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Article by DailyStocks_admin    (08-06-08 07:39 AM)

The Daily Magic Formula Stock for 08/06/2008 is Exxon Mobil Corp. According to the Magic Formula Investing Web Site, the ebit yield is 15% and the EBIT ROIC is 25-50 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

Exxon Mobil Corporation was incorporated in the State of New Jersey in 1882. Divisions and affiliated companies of ExxonMobil operate or market products in the United States and most other countries of the world. Their principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a major manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. ExxonMobil also has interests in electric power generation facilities. Affiliates of ExxonMobil conduct extensive research programs in support of these businesses.



Exxon Mobil Corporation has several divisions and hundreds of affiliates, many with names that include ExxonMobil, Exxon, Esso or Mobil . For convenience and simplicity, in this report the terms ExxonMobil, Exxon, Esso and Mobil , as well as terms like Corporation, Company, our, we and its , are sometimes used as abbreviated references to specific affiliates or groups of affiliates. The precise meaning depends on the context in question.



Throughout ExxonMobil’s businesses, new and ongoing measures are taken to prevent and minimize the impact of our operations on air, water and ground. These include a significant investment in refining infrastructure and technology to manufacture clean fuels as well as projects to reduce nitrogen oxide and sulfur oxide emissions and expenditures for asset retirement obligations. ExxonMobil’s 2007 worldwide environmental expenditures for all such preventative and remediation steps, including ExxonMobil’s share of equity company expenditures, were about $3.8 billion, of which $1.5 billion were capital expenditures and $2.3 billion were included in expenses. The total cost for such activities is expected to remain in this range in 2008 and 2009 (with capital expenditures approximately 45 percent of the total).



Operating data and industry segment information for the Corporation are contained in the Financial Section of this report under the following: “Quarterly Information”, “Note 17: Disclosures about Segments and Related Information” and “Operating Summary”. Information on oil and gas reserves is contained in the “Oil and Gas Reserves” part of the “Supplemental Information on Oil and Gas Exploration and Production Activities” portion of the Financial Section of this report. Information on Company-sponsored research and development activities is contained in “Note 3: Miscellaneous Financial Information” of the Financial Section of this report.



The number of regular employees was 80.8 thousand, 82.1 thousand and 83.7 thousand at years ended 2007, 2006 and 2005, respectively. Regular employees are defined as active executive, management, professional, technical and wage employees who work full time or part time for the Corporation and are covered by the Corporation’s benefit plans and programs. Regular employees do not include employees of the company-operated retail sites (CORS). The number of CORS employees was 26.3 thousand, 24.3 thousand and 22.4 thousand at years ended 2007, 2006 and 2005, respectively.



ExxonMobil maintains a website at exxonmobil.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 are made available through our website as soon as reasonably practical after we electronically file or furnish the reports to the Securities and Exchange Commission. Also available on the Corporation’s website are the Company’s Corporate Governance Guidelines and Code of Ethics and Business Conduct, as well as the charters of the audit, compensation and nominating committees of the Board of Directors. All of these documents are available in print without charge to shareholders who request them. Information on our website is not incorporated into this report.

CEO BACKGROUND

Michael J. Boskin
Age 62
Director since 1996
Principal Occupation: T.M. Friedman Professor of Economics and Senior Fellow, Hoover Institution, Stanford University
Recent Business Experience: Dr. Boskin is also a Research Associate, National Bureau of Economic Research; and serves on the Commerce Department’s Advisory Committee on the National Income and Product Accounts. He is Chief Executive Officer and President of Boskin & Co., an economic consulting company.
Public Company Directorships: Oracle Corporation; Shinsei Bank; Vodafone Group

Larry R. Faulkner
Age 63
Director since 2008
Principal Occupation : President, Houston Endowment; President Emeritus, the University of Texas at Austin
Recent Business Experience: Dr. Faulkner served as President of the University of Texas at Austin from 1998 to 2006. He also served on the chemistry faculties of the University of Texas, the University of Illinois, and Harvard University. At the University of Illinois, he also held a number of positions in academic administration including Provost and Vice Chancellor for Academic Affairs.
Public Company Directorships : Temple-Inland; Guaranty Financial Group

William W. George
Age 65
Director since 2005
Principal Occupation: Professor of Management Practice, Harvard University
Recent Business Experience: Mr. George was elected Chairman of Medtronic in 1996, and retired in 2002; Chief Executive Officer in 1991; and President and Chief Operating Officer in 1989.
Public Company Directorships: Goldman Sachs; Novartis

James R. Houghton
Age 72
Director since 1994
Principal Occupation : Chairman of the Board Emeritus, Corning Incorporated
Recent Business Experience: Mr. Houghton retired as Non-Executive Chairman in 2007. He resumed his role as Chairman and Chief Executive Officer of Corning Incorporated in 2002, relinquished the role of CEO in 2005, and retired as Executive Chairman in 2006. He also served as Non-Executive Chairman from 2001 to 2002 and Chairman Emeritus from 1996 to 2001. He was elected Chairman and Chief Executive Officer of Corning Incorporated in 1983, retired in 1996. Public Company Directorships : Corning Incorporated; MetLife


Reatha Clark King
Age 70
Director since 1997
Principal Occupation : Former Chairman, Board of Trustees, General Mills Foundation
Recent Business Experience : Dr. King was elected Chairman, Board of Trustees, General Mills Foundation in 2002, and retired in 2003; President and Executive Director, General Mills Foundation, and Vice President, General Mills, Inc. from 1988 to 2002. Prior to joining the General Mills Foundation, Dr. King held a variety of positions in chemical research, education, and academic administration.
Public Company Directorships : Lenox Group

Marilyn Carlson Nelson
Age 68
Director since 1991
Principal Occupation : Chairman of the Board, Carlson
Recent Business Experience : Mrs. Nelson was elected Chairman and Chief Executive Officer of Carlson in 1998, and relinquished the role of CEO in 2008. She has held a number of other management positions at Carlson including President, Chief Operating Officer, Vice Chair and Senior Vice President.
Company Directorships : Carlson

Samuel J. Palmisano
Age 56
Director since 2006
Principal Occupation : Chairman of the Board, President, and Chief Executive Officer, IBM
Recent Business Experience : Mr. Palmisano was elected Chairman, President, and Chief Executive Officer of IBM in 2003. Mr. Palmisano also served as President, Senior Vice President, and Group Executive for IBM’s Enterprise Systems Group, IBM Global Services, and IBM’s Personal Systems Group.
Public Company Directorships : IBM

Steven S Reinemund
Age 60
Director since 2007
Principal Occupation: Retired Executive Chairman of the Board, PepsiCo
Recent Business Experience: Mr. Reinemund served as Executive Chairman of the Board of PepsiCo from 2006 to 2007; was elected Chief Executive Officer and Chairman of the Board in 2001; President and Chief Operating Officer in 1999; and Director in 1996. He was also elected President and CEO of Frito-Lay in 1992 and Pizza Hut in 1986.
Public Company Directorships: Johnson & Johnson; American Express; Marriott
MANAGEMENT DISCUSSION FOR LATEST QUARTER

REVIEW OF SECOND QUARTER AND FIRST SIX MONTHS 2008 RESULTS


ExxonMobil's reported second quarter net income was a record $11,680 million, up 14 percent from the second quarter of 2007. Net income included an after tax special charge of $290 million reflecting the $508 million maximum punitive damages set by the recent Supreme Court ruling in the Valdez litigation. Record crude oil and natural gas realizations were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs. Earnings per share of $2.22 were up 21 percent reflecting the strong earnings and the impact of the continuing share purchase program.

Net income for the first six months of 2008 of $22,570 million was a record and increased $3,030 million or 16 percent from 2007 reflecting higher crude oil and natural gas realizations. Earnings per share increased 23 percent to $4.25, reflecting strong business results and the continued reduction in the number of shares outstanding.

Upstream earnings in the second quarter of 2008 were $10,012 million, up $4,059 million from the second quarter of 2007. Record crude oil and natural gas realizations increased earnings approximately $6.1 billion. Lower sales volumes decreased earnings about $1.7 billion. Higher operating costs and increased taxes also reduced earnings.


On an oil-equivalent basis, production decreased 8 percent from the second quarter of 2007. Excluding impacts related to the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes (including price and spend impacts and PSC net interest reductions), production was down about 3 percent.


Liquids production totaled 2,393 kbd (thousands of barrels per day), down 275 kbd from the second quarter of 2007. Excluding the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, liquids production was down just over 2 percent, as increased production from projects in west Africa and the North Sea was more than offset by mature field decline and higher maintenance activity.


Second quarter natural gas production was 8,448 mcfd (millions of cubic feet per day), down 285 mcfd from 2007. Higher European demand and new production volumes from project additions in the North Sea were more than offset by mature field decline and increased maintenance activity.


Earnings from U.S. Upstream operations were $2,034 million, $812 million higher than the second quarter of 2007. Non-U.S. Upstream earnings were $7,978 million, up $3,247 million from last year.

Upstream earnings for the first six months of 2008 were a record $18,797 million, up $6,803 million from 2007. Record high crude oil and natural gas realizations increased earnings approximately $10.5 billion. Lower sales volumes reduced earnings about $2.5 billion. Higher taxes, increased operating costs and lower gains on asset sales decreased earnings approximately $1.2 billion.


On an oil-equivalent basis, production decreased 7 percent from last year. Excluding impacts related to the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, production was down 2 percent.


Liquids production of 2,431 kbd decreased 276 kbd from 2007. Excluding the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, liquids production was down 3 percent as field decline in mature areas more than offset project volume increases.


Natural gas production of 9,333 mcfd decreased 86 mcfd from 2007. Higher volumes from North Sea and Qatar projects and higher European demand were more than offset by mature field decline.


Earnings from U.S. Upstream operations for 2008 were $3,665 million, an increase of $1,266 million. Earnings outside the U.S. were $15,132 million, $5,537 million higher than 2007.

Downstream earnings in the second quarter of 2008 of $1,558 million were down $1,835 million from the second quarter of 2007 as lower margins reduced earnings by $1.9 billion, driven by significantly lower worldwide refining margins. Petroleum product sales of 6,775 kbd were 199 kbd lower than last year's second quarter, mainly reflecting asset sales and lower demand.


U.S. Downstream earnings were $293 million, down $1,452 million from the second quarter of 2007. Non-U.S. Downstream earnings of $1,265 million were $383 million lower.

Downstream earnings in the first six months of 2008 of $2,724 million were $2,581 million lower than 2007. Lower worldwide refining and marketing margins decreased earnings approximately $2.9 billion while higher operating costs reduced earnings about $300 million. Improved refinery operations increased earnings about $600 million. Petroleum product sales of 6,798 kbd decreased from 7,085 kbd in 2007, mainly reflecting asset sales.


U.S. Downstream earnings were $691 million, down $1,893 million. Non-U.S. Downstream earnings were $2,033 million, $688 million lower than last year.

Chemical earnings in the second quarter of 2008 of $687 million were $326 million lower than the second quarter of 2007. Lower margins, which reduced earnings approximately $500 million, were partly offset by favorable foreign exchange and tax effects. Prime product sales of 6,718 kt (thousands of metric tons) in the second quarter of 2008 were 179 kt lower than the prior year.

Chemical earnings in the first six months of 2008 of $1,715 million decreased $534 million from 2007. Lower margins, which decreased earnings approximately $800 million, were partly offset by favorable foreign exchange and tax effects. Prime product sales of 13,296 kt were down 406 kt from 2007.

Corporate and financing expenses in the second quarter of 2008 of $577 million increased from 2007 by $188 million mainly due to tax items and lower interest income and included $290 million for the Valdez litigation charge.

Corporate and financing expenses in the first six months of 2008 of $666 million increased by $368 million mainly due to lower interest income, higher corporate costs and tax items and included $290 million for the Valdez litigation charge.

Total cash and cash equivalents of $39.0 billion at the end of the second quarter of 2008 compared to $33.6 billion, including the $4.6 billion of restricted cash, at the end of the second quarter of 2007.


Cash provided by operating activities totaled $34,838 million for the first six months of 2008, $9,234 million higher than 2007. The major source of funds was net income of $22,570 million, adjusted for the noncash provision of $6,194 million for depreciation and depletion, both of which increased. The effects of higher prices and the timing of payments of accounts and other payables, of collection of accounts receivable and the timing of income taxes payable added to cash provided by operating activities. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.


Investing activities for the first six months of 2008 used net cash of $8,768 million compared to $6,323 million in the prior year. Spending for additions to property, plant and equipment increased $1,959 million to $8,851 million. Proceeds from asset divestments of $1,572 million in 2008 were similar to the prior year.


Cash flow from operations and asset sales in the second quarter of 2008 of $14.6 billion, including asset sales of $1.2 billion, was $2.1 billion higher than in the second quarter of 2007. Cash flow from operations and asset sales for the first six months of 2008 of $36.4 billion, including $1.6 billion from asset sales, was $9.1 billion higher than in the comparable 2007 period.


Net cash used in financing activities of $22,204 million in the first six months of 2008 increased $3,043 million, reflecting a higher level of purchases of shares of ExxonMobil stock.


During the second quarter of 2008, Exxon Mobil Corporation purchased 98 million shares of its common stock for the treasury at a gross cost of $8.8 billion. These purchases included $8.0 billion to reduce the number of shares outstanding, with the balance used to offset shares issued in conjunction with the company's benefit plans and programs. Shares outstanding were reduced 1.7 percent from 5,284 million at the end of the first quarter to 5,194 million at the end of the second quarter.


Gross share purchases in the first six months of 2008 were $18.2 billion, reducing shares outstanding by 3.5 percent. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.

The Corporation distributed a total of $10.1 billion to shareholders in the second quarter of 2008 through dividends of $2.1 billion and share purchases to reduce shares outstanding of $8.0 billion, an increase of 12 percent or $1.1 billion versus the second quarter of 2007. The Corporation distributed a total of $20.0 billion to shareholders in the first six months of 2008 through dividends and share purchases to reduce shares outstanding, an increase of $2.2 billion versus 2007. Year to date dividends per share of $0.75 increased 12 percent.


Total debt of $9.6 billion at June 30, 2008, was the same as at year-end 2007. The Corporation's debt to total capital ratio was 6.9 percent at the end of the second quarter of 2008 compared to 7.1 percent at year-end 2007.


Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds cover the majority of its financial requirements.


In accordance with a nationalization decree issued by Venezuela’s president in February 2007, by May 1, 2007, a subsidiary of the Venezuelan National Oil Company (PdVSA) assumed the operatorship of the Cerro Negro Heavy Oil Project. This Project had been operated and owned by ExxonMobil affiliates holding a 41.67 percent ownership interest in the Project. The decree also required conversion of the Cerro Negro Project into a “mixed enterprise” and an increase in PdVSA’s or one of its affiliate’s ownership interest in the Project, with the stipulation that if ExxonMobil refused to accept the terms for the formation of the mixed enterprise within a specified period of time, the government would “directly assume the activities” carried out by the joint venture. ExxonMobil refused to accede to the terms proffered by PdVSA, and on June 27, 2007, the government expropriated ExxonMobil’s 41.67 percent interest in the Cerro Negro Project.


To date, discussions with Venezuelan authorities have not resulted in an agreement on the amount of compensation to be paid to ExxonMobil. On September 6, 2007, ExxonMobil filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes. ExxonMobil has also filed an arbitration under the rules of the International Chamber of Commerce against PdVSA and a PdVSA affiliate for breach of their contractual obligations under certain Cerro Negro Project agreements. At this time, the net impact of this matter on the Corporation’s consolidated financial results cannot be reasonably estimated. However, the Corporation does not expect the resolution to have a material effect upon the Corporation’s operations or financial condition. ExxonMobil’s remaining net book investment in Cerro Negro producing assets is about $750 million.


The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses.


On July 1, 2008, affiliates of Exxon Mobil Corporation completed the sale of their interests in the natural gas transport business in northern Germany. This transaction does not affect the exploration, production and natural gas sale and storage activities conducted by ExxonMobil affiliates in Germany. The positive after-tax earnings of this transaction of approximately $1.6 billion will be reported in third quarter 2008 results.

CONF CALL

Henry H. Hubble - Vice President of Investor Relations and Secretary

Thank you. Good morning and welcome to ExxonMobil's teleconference and webcast on our second quarter 2008 financial and operating results.

As you are aware from this mornings press release, ExxonMobil's net income in the second quarter was a record for the corporation. Our integrated business portfolio and strong operational performance have allowed us to capture the benefits of the commodity price environment. The fundamentals of our business remain strong and we continue to invest at record levels to bring new supplies to the market.

Before we go further, I'd like to draw your attention to our cautionary statement. Please note that estimates, plans and expectations 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 2007 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 second quarter results. Exxon Mobil's second quarter 2008 net income was $11.7 billion, an increase of $1.4 billion from the second quarter of 2007. Second quarter 2008 net income included a special charge of $290 million related to the Valdez litigation.

Second quarter normalized earnings, excluding the Valdez litigation charge, were nearly $12 billion, up $1.7 billion from the second quarter of 2007. Normalized earnings per share were $2.27 per share, up 24% from a year ago, reflecting strong earnings performance and the benefits of our share purchase program.

During the second quarter of 2008, ExxonMobil distributed a total of $10.1 billion to shareholders, including dividends of $2.1 billion and share purchased to reduce shares outstanding of $8 billion.

Before I discuss specific business results, I'd like to share some of the milestones we achieved since the last earnings call. In the second quarter, we started up production from the East Area Natural Gas Liquids II project, offshore Nigeria, three months ahead of schedule. The project will recover more than 275,000 million barrels of natural gas liquids from several east areas fields, which will help monetize gas resources and significantly, reduce layering. At peak, the project is expected to produce 50,000 barrels per day of natural gas liquids.

In the second quarter, production also started from the Deepwater Gunashli platform in Azerbaijan. The startup of the Gunashli complex completes the third phase of development of the Azeri-Chirag-Gunashli or ACG field in the Azerbaijan sector of the Caspian Sea. At peak, phase 3 production is expected to reach almost 300,000 barrels per day.

These startups bring the total number of major project startups to-date in 2008 to five, demonstrating our commitment to bring new supplies to market.

Also in the second quarter, ExxonMobil announced that the joint venture participants and the PNG state have formerly signed and executed a gas agreement with the PNG LNG project. The agreement establishes the physical regime and legal framework by which a project will be regulated. It sets the terms and mechanisms for state equity participation and allows the FEED stage of the project to begin.

In exploration, we had several notable milestones. We began shooting seismic in the Porcupine Basin of the southwest coast of Ireland, to improve the understanding of the geology and hydrocarbon bearing potential of our significant exploration acreage holdings, totaling about 760,000 gross acres in the area.

In Columbia, ExxonMobil was awarded a technical evaluation agreement or block CPE3 [ph] covering 6.4 million acres in the onshore Yannos heavy oil [ph]. ExxonMobil has significant expertise and technological capabilities in heavy oil resources, and we look forward to assisting in the exploration and possible development of this potential resource.

ExxonMobil continues to lead the industry in our long-term commitment to technology development. In May, we announced the decision to invest over $100 million to build a commercial demonstration plant near LaBarge, Wyoming or ExxonMobil's Controlled Freeze Zone technology to significantly reduce the cost of our moving and sequestering carbon dioxide and hydrogen sulfide for natural gas. This CFZ technology will assist in the development of additional natural gas resources to meet the world's growing demand for energy and facilitate the application of carbon capture and storage to reduce green house gas emissions.

Finally on July 1st, ExxonMobil announced the completion of the sale of its interest in the natural gas transport business in Northern Germany. The positive after tax earnings of this transaction of approximately $1.6 billion will be reported in the third quarter 2008 results. This transaction does not effect the exploration, production and natural gas sales and storage activities conducted by ExxonMobil affiliates in Germany.

Moving now to the downstream. In refining, we continue to identify and to implement projects which maximize the performance of existing facilities. At our Fawley refinery in the UK, we recently completed deign changes on distillation units to improve yields of jet and diesel fuel, as well as increased feed to our catalytic cracking unit.

Additionally, at Baytown, Texas refinery, we started up new facilities to increase the capacity of our crude distillation and delay coking units. We also continue to utilize our proprietary molecule management technology to rapidly assess and optimally process feedstocks. During the second quarter, we ran 36 crudes that were new to individual refineries, six of which were new ExxonMobil.

Our selective investments and ongoing optimization activities allow us to maximize the capture of available margin and achieve advantage returns even at the bottom of the business cycle. During the second quarter, our flagship engine oil, Mobil 1 was selected as the recommended service-fill oil for the smart fortwo car in the U.S. market. Additionally, Mobil 1, turbo diesel truck, 5W-40 has been reformulated to meet EPA emission standards mandated for new on-highway diesel trucks. Our continued focus on proprietary research and formulation upgrades allows Mobil 1 to remain the world's leading synthetic motor oil brand.

In our Chemical business, we started up facilities at our plant in Baytown, Texas which will increase the bromobutyl rubber production capacity at the site by 60%, allowing us to meet growing global demand for halobutyl rubber. ExxonMobil Chemical is the largest supplier of halobutyl rubber to the global tire industry, and we have expanded our capacity to produce this polymer by 80% in the last decade.

During the quarter, the American Chemistry Council granted ExxonMobil Chemical a total of 13 energy efficiency awards. This is the 11th consecutive year that ExxonMobil Chemical has been recognized by the ACC for energy efficiency.

Now turning to the business line results. Upstream earnings in the second quarter were record at $10 billion, up nearly $4.1 billion from the second quarter of 2007. We continue to capture the benefit of strong industry conditions this quarter with upstream after tax unit earnings of $29 per barrel.

Record crude oil and natural gas realization increased earnings by $6.1 billion. Worldwide crude realizations were up $54.17 per barrel to $119.29 in the quarter. Natural gas realizations were up $3.78 per kcf from second quarter 2007, reflecting higher prices in all major producing regions.

Lower crude oil and natural gas volumes decreased earnings by $1.7 billion. Other effects reduced earnings by $330 million, primarily due to increased operating expenses including the effect of new field startups and higher taxes.

In total, oil equivalent volume has decreased about 8% from the second quarter of last year. Entitlement volume effects including price and spend impacts and PSC net interest reductions reduced volumes by 160,000 barrels per day. Excluding the impacts of lower entitlement volumes, the Venezuela expropriation and the Nigeria labor strike, production was down 2.5%. The reduction principally reflects the impact of higher maintenance activity. As major project ramp ups in the North Sea and West Africa, an increased European natural gas demand largely offset natural field decline in mature areas.

Liquids production decreased about 275,000 barrels per day, or 10% from the second quarter of last year. Excluding impacts related to the Valdez... Venezuela expropriation, Nigeria labor strike and lower entitlement volumes, production was down 2.5%. The reduction principally reflects impact of higher maintenance activity, as major project ramp ups in West Africa and North Sea largely offset natural field decline in mature areas.

Gas volumes decreased approximately 285 million cubic feet per day from the second quarter of 2007. Natural field decline in mature areas, increased maintenance activity and asset management effects were partly offset by higher demand due to colder weather in Europe and new project volumes. New project volumes were below expectations due to slower than anticipated volume ramp up in the North Sea.

Turning now to the sequential comparison. Versus the first quarter of 2008, upstream earnings increased $1.2 billion, due to higher crude oil and natural gas realizations, partly offset by lower volumes, primarily due to seasonally lower natural gas demand in Europe.

Liquids production decreased 3%, due to scheduled maintenance activities in Canada, entitlement volume effects and the labor strike in Nigeria. Natural gas production was down 17%, driven by seasonally lower demand in Europe. Oil equivalent volumes were down about 9% from the first quarter. For further data on regional volumes, please refer to the press release and IR supplement.

Turning now to the downstream results. Earnings in the second quarter were $1.6 billion, down $1.8 billion from the second quarter of 2007. Lower margins reduced earnings by $1.9 billion, driven by significantly lower refining margins. Volume and mix effects increased earnings by $230 million, as margin improvement activities more than offset lower sales volumes. Other effects reduced earnings by $180 million, primarily due to higher operating expenses.

Sequentially, second quarter earnings increased by $390 million, reflecting stronger refining margins, partially offset by negative price finalization effects. Other factors increased earnings by $40 million, including higher gains of asset sales, offset by higher operating expenses and foreign exchange effects.

Focusing now on our Chemical results. Second quarter chemical earnings of $687 million were 325 million lower than the second quarter of 2007. Lower margins reduced earnings by $480 million, as higher feedstock costs more than offset increased product realizations.

Other impacts increased earnings by 130 million, reflecting positive foreign exchange and tax effects.

Sequentially, second quarter Chemical earnings decreased by $340 million, driven by lower margins as continued increases in feedstock costs more than offset higher realizations.

Turning now to the corporate and financing segments. Corporate and financing expenses excluding special items were $287 million in the second quarter of 2008, an increase of 188 million from the same period a year ago, primarily driven by tax items and lower interest income.

The effective tax rate for the second quarter was 49%.

Our cash balance was $39 billion and debt was $9.6 billion at the end of the second quarter. ExxonMobil made share purchases in excess of dilution of $8 billion during the second quarter, reducing the number of shares outstanding by 1.7%, and again demonstrating our commitment to return cash to our shareholders.

CapEx in the second quarter totaled nearly $7 billion, an increase of $1.9 billion or 38% from the second quarter of 2007. Spending increased across all business lines as we continue to invest actively in projects to meet global demand for crude oil, natural gas and finished products.

In summary, this quarter's results highlight the quality of our integrated business model, and disciplined investment approach. In the upstream, our outstanding portfolio of producing assets is performing well. While volumes were impacted by the high price environment, operational performance was solid and we delivered record earnings in the quarter.

In the downstream and chemical, ExxonMobil's disciplined integrated operations and continued focus on efficiency improvements and optimization allow us to deliver a differentiated results in a period of lower industry margins.

That concludes my prepared remarks and now I'll be happy to take your questions.

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