Item 1. Business.
(a) General
Mobil Corporation (Mobil) was incorporated in March, 1976 in the state of Delaware. Mobil's principal business, which is conducted primarily through wholly-owned subsidiaries, is in the petroleum industry. Mobil is also a manufacturer and marketer of petrochemicals, packaging films and specialty chemical products. Through its subsidiaries, Mobil had business interests in over 125 countries and employed approximately 50,400 people worldwide at December 31, 1995.
Through its subsidiaries, Mobil operates a worldwide oil and gas exploration and producing business, a global marketing and refining complex, a network of pipelines and tankers linking these worldwide oil and gas businesses, a world- scale chemical business and a highly sophisticated research and engineering operation.
A list of Mobil's most significant subsidiaries is contained on pages 27 through 29 of this Annual Report on Form 10-K. Summarized financial data for Mobil Oil Corporation is included on page 21 of this Annual Report on Form 10- K. In this Report, except as otherwise indicated by the context, the term "Mobil" refers to the parent corporation and all of its subsidiaries and affiliates and their operating divisions collectively, and sometimes to one or more of them.
Mobil makes no representations as to the future trend of its business and earnings, or as to future events and developments that could affect the oil industry in particular and that may affect other businesses in which Mobil is directly or indirectly engaged. These include such matters as the divestiture of certain operations, environmental quality control standards, oil imports, new discoveries of hydrocarbons and the demand for petroleum products. Furthermore, Mobil's business could be affected by future price changes or controls, material and labor costs, legislation, taxes, labor conditions, transportation regulations, tariffs, litigation, embargoes, foreign currency exchange restrictions and changes in foreign currency exchange rates. Mobil has direct and indirect investments and interests in many enterprises worldwide and makes no representation as to future developments which may have a profound effect on its business enterprises throughout the world. Mobil also recognizes that such enterprises are subject to political uncertainties in many of the countries in which it operates. Countries outside of the U.S. which currently are, and are expected to continue to be, significant contributors to Mobil's operating earnings are Australia, Indonesia, Japan, Nigeria, Norway, Saudi Arabia, Singapore and the United Kingdom (U.K.).
(b) Environmental Matters
The discussions of Environmental Matters on pages 26 and 47 of Mobil's 1995 Annual Report to Shareholders are incorporated herein by reference.
Mobil and certain of its subsidiaries and affiliates are parties to numerous proceedings instituted by governmental authorities and others under provisions of applicable laws or regulations relating to the discharge of materials into the environment. Such environmental proceedings are further discussed herein on page 16 under Item 3. Legal Proceedings.
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(c) Segment and Geographic Information
Segment and Geographic information for 1993, 1994 and 1995 on pages 34 and 35 of Mobil's 1995 Annual Report to Shareholders is incorporated herein by reference.
(d) Business Description and Properties
In addition to the business description and properties contained herein, the following data included in Mobil's 1995 Annual Report to Shareholders are incorporated herein by reference: 1995 Annual Report to Shareholders Description Page
Estimated Quantities of Net Proved Oil and Natural Gas Liquids Reserves (Table 1) ..... 50 Estimated Quantities of Net Proved Natural Gas Reserves (Table 2) ..................... 51 Petroleum Product Sales ...................... 55 Refinery Runs ................................ 55 Chemical Sales by Product Category ........... 55
PETROLEUM OPERATIONS
Mobil is one of the largest oil companies in the world, with petroleum product sales of 3.2 million barrels a day. In 1995 Mobil produced the oil equivalent of 1.6 million barrels daily of crude oil, natural gas liquids and natural gas and had refinery runs of 2.1 million barrels per day. Petroleum net sales in 1995 were $58,121 million, up 12% from 1993 and about 9% from 1994.
Prices for crude oil have experienced dramatic fluctuations during the past several years, making it difficult to forecast future trends in prices or margins in Petroleum Operations. During 1995 the worldwide average price of crude oil increased nearly $1.50 per barrel primarily reflecting higher demand in the Asia-Pacific region and supply disruptions caused by hurricanes in the Gulf of Mexico.
Mobil's Petroleum Operations are divided into two primary business activities -- Upstream, which refers to exploration and producing; and Downstream, which refers to marketing, refining, supply and transportation.
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PETROLEUM OPERATIONS -- UPSTREAM
Exploration and Producing
Significant developments in 1995 in Mobil's exploration and producing operations included the following:
Worldwide In 1995, Mobil conducted exploration and producing activities in 35 countries. Net production of liquids (crude oil and natural gas liquids) averaged 810 thousand barrels a day (TBD) in 1995, a decrease of 44 TBD, from 854 TBD in 1994. Net natural gas production of 4,554 million cubic feet a day (MMCFD) in 1995 was 116 MMCFD lower than 1994. Combined production in the United States was down 7% compared with 1994. International total production was down 2%, primarily due to operational interruptions in Nigeria, natural declines in Canada and expiration of short-term sales contracts in Indonesia, somewhat offset by full year production from new fields in the United Kingdom and Germany. Worldwide natural gas sales in 1995 were 6,626 MMCFD, up 689 MMCFD from the preceding year, as the gas marketing business expanded in the U.S. and Europe. Proved liquids and natural gas reserve additions replaced 106% of 1995 production on a barrel of oil equivalent (BOE) basis, excluding purchases and sales. The following table summarizes net production of crude oil and natural gas liquids (NGL) and of natural gas for 1993 through 1995.
Crude Oil & NGL(TBD) Natural Gas(MMCFD) Net Production 1993 1994 1995 1993 1994 1995
Fully consolidated companies United States .................... 305 300 282 1,529 1,568 1,439 Europe ........................... 161 173 173 887 948 1,098 Asia-Pacific ..................... 90 100 97 1,658 1,664 1,554 Other Areas ...................... 228 234 213 492 461 432 --- --- --- ----- ----- ----- Total Consolidated ............. 784 807 765 4,566 4,641 4,523 --- --- --- ----- ----- ----- Mobil's share of production of equity companies ................. 54 47 45 44 29 31 --- --- --- ----- ----- ----- Total Production ................... 838 854 810 4,610 4,670 4,554 === === === ===== ===== =====
This table presents Mobil's net production from properties in which it has a working or royalty interest and its share of production of investees accounted for on the equity method. Net production excludes royalties and quantities due others when produced, whether taken in kind or settled in cash.
United States In the United States, Mobil produced 1,439 MMCFD of natural gas and 282 TBD of liquids, or a total of 538 TBDOE during 1995. When compared with 1994, total production decreased 7% due to natural decline of maturing fields, asset divestment, and operational disruptions including shut-in production associated with a number of hurricanes in the Gulf of Mexico.
Mobil has narrowed its exploration focus in the U.S., concentrating resources on high-potential Gulf of Mexico, outer continental shelf and deep water opportunities. Mobil is also using advanced technologies to find and develop low-cost reserves around existing infrastructures. To support these
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Significant developments -- continued
efforts and ensure continued growth, Mobil has consolidated both exploitation and exploration activities within a single new business opportunities team. In 1995, the team's efforts resulted in proved reserve additions replacing 65% of Mobil's U.S. production, excluding purchases and sales. This represents Mobil's highest replacement rate in the U.S. since 1990.
Subsequent to year-end, Mobil announced that a non-binding letter of intent had been signed with PanEnergy Corporation to negotiate the sale of Mobil's natural gas gathering and processing assets (seven operated natural gas plants and about 2,600 miles of pipeline) for approximately $300 million. The sale would also include Mobil's equity interest in 17 additional gas-gathering and processing operations which are operated by others in Texas, Utah, Louisiana and Oklahoma.
In a separate but related move, Mobil Natural Gas Inc. and PanEnergy's marketing unit are negotiating the formation of an energy marketing joint venture which would represent the third largest gas marketing operation in North America, with sales of more than 7 BCFD. Mobil would own 40%, with PanEnergy controlling the remaining 60%.
Europe 1995 was a year of continued development and production growth in Europe. Mobil's United Kingdom production reached a record 75 TBD of liquids and 577 MMCFD of natural gas for a cumulative total of 178 TBD oil equivalent, up 16% from the previous year. Liquids production increased 7% from productivity improvements in the Beryl, Scott and Hudson fields; gas production increased 23%, reflecting the first full year of production from the Excalibur field and the startup of four new fields (Gawain, Galahad, Ganymede and Dawn) brought on stream in the Southern Gas Basin.
Full year contributions from these new fields, together with commencement of production from Nevis South, Mordred and Katrine fields, are expected to increase 1996 production to over 185 TBD of oil equivalent.
Mobil was a successful participant in the U.K. government's 16th offshore licensing round and received four new licenses, including one in the West of Shetlands province. Within this promising area, Mobil is also progressing plans to drill its first wildcat well in 1997 on previously awarded acreage.
In Norway, Mobil produced 91 TBD of liquids and 51 MMCFD of gas during 1995, primarily from two of Europe's largest fields, Statfjord and Oseberg. To maximize the value of these key areas, new fields are being tied into the existing infrastructure. Two satellites are on stream in the Statfjord area, and development will begin in 1996 on two Oseberg satellites, Oseberg East and Oseberg South, scheduled for production start up in 1998 and 1999, respectively.
To help replace declining production from existing assets, Mobil acquired a 20% interest in the Njord field, and increased its share in the unitized development on Haltenbanken. The Njord field development was approved in 1995 and development is now under way with pre-drilling scheduled to begin by mid- 1996. Production start up is planned for late 1997 with Mobil's share at peak rate expected to be 13 TBD.
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Significant developments - continued
With a good position in the Aasgard unit, and a recent exploration discovery on a license south of Aasgard, the Haltenbanken area will become Mobil's next core area in Norway. The development of the Aasgard project is expected to yield liquids production starting in 1998, and gas sales two years later. Mobil's share of peak production will be 17 TBD and 85 MMCFD.
In early 1996, Mobil was awarded five licenses in the 15th Norwegian licensing round, including its three top-ranked bids. These awards will allow Mobil to continue exploring and to build on core production within the Norwegian sector of the North Sea.
Germany's reserve replacement for gas was 135%, the result of a very successful drilling program, including contributions from Mobil's first horizontal well in Europe (Soehlingen Z-10) and a new gas field, Alvern.
Also in 1995, Mobil started natural gas deliveries to the former East Germany, with an initial sales rate of 50 MMCFD, and finalized a new 500 BCF gas import contract with Norway.
Asia-Pacific In Indonesia, the Arun field, located in northern Sumatra, supplies virtually all Mobil's Indonesian production. In 1995, production volumes averaged 1,542 MMCFD of natural gas, 41 TBD of condensate and 36 TBD of liquefied petroleum gas (LPG). Booster compression facilities, needed to maintain Arun's high gas deliverability rates, were completed and placed in operation during 1995.
Other gas fields in North Sumatra are being developed to supplement Arun production that will begin to decline. Development of the onshore South Lhok Sukon A and D fields began in 1995 with first production scheduled for 1998. The NSO "A" offshore field is planned for development beginning in 1996 with production start up in 1999.
Mobil also has a 68.6% interest in the Madura Block offshore East Java. Development of the Madura BD field will begin in 1996 to provide fuel for an electric power generation plant.
P.T. Stanvac Indonesia, which was owned 50% each by Mobil and Exxon, has been sold to an Indonesian company, Medco Energy. The sale was finalized in December, 1995.
Other In Canada, the Hibernia development project continued to progress in 1995 with construction of the production platform components at the main construction site located at Bull Arm, 90 miles northwest of St. John's, Newfoundland. The eventual site of the platform will be in 260 feet of water at the Hibernia field some 195 miles offshore southeast of St. John's.
Production from this 615 million-barrel oil field will begin in late 1997 and should reach its peak production of approximately 135 TBD (Mobil's share, 45 TBD) before the year 2000. The crude will be transported to market by specially built, state-of-the-art, double hulled shuttle tankers. Mobil's share in the Hibernia project is 33.1%.
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Significant developments -- continued
The Sable area, 130 miles off the east coast of Nova Scotia, has commercial potential for gas production. The group of producers (Mobil and Shell together hold about 70% of the interest) hope to tap into approximately three trillion cubic feet of natural gas believed recoverable from six fields on the Scotian Shelf. Mobil's interest in this area is roughly 40%. An additional consortium, which includes Mobil and Shell, is studying the transportation system which must be built to transport this gas to the Maritimes and northeastern U. S. markets.
This project is expected to produce about 400 MMCFD of natural gas and 10 TBD of condensate through the staged development of the six fields. Facilities will require the construction and installation of seven offshore platforms, drilling of about 30 wells, laying about 250 miles of pipeline and construction of an onshore gas processing plant. If current plans move ahead, production from Sable could commence around the turn of the century.
In Nigeria, 1995 average equity production was 157 TBD, somewhat lower than the 1994 level of 175 TBD due to temporary operational disruptions experienced during the year. Despite this, there was an overall increase in field producibility due to development projects associated with reservoir management and workovers. Ubit field producibility, among others, increased from 18 TBD (Mobil share) in 1994 to a record 32 TBD in 1995 as a result of technology applications, including horizontal drilling, major facilities upgrades and debottlenecking field processing.
The Inanga field development was fast-tracked in 1995 by leveraging existing infrastructure. The field came on stream in late December within a year of discovery. A peak producing rate of 20 TBD (Mobil's share, 8 TBD) is expected in 1996 when the field is fully developed.
Proved reserves in Nigeria have grown by 50% over the past six years as a result of exploration, 3-D seismic and reservoir management efforts. Mobil replaced over 300% of its 1995 production, the highest replacement ratio for any country where Mobil has production. Mobil's cost of finding and development is among the lowest in Nigeria, inasmuch as existing infrastructure continues to be optimized in progressing new development opportunities.
The Oso natural gas liquids project moved a step closer in 1995 with approval to proceed by the joint venture partners. The engineering, procurement and construction contract was awarded in early 1995, and construction is now progressing. Oso NGL is expected to stream in 1998, with peak production of 51 TBD (Mobil's share, 26 TBD) being reached by year 2000.
Despite recent political problems in the country, our operations have continued without any adverse impact.
In Qatar, Mobil participates in two liquefied natural gas (LNG) projects in partnership with the Qatar General Petroleum Corporation. Mobil's first LNG venture in Qatar, the Qatargas project (Mobil share 10%), expects to start producing gas and condensate in late 1996. Initial gas production will be used to commission the LNG facilities, while condensate production will be sold. Qatargas expects to deliver its first cargo to Chubu Electric Power Company of Japan in early 1997.
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Significant developments -- Continued
Mobil's second LNG project in Qatar, Ras Laffan LNG Co. Ltd. (Mobil share, 30%), signed an agreement to supply Korea Gas Corporation with 2.4 million metric tons of LNG annually for 25 years beginning in 1999. As a result of the sales commitment, Mobil added 230 MMBOE of proved reserves, more than doubling its proved reserves in Qatar.
New Business Development (NBD) Mobil has been very active to capitalize on anticipated growth in regions such as South America and Africa, as governments begin to allow participation by foreign companies in upstream projects.
- Venezuela: In the Venezuelan Exploration Round in January 1996, Mobil and partners were successful bidders on the first block awarded, the 445,000- acre La Ceiba block located on the eastern shore of Lake Maracaibo in western Venezuela. Mobil will have a 50% interest in the La Ceiba block. A seismic program is scheduled to begin in 1996. During 1995, in conjunction with Lagoven, an affiliate of Petroleos de Venezuela, Mobil progressed negotiations for a heavy oil project.
- Peru: Mobil joined in negotiations for development of the large Camisea gas/condensate discovery, as well as for adjacent exploration acreage. Negotiations for additional exploration acreage in the Peruvian portion of the Madre de Dios basin of southern Peru are ongoing.
- Equatorial Guinea: Mobil and partner, United Meridian, discovered oil in the Zafiro prospect on the 547,000-acre B Block concession. The block is located offshore in the Gulf of Guinea in close proximity to Mobil production in Nigeria. Mobil, with a 75% interest, assumed operatorship of the concession at the beginning of 1995 and made the discovery shortly thereafter. Subsequent to the discovery, Mobil drilled three successful appraisal wells on the Zafiro structure.
The Zafiro complex has been declared commercial. The fast-track development plan will consist of a floating production, storage and offloading vessel (FPSO) connected via flexible risers to subsea wells. The four existing wells will be completed as producing wells, and four more wells will be drilled in 1996. Production by year-end 1996 is projected to be at 40 TBD (Mobil Share, 30 TBD). The FPSO has been designed with the flexibility to process up to 80 TBD of crude.
- Angola: Mobil acquired a 21% interest in offshore Block 1 and participated in two wildcat wells during 1995. While the first well was unsuccessful, the second encountered significant signs of oil and gas. A 3-D seismic survey was acquired in late 1995 and evaluation of the area is ongoing. Mobil expects to drill a third wildcat well in 1996.
Toward the end of 1995, Mobil and Sinangol, the national oil company, reached agreement on a production sharing contract for the deep water Block 20 in which Mobil holds a 50% interest and will operate. Mobil is acquiring new seismic data and expects to drill the first wildcat well of a two-well commitment in mid-1996.
- Algeria: Mobil's first wildcat well drilled on the 3.2 million-acre Touggourt concession tested 1 TBD per day of light crude. Evaluation of additional seismic data and another wildcat well are currently scheduled for 1996.
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Significant developments -- continued
- Egypt: Production sharing contracts were negotiated on three new Western Desert concessions: East Bahariya, Marakia and Northeast Abu El Ghadariq. Government approval of the production sharing contracts is expected in early 1996. Future plans call for gathering new seismic data on all three concessions and wildcat wells on two of the concessions by year-end 1996. Mobil will hold non-operated interests of 50% in East Bahariya; 33-1/3% in Marakia; and 24% in Northeast Abu El Ghadariq.
- Kazakstan: Mobil is the only U.S.-based member of an international consortium selected to carry out extensive exploration of a 25 million- acre area in the environmentally sensitive northern Caspian Sea. The geophysical study is ongoing and expected to last through mid-1996, after which selection of blocks by each member company is scheduled to begin.
In April 1995, Mobil signed a joint venture agreement and exploration and development contract with the government of Kazakstan to explore for oil and gas on the 4 million-acre Tulpar block. This block is located near the large Karachagnak and Orenburg fields in northwestern Kazakstan.
- Azerbaijan: Mobil initiated and completed a Work Study Agreement with the State Oil Company of the Azerbaijan Republic (SOCAR) which provided improved technical data covering prospective areas of the south Caspian offshore area.
Reserves
Mobil is required to report reserve estimates to the U.S. Department of Energy. During 1995 Mobil filed proved reserve estimates covering the year 1994 under forms EIA-23, Annual Survey of Domestic Oil and Gas Reserves, and EIA-28, Financial Reporting System. Such estimates were consistent with reserve data filed with the Securities and Exchange Commission (S.E.C.).
Wells in Process of Being Drilled Total at December 31, 1995 Gross Net
United States ......................................... 24 17 International ......................................... 42 20 -- -- Worldwide ............................................. 66 37 == ==
Improved Recovery Projects Being Installed In Operation at December 31, 1995 Gross Net Gross Net
United States .................... 1 1 250 98 International .................... 1 - 83 39 - - --- --- Worldwide ........................ 2 1 333 137 = = === ===
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------- International -------- Productive Wells at Asia- Other World- Mult. December 31, 1995 U.S. Europe Pacific Areas Total wide Compl.(a)
Oil: Gross ....... 19,801 1,106 9 2,352 3,467 23,268 753 Net ......... 7,221 344 3 1,337 1,684 8,905 291
Gas: Gross ....... 4,723 485 79 1,156 1,720 6,443 770 Net ......... 2,959 140 79 272 491 3,450 411
(a) Multiple completions included in geographic totals.
Net Exploratory and ------- International -------- Development Wells Asia- Other World- Drilled U.S. Europe Pacific Areas Total wide
Exploratory wells Productive ............. 23 5 1 7 13 36 Dry .................... 14 4 2 9 15 29 Development wells Productive ............. 313 8 7 28 43 356 Dry .................... 15 - - 1 1 16
Exploratory wells Productive ............. 42 2 - 17 19 61 Dry .................... 19 7 5 23 35 54 Development wells Productive ............. 393 14 2 17 33 426 Dry .................... 14 - - 1 1 15
Exploratory wells Productive ............. 41 - - 25 25 66 Dry .................... 18 7 3 17 27 45 Development wells Productive ............. 476 14 1 62 77 553 Dry .................... 15 - 1 1 2 17
Oil and Gas Acreage at December 31, 1995 Undeveloped Acreage Developed Acreage (Thousands of acres) Gross Net Gross Net
United States .................. 4,191 2,482 4,580 2,845
Europe ......................... 17,370 8,563 1,473 560 Asia-Pacific ................... 33,565 19,310 102 51 Other .......................... 44,985 22,910 2,708 1,329 ------- ------ ------ ----- Total International .......... 95,920 50,783 4,283 1,940 ------- ------ ------ ----- Worldwide ...................... 100,111 53,265 8,863 4,785 ======= ====== ====== =====
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Average Sales Price/Transfer Value
The following table shows Mobil's average sales price/transfer value (transfer values are essentially equal to third-party sales prices) and average production costs in oil and gas producing activities in 1993, 1994 and 1995. In calculating the "dollar per barrel" data, the divisor used is net production. Natural gas volumes have been converted to oil equivalent barrels on a BTU (British Thermal Unit) basis, with 5,626 cubic feet of gas per barrel. Mobil's share of equity companies represents Mobil's share of results of operations for producing activities of investees accounted for on the equity method. The geographic segment "Other Areas", in this table, includes principally Canada and Nigeria.
UNITED STATES 1993 1994 1995
Revenues Crude oil (per barrel) ............................ $13.54 $12.91 $14.52 NGL (per barrel) .................................. $11.25 $10.37 $ 9.94 Natural gas (per thousand cubic feet) ............. $ 2.22 $ 1.90 $ 1.58 Average dollars per barrel of oil equivalent Revenues .......................................... $11.76 $10.51 $10.23 Production (lifting) costs ........................ (4.64) (4.48) (5.00) Exploration expenses .............................. ( .31) ( .54) ( .37) Depreciation, depletion and amortization .......... (4.01) (4.49) (5.92) Other operating revenues/(expenses) ............... ( .20) ( .15) .16 Income tax expense ................................ ( .87) ( .26) .35 ------ ------ ------- Results of operations for producing activities ...... $ 1.73 $ .59 $( .55) ====== ====== ======= Above results include the following special items: Asset sales and write-downs ....................... ( .06) ( .86) ( .11) Environmental provision ........................... ( .02) - - Restructuring provisions .......................... ( .05) - ( .26) Tax rate change ................................... ( .11) - - Inventory adjustment .............................. ( .09) - - Asset impairment (FAS 121) ........................ - - (1.87)
EUROPE 1993 1994 1995
Revenues Crude oil (per barrel) ............................ $17.42 $16.21 $17.47 NGL (per barrel) .................................. $14.55 $11.69 $14.32 Natural gas (per thousand cubic feet) ............. $ 2.87 $ 2.70 $ 2.70 Average dollars per barrel of oil equivalent Revenues .......................................... $16.70 $15.58 $16.16 Production (lifting) costs ........................ (5.85) (5.30) (5.35) Exploration expenses .............................. (1.65) (1.16) ( .95) Depreciation, depletion and amortization .......... (3.18) (3.43) (3.47) Other operating revenues/(expenses) ............... .52 .53 .92 Income tax expense ................................ (3.18) (3.68) (4.10) ------ ------ ------ Results of operations for producing activities ...... $ 3.36 $ 2.54 $ 3.21 ====== ====== ====== Mobil's share of equity companies ................... $ .92 $ 1.99 $ 2.84 ====== ====== ====== Total ............................................... $ 3.34 $ 2.53 $ 3.20 ====== ====== ====== Above results include the following special items: Asset sales and write-downs ...................... - ( .13) .04 Restructuring provisions .......................... - ( .07) ( .19) Tax related items ................................. .77 - .19 Asset impairment (FAS 121) ........................ - - ( .10)
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ASIA-PACIFIC 1993 1994 1995
Revenues Crude oil (per barrel) ............................ $14.03 $14.93 $15.09 NGL (per barrel) .................................. $10.09 $11.77 $16.35 Natural gas (per thousand cubic feet) ............. $ 2.12 $ 1.99 $ 2.15 Average dollars per barrel of oil equivalent Revenues .......................................... $12.02 $11.87 $12.97 Production (lifting) costs ........................ (1.73) (1.80) (1.75) Exploration expenses .............................. ( .36) ( .72) ( .56) Depreciation, depletion and amortization .......... (1.25) (1.59) (1.50) Other operating revenues/(expenses) ............... .05 ( .04) ( .06) Income tax expense ................................ (5.12) (4.61) (5.26) ------ ------ ------ Results of operations for producing activities ...... $ 3.61 $ 3.11 $ 3.84 ====== ====== ====== Mobil's share of equity companies ................... $ 2.65 $ .42 $ 1.75 ====== ====== ====== Total ............................................... $ 3.57 $ 3.06 $ 3.80 ====== ====== ======
Above results include the following special items: Asset sales and write-downs ....................... - - .13
OTHER AREAS 1993 1994 1995
Revenues Crude oil (per barrel) ............................ $16.72 $15.26 $17.03 NGL (per barrel) .................................. $12.53 $11.44 $14.74 Natural gas (per thousand cubic feet) ............. $ 1.37 $ 1.29 $ .78 Average dollars per barrel of oil equivalent Revenues .......................................... $14.03 $13.01 $13.57 Production (lifting) costs ........................ (4.92) (4.40) (5.86) Exploration expenses .............................. ( .84) (1.32) (1.42) Depreciation, depletion and amortization .......... (2.06) (2.61) (3.77) Other operating revenues/(expenses) ............... 1.50 .96 .73 Income tax expense ................................ (4.57) (4.17) (3.46) ------ ------ ------ Results of operations for producing activities ...... $ 3.14 $ 1.47 $( .21) ====== ====== ====== Mobil's share of equity companies ................... $ .99 $ .96 $ .94 ====== ====== ====== Total ............................................... $ 2.88 $ 1.40 $( .07) ====== ====== ====== Above results include the following special items: Asset sales and write-downs ....................... .05 ( .32) - Tax related items ................................. .72 - - Restructuring provision ........................... - - ( .12) Asset impairment (FAS 121) ........................ - - ( .90)
WORLDWIDE 1993 1994 1995
Revenues Crude oil (per barrel) ............................ $15.53 $14.64 $16.10 NGL (per barrel) .................................. $10.07 $ 8.99 $10.38 Natural gas (per thousand cubic feet) ............. $ 2.12 $ 1.96 $ 1.87 Average dollars per barrel of oil equivalent Revenues .......................................... $13.26 $12.38 $12.89 Production (lifting) costs ........................ (4.23) (3.98) (4.47) Exploration expenses .............................. ( .70) ( .87) ( .75) Depreciation, depletion and amortization .......... (2.79) (3.20) (3.89) Other operating revenues/(expenses) ............... .34 .23 .39 Income tax expense ................................ (3.09) (2.79) (2.73) ------ ------ ------ Results of operations for producing activities ...... $ 2.79 $ 1.77 $ 1.44 ====== ====== ====== Mobil's share of equity companies ................... $ 1.37 $ .96 $ 1.15 ====== ====== ====== Total ............................................... $ 2.73 $ 1.75 $ 1.43 ====== ====== ====== Above results include special items, net ............ .20 ( .40) ( .93)
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PETROLEUM OPERATIONS -- DOWNSTREAM
Refining
At December 31, 1995, Mobil owned or had an operating interest in 20 refineries in 12 countries. Mobil's share of crude oil refinery capacity was 2,256 TBD, 43% of which was located in the United States. Worldwide utilization of Mobil's refining capacity averaged 94% in 1993, 92% in 1994 and 92% in 1995.
Significant developments in 1995 in Mobil's refining operations included the following projects:
- At Altona, Australia, construction began in May, 1995 on a new fluid catalytic cracking unit, which will increase gasoline and distillate production at the refinery.
- At Adelaide, Australia, construction is under way on an expansion of the refinery's lube base stock capacity. It is scheduled for completion in late 1996.
- Construction is under way on a residual fuel oil upgrading unit at a joint venture refinery (Mobil's share 25%) in Kawasaki, Japan, and will be completed in 1997. It will increase production of gasoline and low-sulfur distillates and fuel oil.
- Approval was obtained to construct an 8 TBD lubricant base stock unit which will enhance the Jurong, Singapore, refinery. It is scheduled to start-up in late 1997.
- In Saudi Arabia, the Petromin Lubricating Oil Refining Company (Mobil share, 30%) is constructing a new 5.5 TBD lubricant basestock refinery in Yanbu, Saudi Arabia, with completion scheduled in early 1997.
- In order to improve European downstream operations, the 104 TBD Woerth, Germany, refinery was closed in 1995.
Marketing
Petroleum Sales Volumes By Product (TBD) 1993 1994 1995
Automotive gasoline ............................ 1,152 1,216 1,291 Jet fuel ....................................... 215 246 262 Distillate ..................................... 895 911 954 Other products ................................. 672 702 715 ----- ----- ----- Total .......................................... 2,934 3,075 3,222 ===== ===== =====
Petroleum products are marketed extensively in the U.S. and in more than 100 other countries. Mobil has nearly 19,000 retail outlets, about 40% of which are located in the United States. Petroleum products include automotive and aviation gasolines, motor oils, lubricants and greases, marine fuels, jet fuels, fuel oil, diesel oil, kerosene, asphalts, naphthas, solvents, waxes and liquefied petroleum gas.
The principal brand names identifying Mobil's products are "Mobil Unleaded", "Mobil Super Unleaded+", "Mobil Special", "Mobil Regular", and "Mobil Premium" gasolines, and "Mobiloil", "Mobilheat", "Mobilgrease", "Mobil 1", "Delvac 1", and "Mobil" industrial and marine lubricants and process products.
In Tianjin, China, construction is under way on a lubricant blending plant scheduled for streaming in 1996. This is the first 100% foreign-owned oil industry facility approved in China. A second lubricant blending plant, located at Taicang, China (near Shanghai), has been approved and is scheduled to be streamed in 1997. Mobil has entered the lubricants market in Venezuela and the retail fuels markets in Peru and Ecuador.
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Marketing -- continued
Tankers
At December 31, 1995, Mobil owned 30 ocean-going tankers with an aggregate of 3,866 thousand deadweight tons, of which one, with a capacity of 49 thousand deadweight tons, was registered in the United States. An additional 4 tankers, aggregating 324 thousand deadweight tons, were under term charter. Mobil's second double-hull, 280 thousand deadweight-ton, very large crude carrier was ordered in 1994, with estimated delivery in mid-1996. The vessel, with a capacity of 2.2 million barrels of crude oil, will be similar to the "Eagle" which was commissioned in 1993.
Pipelines
At December 31, 1995, Mobil's U.S. pipeline system, including partly-owned facilities, consisted of 15,368 miles of crude oil, natural gas liquids, natural gas, and carbon dioxide trunk and gathering lines, and 7,880 miles of product lines. Also at that date, Mobil's pipeline system outside the U.S., including partly owned facilities, consisted of 9,182 miles of crude oil, natural gas liquids, and natural gas trunk and gathering lines, and 2,069 miles of product lines.
CHEMICAL OPERATIONS
Mobil Chemical, with manufacturing operations in 10 countries, is a large producer of petrochemicals, packaging films and specialty chemical products.
Mobil Chemical Facilities United Inter- World- at December 31, 1995 States national (a) wide
Petrochemicals ....................... 5 7 12 Plastics/OPP Films ................... 7 5 12 Additives and Synthetics ............. 2 2 4 Research and Development ............. 3 - 3 -- -- -- Total Chemical facilities ............. 17 14 31 == == == (a) Includes six partly owned facilities.
Principal chemical products include basic petrochemicals (ethylene, propylene, benzene, paraxylene), intermediates (ethylene glycol) and a key derivative (polyethylene). Other products include synthetic lubricant base stocks and lube additives, plastic films for packaging and industrial applications and molded plastics products.
Mobil - 13 -
Chemical Operations -- continued
Significant developments in 1995 in Mobil's chemical operations included the following:
- The Plastics Division, consisting of the fabricated packaging and consumer businesses, was sold in November for $1.27 billion. The sale included plants in Macedon and Canandaigua, New York; Covington, Georgia; Temple, Texas; Frankfort and Jacksonville, Illinois; Bakersfield, California; and Belleville, Ontario, Canada. In 1995, Plastics had sales revenue of approximately $1 billion. In addition, the resin trading operation, H. Muehlstein & Co, Inc., was sold in early 1996.
- In November, a grass-roots plant for the manufacture of lubricant esters was streamed in Amsterdam, the Netherlands. The 4.4 million gallon capacity plant will be capable of producing esters for synthetic lubricants such as Advanced Formula Mobil 1(TM), refrigeration lubricants for non-CFC compressors and biodegradable esters for environmentally sensitive applications.
- A second orienter streamed in March 1995 at the oriented polypropylene (OPP) plant in Kerkrade, the Netherlands. This doubles OPP capacity at the plant to over 60 million pounds.
- In January, 1996 Mobil announced worldwide oriented polypropylene (OPP) capacity expansions totaling 145 million pounds. This additional capacity will be installed at various North American and overseas locations, and will increase Mobil's annual worldwide OPP capacity from 430 million pounds to 575 pounds by year-end 1998.
- Mobil authorized projects to expand capacity at Chalmette, Louisiana, and Beaumont, Texas, as part of a program that will more than double its worldwide paraxylene production capacity. Combined, the paraxylene capacity of these expansions is 365,000 metric tons.
OTHER OPERATIONS
Mining and Minerals
Mobil Mining and Minerals produces and sells phosphate rock and fertilizers, markets Mobil's recovered sulfur in the U.S. and administers other mineral resources. The newly completed, 3.5 million ton (annual capacity) mine at South Fort Meade, Florida, was sold in December, 1995 for $283 million. We expect to divest our remaining mining assets in 1996. Phosphate rock production totaled 2.7 million tons in 1995 compared with 2.3 million tons in 1994. Phosphate minerals net sales to trade were $192 million in 1995.
Mobil - 14 -
Other Operations - Continued
Real Estate
Mobil Land Development Corporation (Mobil Land) carries on Mobil's real estate activities in the United States. Mobil Land has various properties in Arizona, California, Colorado, Florida, Georgia, Texas and Virginia. Mobil Land sales to trade were $128 million in 1993, $201 million in 1994 and $275 million in 1995. Included in 1995 is the sale of Colonial Place in Arlington, Virginia. Rents to trade were $28 million in 1993, $29 million in 1994 and $20 million in 1995. Mobil Land is a 50% partner in a resort community development in North Scottsdale, Arizona. Mobil Land is also the 100% owner of a commercial office and retail complex in Reston, Virginia.
Research
Mobil engages in research and development, principally in the U.S., Australia, France, Germany, Japan, Norway and the United Kingdom. Activities include the development of technologies and services which improve Mobil's competitiveness in core business areas -- finding oil and gas, and converting them to fuels, lubricants and chemicals while meeting environmental, health and safety standards. Annual research expense was $301 million in 1993, $275 million in 1994 and $252 million in 1995.
Mobil - 15 -
Item 2.

Item 2. Properties.
Mobil and its subsidiaries own, lease or have interests in extensive production, manufacturing, marketing, transportation and other facilities worldwide. Information on these properties has been incorporated into Item 1. Business.
Item 3.

Item 3. Legal Proceedings.
Environmental Litigation
Mobil periodically receives notices from the Environmental Protection Agency (EPA) or equivalent agencies at the state level that Mobil is a "potentially responsible party" under Superfund or equivalent state legislation with respect to various waste disposal sites. The majority of these sites are either still under investigation by the EPA or the state agencies concerned, or under remediation, or both. In certain instances, Mobil and other potentially responsible parties have been named in court or administrative proceedings by federal or state agencies seeking the cleanup of these sites. Mobil has also been named as a defendant in various suits brought by private parties alleging injury from disposal of wastes at these sites. The ultimate impact of these proceedings on the business or accounts of Mobil cannot be predicted at this time due to the large number of other potentially responsible parties and the speculative nature of clean-up cost estimates, but based on our long experience in managing environmental matters, we do not anticipate that the aggregate level of future remediation costs will increase above recent levels so as to materially and adversely affect our consolidated financial position or liquidity.
On October 20, 1995, a proceeding involving Mobil Oil Corporation's Joliet, Illinois, refinery was brought by the Environmental Protection Agency. The penalty sought is $146,000. It is alleged that Mobil Oil Corporation violated the Illinois State Implementation Plan under the Clean Air Act, violated the state air regulatory standards for opacity, particulates and carbon monoxide and failed to comply with an Agency request under the Clean Air Act.
The matter described in the preceding paragraph is not of material importance in relation to Mobil's accounts and is described in compliance with SEC rules regarding disclosure of such matters although not material.
Other Than Environmental Litigation
Mobil and its subsidiaries are engaged in various litigations and have a number of unresolved claims pending. While the amounts claimed are substantial and the ultimate liability in respect of such litigations and claims cannot be determined at this time, Mobil is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to be of material importance in relation to its accounts.
Mobil has provided in its accounts for items and issues not yet resolved based on management's best judgement.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
None submitted.
Mobil - 16 -
PART II
The information required by Items 5 through 7 is incorporated herein by reference to Mobil's 1995 Annual Report to Shareholders. The charts, graphs and associated captions appearing on pages 17 through 32 of Mobil's 1995 Annual Report to Shareholders are not incorporated into this Annual Report on Form 10-K. Below is an index to the incorporated information. Annual Report to Shareholders Item Description Page(s)
5. Market for Registrant's Common Stock and Related Stockholder Matters .............................. 27 6. Selected Financial Data ............................ 56-57 7. Management's Discussion and Analysis of Results of Operations and Financial Condition ............... 17-28,30,32
Item 8.

Item 8. Financial Statements and Supplementary Data.
See page 19 for a list of the financial statements and supplementary data including those incorporated herein by reference to Mobil's 1995 Annual Report to Shareholders.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
Item 11.

Item 11. Executive Compensation.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13.

Item 13. Certain Relationships and Related Transactions.
For Item 10, the names and ages of the Executive Officers of Mobil as of March 1, 1996, and the position(s) each of them has held during the past five years, are provided on page 18 of this Annual Report on Form 10-K. The other information called for by Item 10, and the information called for by Items 11, 12 and 13, is incorporated by reference to the Registrant's definitive proxy statement for its Annual Meeting of Shareholders, to be held on May 9, 1996, which will be filed with the S.E.C. within 120 days after December 31, 1995.
Mobil - 17 -
Information required by Item 10 of this report related to the names and ages of the Executive Officers of Mobil Corporation as of March 1, 1996, and the position(s) each of them has held during the past five years, is provided below.
Mobil - 18 -
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Mobil's consolidated financial statements, together with the report thereon of Ernst & Young LLP, independent auditors, dated February 23, 1996, and Supplementary Information appearing in Mobil's 1995 Annual Report to Shareholders on the pages indicated below, are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in Mobil's 1995 Annual Report to Shareholders are deemed to be filed as part of this Annual Report under Items 8 and 14. The charts, graphs and associated captions appearing on pages 30 through 48 of Mobil's 1995 Annual Report to Shareholders are not incorporated into this Annual Report on Form 10-K.
Financial Statement Schedules: Page(s) 1995 1995 Annual Annual Report on Report to Form 10-K Shareholders (a)1. Financial Statements.
Consolidated Statement of Income .......... - 29 Consolidated Statement of Changes in Shareholders' Equity ..................... - 29 Consolidated Balance Sheet ................ - 31 Consolidated Statement of Cash Flows ...... - 33 Segment and Geographic Information ........ - 34,35 Notes to Financial Statements ............. - 36-48 Report of Ernst & Young LLP, Independent Auditors ................................. - 49 Supplementary Information ................. - 27,50-53 Summarized Financial Data for Mobil Oil Corporation .............................. 21 -
(a)2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts.................................. 22 -
Schedules not included above have been omitted because they are not applicable, not material, or the required information is given in the financial statements or notes thereto or combined with the information presented in other schedules.
(a)3. Exhibits
An index to exhibits filed as part of this Annual Report on Form 10-K is included on page 24.
Mobil - 19 -
(b) Reports on Form 8-K.
Date of 8-K Description of 8-K
October 2, 1995 Submitted a copy of the Mobil News Release dated October 2, 1995, announcing the sale of Mobil Chemical Company's Plastics Division to Tenneco Inc.
October 23, 1995 Submitted a copy of the Mobil News Release dated October 23, 1995, reporting estimated earnings for the third quarter of 1995.
December 15, 1995 Submitted (1) a copy of the Mobil News Release dated December 15, 1995, reporting that Mobil will adopt the Statement of Financial Accounting Standard (FAS) 121 in the fourth quarter of 1995 and (2) a copy of the Mobil News Release dated December 15, 1995, announcing that Mobil's board of directors has approved an updated Preferred Share Purchase Rights Plan to replace the current plan when it expires April 30, 1996.
January 22, 1996 Submitted a copy of the Mobil News Release dated January 22, 1996, reporting estimated earnings for the fourth quarter and full year of 1995.
February 14, 1996 Submitted a copy of the Mobil News Release dated February 14, 1996, announcing that Mobil Exploration and Producing Australia Pty. Ltd. (MEPA) has acquired a substantial position in Ampolex Limited through the purchase of its listed securities and has made a proposal to acquire the Australian oil and gas exploration and producing company.
February 29, 1996 Submitted a copy of the Mobil News Release dated February 29, 1996, announcing that BP and Mobil will combine their European operations in the refining and marketing of fuels and lubricants.
Mobil - 20 -
(c) Supplemental Financial Information.
SUMMARIZED FINANCIAL DATA
Summarized financial data of Mobil Oil Corporation, a wholly-owned subsidiary of Mobil Corporation, are presented below. The year-end net obligations to Mobil Corporation amounted to $2,676 million in 1993, $1,737 million in 1994 and $3,373 million in 1995.
Mobil Oil Corporation engages in an integrated petroleum business and a chemical business in the U.S., and certain of its subsidiaries are engaged in petroleum operations outside the U.S. On December 31, 1995, Mobil Oil Corporation transferred to its parent corporation, Mobil Corporation, its ownership of the shares of Mobil International Petroleum Corporation, whose subsidiaries conduct the bulk of the non-U.S. petroleum operations of the Mobil group of companies. This transfer of ownership is reflected in Exhibit 21, Subsidiaries of the Registrant, and in the summarized balance sheet data below.
MOBIL OIL CORPORATION (Millions of dollars) 1993 1994 1995
At December 31: Current assets ............................ $ 10,863 $ 12,942 $ 4,117 Noncurrent assets ......................... 24,209 25,006 11,946 Current liabilities ....................... (11,113) (12,398) ( 5,794) Long-term debt ............................ (6,218) (6,639) (4,301) Deferred credits and other liabilities .... (4,617) (4,899) (2,586) Minority interests, primarily Mobil Corporation ............................. (1,138) (1,165) (1,202) -------- ------- ------- Net assets ................................ $ 11,986 $ 12,847 $ 2,180 ======== ======= ======= Year ended December 31: Gross revenues ............................ $ 60,522 $64,032 $ 71,893 Income before taxes and change in accounting principle .................... 2,274 2,487 3,791 Income after taxes but before change in accounting principle .................... 1,032 1,186 2,269 Cumulative effect of change in accounting principle (a) ........................... - (680) - Net income ................................ 1,032 506 2,269
(a)Reflects the adoption of a change in the accounting method used to apply the lower of cost or market test for crude oil and product inventories in 1994.
Mobil - 21 -
Supplemental Financial Information -- continued
FINANCIAL STATEMENT SCHEDULE
MOBIL CORPORATION SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 1993, 1994 and 1995 (Millions of dollars)
Balance Balance Beginning End of Description of Period Additions Deductions Period - - - - -------------------------------- --------- --------- ---------- ------- For the year ended December 31, 1993: Reserves deducted in the balance sheet from the assets to which they apply: For doubtful accounts (a) .... $115 $ 76 $63 $128 For investments and long-term receivables ...... 31 4 3 32 For deferred tax assets ...... 134 37 - 171
For the year ended December 31, 1994: Reserves deducted in the balance sheet from the assets to which they apply: For doubtful accounts (a) .... $128 $ 36 $42 $122 For investments and long-term receivables ...... 32 3 - 35 For deferred tax assets (b) .. 171 256 48 379
For the year ended December 31, 1995: Reserves deducted in the balance sheet from the assets to which they apply: For doubtful accounts (a) .... $122 $ 58 $74 $106 For investments and long-term receivables ...... 35 5 - 40 For deferred tax assets (b) .. 379 9 77 311
(a) Deductions include accounts written off. (b) Deductions reflect utilization of tax credit carryforwards
Mobil - 22 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant, Mobil Corporation, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT MOBIL CORPORATION
By:/s/ George Broadhead (George Broadhead, Acting Controller, Principal Accounting Officer)
Date: March 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on March 11, 1996 on behalf of the registrant and in the capacities indicated.
Signature Title
Lucio A. Noto* Director, Chairman of the Board and (Lucio A. Noto) President, Principal Executive and Operating Officer
Thomas C. DeLoach, Jr.* Principal Financial Officer (Thomas C. DeLoach, Jr.)
George Broadhead* Acting Controller, Principal Accounting Officer (George Broadhead)
DIRECTORS
Lewis M. Branscomb* Donald V. Fites* Charles A. Heimbold, Jr.* Paul J. Hoenmans* Allen F. Jacobson* Samuel C. Johnson* Helene L. Kaplan* J. Richard Munro* Aulana L. Peters* Eugene A. Renna* Charles S. Sanford, Jr.* Robert G. Schwartz* Robert O. Swanson*
*By /s/ Gordon G. Garney (Gordon G. Garney, Attorney-in-fact) Date: March 11, 1996
Mobil - 23 -
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
3(i).1 Certificate of Incorporation Incorporated by reference to Exhibit of Mobil Corporation, as amended, 3-a(i) to the Registration Statement in effect October 27, 1989. on Form S-3 (S.E.C. File No. 33-32651), filed under Form SE dated December 14, 1989.
3(i).2 Certificate of Designation, Incorporated by reference to Exhibit Preferences and Rights of Series 3-a(ii) to the Registration Statement A Junior Participating Preferred on Form S-3 (S.E.C. File No. Stock of Mobil Corporation dated 33-32651), filed under Form SE dated April 25, 1986. December 14, 1989.
3(i).3 Certificate of Designation, Incorporated by reference to Exhibit Preferences and Rights of Series 3-a(iii) to the Registration B ESOP Convertible Preferred Statement on Form S-3 (S.E.C. File Stock of Mobil Corporation dated No.33-32651), filed under Form SE November 22, 1989. dated December 14, 1989.
3(ii).4 By-laws of Mobil Corporation, Incorporated by reference to Exhibit as amended to December 16, 1994. 3.4 filed on Form 8-K dated July 6, 1995.
10.1 1995 Mobil Incentive Compensation Incorporated by reference to and Stock Ownership Plan. definitive Proxy Statement filed March 20, 1995.
10.2 1991 Mobil Incentive Compensation Incorporated by reference to Exhibit and Stock Option Plan. 15 to the Registration Statement on Form S-8 (S.E.C. File No. 33-48887) filed August 10, 1992.
10.3 1986 Mobil Incentive Compensation Incorporated by reference to Exhibit and Stock Option Plan. 15 to the Registration Statement on Form S-8 (S.E.C. File No. 33-5797) filed May 20, 1986.
11. Computation of Earnings per Electronic Common Share. (Page 25)
12. Computation of Ratio of Earnings Electronic to Fixed Charges. (Page 26)
13. Mobil Corporation 1995 Annual Electronic Report to Shareholders.
21. Subsidiaries of the Registrant. Electronic (Pages 27-29)
23. Consent of Ernst & Young LLP, Electronic Independent Auditors, dated March 6, 1996. (Page 30)
24.1 Power of attorney dated as of Electronic February 23, 1996, executed by the Board of Directors of Mobil Corporation authorizing execution of Annual Report on Form 10-K.
24.2 Certified copy of Board of Electronic Directors' Resolutions adopted February 23, 1996, authorizing signature by officers pursuant to power of attorney.
27. Financial Data Schedule Electronic
Mobil - 24 -


Item 1. Business.
(a) General Development of Business
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP (the "Partnership") was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on December 30, 1987 for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the Managing General Partner (AFG Leasing Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On April 15, 1988, the Partnership issued 519,926 units representing assignments of limited partnership interests (the "Units") to 1,129 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. The 519,926 Units include 76 bonus Units. Subsequent to the Partnership's Closing, the Partnership had five General Partners: AFG Leasing Incorporated, a Massachusetts corporation, Kestutis J. Makaitis, Daniel J. Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively the "General Partners"). Messrs. Makaitis, Roggemann and Laughlin subsequently elected to withdraw as Individual General Partners. The General Partners, each of whom is affiliated with American Finance Group ("AFG"), a Massachusetts partnership, are not required to make any other capital contributions except as may be required under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement").
(b) Financial Information About Industry Segments
The Partnership is engaged in only one industry segment: the business of acquiring capital equipment and leasing the equipment to creditworthy lessees on a full payout or operating lease basis. Full payout leases are those in which aggregate noncancellable rents equal or exceed the Purchase Price of the leased equipment. Operating leases are those in which the aggregate noncancellable rental payments are less than the Purchase Price of the leased equipment. Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital equipment subject to various full payout and operating leases and to lease the equipment to third parties as income-producing investments. More specifically, the Partnership's primary investment objectives are to acquire and lease equipment which will:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and
3. Maintain substantial residual value for ultimate sale.
The Partnership has the additional objective of providing certain federal income tax benefits.
The Closing Date of the Offering of Units of the Partnership was April 15, 1988. The initial purchase of equipment and the associated lease commitments occurred on April 19, 1988. The acquisition of the equipment and its associated leases is described in detail in Note 3 to the financial statements included in Item 14, herein. The Partnership is expected to terminate no later than December 31, 1999.
The Partnership has no employees; however, it entered into a Management Agreement with AFG (the "Manager"). The Manager's role, among other things, is to (i) evaluate, select, negotiate, and consummate the acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and refinancing of equipment, and (iii) arrange the resale of equipment. The Manager is compensated for such services as described in the Restated Agreement, as amended, Item 13 herein and in Note 4 to the financial statements included in Item 14, herein.
The Partnership's investment in equipment is, and will continue to be, subject to various risks, including physical deterioration, technological obsolescence and defaults by lessees. A principal business risk of owning and leasing equipment is the possibility that aggregate lease revenues and equipment sale proceeds will be insufficient to provide an acceptable rate of return on invested capital after payment of all debt service costs and operating expenses. Consequently, the success of the Partnership is largely dependent upon the ability of the Managing General Partner and its Affiliates to forecast technological advances, the ability of the lessees to fulfill their lease obligations and the quality and marketability of the equipment at the time of sale.
In addition, the leasing industry is very competitive. Although all funds available for acquisitions have been invested in equipment, subject to noncancellable lease agreements, the Partnership will encounter considerable competition when equipment is re-leased or sold at the expiration of primary lease terms. The Partnership will compete with lease programs offered directly by manufacturers and other equipment leasing companies, including limited partnerships and trusts organized and managed similarly to the Partnership and including other AFG sponsored partnerships and trusts, which may seek to re-lease or sell equipment within their own portfolios to the same customers as the Partnership. Many competitors have greater financial resources and more experience than the Partnership, the Managing General Partner and the Manager.
Generally, the Partnership is prohibited from reinvesting the proceeds generated by refinancing or selling equipment. Accordingly, it is anticipated that the Partnership will begin to liquidate its portfolio of equipment at the expiration of the initial and renewal lease terms and to distribute the net liquidation proceeds. As an alternative to sale, the Partnership may enter re-lease agreements when considered advantageous by the Managing General Partner and the Manager. In accordance with the Partnership's stated investment objectives and policies, the Managing General Partner is also considering winding-up the Partnership's operations, including the liquidation of its entire portfolio.
Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1995, 1994 and 1993 is incorporated herein by reference to Note 2 to the financial statements in the 1995 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission.
Default by a lessee under a lease may cause equipment to be returned to the Partnership at a time when the Managing General Partner or the Manager is unable to arrange for the re-lease or sale of such equipment. This could result in the loss of a material portion of anticipated revenues and significantly weaken the Partnership's ability to repay related debt.
AFG is a successor to the business of American Finance Group, Inc., a Massachusetts corporation engaged since its inception in 1980 in various aspects of the equipment leasing business. In 1990, certain members of AFG's management, principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts effected this event by acquiring all of the equity interests of AFG's two partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and AFG Corporation. Holdings Massachusetts incurred significant indebtedness to finance this acquisition, a significant portion of which was scheduled to mature in 1995.
On December 16, 1994, the senior lender to Holdings Massachusetts (the "Senior Lender") assumed control of its security interests in Holdings Illinois and AFG Corporation and sold all such interests to GDE Acquisitions Limited Partnership, a Massachusetts limited partnership owned and controlled entirely by Gary D. Engle, President and member of the Executive Committee of AFG. As a result of this transaction, GDE Acquisitions Limited Partnership acquired all of the assets, rights and obligations of AFG from the Senior Lender and assumed control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG and member of its Executive Committee.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Not applicable.
Item 2.

Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements in the 1995 Annual Report.
Item 3.

Item 3. Legal Proceedings.
Incorporated herein by reference to Note 7 to the financial statements in the 1995 Annual Report.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.

Item 5. Market for the Partnership's Securities and Related Security Holder Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1995, there were 1,015 recordholders of Units in the Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the Partnership's Distributable Cash From Operations and Distributable Cash From Sales or Refinancings are determined and distributed to the Partners quarterly. Each quarter's distribution may vary in amount. Distributions may be made to the Managing General Partner prior to the end of the fiscal quarter; however, the amount of such distribution reflects only amounts to which the Managing General Partner is entitled at the time such distribution is made. Currently, there are no restrictions that materially limit the Partnership's ability to distribute Distributable Cash From Operations and Distributable Cash From Sales or Refinancings or that the Partnership believes are likely to materially limit the future distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings. The Partnership expects to continue to distribute all Distributable Cash From Operations and Distributable Cash From Sales or Refinancings on a quarterly basis.
Distributions payable were $98,470 and $164,118 at December 31, 1995 and 1994, respectively.
"Distributable Cash From Operations" means the net cash provided by the Partnership's normal operations after general expenses and current liabilities of the Partnership are paid, reduced by any reserves for working capital and contingent liabilities to be funded from such cash, to the extent deemed reasonable by the Managing General Partner, and increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations and reduced by all accrued and unpaid Equipment Management Fees and, after Payout, further reduced by all accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From Operations does not include any Distributable Cash From Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or Refinancings as reduced by (i)(a) amounts realized from any loss or destruction of equipment which the Managing General Partner determines shall be reinvested in similar equipment for the remainder of the original lease term of the lost or destroyed equipment, or in isolated instances, in other equipment, if the Managing General Partner determines that investment of such proceeds will significantly improve the diversity of the Partnership's equipment portfolio, and subject in either case to satisfaction of all existing indebtedness secured by such equipment to the extent deemed necessary or appropriate by the Managing General Partner, and (b) the proceeds from the sale of an interest in equipment pursuant to any agreement governing a joint venture which the Managing General Partner determines will be invested in additional equipment or interests in equipment and which ultimately are so reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated Remarketing Fees.
"Cash From Sales or Refinancings" means cash received by the Partnership from sale or refinancing transactions, as reduced by (i)(a) all debts and liabilities of the Partnership required to be paid as a result of sale or refinancing transactions, whether or not then due and payable (including any liabilities on an item of equipment sold which are not assumed by the buyer and any remarketing fees required to be paid to persons not affiliated with the General Partners, but not including any Subordinated Remarketing Fees whether or not then due and payable) and (b) any reserves for working capital and contingent liabilities funded from such cash to the extent deemed reasonable by the Managing General Partner and (ii) increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations. In the event the Partnership accepts a note in connection with any sale or refinancing transaction, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales or Refinancings, regardless of the treatment of such payments by the Partnership for tax or accounting purposes. If the Partnership receives purchase money obligations in payment for equipment sold, which are secured by liens on such equipment, the amount of such obligations shall not be included in Cash From Sales or Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings of the Partnership shall be made 99% to the Recognized Owners and 1% to the General Partners until Payout and 85% to the Recognized Owners and 15% to the General Partners after Payout.
"Payout" is defined as the first time when the aggregate amount of all distributions to the Recognized Owners of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings equals the aggregate amount of the Recognized Owners' original capital contributions plus a cumulative annual return of 10% (compounded quarterly and calculated beginning with the last day of the month of the Partnership's Closing Date) on their aggregate unreturned capital contributions. For purposes of this definition, capital contributions shall be deemed to have been returned only to the extent that distributions of cash to the Recognized Owners exceed the amount required to satisfy the cumulative annual return of 10% (compounded quarterly) on the Recognized Owners' aggregate unreturned capital contributions, such calculation to be based on the aggregate unreturned capital contributions outstanding on the first day of each fiscal quarter.
Distributable Cash From Operations and Distributable Cash From Sales or Refinancings ("Distributions") are distributed within 60 days after the completion of each quarter, beginning with the first full fiscal quarter following the Partnership's Closing Date. Each Distribution is described in a statement sent to the Recognized Owners.
Item 6.

Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected Financial Data" in the 1995 Annual Report.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1995 Annual Report.
Item 8.

Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and supplementary data included in the 1995 Annual Report.
Item 9.

Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing Incorporated is the Managing General Partner of the Partnership. Under the Restated Agreement, as amended, the Managing General Partner is responsible for the operation of the Partnership's properties and the Recognized Owners have no right to participate in the control of such operations. The names, titles and ages of the Directors and Executive Officers of the Managing General Partner as of March 15, 1996 are as follows:
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11.

Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Partnership has no employees. However, under the terms of the Restated Agreement, as amended, the Partnership is obligated to pay all costs of personnel employed full or part-time by the Partnership, including officers or employees of the Managing General Partner or its Affiliates. There is no plan at the present time to make any officers or employees of the Managing General Partner or its Affiliates employees of the Partnership. The Partnership has not paid and does not propose to pay any options, warrants or rights to the officers or employees of the Managing General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership has no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurs a monthly charge for personnel costs of the Manager for persons engaged in providing administrative services to the Partnership. A description of the remuneration paid by the Partnership to the Manager for such services is included in Item 13, herein and in Note 4 to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General Partners or the Managing General Partner or its Affiliates which results or may result from their resignation, retirement or any other termination.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided in Section 11.2(a) of the Restated Agreement, as amended (subject to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners have voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partners; and
4. Approval or disapproval of the sale of all, or substantially all, of the assets of the Partnership (except in the orderly liquidation of the Partnership upon its termination and dissolution).
The ownership and organization of AFG is described in Item 1 of this report.
Item 13.

Item 13. Certain Relationships and Related Transactions.
The Managing General Partner of the Partnership is AFG Leasing Incorporated, an affiliate of AFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership are paid by AFG on behalf of the Partnership and AFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the years ended December 31, 1995, 1994 and 1993, which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows:
As provided under the terms of the Management Agreement, AFG is compensated for its services to the Partnership. Such services include all aspects of acquisition, management and sale of equipment. For acquisition services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG is compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenue or (ii) fees which the Managing General Partner reasonably believes to be competitive for similar services for similar equipment. Both of these fees are subject to certain limitations defined in the Management Agreement. Compensation to AFG for services connected to the sale of equipment is calculated as the lesser of (i) 3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under arm's length circumstances. Payment of the remarketing fee is subordinated to Payout and is subject to certain limitations defined in the Management Agreement.
Interest expense - affiliate represents interest incurred on legal costs in connection with a state sales tax dispute involving certain equipment owned by the Partnership and other affiliated investment programs sponsored by AFG. Legal costs incurred by AFG to resolve this matter and the interest thereon was allocated to the Partnership and other affected investment programs. Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who are engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by AFG on behalf of the Partnership which are reimbursed to AFG.
All equipment was purchased from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2 to the financial statements, included in Item 14, herein.
All rents and proceeds from the sale of equipment are paid directly to either AFG or to a lender. AFG temporarily deposits collected funds in a separate interest-bearing account prior to remittance to the Partnership. At December 31, 1995, the Partnership was owed $37,479 for such funds and the interest thereon. These funds were remitted to the Partnership in January 1996.
On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a newly formed Massachusetts limited partnership owned and controlled by certain principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up to approximately 45% of the outstanding units of limited partner interest in this Partnership and 20 affiliated partnerships sponsored and managed by AFG. The Offer was subsequently amended and supplemented in order to provide additional disclosure to unitholders; increase the offer price; reduce the number of units sought to approximately 35% of the outstanding units; and extend the expiration date of the Offer to October 20, 1995. Following commencement of the Offer, certain legal actions were initiated by interested persons against AALP, each of the general partners (4 in total) of the 21 affected programs, and various other affiliates and related parties. One action, a class action brought in the United States District Court for the District of Massachusetts (the "Court") on behalf of the unitholders (limited partners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. A second class action, brought in the Superior Court of the Commonwealth of Massachusetts (the "Superior Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and intervene in the first class action, was dismissed by the Superior Court. The Plaintiffs have filed an appeal in this matter. The limited partners of the Partnership tendered approximately 37,604 units or 7.23% of the total outstanding units of the Partnership to AALP. The operations of the Partnership are not expected to be adversely affected by these proceedings or settlements.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
Exhibit Number
99 (b) Lease agreement with Northwest Airlines, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 as Exhibit 28 (d) and is incorporated herein by reference.
99 (c) Lease agreement with Equicor, Incorporated was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 as Exhibit 28 (e) and is incorporated herein by reference.
99 (d) Lease agreement with ING Aviation Lease is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and is included herein.
(b) Reports on Form 8-K
None.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners III-D Limited Partnership of our report dated March 12, 1996, included in the 1995 Annual Report to the Partners of American Income Partners III-D Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts March 12, 1996
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will be furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.