In the Downstream earnings were $2.3 billion, up nearly $310 million from the fourth quarter of 2006.
- Lower margins reduced earnings by $410 million primarily due to lower U.S. refining margins.
- Volume and mix effects increased earnings by $290 million, reflecting the benefits of ongoing refinery optimization activities.
- Other affects improved earnings by $430 million, driven by gains on assets sales this quarter.
Chemical earnings were $1.1 billion, $130 million lower than the prior year.
- Margin effects reduced earnings by $520 million, as higher feedstock costs more than offset increased product realizations.
- Volume and mixed effects improved earnings by $170 million, reflecting higher commodity and specialty sales.
- Other factors were a positive $220 million, including favorable tax and foreign exchange effects.
Sequentially, Chemical earnings decreased by $90 million.
- Lower margins reduced earnings by $300 million, as higher feedstock costs more than offset increased realizations.
- Other factors benefited earnings by $180 million, including positive tax and LIFO inventory effects.
Key questions and answers from the fourth quarter earnings call as presented by Exxon Mobil Corp. on February 1, 2008
Douglas T. Terreson (Morgan Stanley): Provide an update on productivity programs or initiatives that might be in place or emerging in E&P and also the result that you have to achieve if these plans are in place?
Henry H Hubble: If you look at the E&P area in particular, one of the areas of the biggest ramp-up in cost has been in drill rigs and those costs can be reduced by drilling faster, bringing those wells more productively is a big driver. We have spent over $4 billion a year in drilling alone.
The multi-zone stimulation technology that we have in the Piceance''s Basin helps us lower cost and improve productivity of those operations. What we have delivered in self help things and OpEx, brought forward, is about $1 billion a year.
Mark Flannery (Credit Suisse): What would happen to your expectations of 2008 production, let''s say, if oil average $90 for 2008 versus averaging $70 for 2008?
Henry H Hubble: What you see in the PSC impacts and these net interest reductions, basically is a reflection of a significant acceleration in value that we have captured associated with these projects.
The higher prices have improved the economics, but they reduce the number of barrels. We have just over 20% of our production under PSC-type terms. Not all of those PSCs are the same, they can have different, terms and characteristics, including the extent to which volumes change over time.
Most of those the effects that we have seen have occurred in Africa and then the PSC reductions and net interest reductions, basically reflect us moving through investment return thresholds at those specific developments. These occur at different times during the year, it depends on the price, and performance of the projects.
Nicole Decker (Bear Stearns): Are you seeing any changes in terms of the pace at which projects are able to move forward in Angola and comment on where you are on Kizomba D?
Henry H Hubble: We really have not seen anything roll through. As you see in the Kizomba C developments, they moved ahead first schedule. And the Kizomba A satellites are moving ahead as we expect.
So we can not point anything that would say there is change associated with that. And we have had very good relations; those projects have performed very well both in terms of being able to bring them in on-schedule and at our costs.
Paul Sankey (Deutsche Bank Securities): Go through your asset sales stripping out upstream, downstream?
Henry H Hubble: The Downstream was about $450 million associated with the Downstream divestments. None of those large on their own, both mostly in Europe and in our marketing operations.
But it is part of our normal process that we go through possibly looking at what the market is willing to pay for things and we are constantly high-grading and basically reflects our ongoing activity.
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