Hubble
That’s right.
Paul Sankey - Deutsche Bank
And on the product sales?
Henry Hubble
And on the product sales, that again, is I was talking about the divestments, that’s the big piece of, I am just trying to look, we have I think that's bullet said it is the basically the best months, the bulk of it is the best men in chief of those investments in each of these areas, the same story. You kind of see it reflected in the numbers in the US, basically down the same direction, and the overall total sales down about the same direction from the throughput. It’s about down equally.
Paul Sankey - Deutsche Bank
So, the underlying market was flat, is what you’re telling me?
Henry Hubble
Yeah, I mean, if you’re trying to get back to what was the product demand, what we’re seeing on a worldwide basis, is that we continue to see growth overall, about, not much down at all from what we have historically seen, on a total global demand basis, most of that growth occurring, though, in the Asia Pac area. US is near flat, up a little bit. And we’re seeing, there’s nothing there that we can really point to as a global demand response.
Again, you don’t know how high it would be if crude prices weren’t this high, but we’re not seeing big declines. We’re still seeing year on year growth, and we’re not seeing big declines in that rate of growth on a worldwide basis.
Paul Sankey - Deutsche Bank
Sounds like you’re predicting $100 oil then, Henry?
Henry Hubble
I don’t know. I can’t tell you why it’s ninety-something today.
Paul Sankey - Deutsche Bank
Okay, thanks.
Operator
We’ll take our next question from Mark Flannery with Credit Suisse.
Mark Flannery - Credit Suisse
Hi, Henry. I have more of a local question, about ethanol blending in the US; specifically, in the Southeast. Are you guys getting ready to blend more ethanol into product in the Southeast, I’m thinking in Florida particularly; from next year? Are you making the necessary infrastructure and terminal end sort of investments right now, or are you holding back a little bit?
Henry Hubble
Well, as you know, we are a major blender of ethanol. There are incentives to blend ethanol currently. We are maximizing that, but I’m not going to get into specific regional thoughts that we might have. But we’re basically meeting the Federal requirements. We’ve blended before it was required because we saw economic opportunities there, and we continue to do that. So, we’ll take advantage of the incentives that are there to blend ethanol. But again, I’m not going to get into specific investment plans.
Mark Flannery - Credit Suisse
Right. Just a quick follow-up on the refining side; when you think about ethanol blending and how it might go in this country, just for the sake of it say, the donation goes to E-10 at some unspecified time in the future. Does that impact the way you think about investments in the domestic refining base?
Henry Hubble
Well, if you look at our long-term outlook for demand in the US, and actually in OECD in general, our longer term outlook is that it is basically flat. And what you see there is ongoing efficiencies that continue to come in, basically offsetting whatever modest growth there may be in miles driven and vehicle use.
So as we go forward, we are not seeing a lot of growth in our outlook, so we continue to focus on economically creeping our capacities, de-bottlenecking, low cost conversions ads. That’s been part of our base improvement, continuous improvement of our refining facilities. So, we’re constantly adding capacity through those kinds of mechanisms, but we’re not seeing a lot of need for grass roots kinds of investments in these mature markets.
Now, on contrast, though, when you move out to Asia Pacific, China, some of these other areas. Our Fujian project is a prime example there, where we’re investing to meet that growing demand, which is substantially about what you can meet through de-bottlenecking. And of course, in the base where we’re running our conversion capacity full in all of the regions and there is incentive to continue to de-bottleneck that.
Mark Flannery - Credit Suisse
Great, thank you very much.
Operator
And we’re taking follow-up question from Mark Gilman with the Benchmark Company. Please go ahead.
Mark Gilman - Benchmark Company
Henry, I noticed that the volume mix bar in your Upstream year-over-year earning experience is essentially zero, like the fact that the production is down. Was the lifting position in this recently completed quarter more favorable than production, and that explains the bar in the chart, or was there an adverse lifting position in the year-ago period. Can you shed some light on that?
Henry Hubble
Basically, what you are seeing there is a mix effect, as you point out. There is a positive effect associated with the Sakhalin project, where we have the export facilities now. And so you have higher realizations associated with that.
Mark Gilman - Benchmark Company
Okay. One other if I could. Marimba on offshore Angola, is that ringed fence with [Kiz-A] in the same PSC, or is it a separate PSC?
Henry Hubble
It’s ring fence.
Mark Gilman - Benchmark Company
Thank you.
Operator
We’ll take a follow-up question from Paul Cheng with Lehman Brothers. Please go ahead.
Paul Cheng - Lehman Brothers
Hey Henry, Nigeria, the government, as a contact, you guys about change in the region or there is just noise?
Henry Hubble
No. We have not had any contacts with them at this point.
Paul Cheng - Lehman Brothers
Final one, Piceance basin, where are you in terms of production at this point? And what kind of rate program do you have?
Henry Hubble
The latest numbers I have about 50 million cubic feet per day. And of course, we have our phase one project that we’re working for. We’ve gotten the finding of no significant impact associated with that, so we’re basically moving ahead with our development plans there. And expecting, that’s out in our ‘08/’09 time frame, basically.
Paul Cheng - Lehman Brothers
Are we still looking at 400 million cubic feet per day kind of production by the 2010/2011, even under today’s gas price?
Henry Hubble
Well, when you look at the total, we have multiple phases that give out, it’s in the '06 F&O. But basically, those future phases take us out to 2011 or so, something in that, beyond, basically get us to up to that full potential.
Paul Cheng - Lehman Brothers
So the current price structure in the natural gas did not alter your view or your program?
Henry Hubble
Well, there’s infrastructure that’s being added there to get the gas out of the region, so that is a short-term phenomenon that you’re seeing there.
Paul Cheng - Lehman Brothers
Okay very good. Thank you.
Operator
This will conclude today's question-and-answer session. Mr. Hubble, I will turn the conference back over to you for closing comments.
Henry Hubble
Well, I just want to say thanks to everybody for your questions, and for listening in. I look forward to seeing it on the road.
Operator
Ladies and Gentlemen, this will conclude ExxonMobil Corporation’s 2007 conference call. We thank you for your participation, and you may disconnect at this time.
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