Year 2000Project Mobil is engaged in a company-wide effort (Project) to address the issues that are likely to arise if computer programs and embedded computer chips are unable to properly recognize dates in and after the year 2000. The Project is focused on three main areas: the information technology (IT) systems in Mobil's computers and computer software, including those that are linked to the systems of third parties; the non-IT systems embedded in equipment that controls or monitors Mobil's operating assets such as refineries, production facilities, pipelines and marine vessels; and Mobil's business relationships with third parties such as suppliers, customers, joint-venture companies and governments (referred to herein as external agents). The thrust of the Project is to address those of Mobil's IT systems, non-IT systems and relationships with external agents which Mobil judges to be materially important to Mobil. These systems or relationships, referred to herein as materially important, are those whose failure for year 2000 reasons would likely: put the safety of individuals at risk; lead to damage to property or the environment; put in jeopardy the value of Mobil's name or intellectual property; or trigger a significant adverse consequence to Mobil's financial performance or condition. Project work dealing with IT systems and Project work dealing with non-IT systems has the following three phases: (1) inventory and assessment: inventorying all of Mobil's systems (including those that are linked to third parties), identifying those of Mobil's systems that are not year 2000 compliant, and making judgments as to which of Mobil's systems (both compliant and non-compliant) would likely be materially important; (2) strategy and planning: developing strategies and plans for (a) remediating, upgrading or replacing all non-compliant systems (except those whose failure would, in Mobil's judgment, have an insignificant impact on Mobil's operations) and (b) testing all systems judged to be materially important, and estimating the costs of implementing these strategies and executing these plans; and (3) execution: implementing the strategies and executing the plans. Project work dealing with relationships with external agents has the following three phases: (1) inventory and assessment: inventorying Mobil's relationships with external agents and making judgments as to which of those relationships would likely be materially important; (2) communication and evaluation: sending letters and questionnaires to those external agents whose MOBIL - 15 -Year 2000 - continued relationships are judged to be materially important to elicit information about the plans and actions of those external agents to achieve timely year 2000 readiness, and evaluating the information so obtained; and (3) follow up: contacting external agents with whom Mobil has already communicated to obtain further assurance that such external agents will achieve timely year 2000 readiness. Additional Project work, discussed below, involves identifying scenarios involving failures for year 2000 reasons of materially important IT and non-IT systems or materially important relationships with external agents and developing contingency plans for mitigating the impact of such failures. The inventory and assessment and the strategy and planning phases of the work dealing with IT systems are complete. The execution phase of this work involves both application and infrastructure repair and systems upgrades and replacements. Application and infrastructure repair involves: the remediation and testing of non-compliant code; the remediation, replacement and testing of computing infrastructure and telecommunications devices; and the upgrading and testing of end user applications. The application and infrastructure repair work, which is being performed by both Mobil personnel and third parties with extensive experience in resolving year 2000 issues, is expected to be completed by June 30, 1999, and Mobil estimates that approximately 68% of the projects comprising this work had been completed as of September 30, 1998. The systems upgrade and replacement work consists of the implementation of a major integrated enterprise software system in North America (which would have been implemented regardless of year 2000 considerations) and numerous other systems. All of this work is expected to be essentially completed by June 30, 1999. Based on calculations that reflect successful attainment of milestones, Mobil estimates that approximately 61% of the major integrated enterprise software system implementation project had been completed as of September 30, 1998. Mobil estimates that approximately 43% of the projects comprising the work to upgrade and replace other systems had been completed as of September 30, 1998. The inventory and assessment phase of the work dealing with non-IT systems is essentially complete. The strategy and planning phase of this work is expected to be completed by March 31, 1999, and Mobil estimates that it was approximately 72% complete as of September 30, 1998. The execution phase of this work, much of which is being performed by the vendors of the products involved, is expected to be completed by June 30, 1999, and Mobil estimates that approximately 7% of the projects comprising this work had been completed as of September 30, 1998. The inventory and assessment phase of the work dealing with relationships with external agents is essentially complete. The communication and evaluation phase of this work is expected to be completed by March 31, 1999, and Mobil estimates that approximately 65% of the suppliers whose relationships Mobil judges to be materially important had been contacted and had responded as of September 30, 1998. The follow-up phase of this work will be undertaken on a continuous, ongoing basis through the end of 1999, and consequently Mobil does not believe that it would be meaningful to provide an estimate of the percentage of such work that has been completed as of a particular date. MOBIL - 16 -Year 2000 - continuedCost The costs associated with the Project (all on a pre-tax basis) are being spent over a three-year period. There are two categories of these costs: (1) costs that are being incurred solely to achieve year 2000 compliance and (2) costs that are being incurred to install new systems that improve business functionality and in many cases concurrently provide year 2000 compliance. Mobil estimates that the costs to be incurred solely to achieve year 2000 compliance will total approximately $200 million, of which the costs of dealing with IT systems are expected to be about $178 million and the costs of dealing with non-IT systems are expected to be about $22 million (the costs of dealing with relationships with external agents are expected to be minimal). As of September 30, 1998, about $89 million of the total costs estimated to be incurred solely to achieve year 2000 compliance had been expended. Mobil estimates that the costs to be incurred for new systems that improve business functionality and in many cases concurrently provide year 2000 compliance will total approximately $290 million, and as of September 30, 1998, about $154 million of these costs had been expended. All Project costs are being funded with cash flows from operations. The $200 million which Mobil estimates will be expended solely to achieve year 2000 compliance represents less than 15% of Mobil's estimated total IT budget for the period covered by the Project. This entire amount is being expensed as it is incurred. Of the $290 million which Mobil estimates will be expended on new systems that improve business functionality and in many cases concurrently provide year 2000 compliance, approximately $110 million is being expensed as it is incurred and approximately $180 million is being capitalized. As a result of the Project, certain IT projects to improve business functionality have been reprioritized and accelerated while other such IT projects have been deferred. As a consequence, expenditures during the period covered by the Project on IT systems that will improve business functionality will actually be greater than the expenditures that would have been made on such systems had there been no Project. Accordingly, the deferral of IT work due to the Project will not have a material adverse effect on Mobil's results of operations or financial condition.Risks and Contingency Plans The failure or failures for year 2000 reasons of materially important systems or relationships with external agents could have a material adverse effect on Mobil's results of operations, liquidity and/or financial condition. For example, if, for year 2000 reasons, a utility company were to be unable to supply electricity to a Mobil refinery for an extended period, the refinery would have to be shut down for that period, which could result in substantial losses of production, sales and income. Mobil believes that the Project work described above dealing with materially important IT systems and non-IT systems will, when completed, serve to reduce very substantially the risk that such systems will fail for year 2000 reasons. Mobil has no way of ensuring, however, that external agents whose relationships with Mobil are judged to be materially important (e.g., utilities, telecommunications providers and transportation providers) will be timely year 2000 compliant. MOBIL - 17 -Year 2000 - continued To minimize the risks associated with the year 2000 issue, Mobil has begun work (1) to identify scenarios involving possible failures for year 2000 reasons of materially important systems and relationships with external agents and (2) to develop contingency plans for mitigating the impact of these scenarios. A key aspect of this work will be to determine the most reasonably likely worst-case scenarios, since the development of contingency plans for mitigating the impact of these will have the highest priority. At this time, Mobil has not yet identified specific most reasonably likely worst-case scenarios. Mobil believes, however, that these scenarios will likely involve the failure for year 2000 reasons of one or more materially important relationships with external agents. Work on identifying scenarios involving failures for year 2000 reasons and on the development of contingency plans for mitigating their impact will intensify over the next two quarters as the last phases of the Project work come to a close and Mobil acquires additional and better information about potential year 2000 risks. The work described in the preceding paragraph will be focused on risks, scenarios and contingency plans involving materially important systems and relationships with external agents. There are, however, an almost infinite number of additional risks which are simply not assessable and for which, therefore, contingency plans cannot be developed. These are the risks of failure for year 2000 reasons of one or more systems or relationships with external agents which, individually, Mobil does not judge to be materially important but whose failure could trigger a cascade of other failures for year 2000 reasons, the combination of which could be materially important or could prevent Mobil from implementing contingency plans it has developed. Such a combination of failures could also have a material adverse effect on Mobil's results of operations, liquidity and/or financial condition. Forward-Looking Statements Relating to the Year 2000 Issue The foregoing discussion about the year 2000 issue includes a number of forward-looking statements, which are based on Mobil's best assumptions and estimates as of the date hereof. These include, without limitation, statements concerning: Mobil's estimated timetables for completing the not-yet-completed phases of the Project work; Mobil's estimates of the percentages of the work that remains to be performed to complete such phases; Mobil's estimated timetable for identifying scenarios involving possible failures for year 2000 reasons of materially important systems and relationships with external agents and the development and implementation of contingency plans for mitigating the impacts of these scenarios; and Mobil's estimates of the costs of (1) completing the not-yet-completed phases of the Project and (2) identifying possible year 2000 failure scenarios and developing and implementing contingency plans for mitigating the impacts of these. Actual results could differ materially from the estimates expressed in such forward-looking statements, due to a number of factors. These factors, which are not necessarily all the key factors that could cause such differences, include the following: Mobil's failure to judge accurately which of Mobil's systems and relationships with external agents are materially important; Mobil's inability to obtain and retain the staff and third-party assistance necessary to complete the not-yet-completed phases of the Project in accordance with Mobil's estimated timetables; the inability of such staff and third parties (1) to locate and correct all non-year 2000 compliant computer code in materially important systems and test such corrected code and (2) to install and test upgrades or new MOBIL - 18 -Year 2000 - concluded systems containing year 2000-compliant computer code, all in accordance with Mobil's estimated timetables; unforeseen costs of completing Project work; Mobil's inability or failure to identify significant year 2000 issues not now contemplated; and the failure of external agents to achieve timely year 2000 readiness.

-- James Chancellor (publicworks1@bluebonnet.net), February 08, 1999

Answers

I find particulary interesting the part that reads:

"The inventory and assessment phase of the work dealing with non-IT systems is essentially complete. The strategy and planning phase of this work is expected to be completed by March 31, 1999, and Mobil estimates that it was approximately 72% complete as of September 30, 1998. The execution phase of this work, much of which is being performed by the vendors of the products involved, is expected to be completed by June 30, 1999, and Mobil estimates that approximately 7% of the projects comprising this work had been completed as of September 30, 1998."

Very interesting.

Jerry

-- Jerry B (skeptic76@erols.com), February 08, 1999.

James, One deserves a hero's badge for reading all the legalize and no paragraphs to boot. The data is based on a Sept 30 1998 date. When was this info published?

-- Bill Watt (wtwatt01@sprynet.com), February 08, 1999.

Hard to read ... but did did you notice the "no power -> no refinery" statement; and also, "... we have not yet started on contingency planning... but will base them on th eseverity of the potential problems."

Good, honest sobering report from a company that appears to doing it right - though possibly only after a very late start (7% complete last Sept?) - wish there were more reports this thorough.

Wish there were more reports further along than this - although their schedule may yet allow them to complete. If things slip - they are cutting it very, very close.

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), February 08, 1999.

Bill,

This was from Mobil's quarterly 10Q filing with the Securities and Exchange Commission (SEC) at the SEC's EDGAR website.

http://www.sec.gov/edaux/formlynx.htm

Quarterly SEC reports (10Qs) are filed about 45 days after the end of the quarter, (in this case, it was filed on November 12), and then become publicly available on EDGAR usually a few days later.

Since, for most major companies, the next quarter would be the fourth quarter of their fiscal year, the next periodic report would be the annual report (the 10K), and for that, they have 90 days after the end of their fiscal year to file. So the next large batch of similar reports from publicly traded companies will start showing up on the SEC EDGAR site in late March, and will be reporting as of 12/31/98.

Jerry

-- Jerry B (skeptic76@erols.com), February 09, 1999.