MOBIL The energy
                                                        to make a difference(TM)


MOBIL CORPORATION 1996


[Artwork FC]


                                                              1996 ANNUAL REPORT


<PAGE>


                                      TABLE OF
                                      CONTENTS

                                      Letter to Shareholders 1
                                      Mobil At a Glance 4 
                                      THE  ENERGY  TO
                                        MAKE A DIFFERENCE
                                      Partnerships 6
                                      Growth 8
                                      Expansion 10
                                      Service 12
                                      Opportunity 14
                                      Technology 16
                                      Commitment 17
                                      FINANCIAL SECTION
                                      Management Discussion
                                        and Analysis 19
                                      Consolidated Financial
                                        Statements 31
                                      Notes to Financial Statements 38
                                      Reports of Management and
                                        Independent Auditors 52
                                      Supplementary Information 53
                                      Shareholder Information 60
                                      Directors and Officers 61

[Bar Chart - IFC]

AVERAGE
ANNUAL
RETURNS TO SHAREHOLDER
Mobil share-price appreciation
  plus reinvested dividends
    % as of year-end 1996


<TABLE>
<CAPTION>
FINANCIAL
HIGHLIGHTS
                                                                  1995            1996        %Change
-----------------------------------------------------------------------------------------------------
  <S>                                                          <C>             <C>              <C>
  Net income (millions)                                         $2,376          $2,964           25
    Per common share (based on average shares outstanding)        5.87            7.38           26
-----------------------------------------------------------------------------------------------------
  Return on average shareholders' equity                          13.5%           16.0%          --
  Return on average capital employed                              10.9%           12.7%          --
  Income per dollar of revenue                                     3.2(cent)       3.6(cent)     13
  Petroleum earnings per gallon sold                               2.2(cent)       4.5(cent)    105
-----------------------------------------------------------------------------------------------------
  Revenues  (millions)                                         $75,370         $81,503            8
  Total assets, year-end (millions)                             42,138          46,408           10
  Investment spending (millions)                                 4,525           7,019           55
  Shareholders' equity, year-end (millions)                     17,951          19,072            6
    Per common share (based on shares outstanding at year-end)   44.71           47.62            7
-----------------------------------------------------------------------------------------------------
  Common shares outstanding, year-end (thousands)              394,560         393,794           --
  Shareholders of common stock, year-end                       188,800         185,600           (2)
  Number of employees, year-end                                 50,400          43,000          (15)
-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                                          LETTER TO SHAREHOLDERS

                     MOBIL: THE ENERGY TO MAKE A DIFFERENCE

[Photograph of Lucio A. Noto]

I am pleased to report that Mobil achieved record operating earnings in 1996 and
made tangible  progress  toward our vision of becoming a great,  global company.
Mobil people everywhere created "the energy to make a difference," and helped us
meet some of our 1998 goals a full two years early.
      Operating  income rose to $3.1  billion,  up 9% from 1995.  Higher oil and
natural gas prices in our upstream  businesses  helped  substantially,  although
this was partially offset by lower margins  downstream and in chemical.  We also
benefited from higher production and sales volumes and lower operating expenses,
which  declined  10%  on  a  per-barrel  basis.  On  the  other  hand,  we  were
disappointed  with a  higher  level  of  unscheduled  downtime  at  some  of our
manufacturing facilities.
      Our 1998 goals had called for more than $3 billion in  earnings,  a 12% or
better  return on capital  employed,  and a share price of $125.  Our income was
essentially at that level,  our return on an operating basis rose to 13.2%,  and
our stock price topped $130 in January 1997. However, we didn't do as well as we
would have liked versus our competition.
      We  raised  our  spending  during  1996 to take  advantage  of a number of
world-class growth opportunities.  Investment spending was $7.0 billion, up from
$4.5 billion in 1995. In 1997 we plan to spend $5.4 billion.
      Our  investments  included  acquiring 25% interest in the giant Tengiz oil
field  in  Kazakstan  in  Central  Asia,  one of  the  world's  great  producing
provinces. We also acquired Ampolex, an Australian oil and gas company,  gaining
attractive production and development potential,  especially in the Asia-Pacific
region.
      We funded a  substantial  portion  of our  spending  by  redeploying  $1.8
billion realized from the sale of noncore assets in land development, chemicals,
mining,  gas  processing and some North American  production.  Since 1985,  this
strategy has yielded $13 billion for redeployment.
      Production  rose 3% last year despite those  divestments,  and we replaced
133% of our  production  with  new  oil  and  natural  gas  reserves,  including
purchases  and sales.  Total  resources,  which  include  proven  and  potential
reserves,  rose 28%, a promising  note for the future.  Marketing  and  refining
volumes  rose  nearly 5%,  while in Mobil  Chemical,  volumes in our  continuing
businesses declined 3% due to lower aromatics production.
      We also better aligned Mobil's  structure to become more responsive to our
markets  by  reorganizing  into 11  business  groups.  And we  designated  Mobil
Technology  Company  as a  business  group  since our  technology  represents  a
critical competitive advantage for Mobil.

                                                                               1

<PAGE>

LETTER TO SHAREHOLDERS

      All these  achievements  were  accompanied  by further  improvement in our
safety  performance.  I am proud  of these  efforts,  and we  intend  additional
progress.

STOCK SPLIT, DIVIDENDS RAISED TO ENHANCE SHAREHOLDER RETURN
Our  shareholders  received a 13% return  during  1996.  This was below the
market  performance of companies whose business mix brought greater benefit from
the higher energy prices.  However, our 5- and 10-year average annual returns of
17% still outpace those of our peers and the market.

WE APPROACH THE NEW  MILLENNIUM  WITH THE FINEST  INVENTORY OF  DEVELOPMENT
PROSPECTS IN OUR HISTORY

      In January 1997 Mobil  proposed a  two-for-one  stock split and declared a
six-cents-per-share,  or 8% annualized, dividend increase. This will be the 10th
straight  year of higher  dividends,  reflecting  our strong  balance  sheet and
confidence in the future of our business.

MOBIL'S STRATEGIES FOCUS ON PERFORMANCE, GROWTH AND PEOPLE
PERFORMANCE--We're maximizing results from existing assets by reducing costs and
improving  efficiency.  Even as savings grow from such past  initiatives  as the
staff redesign project,  we're developing new ones. For example, by working more
closely  with  fewer  vendors,  we  plan to  reduce  future  procurement  costs.
Cumulative  annual net cost savings since 1991 now stand at $1.3  billion,  even
after absorbing higher expenses from inflation and volume growth.
      We're also seizing opportunities for both efficiency and growth by forming
alliances  with  other  companies.  Two  are  being  implemented--with   British
Petroleum  in European  marketing  and  refining,  and with  PanEnergy  in North
American energy marketing.  We plan a third,  with Shell, to optimize  heavy-oil
production in California.

GROWTH--We  intend to grow  production by an average of 3.5%  annually,  to more
than replace production with new reserves, to expand our core chemicals business
and to profitably grow our marketing and refining business.
   EXPLORATION & PRODUCING:  Among our  "megaprojects,"  oil  production  should
begin  this  year from the  Hibernia  project  in  Canada,  and we've  asked for
government approval to develop the nearby Terra Nova and Sable projects.
      Our West African reserves have tripled since 1990, with production  rising
rapidly  from  Nigeria  and  Equatorial  Guinea,  where we  recently  streamed a
fast-track development project.
      We also  expect  substantial  increases  from  Tengiz  through  2010  with
completion of an export pipeline.
      In Venezuela,  we plan to begin heavy-oil production in 1999, and hope for
new discoveries on recently acquired  exploration blocks. In Peru and Argentina,
we're building a strategic position in natural gas.
      In Qatar, we expect rising  liquefied  natural gas output from Qatargas in
the near term and from the startup of the Ras Laffan project in 1999.

2

<PAGE>

     MOBIL  CHEMICAL:  We're growing our core  aromatics and olefins  businesses
while focusing on becoming the industry's low-cost producer.
      Among major  projects,  the Yanpet facility in Saudi Arabia will double in
size by 2000, an expansion is under way at the Beaumont,  Texas,  plant,  and an
expansion  streamed at the  Chalmette,  Louisiana,  plant.  We've also agreed to
study production of ethylene derivatives in Venezuela.
      MARKETING &  REFINING:  We're  investing for growth in the  Asia-Pacific
region,  Latin America and Africa,  while  focusing on efficiency  and selective
growth in mature markets such as the U.S. and Europe. Meanwhile,  we're pursuing
our goal of becoming the world's number-one lubricants company.
      In Asia, we're upgrading fuels  refineries,  and a lubes refinery is under
construction in Singapore.  A blending plant recently streamed in China, where a
second  plant and an  import  terminal  for  liquefied  petroleum  gas are under
development.
      In Latin America,  we're focusing on the fuels and lubes markets. In Peru,
we acquired 5% interest  in a refinery,  and 100%  interest in a lubes  blending
plant. And in Africa, we acquired Exxon's downstream assets in Kenya.
      In the  U.S.,  we're  rolling  out new  convenience  stores,  new  service
initiatives and new technology.

PEOPLE--The  contributions  of our people are  enabling  Mobil to  undertake  an
ongoing transformation that is better positioning us for growth. We are proud of
our  people,  and are taking  steps to assure that we  continue  providing  them
challenging work and rewarding them for performance.
      A diverse,  inclusive and productive workforce is essential to our future.
Early in 1996 we  heightened  our focus on  inclusion  and  diversity,  and tied
management  compensation  to progress in these  areas.  This effort has the full
commitment  of our  board  and  senior  management,  as well as my own  personal
attention.

NEW BOARD MEMBER ELECTED
We are pleased to welcome a new board member,  Iain D.T.  Vallance,  chairman of
British  Telecommunications,  raising the number of  directors  to 15. Iain will
significantly enhance our perspective on international business development.

OUR FUTURE IS PROMISING
We began working  several  years ago toward  becoming a great,  global  company.
Today,  as a  result,  Mobil is more  efficient,  more  responsive,  and  better
positioned for growth. In that respect, 1996 was a pivotal year for our company.
      We can now see the Mobil of  tomorrow  taking  shape--more  profitable,  a
recognized leader in all our businesses,  with  unprecedented  opportunities for
long-term  growth for our  shareholders,  better  products  and services for our
customers, and a challenging and inclusive environment for our employees.


/S/LUCIO A. NOTO
   Lucio A. Noto
   Chairman, President and Chief Executive Officer

                                                                               3

<PAGE>

MOBIL AT A GLANCE


[Mobil Logo]

MOBIL CORPORATION
We are  one of the  world's  preeminent  companies,  with  energy  and  chemical
operations in more than 125  countries. Our 11 business  groups in the upstream,
downstream  and chemical  areas are: 
o North  America  Exploration & Producing 
o North America Marketing & Refining 
o Europe & Commonwealth of Independent States
o Asia/Pacific  
o South America  
o Africa & Middle East 
o New Exploration & Producing Ventures &
  Exploration
o Supply, Trading & Transportation
o Liquefied Natural Gas & Independent Power
  Projects
o Mobil Chemical Company
o Mobil Technology Company

[Photograph]

EXPLORATION & PRODUCING
We find and produce  crude oil and natural gas,  manufacture  liquefied  natural
gas, and market all three.  Our current  production  in North  America,  Europe,
Nigeria  and  Indonesia  is being  joined by new  production  from West  Africa,
Eastern Canada, Central Asia, Qatar, the Asia-Pacific region, and South America.
We plan to grow  production  by an  average of 3.5%  annually,  and to more than
replace production with new reserves.

4

<PAGE>

[Photograph]

MARKETING & REFINING
We process crude oil into fuels,  lubricants and petrochemical  feedstocks at 21
refineries  in 13  nations,  and  market  Mobil(R)  products  worldwide.  We are
currently  increasing  our market  share in such  rapidly  growing  areas as the
Asia-Pacific  region,  Latin America and Africa,  while achieving new efficiency
and seizing targeted growth  opportunities in markets like the United States and
Europe.  We are  also  pursuing  the goal of  becoming  the  world's  number-one
lubricants company.

[Photograph]

MOBIL CHEMICAL
We manufacture and market basic petrochemicals and key derivatives that form the
building  blocks of thousands of consumer  products,  such as plastic bags, milk
bottles,  toys and synthetic  lubricants.  We are  selectively  growing our core
chemicals businesses: in particular,  the manufacture of aromatics products such
as paraxylene, and ethylene derivatives such as polyethylene.

MOBIL(R) The Energy
to make a difference(TM)

The energy of Mobil's people made possible a number of landmark  achievements in
1996. This year's report  highlights only a few of the more prominent  examples,
as Mobil people at work throughout the world describe how these  accomplishments
were achieved, and what they mean for the future.
      Our Mobil: The energy to make a difference  message captures the spirit of
our drive to become a great,  global company.  In this quest, Mobil is dedicated
to  building  trust  and  respect  through  innovative   people,   products  and
partnerships. The company is also committed to achieving a better future for our
stakeholders.

                                                                               5

<PAGE>

PARTNERSHIPS

[Photograph]

PARTNERSHIPS  are  providing  Mobil  with new ways to  operate  successfully  in
today's fiercely competitive markets.  During 1996, Mobil entered into alliances
with British Petroleum (BP) to strengthen  marketing and refining in Europe, and
with PanEnergy  Corporation to enhance North American energy marketing  efforts.
Both show early signs of success.
      "In Europe,  Mobil did not have sufficient scale. Despite highly efficient
regional networks,  our retail gasoline market share was only 5%," explained Hal
Cramer,  operating officer, Europe & Commonwealth of Independent States. "Now we
and BP together  have 12% of the market.  We are a  pacesetter  and can go after
further growth."
      Prospects are equally bright in lubricants, where Mobil's 10% market share
rose to 18% for the joint venture. "This makes us the market leader, and we also
see  opportunities  to grow our share and our  profitability,"  said  Jean-Louis
Schilansky, CEO, Mobil Europe Lubricants.

6

<PAGE>

MOBIL-PANENERGY EMPLOYEES
ARE GENERATING RISING SALES
VOLUMES IN THE BOOMING NAT-
URAL GAS AND ELECTRICITY TRAD-
ING MARKETS.

      In addition,  the merging of operations is going well. "We're finding that
the  Mobil  and BP  people  have more  compatible  business  practices  and more
commonality in their views of the market than we first  thought.  They recognize
the strength and potential of the new partnership," said Schilansky.
      The alliance  combines  businesses with revenues of $20 billion and assets
of $5  billion.  BP  operates  the fuels  venture  with 9,000  service  stations
ultimately carrying BP colors and marketing Mobil(R) lubricants.  Mobil operates
the lubricants venture, which offers three brands: Mobil(R), BP and Duckham's (a
BP brand in the  U.K.).  Mobil has 30%  interest  in the fuels  venture  and 51%
interest in the lubricants venture.

[BP-Mobil Logo]

      A  projected  $400  million-$500  million  in  annual  savings  and  other
synergies between the two companies will begin in 1997.
     Reports are also encouraging from Mobil's alliance with PanEnergy,  a major
natural gas  transportation  and  marketing  company.  A new joint  venture with
PanEnergy Trading and Marketing Services (PTMS) sells natural gas production in
the U.S. and Canada.
     "The Mobil-PanEnergy combination provides immediate scale in an industry in
which being one of the  biggest is  virtually  a  prerequisite,"  said Tom Case,
Mobil Natural Gas executive vice president assigned to PTMS. "In December, total
gas moved exceeded the combined volumes of the old  organizations  for the first
time, and we expect future increases."

ALLIANCES  FORMED  WITH  MAJOR  PLAYERS IN EUROPE  AND NORTH  AMERICA  WILL
LEVERAGE MOBIL'S STRENGTHS AND REDUCE COSTS

     PTMS is North America's  third-largest gas marketer,  and also holds a firm
beachhead   in   the   rapidly    growing    wholesale    electricity    trading
market--attractive  because  the U.S.  and Canada  consume  three  times as much
electricity as gas on an energy equivalent basis.
     PTMS ranks 10th in wholesale electricity  marketing,  and volumes increased
eight-fold during 1996. Planned  government  deregulation will soon open market
access to industrial and retail  consumers,  thus creating  another huge base of
potential customers.
     "Electricity  sales are  progressing  much faster than  expected," said Lou
Allstadt,  operating officer,  North America  Exploration & Producing.  "And the
proposed  merger of  PanEnergy  with Duke  Power  will make PTMS an even  bigger
player."  Duke,  a  North   Carolina-based   electric  utility,   ranks  as  the
second-largest electricity trader.
     Industry  reaction  to the  Mobil-PanEnergy  alliance  has been  favorable.
"We've  seen a wave of  similar  alliances  since  ours  was  announced,"  added
Allstadt. "The consensus is that Mobil got in early and did it right."

                                                                               7

<PAGE>

GROWTH

[Photograph]

GROWTH  in  production  by  a  company  Mobil's  size  usually   requires  major
discoveries  that take years of planning and  assessment to develop.  But during
1996,  Mobil  initiated  production in Equatorial  Guinea's Zafiro field only 18
months after drilling the discovery well, a landmark achievement.
      "Early production really helps the economics, so we took the risk of doing
things in new ways to make it possible," said Art Green, general manager,  Mobil
Equatorial Guinea.
      At an unprecedented pace, Mobil drilled producing wells,  installed subsea
wellheads  and  tied  them  back to a  floating  production  system  based  on a
converted oil tanker.
      The  valves  opened on August  25, and by  year-end,  production  exceeded
37,000 barrels daily (Mobil has 75% interest).  Two satellite  fields also await
development, and production is expected to reach 80,000 barrels daily by 1998.
      Success  came despite an initial  wildcat that turned up dry in 1994.  But
Mobil's  proprietary  basin  modeling and growing  understanding  of the geology

8

<PAGE>

[Photograph]

HUMAN MUSCLE AND
MOBIL TECHNOLOGY
YIELDED DEVELOPMENT
DRILLING SUCCESS AND
DISCOVERY OF TWO
SATELLITE OILFIELDS.

MOBIL DISPLAYS UNPARALLELED SPEED IN BRINGING MAJOR OFFSHORE OIL PRODUCTION
ONSTREAM IN EQUATORIAL GUINEA

[Map of Equatorial Guinea]

achieved a discovery with the second well in March 1995.
      Fast-track  development  was  always  the  goal,  but a new  approach  was
essential to getting  there.  Mobil adopted a parallel  process in which a small
interdisciplinary  team  worked in tandem  instead of in cycles.  "Team  members
could better see how their work  affected  each other," said Green.  "Things got
done faster. I can't say enough about the ingenuity of our people."
      The team reduced risk by incorporating  flexibility into its designs.  The
production  equipment accepts easy modification,  and the tanker can be moved to
accommodate future outlying well locations.
      Contractors  were chosen for their ability to deliver quality work on time
and within  budget and for their  proximity  to each  other,  so they could work
together to ensure compatibility of the many separate systems.
      "It all worked," Green said. "Zafiro came onstream faster than any
similar-sized project in oil-industry history. And we also brought it in under
budget."

                                                                               9

<PAGE>

EXPANSION

BOOMING WORLD DEMAND FOR LNG POSES A LANDMARK GROWTH  OPPORTUNITY FOR MOBIL
DURING THE 21ST CENTURY

EXPANSION  of Mobil's  interests  in the  emerging  liquefied  natural gas (LNG)
business is a key to future growth.  Long a market leader through  participation
in  Indonesia's  massive Arun LNG project,  Mobil is now pursuing an  aggressive
global growth strategy. As a result, the company is favorably positioned to help
meet a projected doubling in international LNG demand by 2010.
      "LNG is the highest-growth  sector of the world natural gas business,  and
we intend to be the market  leader,"  said John Simpson,  operating  officer for
Liquefied Natural Gas & Independent Power Projects.
      Indonesia has long been a major  supplier,  thanks largely to Arun,  which
Mobil operates under a production-sharing  contract.  "Our experience there with
Pertamina in designing,  building and operat-

[Photograph]

10

<PAGE>

ing LNG facilities places us among the few elite companies with world-class
capability," added Simpson.
      With Arun now mature, Mobil is developing two satellite fields to feed the
LNG plant there. The company is also evaluating  Indonesia's  giant Natuna field
(Mobil  acquired  26% interest in  mid-1996).  Natuna holds at least 46 trillion
cubic feet of recoverable gas, triple Arun's original  reserves.  Production may
begin as early as 2003 via an LNG project or a pipeline.
      Meanwhile,  LNG  production  has already begun in Qatar,  site of the huge
North field just offshore.  "With 380 trillion  cubic feet of  recoverable  gas,
it's the largest field in the world,  with twice the reserves of the entire U.S.
So it represents an enormous  opportunity  for Qatar and for Mobil,"  stated Ken
Hull, president and general manager of Mobil Oil Qatar.
      Shipments  began in  December  from  Qatargas,  in which  Mobil  holds 10%
interest,  following completion of the first two liquefaction  "trains." A third
train  entering  service in 1998 will boost  annual  production  to six  million
metric tons.
      "The first two trains were below budget and ahead of schedule, a result of
our Indonesian experience," said Dave Kulig, Qatargas venture manager.

                           WHY IS LNG SO ATTRACTIVE?
IT BRINGS  CLEAN-BURNING  METHANE  (NATURAL  GAS) TO AREAS THAT CANNOT BE SERVED
ECONOMICALLY BY PIPELINES.  WHEN CHILLED TO MINUS 160 DEGREES  CELSIUS,  METHANE
CONDENSES  INTO A LIQUID (LNG) THAT TAKES UP ONLY 1/600TH OF ITS FORMER  VOLUME.
AND THAT LIQUID CAN BE TRANSPORTED IN SPECIALLY INSULATED SHIPS.

      Progress on the nearby Ras Laffan project included closure on $2.6 billion
in financing,  beginning  work on production  and  liquefaction  facilities  and
agreeing in principle to add several partners, which will reduce Mobil's current
30% interest to no less than 25%.  Production will begin in 1999 and is expected
to reach at least 10 million metric tons annually.
      Another potential LNG project could develop Australia's Gorgon field, site
of seven trillion cubic feet of reserves. Mobil acquired 14% interest as part of
the 1996 Ampolex acquisition and is studying various options for development.

[Map of Arabian Gulf]

[Caption of Photograph on Page 10]
LEFT: A TANKER LOADED QATAR'S FIRST LNG EXPORTS IN DECEMBER.  VOLUMES ARE RISING
AS MOBIL AND ITS PARTNERS COMPLETE ADDITIONAL LIQUEFACTION FACILITIES ASSOCIATED
WITH THE WORLD'S LARGEST NATURAL GAS FIELD.

                                                                              11

<PAGE>

SERVICE

Service is the key to earning  customer  loyalty  and  ensuring  the  success of
Mobil's retail gasoline marketing. During 1996, three innovations in management,
marketing and technology moved Mobil closer to "delighting  every customer every
time," a goal  delineated  by Brian  Baker,  operating  officer,  North  America
Marketing & Refining.  The new initiatives  join the Friendly Serve(SM) program,
introduced in the U.S. in 1995 and rolled out broadly in 1996.
      Foremost of the new  initiatives  is Franchise  2000.  "It  redefines  and
strengthens  relations between Mobil and our  franchisees,"  Baker said. That is
important  because over 7,000 of Mobil's  7,700 U.S.  outlets are  independently
operated. Although several competitors have more sites, Mobil's higher sales per
unit  usually  enable  the  company  to rank  first or  second  in all its major
markets.
      Franchise  2000  offers  dealers  expanded  opportunities  to  grow  their
businesses,   as  well  as   guidelines   and  training  to  help  them  develop
industry-best retailing practices that will earn customer loyalty.
      "We benchmarked  Franchise 2000 against the best franchises in the world,"
said Mike Roman, fuels franchise  development  manager,  "and it puts us well in
front of the industry."

[Artwork]

     Franchise  2000  features  five  core  commitments  to  customers--quality
products;  friendly, helpful people; speedy, reliable service; clean, attractive
facilities; and responsible environmental stewardship.
     Mobil also  accelerated  rollout of new On The Run(SM)  convenience  stores
that include up to five  separate but  complementary  businesses--gasoline,  car
wash, convenience items,  quick-service restaurant,  and banking. Together, they
offer one-stop  shopping  convenience and maximize site  profitability for Mobil
and dealers. By year-end, 147 were in operation, with 1,200 planned by 2001.
     "Shoppers  increasingly  demand  speed,  convenience  and fair prices,  and
quality  and  variety as well,"  said Rob Kelly,  manager of  convenience  store
marketing.  "These  were  once  contradictory.  But our On The  Run(SM)  concept
responds with larger stores,  an inviting  atmosphere  and a greater  variety of
high-quality takeout foods in addition to traditional merchandise."
      Store  owners  receive  training  and support in  marketing,  advertising,
back-office  systems and  operations.  "Where we've  achieved  critical  mass in
numbers of stores, On The Run(SM) is exceeding expectations," said Kelly.  Mobil
will build additional stores in strategic market clusters.
      Another new  convenience is Speedpass(TM), an electronic system located in
the pump that  transmits  information  to and from a window  sticker or key ring
issued  to the  customer.  It  automatically  activates  the  pump  and  charges
purchases to a credit card.
      "Speedpass(TM) is a big hit," said Vince Betette, project team lead. "It's
the  fastest  and easiest  payment  method  available  in the  industry  today."
Following  testing at 50 Mobil  stations in St.  Louis, Speedpass(TM) will debut
nationwide during 1997.

12

<PAGE>

MOBIL'S  STELLAR U.S.  RETAIL  MARKETING  NETWORK GAINS AN ENHANCED  DEALER
RELATIONS PROGRAM AND OFFERS NEW CONVENIENCE TO CUSTOMERS

[Photograph]

A GROWING NUMBER OF ATTRACTIVE ON THE RUN(SM) STORES APPEAL TO BUSY CONSUMERS BY
OFFERING ONE-STOP SHOPPING FOR CONVENIENCE ITEMS, TAKEOUT FOODS, GASOLINE, A CAR
WASH AND BANKING SERVICES.
                                                                              13

<PAGE>

OPPORTUNITY

OPPORTUNITY  can knock  twice.  Twenty  years  after  exiting  Venezuela  due to
nationalization, Mobil is back. "We've returned because Venezuela offers massive
reserves,  a strategic  location and new access to its energy markets," said Don
Voelte, operating officer, New Exploration & Producing Ventures & Exploration.

MOBIL REENTERS  VENEZUELA IN EXPLORATION AND HEAVY-OIL  PRODUCTION AND REFINING,
AND EARNS SELECTION AS A PARTNER IN A MAJOR PETROCHEMICALS PLANT

      The first step came in 1995,  with  acquisition  of 50%  interest  in C.A.
Nacional  de  Grasas   Lubricantes,   Venezuela's   largest  private  lubricants
manufacturer.
      Then in 1996, a Mobil  partnership won the La Ceiba exploration block with
a bid of $104 million  (Mobil has 50%  interest).  "We believe La Ceiba holds at
least 400  million  barrels of  recoverable  oil.  An earlier  discovery  by the
national oil company,  PDVSA, was never  developed,  and a shipping port is only
five miles away," said Travis  Crouch,  general  manager,  Mobil  Exploration  &
Development Venezuela.
      Mobil's  stake  grew  when the  Ampolex  acquisition  brought  with it the
Quiamare block, which already produces 3,000 net barrels of oil per day.

[Photograph]

      Next came  proposed  entry into a $2.5  billion  venture  to  extract  and
upgrade  120,000  barrels  per  day  of  heavy  crude  oil in  partnership  with
PDVSA-affiliate Lagoven and Germany's Veba Oel AG. Mobil would have 42% interest
in the  Venezuelan  operations.  After  upgrading,  most of the oil  would go to
Mobil's  Chalmette,  Louisiana,  refinery,  with Veba's  share going to Germany.
Lagoven would also acquire 50% interest in the Chalmette refinery.
      "We would gain 600 million  barrels of recoverable  oil that would provide
income  for 35  years,"  said  Ray  Kruep,  manager  for  business  development,
manufacturing  and logistics.  Chalmette would receive 50,000 barrels per day by
1999, and double that in 2002.

[Map of Northwestern South America]

14

<PAGE>

[Photograph]

MOBIL GAINS ACCESS TO 600 MILLION  BARRELS OF HEAVY-OIL RESERVES IN  VENEZUELA'S
ORINOCO OIL BELT,  WITHIN EASY  SHIPPING  DISTANCE OF THE  COMPANY'S  CHALMETTE,
LOUISIANA, REFINERY.

      Meanwhile,  Mobil  Chemical  was named a 50-50  partner  to  evaluate  the
feasibility   of  building  a  $1.5   billion   petrochemicals   facility   with
PDVSA-subsidiary   Pequiven.   The  plant  would  manufacture  910,000  tons  of
polyethylene and ethylene glycol annually, with start-up in 2000.
     "We competed  against 25 other  companies for this  project,"  recalled Joe
McGregor,  vice president of new business development,  Mobil Chemical.  "We won
due to our  technical  expertise  and the  responsiveness  and  openness  of our
people."

[Map of Asia-Pacific Region]

OPPORTUNITY IN THE ASIA-PACIFIC REGION

The  Asia-Pacific  region is  booming,  opening new  opportunities  even after a
century of operations that have made Mobil a leader in a number of markets.
      "We are expanding in China and  Malaysia,  and entering  emerging  markets
that are being deregulated," said Steve Pryor, operating officer for the region.
"We're also reducing  costs and improving  asset  utilization  in mature markets
like Japan and Australia, where competitive pressures have intensified."
      Refineries in Japan, Singapore and Australia are being upgraded, and a new
lubricants  hydrocracker  under  construction  in Singapore  will make Mobil the
region's low-cost supplier.
      In China,  Mobil is already the leading lubes importer,  and will start up
two new  blending  plants in 1997.  The  company  intends  to become a leader in
China's liquefied  petroleum gas (LPG) market by developing  large-scale  import
terminal and inland distribution networks.
      Mobil is also establishing  joint ventures in lubricants and LPG that will
serve as a platform for future growth on the Indian subcontinent.
      In exploration and producing,  the Ampolex  acquisition  added  attractive
prospects in Australia's North West Shelf and in Papua New Guinea.
      "Mobil is well  positioned to serve the region's  growing needs across the
energy chain--from oil and gas to refined products to power," said Pryor.

                                                                              15

<PAGE>

TECHNOLOGY

EXPERTISE DEVELOPED BY MOBIL TECHNOLOGY COMPANY HELPS DRIVE PROGRESS IN ALL
MOBIL BUSINESS UNITS

Technology,  always a core  strength for Mobil,  became a more  integral part of
company business in 1996 with designation of Mobil Technology Company (MTC) as a
separate  business  group.  MTC supports  Mobil's  other groups by  contributing
innovations  that  enhance  their  short-term  results,   while  also  exploring
potential breakthroughs that can drive long-term growth.
      "We intend to remain a pacesetter in bringing  technology's  value to the
bottom line," said Mike Ramage,  president of MTC and Mobil's  chief  technology
officer. "Our job is to continue pushing the limit to help differentiate Mobil's
performance from that of the competition."

[Molecule Artwork]
A KEY MOLECULE IN THE NEW MOBIL 1(R) 0W-40 LUBRICANT.

      For example, in Mobil's upstream businesses, horizontal and extended-reach
drilling is adding oil and natural gas reserves while reducing costs.
      In Nigeria,  Mobil drilled horizontal wells in the declining Ubit field to
tap new  reservoirs  identified  by  advanced  3-D  seismic  imaging  and  other
techniques.  The results were a 400-million-barrel  increase in oil reserves and
significantly higher production.
      And in  Germany,  Mobil  drilled the world's  longest,  deepest  fractured
horizontal well into a gas reservoir three miles beneath the surface.  To ensure
sufficient gas flow,  the company  fractured the  hard-as-marble  rock along the
well's path. Mobil technology thus transformed  previously  uneconomic  reserves
into an indigenous supply of gas for Germany.
      Downstream,  Mobil  extended its  leadership  in synthetic  lubricants  by
introducing Mobil 1(R) 0W-40 engine oil, a new high-efficiency, high-performance
lubricant for virtually any engine application.
      The  company  also  completed  a  five-year,  million-mile  test  of a BMW
automobile  that ran on Mobil 1(R) oil and  Mobil(R)  super  unleaded  gasoline.
Later  inspections  found  almost no engine wear.  In addition,  in an exclusive
partnership  formed  during 1996,  Porsche  began  filling all its new cars with
Mobil 1(R) synthetic lubricant.
      Mobil's  many  technological  feats  are  part  of  industry  legend--from
building  giant  concrete  production  platforms in the North Sea to  developing
unique catalysts that revolutionized the refining industry.
      "We intend to develop  even higher  capabilities  in the future,  then put
them  into the  hands of Mobil  people  in the  field so they can do their  jobs
better," said Ramage.  "That's how technology is sharpening Mobil's  competitive
advantage."

16

<PAGE>

                                                                      COMMITMENT

MOBIL'S  ENVIRONMENTAL,  HEALTH AND SAFETY PERFORMANCE  ACHIEVES MILESTONES AS A
BROAD NEW POLICY AIMS FOR FURTHER IMPROVEMENT

Commitment  to a goal can  achieve  wonders.  Day after  day,  as cranes  lifted
process  equipment  into place and sparks flew from welders'  torches,  the more
than 1,400 workers at the  Singapore  refinery's  lubricants  base stock project
were  building  a vital new  facility,  while also  working  toward a key safety
milestone.
      They exceeded two million hours worked  without a lost-time  injury during
1996, a banner achievement for such a major industrial construction project.
      In Japan,  Mobil's marketing and refining operations  completed the entire
year, almost three million hours worked, without a lost-time injury.  Elsewhere,
dozens of other  Mobil  units  throughout  the world  recorded  their own safety
milestones.

[Artwork]

      Overall,  Mobil employees  continued a  three-year-long  reduction in days
away from work due to injuries. The decline now stands at more than 35%.
      "In addition to these individual achievements,  we took steps to reinforce
our culture of operating safely and practicing sound environmental stewardship,"
said Bill Dalgetty, general manager, Environmental, Health & Safety (EHS).
      Among its  environmental  actions,  Mobil put into service the Raven,  its
second  double-hulled very large crude carrier.  Such vessels reduce the risk of
spills caused by accidental groundings or collisions. Two others are on order.
      To heighten internal awareness,  the company adopted a new policy entitled
Mobil's  Commitment  to the  Environment,  Health &  Safety,  which  spells  out
principles  and  commitments  to  ensure  further  improvement  in  Mobil's  EHS
performance.
      "The policy makes every Mobil  employee  and  contractor  responsible  for
protecting  the  environment  and the  health  and  safety  of our  people,  our
customers  and the  communities  in which we work," said  Dalgetty.  "No one can
claim that these responsibilities are someone else's job."
      The  policy  also  serves as the  foundation  of the Mobil EHS  Management
System,  which  establishes  certain  expectations  of  how  company  facilities
throughout the world will operate.  The system provides  employees with a better
understanding of how their actions affect EHS performance.
      A comprehensive account of Mobil's overall record and achievements will be
communicated  through  a  new  report,  Meeting  our  Commitments:  Mobil's  EHS
Performance  Report.   Copies  will  be  available  in  May  1997  from  Mobil's
Publications Department at 1-800-293-5796.

17

<PAGE>

FINANCIAL SECTION                                                  


FINANCIAL

HIGHLIGHTS

OPERATING  EARNINGS  EXCEEDED $3 BILLION FOR THE FIRST TIME,  SURPASSING LAST
YEAR'S $2.8 BILLION RECORD HIGH.

E&P  OPERATING  EARNINGS OF OVER $2 BILLION WERE THE HIGHEST  EVER,  WORLDWIDE
PRODUCTION WAS UP 3%, AND NET RESERVE REPLACEMENT WAS 133% OF PRODUCTION.

M&R  OPERATING  EARNINGS OF OVER $1 BILLION  BENEFITED  FROM HIGHER  PETROLEUM
PRODUCT SALES VOLUMES, UP 5%, A SIXTH CONSECUTIVE ANNUAL INCREASE.

CHEMICAL'S  PROGRAMS  TO REDUCE  COST AND  IMPROVE  ASSET  UTILIZATION  HELPED
ACHIEVE  A  13%  RETURN  ON  CAPITAL  EMPLOYED  DESPITE  DIFFICULT   WORLDWIDE
PETROCHEMICAL BUSINESS CONDITIONS.

VOLUME GROWTH WAS ACHIEVED IN THE PETROLEUM SECTOR,  WHILE PER-BARREL EXPENSES
WERE REDUCED BY ABOUT 10%.

ASSET  SALES  PROCEEDS  OF $1.8  BILLION  HAVE  BEEN  REDEPLOYED  TOWARD  MORE
PROFITABLE PROJECTS THAT FIT OUR LONG-TERM STRATEGIES.


CONTENTS

MANAGEMENT DISCUSSION AND ANALYSIS ........................19
CONSOLIDATED FINANCIAL STATEMENTS .........................31
NOTES TO FINANCIAL STATEMENTS .............................38
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS.............52
SUPPLEMENTARY INFORMATION .................................53
SHAREHOLDER INFORMATION ...................................60

18

<PAGE>

<TABLE>
<CAPTION>

                      MANAGEMENT DISCUSSION AND ANALYSIS

KEY FINANCIAL INDICATORS

(In millions, except per-share and ratio amounts)1992          1993       1994         1995       1996
---------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>        <C>          <C>        <C>    
Operating Earnings(1)                         $ 1,488(2)    $ 2,224    $ 2,231(2)   $ 2,846    $ 3,097
Special Items                                    (180)         (140)      (472)        (470)      (133)
---------------------------------------------------------------------------------------------------------
Income, Excluding the Effects of Change in
  Accounting Principle(s)                     $ 1,308(2)    $ 2,084    $ 1,759(2)   $ 2,376    $ 2,964  
Per common share                                 3.13          5.07       4.28         5.87       7.38
Common Stock Dividends Per Share                 3.20          3.25       3.40        3.625      3.925
---------------------------------------------------------------------------------------------------------
Capital and Exploration Expenditures          $ 4,470       $ 3,656    $ 3,825      $ 4,268    $ 6,361
Cash Investments in Equity Companies               21            31        102          257        658
---------------------------------------------------------------------------------------------------------
Total Investment Spending                      $4,491       $ 3,687    $ 3,927      $ 4,525    $ 7,019
---------------------------------------------------------------------------------------------------------
Debt-to-capitalization Ratio                       34%           32%        31%          27%        29%
Total Debt                                    $ 8,520       $ 8,027    $ 7,727      $ 6,756    $ 7,875
---------------------------------------------------------------------------------------------------------
Shareholders' Equity                          $16,540       $17,237    $17,146      $17,951    $19,072
Per common share                                41.06         42.74      42.61        44.71      47.62
---------------------------------------------------------------------------------------------------------
<FN>
(1) Operating  earnings  exclude  the  effects of  special  items and change in
    accounting  principle(s).  
(2) Excludes unfavorable effects of adopting FAS 106 and 109 ($446 million) in
    1992; Inventory lower of cost or market ($680 million) in 1994.
</FN>
</TABLE>

OUTLOOK
WHILE  REVIEWING  THE GOALS AND FINANCIAL  RESULTS THAT FOLLOW,  YOU MAY FIND IT
HELPFUL TO UNDERSTAND MOBIL'S OUTLOOK FOR THE PETROLEUM AND CHEMICAL INDUSTRIES.
ALTHOUGH MOBIL CANNOT BE CERTAIN THIS VIEW WILL PROVE ACCURATE,  DESCRIBED BELOW
ARE BOTH KNOWN AND ANTICIPATED  TRENDS RELEVANT TO PLANNING THE COMPANY'S FUTURE
OPERATIONS.
    OVERALL,  THE ENERGY  BUSINESS  WILL REMAIN  HIGHLY  COMPETITIVE,  REQUIRING
CONTINUING,  LARGE CAPITAL  INVESTMENTS TO SUPPORT FUTURE OPERATIONS AND GROWTH,
WHICH WILL BE PREDOMINANTLY IN INTERNATIONAL  AREAS. THE SIZE OF SUCH INVESTMENT
PROGRAMS  AND THE LEAD  TIME  OFTEN  NEEDED  TO  COMPLETE  THEM  NECESSITATES  A
LONG-TERM VIEW.
    Oil and natural  gas will  continue  to satisfy  much of the world's  energy
needs well into the next century.  Near term, Mobil expects continued volatility
in  prices  and  related  profitability,  reflecting  market  forces,  political
uncertainties  and  host-country   regulation.   With  new  production  capacity
streaming  and the return of Iraqi  crude  exports,  oil prices are  expected to
soften  in 1997,  and then  rise  gradually  in the  longer  term,  in line with
inflation.  Supplies  appear  adequate to meet demand growth for the  forseeable
future.
    In this  environment,  Mobil  balances  its  overall  supply  and demand and
manages  its price  risk by using  different  instruments  on  various  markets.
Contracts  on  some  of  these  markets  require  physical  deliveries,  whereas
contracts on others, such as forwards, futures, swaps and options do not require
settlement  with  physical  volumes.  All of these  contracts  are  integral  to
achieving Mobil's overall business strategies.
    Mobil  believes  the  industry  will  continue to grow in the  international
upstream  sector  where  investment  opportunities  are  more  available.   Many
countries,  previously  closed to outside  investment,  are beginning to open to
companies  like Mobil as those  countries  recognize the financial and technical
strength  that such  companies  can  provide.  Mobil looks to these areas as the
basis of its  program  to  increase  its  hydrocarbon  reserves  and to  provide
continuing  production and earnings growth.  Mobil's program reflects a strategy
of assessing  political,  economic and geologic  risks and managing  these risks
through a geographically  diverse portfolio of existing assets and new projects,
maximum use of nonrecourse financing,  economic use of long-term leasing, staged
development,  joint ventures, alliances and careful monitoring of cash exposure.
In the U.S., economic opportunities remain limited.
    The marketing and refining industry will continue to face competitive market
pressures.  More downstream  alliances,  such as Mobil-BP in Europe and proposed
competitor  ventures in the U.S.,  can be  expected.  U.S.  industry net margins
should  show  gradual  improvement  as  moderate  demand  growth and  efficiency
improvements  will be partly offset by modest  increases in capacity at existing
refineries.  Refin-

                                                                              19

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

[Bar Chart]

      INCOME
(Millions of dollars)

INCOME CONTINUED TO TREND UP-
ARD, REFLECTING THE  STRENGTH-
ENING OF OUR CORE BUSINESSES
AND THE EFFECTS OF FAVORABLE
MARKET FACTORS.

[Bar Chart]

      TOTAL RETURN TO SHAREHOLDERS
(Per $100 invested on December 31, 1991)*

*Mobil share price appreciation plus
 reinvested dividends returned 17.2%
 annually, on average, over the last
 five years -- 2 percentage points above
 the S&P 500.

OUTLOOK (concluded)
ing will  also  continue  to  require  expenditures  to meet  environmental
regulations, including those pertaining to introduction of Phase II reformulated
gasolines by the end of the decade.  Mobil's U.S.  refining  system is among the
best  in  the  industry  and  is  generally   well   positioned  to  meet  these
requirements.
   International  marketing and refining will also face  competitive  pressures.
Marketing margins in most enclaves are, on average,  expected to remain at about
the levels  experienced in 1996.  However,  margins in the United Kingdom should
show some improvement  over the depressed  levels of 1996.  Refining margins are
expected to improve  somewhat over the long term as demand growth is expected to
exceed capacity additions.
   The  worldwide  petrochemical  business  continues to be  cyclical.  Over the
longer term,  polyethylene  and paraxylene  margins are expected to improve from
1996, as demand growth outpaces new capacity.

INVESTMENT PROGRAM
   Mobil's planned 1997 investment  program,  including  capital and exploration
expenditures and cash investments in equity companies, is $5.4 billion. Spending
this   year   will   continue   to   be   focused   in    international    areas
(International--75%;   U.S.--25%),  where  opportunities  to  find  and  develop
resources are the greatest and product  demand  growth is the highest.  The 1997
spending  program is also consistent with Mobil's  strategy to grow the upstream
sector as a share of its  overall  asset  base.  The  company  will  continue to
monitor  its  business  environment  and remain  flexible to adjust its plans as
attractive  opportunities  arise or economic and political  conditions  warrant.
Mobil's  debt-to-capitalization  ratio rose from 27% to 29% in 1996,  reflecting
the financing of the Ampolex and Tengiz acquisitions.  Mobil's primary focus for
all business segments is to realize the greatest value from its existing assets,
to grow selected businesses and to provide superior returns to shareholders.

RESTRUCTURINGS
In 1996, Mobil and The British  Petroleum Company p.l.c. (BP) formed a strategic
alliance by combining their European operations in the refining and marketing of
fuels and  lubricants.  This  program  is  designed  to enhance  the  companies'
positions  in numerous  national  markets  and product  sectors and to provide a
strong  basis for future  profit  growth.  The  alliance  is expected to produce
efficiencies  through  sharing  costs,  eliminating  duplication,  and achieving
economies of scale.
   The Mobil-BP  alliance will result in the elimination of approximately  2,700
positions   from  the   combined   work  forces  of  the  two   companies,   the
rationalization  of  certain  marketing  assets,  and the  disposal  of  surplus
facilities.  The alliance,  which is being  implemented on a  country-by-country
basis, should be essentially  completed by midyear 1997. In 1996, Mobil recorded
restructuring  charges of $184 million ($145  million after tax),  primarily for
separation costs related to work force reductions and facilities  closing costs.
Cash outlays  associated  with these  charges will be made  throughout  1997 and
1998.  Additionally,  about $140 million ($110 million after tax) in charges are
expected to be incurred  during  1997-1998  for one-time  implementation  costs,
primarily for reimaging of retail outlets and for systems implementation. Annual
benefits  from  the  combined  operations  are  expected  to be in the  range of
$400-$500 million before tax, and should be fully achieved by year-end 1998.
   During 1995 and 1996,  Mobil  implemented five major  restructuring  programs
affecting  worldwide  staff  support  services,  U.S.  upstream  and  downstream
businesses,  and European refining and lubricant blending operations.  These and
other smaller  programs  resulted in the closure of certain  facilities  and the
elimination  of about 7,000  positions,  approximately  half in 1995 and half in
1996.  During 1995,  the company  established  restructuring  provisions of $911
million  ($590  million  after  tax),  primarily  to cover the cost of  employee
separation benefits and the closure of certain facilities.  Of this amount, $671
million  represented  forecast  cash  expenditures.  As of  December  31,  1996,
cumulative cash outlays for these restructuring provisions totaled $452 million.
The  remainder  is  expected to be spent by midyear  1997.  In addition to these
restructuring provisions,  implementation costs for these programs totaled about
$170  million  ($125  million  after tax)  through  the end of 1996.  All of the
programs  required to support the $1.3 billion reduction in costs announced over
the past few years were in place by the end of 1996.
   See Note 2 to Financial  Statements  on page 39 for further  details of these
restructuring programs.

20

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

                                                                     [Bar Chart]

                                                      ANNUAL DIVIDENDS
                                         (Per share of common stock, in dollars)

                                                     DIVIDEND PAYMENTS INCREASED
                                                     FOR THE NINTH CONSECUTIVE
                                                     YEAR.

FINANCIAL RESULTS
A DISCUSSION AND ANALYSIS OF  CONSOLIDATED  FINANCIAL AND OPERATING  PERFORMANCE
APPEARS ON THIS PAGE. MOBIL'S BUSINESS SEGMENTS ARE SEPARATELY REVIEWED ON PAGES
22-27.  WHILE  READING  THESE  DISCUSSIONS,  YOU MAY FIND IT HELPFUL TO REFER TO
PAGES 30-51 FOR THE  CONSOLIDATED  FINANCIAL  STATEMENTS AND COMMENTARY,  AND TO
PAGES 53-59 FOR SUPPLEMENTARY INFORMATION.

<TABLE>
<CAPTION>

CONSOLIDATED RESULTS
--------------------------------------------------------------------------------
NET INCOME (In millions, except per-share amounts)     1994      1995      1996
--------------------------------------------------------------------------------
<S>                                                 <C>        <C>       <C>   
Petroleum Operations
  Exploration & Producing                            $1,076      $845    $2,109
  Marketing & Refining                                  888       673       913
--------------------------------------------------------------------------------
Total Petroleum                                       1,964     1,518     3,022
Chemical                                                102     1,164       306
--------------------------------------------------------------------------------
Segment Earnings                                      2,066     2,682     3,328
Corporate and Other                                     (98)      (11)     (122)
Net Financing Expense                                  (209)     (295)     (242)
--------------------------------------------------------------------------------
Income Before Change in Accounting Principle          1,759     2,376     2,964
Cumulative Effect of Change in Accounting Principle    (680)       --        --
--------------------------------------------------------------------------------
Net Income                                           $1,079    $2,376    $2,964
  Per common share                                     2.57      5.87      7.38
--------------------------------------------------------------------------------
</TABLE>

CONSOLIDATED  NET INCOME of $2,964  million in 1996 was $588 million higher than
1995.  Charges for special items  reduced net income by $133 million,  primarily
due to restructuring  provisions for the Mobil-BP alliance and the write-down of
an offshore  Gulf of Mexico  property,  partly  offset by gains on asset  sales.
EXPLORATION  & PRODUCING  earnings  improved  significantly,  reflecting  higher
prices for crude oil and natural  gas, as well as lower  producing  expenses and
lower capital recovery charges. Additionally, results were favorably impacted by
gains on asset sales and a lower level of charges for FAS 121 asset  impairments
and  restructurings in 1996.  MARKETING & REFINING income was higher in 1996, as
increases in worldwide  petroleum  product sales,  which were up 5%, and a lower
level of  restructuring  charges  more than  offset a higher  level of  refinery
downtime and lower overall margins. Operating results were adversely affected by
extremely  competitive  market  conditions in many of the areas where Mobil does
business.   CHEMICAL  earnings  were  lower,   reflecting   significantly  lower
petrochemicals  margins,  the absence of income from divested businesses and the
expiration of certain tax benefits.  Additionally,  last year's results included
the gain on the sale of the Plastics Division.
   Consolidated  net income in 1995 of $2,376  million was $617  million  higher
than in 1994, excluding a $680 million noncash charge for a change in accounting
principle.  The earnings  improvement  primarily  reflected  excellent operating
performance  and  initiatives  throughout  the company  that  reduced  costs and
increased sales volumes.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
OPERATING EARNINGS (In millions)                     1994        1995      1996
--------------------------------------------------------------------------------
<S>                                                <C>         <C>       <C>   
Operating Earnings                                 $2,231      $2,846    $3,097
Memo:Special Items                                   (472)       (470)     (133)
--------------------------------------------------------------------------------
</TABLE>

   OPERATING  EARNINGS of $3.1 billion were very near the company's 1998 goal of
$3.2 billion,  two years ahead of plan, and its 1996 operating return on capital
employed of 13.2% exceeded the 12% target.  Mobil's continued growth in earnings
in 1996 was due to overall  favorable  industry  fundamentals,  volume growth in
petroleum operations, and initiatives-driven expense reductions.
   Operating earnings,  which exclude special items and the effect of any change
in accounting  principle,  were $3,097  million in 1996,  exceeding  last year's
record  high $2,846  million.  Operating  earnings in 1994 were $2,231  million.
Special  items  decreased  net  income in 1996 by $133  million,  compared  with
decreases  of $470  million  in 1995 and $472  million  in 1994.  Special  items
represent the earnings effects from events or circumstances  not attributable to
Mobil's current  operations and are more fully described in the business segment
discussions that follow.

Graphs,  charts and  associated  captions  on pages  18-51 are not a part of the
Consolidated Financial Statements and Notes thereto.

                                                                              21

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

[Bar Chart]

  UPSTREAM EARNINGS
(Millions of dollars)

RECORD UPSTREAM EARNINGS RE-
FLECTED HIGHER OIL AND GAS
PRICES AND LOWER EXPENSES.

[Bar Chart]

      NET PRODUCTION
(Thousands of barrels daily
    of oil equivalent)

INTERNATIONAL VOLUME GROWTH
IS DUE TO THE IMPACT OF CAPITAL
PROGRAMS IN WEST AFRICA, PLUS
THE AMPOLEX AND TENGIZ
ACQUISITIONS. U.S. VOLUMES FELL
DUE TO NATURAL FIELD DECLINES
AND ASSET SALES.

PETROLEUM OPERATIONS
UPSTREAM-EXPLORATION & PRODUCING

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXPLORATION & PRODUCING SEGMENT FINANCIAL INDICATORS
--------------------------------------------------------------------------------
(In millions)                                       1994        1995       1996
--------------------------------------------------------------------------------
<S>                                              <C>         <C>        <C>    
U.S. Income (Loss)                               $   125     $  (107)   $   737
International Income                                 951         952      1,372
--------------------------------------------------------------------------------
Total Upstream Net Income                        $ 1,076     $   845    $ 2,109
--------------------------------------------------------------------------------
Revenues(1)                                      $10,193     $11,081    $12,841
--------------------------------------------------------------------------------
Assets                                           $14,116     $14,393    $18,279
--------------------------------------------------------------------------------
Capital Expenditures                             $ 1,642     $ 2,247    $ 3,914
Exploration Expenses                                 516         427        512
Cash Investments in Equity Companies                  80         213        520
--------------------------------------------------------------------------------
Total Investment Spending                        $ 2,238     $ 2,887    $ 4,946
--------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>

MOBIL'S PRIMARY  UPSTREAM GOALS ARE TO GROW LONG-TERM  PRODUCTION,  RESERVES AND
EARNINGS  WHILE  ENHANCING  ITS CORE ASSET BASE  THROUGH  SELECTIVE  INVESTMENT,
EFFICIENT DEPLETION AND MANAGED DIVESTITURE. Earnings exceeded $2 billion on the
strength of favorable fundamentals and lower expenses.
   UPSTREAM net income of $2,109 million was $1,264 million higher than in 1995.
Operating earnings of $2,059 million (U.S., $694 million; International,  $1,365
million;  refer to tables on page 23)  increased  $662  million,  or 47%, due to
higher worldwide crude oil and natural gas prices,  lower operating expenses and
lower capital recovery charges.
   In 1996,  Mobil produced 854,000 barrels per day of liquids and 4,587 million
cubic feet per day of natural gas. Worldwide production increased the equivalent
of 49,000  barrels per day from 1995 due to the  success of capital  programs in
West Africa and the  acquisitions  of Ampolex  and a 25%  interest in the Tengiz
field,  offset somewhat by natural field declines and asset sales,  primarily in
North America. Mobil replaced 133% of its production with new reserves, compared
with 105% in 1995.
   In 1995,  net  income of $845  million  was $231  million  lower than in 1994
mainly due to FAS 121 impairments of $487 million.  Operating earnings of $1,397
million  increased  $73 million,  due to higher crude oil prices,  lower capital
recovery charges and lower exploration expenses,  partly offset by lower natural
gas prices and production volumes.
   Revenues in 1996 were up 16% as the  effects of higher  crude oil and natural
gas prices and higher  international  volumes were only partially  offset by the
effects of lower crude oil  production in the United States.  In 1995,  revenues
were up 9% from 1994 as higher  crude oil prices and  higher  natural  gas sales
volumes were partially offset by lower crude oil sales volumes and lower natural
gas prices in North America and the United  Kingdom.  Revenues  include sales to
other segments of the company,  which are eliminated in  consolidated  financial
information.
   Investment  spending in 1996 was $4.9 billion,  compared with $2.9 billion in
1995.  The increase was primarily due to the  acquisitions  of Ampolex and a 25%
equity  interest in a joint venture that owns the Tengiz  field.  Mobil has paid
$0.5 billion as of December 31, 1996, for its Tengiz interest,  and has recorded
its obligation for the remaining $0.6 billion.  Planned investment  spending for
1997 is $3.5 billion,  and continues to be mainly in  international  areas where
opportunities are greatest.
   First production from the Zafiro offshore complex in Equatorial  Guinea began
in the third quarter of 1996.  Natural gas production from the giant North field
in Qatar  began in the fourth  quarter,  and the first LNG  deliveries  from the
Qatargas  project  were made in January  1997.  Work  continued in Canada on the
Hibernia  production  facilities,  with production  start-up  scheduled for late
1997. In Nigeria,  the Oso NGL  construction  project  continued  with streaming
expected  in 1998.  First  deliveries  of LNG from the Ras  Laffan  project  are
scheduled for 1999. In addition, development is under way on new fields in South
America, the North Sea, and Asia-Pacific.
   In  1996,  Mobil  drilled  44  wildcat  exploration  wells,  resulting  in 15
discoveries.  Exploration  activities continued in 34 countries on 6 continents.
Efforts to replace reserves in established areas continue through  participation
in new producing ventures and acquisitions.

22

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

PETROLEUM OPERATIONS (continued)

                                                                     [Bar Chart]

                                                                   CRUDE OIL
                                                             AVERAGE SALES PRICE
                                                            (Dollars per barrel)

                                                  HIGHER WORLDWIDE CRUDE
                                                  PRICES WERE A MAJOR FACTOR IN
                                                  THIS YEAR'S EARNINGS INCREASE.

                                                                     [Bar Chart]

                                                             NATURAL GAS
                                                        AVERAGE SALES PRICE
                                               (Dollars per thousand cubic feet)

                                                 HIGHER NATURAL GAS PRICES
                                                 ALSO CONTRIBUTED TO THIS YEAR'S
                                                 EARNINGS INCREASE.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
U.S. EXPLORATION & PRODUCING EARNINGS
--------------------------------------------------------------------------------
(In millions)                                      1994         1995       1996
--------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>  
U.S. Income (Loss)                                 $125        $(107)     $ 737
Special Items in Income
  Asset sales and write-downs                      (181)         (22)       119
  Asset impairment (FAS 121)                         --         (366)       (69)
  Restructuring provisions                           --          (51)        (7)
--------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items)        $306         $332       $694
--------------------------------------------------------------------------------
</TABLE>

   U.S.  UPSTREAM  operating  earnings of $694 million in 1996 were $362 million
higher than 1995,  mainly due to higher  prices for crude oil and  natural  gas.
Lower producing  expenses and decreased  capital recovery charges largely offset
the impacts of lower production  volumes,  which resulted primarily from natural
field declines and asset disposals.  Opportunity  losses on forward  hydrocarbon
sales slightly lessened the favorable impact of the higher prices. The weakening
of heavy crude prices  relative to prices of light crudes  somewhat  reduced the
benefits from higher crude oil prices.  Operating earnings increased $26 million
in 1995 from 1994  mainly  due to higher  crude oil  prices,  lower  exploration
expenses and reduced capital recovery  charges,  largely offset by lower natural
gas prices and lower production volumes.
   Mobil's  average U.S.  crude oil price per barrel of $17.40  increased  $2.88
from 1995 due to strong demand and political  uncertainties  in the Middle East.
In 1996,  average U.S.  natural gas prices per thousand  cubic feet rose $.76 to
$2.17, reflecting higher weather-related demand and low inventories. Natural gas
prices have been restated to reflect the wellhead price.
   Special items in 1996 included  gains on asset sales, a FAS 121 write-down of
a Gulf of Mexico property,  and additional charges for restructuring.  Income in
1995 included  losses on asset sales,  FAS 121 impairments and charges for major
restructuring initiatives. Income in 1994 included charges for asset write-downs
and losses on asset sales.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
INTERNATIONAL EXPLORATION & PRODUCING EARNINGS
--------------------------------------------------------------------------------
(In millions)                                        1994        1995      1996
--------------------------------------------------------------------------------
<S>                                                <C>         <C>       <C>  
International Income                               $  951      $  952    $1,372
Special Items in Income
  Asset sales and write-downs                         (58)         23        12
  Restructuring provisions                             (9)        (41)       (5)
  Asset impairment (FAS 121)                           --        (121)       --
  Tax rate changes and other items                     --          26        --
--------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items)        $1,018      $1,065    $1,365
--------------------------------------------------------------------------------
</TABLE>

   INTERNATIONAL UPSTREAM operating earnings of $1,365 million were $300 million
higher than 1995,  principally  due to higher  crude oil and natural gas prices.
Increased production volumes also contributed to higher earnings.  These factors
were slightly offset by higher exploration expenses.  Operating earnings in 1995
were $47 million  higher  than 1994,  reflecting  higher  prices for liquids and
Indonesian LNG, which more than offset higher  operating  expenses in new growth
areas,  lower  production  volumes and lower  natural gas prices in the U.K. and
Canada. Exploration expenses were also lower in 1995 than in 1994.
   Mobil's  average  international  crude  oil price per  barrel  rose  $3.87 to
$20.81,  reflecting  strong  global demand and  political  uncertainties  in the
Middle East. International natural gas prices, which tend to follow the movement
of crude oil prices on a lagged basis, also increased.
   Production  increased by 8% in 1996 due to  additional  volumes from Nigeria,
reflecting the success of our capital  program,  and the acquisitions of Ampolex
and a 25% interest in a joint venture that owns the Tengiz field.  Additionally,
production  commenced  from the Zafiro  field in  Equatorial  Guinea late in the
year.
   Special items in 1996 included  gains on asset sales,  partly offset by asset
write-downs and a restructuring  charge.  Income in 1995 included gains on asset
sales,  charges  for  restructuring  initiatives  and FAS 121  impairments,  and
benefits  from tax  adjustments.  Income  in 1994  included  charges  for  asset
write-downs and for restructuring.

                                                                              23

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

PETROLEUM OPERATIONS (continued)

[Bar Chart]

 DOWNSTREAM EARNINGS
(Millions of dollars)

NET INCOME IMPROVED PRIMARI-
LY  DUE TO HIGHER SALES VOL-
UMES AND LOWER  SPECIAL
CHARGES.

[Bar Chart]

   REFINERY RUNS FOR MOBIL
(Thousands of barrels daily)

HIGHER U.S. RUNS REFLECTED CA-
PACITY EXPANSION. INTERNATION-
AL RUNS WERE ESSENTIALLY FLAT
AS THE IMPACT OF THE WOERTH 
REFINERY SHUTDOWN WAS OFFSET
BY HIGHER RUNS IN SINGAPORE, 
JAPAN AND THE MIDDLE EAST.

<TABLE>
<CAPTION>
DOWNSTREAM-MARKETING & REFINING
--------------------------------------------------------------------------------
MARKETING & REFINING SEGMENT FINANCIAL INDICATORS
--------------------------------------------------------------------------------
(In millions)                                        1994        1995      1996
--------------------------------------------------------------------------------
<S>                                               <C>         <C>       <C>  
U.S. Income                                       $   241     $   226   $   407
International Income                                  647         447       506
--------------------------------------------------------------------------------
Total Downstream Net Income                       $   888     $   673   $   913
--------------------------------------------------------------------------------
Revenues(1)                                       $56,861     $62,362   $70,796
--------------------------------------------------------------------------------
Assets                                            $21,767     $22,463   $23,592
--------------------------------------------------------------------------------
Capital Expenditures                              $ 1,297     $ 1,292   $ 1,554
Cash Investments in Equity Companies                   13          41       131
--------------------------------------------------------------------------------
Total Investment Spending                         $ 1,310     $ 1,333   $ 1,685
--------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>

MOBIL'S PRIMARY  DOWNSTREAM GOAL IS TO RAISE ITS RETURN ON CAPITAL EMPLOYED TO A
TOP-TIER  COMPETITIVE  LEVEL BY  IMPROVING  THE  QUALITY OF A GOOD  ASSET  BASE,
STREAMLINING   OPERATIONS,   PURSUING  ATTRACTIVE  GROWTH   OPPORTUNITIES,   AND
SATISFYING ITS CUSTOMERS' NEEDS WHILE KEEPING PACE WITH  ENVIRONMENTAL  DEMANDS.
Operating  results in 1996 were strong despite weak  fundamentals  in several of
Mobil's large markets.
     DOWNSTREAM  net income of $913 million in 1996 was $240 million higher than
in 1995.  Excluding  special  items  (refer to  tables  on page  25),  operating
earnings of $1,051 million  (U.S.,  $372 million;  International,  $679 million)
decreased  $84 million.  Lower  margins in some of Mobil's key markets more than
offset the benefits from  initiatives,  including higher worldwide product sales
volumes.
     The company  recorded  restructuring  provisions  of $145 million after tax
related to the  formation  of its  alliance  with  British  Petroleum in Europe.
Additionally,  about $110 million  after tax charges are expected to be incurred
during 1997-1998 for one-time  implementation  costs. The Mobil-BP alliance will
essentially  be in place by  midyear  1997.  Continued  implementation  of other
business  initiatives in all downstream  businesses and further cost  reductions
are expected to favorably  impact 1997 results.  To strengthen  its  competitive
position,  Mobil is  continuing  to look  closely at all of its assets  and,  if
needed,  will  further  restructure  operations  or divest  assets  to  maximize
long-term returns.
     Net income in 1995  totaled  $673  million,  down $215  million  from 1994.
Operating  earnings  in  1995  increased  $171  million.   Business  initiatives
contributed to lower expenses,  higher volumes,  better refinery performance and
higher lube income,  which more than offset lower  worldwide  industry  refining
margins.
     Downstream  revenues  increased  14% in 1996 versus  1995,  and 10% in 1995
versus 1994, due to higher product sales volumes and prices.
     Overall, investment spending was $1.7 billion in 1996, with continued focus
on international opportunities.  Planned spending for 1997 is $1.3 billion, down
23%  from  1996,  with  approximately  30% in  the  U.S.  and  70%  directed  to
international areas.
     Mobil continues to strengthen its position in areas with growth  potential.
A lubricant  blending  plant was streamed  late in 1996 in Tianjin,  China (near
Beijing),  the first 100% foreign-owned oil industry facility in China. A second
lube blending plant in Taicang,  China (near Shanghai) is under construction and
scheduled  to be streamed in 1997.  The  company's  joint  interest  refinery in
Kawasaki,  Japan,  is  scheduled  to  complete a project to upgrade  lower-value
residual fuels to higher-value products in mid-1997,  and a new cracking unit at
the Altona,  Australia,  refinery is  scheduled  to be streamed in the same time
frame.  Mobil  concluded a purchase of Exxon's fuels and lube assets in Kenya at
the end of 1996.  A new lube base stock unit is  scheduled to be streamed at the
Jurong, Singapore, refinery in mid-1997. In Latin America, the company increased
its presence in the fuels market with the purchase of a share of the La Pampilla
refinery in Peru.  Mobil also  enhanced  its lubes  position in Peru through the
purchase of Petrolubes' lubricant business. In Yanbu, Saudi Arabia, the Petromin
Lubricating  Oil  Refining  Company,  in which  Mobil  owns a 30%  interest,  is
scheduled  to  complete  construction  of  a  new,   two-million-barrel-per-year
lubricant base stock  refinery in the first half of 1997. The company  furthered
its marketing  strategies through significant  investments in key markets around
the world.

24

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

PETROLEUM OPERATIONS (concluded)
                                                                     [Bar Chart]

                                                    DOWNSTREAM PETROLEUM PRODUCT
                                                             SALES VOLUMES
                                                    (Thousands of barrels daily)

                                                   WORLDWIDE SALES VOLUMES
                                                   WERE UP 5%, THE SIXTH CONSEC-
                                                   UTIVE ANNUAL INCREASE.

                                                                      [Bar Chat]

                                                    DOWNSTREAM PETROLEUM PRODUCT
                                                             SALES REVENUES
                                                         (Millions of dollars)

                                                    PETROLEUM PRODUCT SALES REV-
                                                    ENUES WERE UP 13%,DRIVEN
                                                    BY HIGHER PRICES AND SALES
                                                    VOLUMES.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
U.S. MARKETING & REFINING EARNINGS
--------------------------------------------------------------------------------
(In millions)                                    1994         1995        1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>         <C> 
U.S. Income                                      $241         $226        $407
Special Items in Income
  Restructuring provisions                        (11)        (104)         --
  Asset write-downs                               (35)          --          --
  LIFO/other inventory adjustments                 14           --          35
--------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items)      $273         $330        $372
--------------------------------------------------------------------------------
</TABLE>

   U.S.  DOWNSTREAM  operating  earnings were $372 million in 1996,  $42 million
higher than 1995.  Results  benefited  from  higher  margins,  although  margins
declined  somewhat in the second half when  continued  increases  in crude costs
could not be  recovered  in the  marketplace.  This  earnings  improvement  also
reflected  continued  growth in retail  automotive  gasoline  sales, up about 3%
versus an estimated  industry  growth of 1%, due to the success of new marketing
programs.  Wider price  spreads  between  heavy and light crudes also  benefited
Mobil's refineries, which are among the best in the industry at processing heavy
crudes.  Partly  offsetting these favorable items was a higher level of refinery
downtime.
   In 1995,  operating  earnings of $330 million were $57 million higher than in
1994. Benefits from business initiatives, including lower expenses, higher sales
volumes,  improved lube income,  and excellent refinery  performance,  more than
offset weaker business conditions.
   The special item in 1996 was for favorable LIFO/other inventory  adjustments,
while income in 1995  included a charge for  restructuring  provisions.  Special
items  in  1994  included  a  restructuring  provision,  asset  write-downs  and
favorable LIFO/other inventory adjustments.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
INTERNATIONAL MARKETING & REFINING EARNINGS
--------------------------------------------------------------------------------
(In millions)                                    1994         1995        1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>         <C> 
International Income                             $647         $447        $506
Special Items in Income
  Restructuring provisions                        (44)        (316)       (154)
  LIFO/other inventory adjustments                 --          (13)          8
  Other                                            --          (29)        (27)
--------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items)      $691         $805        $679
--------------------------------------------------------------------------------
</TABLE>

   INTERNATIONAL  DOWNSTREAM operating earnings were $679 million,  $126 million
lower  than in 1995,  primarily  due to lower  marketing  margins  in Europe and
Asia-Pacific.  Although U.K.  marketing  margins were  particularly  weak due to
competitive  pressures,  they improved in the fourth quarter.  Lower  paraxylene
margins  at Mobil's  Singapore  refinery,  where  earnings  are  shared  between
Marketing & Refining and  Chemical,  and a higher  level of  scheduled  refinery
downtime  also reduced  earnings.  These  factors were partly offset by improved
refining margins at Singapore and higher product sales volumes.
   Operating  earnings  of $805  million in 1995 were $114  million  higher than
1994.   Lower  expenses  in  Europe  and   Australia,   benefits  from  business
initiatives,  higher sales  volumes,  higher lube income,  and benefits from the
Singapore  refinery  upgrade more than offset  generally weak industry  refining
margins and lower marketing margins in Japan.
   Special  items in 1996  include  restructuring  provisions  for the  Mobil-BP
European alliance ($145 million) and other European operations, and a LIFO/other
inventory adjustment.  Special items in 1995 included  restructuring  provisions
and a LIFO adjustment. In 1994, income included a special item for restructuring
provisions.

                                                                              25
<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

CHEMICAL

[Bar Chart]

  CHEMICAL EARNINGS
(Millions of dollars)

LOWER EARNINGS WERE DUE TO 
LOWER MARGINS, THE ABSENCE 
OF OPERATING INCOME FROM DI-
VESTED BUSINESSES AND, IN NET
INCOME, LAST YEAR'S GAIN ON
SALE OF THE PLASTICS DIVISION.

[Bar Chart]

CHEMICAL NET SALES TO TRADE
   (Millions of dollars)

THIS YEAR'S DECLINE IN REV-
ENUES IS PRIMARILY DUE TO THE 
EFFECTS OF OUR DIVESTED BUSI-
NESSES AND PRICE DECLINES.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CHEMICAL SEGMENT FINANCIAL INDICATORS
--------------------------------------------------------------------------------
(In millions)                                      1994         1995       1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>         <C> 
Petrochemicals Income                            $  129        $  544    $  167
Other Income                                         88           135       139
Restructuring Provisions/Asset Sales               (115)          485        --
--------------------------------------------------------------------------------
Total Chemical Net Income                        $  102        $1,164    $  306
--------------------------------------------------------------------------------
Revenues(1)                                      $4,463        $6,390    $3,280
--------------------------------------------------------------------------------
Assets                                           $3,672        $3,212    $2,987
--------------------------------------------------------------------------------
Capital Expenditures                             $  212        $  220    $  339
Cash Investments in Equity Companies                 --            --         7
--------------------------------------------------------------------------------
Total Investment Spending                        $  212        $  220    $  346
--------------------------------------------------------------------------------
<FN>
(1) Includes intersegment revenues.
</FN>
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CHEMICAL EARNINGS
--------------------------------------------------------------------------------
(In millions)                                     1994          1995     1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>        <C> 
Chemical Income                                  $ 102        $1,164     $306
Special Items in Income
  Asset sale                                        --           501       --
  Restructuring provisions                        (115)          (16)      --
  Environmental provision                           (7)           --       --
--------------------------------------------------------------------------------
Operating Earnings (Excludes Special Items)      $ 224        $  679     $306
--------------------------------------------------------------------------------
</TABLE>

CHEMICAL'S  GOALS ARE TO GROW  AGGRESSIVELY  IN AREAS  WHERE IT HAS  COMPETITIVE
ADVANTAGES  AND TO ACHIEVE A FOCUSED  PORTFOLIO  OF  LEADER-BUSINESSES,  EACH OF
WHICH PROVIDES SUPERIOR RETURNS ON INVESTED CAPITAL.  Chemical earnings declined
in 1996 from the  previous  year's  record  high  levels,  largely due to weaker
petrochemical  industry  fundamentals  and  changes in its  business  portfolio.
Despite the  industry  downturn,  Mobil's  chemical  businesses  returned 13% on
capital  employed,  reflecting  efforts to trim  costs and  divest  nonstrategic
assets.
   CHEMICAL  operating  earnings of $306 million in 1996 were $373 million lower
than last year's record earnings when results benefited from very high worldwide
petrochemical  margins.  Petrochemical margins in 1996 were significantly lower,
the  result of higher  feedstock  costs and  lower  commodity  chemical  prices,
notably  for  polyethylene  and  paraxylene.  Current  year  results  were  also
adversely  impacted by the absence of income from  divested  businesses  and the
expiration of the tax holiday for Mobil's  petrochemicals joint venture in Saudi
Arabia.  Partly  offsetting these negative factors were higher earnings from the
oriented polypropylene (films) and chemical products businesses.
   Operating  earnings  were $679  million in 1995,  an increase of $455 million
from  1994 due to  significantly  improved  petrochemical  prices.  Margins  for
integrated  polyethylene  resin  operations  improved,  and  strong  demand  for
paraxylene,  especially in the Asia-Pacific  region,  coupled with tight supply,
drove prices to record highs.
   Trade sales revenues decreased by 42% in 1996 (see graph at left), reflecting
Chemical's  divestiture  of noncore  businesses  and  declines in  petrochemical
prices.  The divested  businesses  accounted for  approximately  90% of the 1996
decline  in sales.  Trade  sales  increased  23% in 1995 from 1994 due to higher
prices and volumes.  This increase in volumes,  up 7%,  reflected a full year of
operations at the Singapore aromatics complex.
   Chemical's asset divestiture program continued in 1996 with the completion of
employee-led buyouts of the Muehlstein  polyethylene resin trading business, and
the Composite Products (Trex) wood-thermoplastic lumber substitute business. The
Tucker  Housewares  business  was also  sold in 1996 to Zeta  Consumer  Products
Corp.,   thereby   completing  Mobil's  withdrawal  from  the  polyethylene  and
polystyrene plastics fabricating  businesses in North America. The sale of these
assets  generated  about $200 million in cash in 1996, and when coupled with the
sale of the Plastics Division to Tenneco in late 1995,  provided $1.2 billion in
cash (after-tax).
   Investments and plans for worldwide growth  opportunities  continued in 1996.
Mobil  Chemical  and

26

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

CHEMICAL (concluded)
Pequiven,  the  petrochemical   affiliate  of  Venezuela's state-owned oil 
company,  signed a 50-50 joint venture agreement to evaluate the feasibility  
of developing a new olefins  complex at an existing  petrochemicals site at 
Jose. This facility would include an ethylene  cracker and related facilities
to produce  polyethylene  and ethylene  glycol.  Additionally,  Mobil Yanbu 
Petrochemical Company and Saudi Basic Industries Corp. are expanding their 
50-50 joint  venture  petrochemicals  complex in Yanbu,  Saudi  Arabia,  by the
addition of a second  ethylene  production  facility and  facilities  to produce
additional polyethylene and ethylene glycol as well as polypropylene.
   Investment  spending was $346 million in 1996,  up from 1995's $220  million,
mainly due to the  Beaumont,  Texas,  paraxylene  project  and an  expansion  of
ethylene  capacity at the Houston,  Texas,  olefins  plant.  Planned  investment
spending for 1997 is $500 million to support worldwide  capacity  expansions and
productivity improvements.

<TABLE>
<CAPTION>
CORPORATE AND OTHER
--------------------------------------------------------------------------------
CORPORATE AND OTHER EXPENSE
--------------------------------------------------------------------------------
(In millions)                                    1994         1995       1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>        <C> 
Corporate and Other Expense                      $(98)        $(11)      $(122)
Special Items included:
  Staff redesign implementation                    --           --         (75)
  Asset sales and write-downs                     (46)          74          30
  Litigation settlement                            --           71          --
  Restructuring provisions                         20          (62)         --
  Environmental provision                          --          (24)         --
--------------------------------------------------------------------------------
Operating Expense (Excludes Special Items)       $(72)        $(70)       $(77)
--------------------------------------------------------------------------------
</TABLE>

CORPORATE AND OTHER expense increased $111 million in 1996 to $122 million. This
category  includes results from Real Estate and Mining and Minerals  operations,
corporate  administrative  expenses and other items.  Excluding  special  items,
operating expense of $77 million was $7 million higher than 1995.
     Special items in 1996 included  implementation  costs  associated  with the
restructuring  of staff support  services and gains on various  asset sales.  In
1995,  results included benefits from the sale of the South Fort Meade phosphate
mine and a favorable litigation settlement, as well as charges for restructuring
and an environmental  provision related to mining operations.  In 1994, expenses
included  charges  for  property  write-downs,  partly  offset  by a credit  for
prior-year restructuring charges allocated to the Chemical business segment when
the program was implemented.
     Excluding special items, Corporate and Other operating expense decreased $2
million in 1995 from 1994.
     During 1996, Mobil sold substantially all of its land development  business
and essentially all of its remaining mining and minerals assets.

<TABLE>
<CAPTION>
NET FINANCING EXPENSE
--------------------------------------------------------------------------------
NET FINANCING EXPENSE
--------------------------------------------------------------------------------
(In millions)                                     1994         1995       1996
--------------------------------------------------------------------------------
<S>                                              <C>          <C>        <C> 
Net Financing Expense                            $(209)       $(295)     $(242)
--------------------------------------------------------------------------------
</TABLE>

NET  FINANCING  EXPENSE is  primarily  the  interest  Mobil pays on  third-party
borrowings, net of earned interest income. Net Financing Expense of $242 million
was $53 million  lower than last year due to the  effects of higher  capitalized
interest  for major  projects in Canada,  Nigeria and Qatar,  and certain  other
favorable, nonrecurring items. Net Financing Expense of $295 million in 1995 was
$86 million higher than in 1994, mainly reflecting higher average interest rates
in 1995 and the absence of certain favorable, nonrecurring items in 1994.

                                                                              27

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

OVER THE PAST  THREE  YEARS  
MOBIL HAS  SPENT  $2.6  
BILLION TO  SAFEGUARD  THE
ENVIRONMENT.

<TABLE>
<CAPTION>
ENVIRONMENTAL MATTERS
--------------------------------------------------------------------------------
ENVIRONMENTAL EXPENDITURES                       U.S.           INTERNATIONAL
--------------------------------------------------------------------------------
(In millions)                            1994   1995   1996   1994   1995   1996
--------------------------------------------------------------------------------
<S>                                      <C>    <C>    <C>    <C>    <C>    <C> 
Capital                                  $279   $172   $149   $174   $135   $108
Protection and Compliance
  Ongoing operations                      303    238    212    191    184    171
  Remediation                              91     67     46     22     24     27
--------------------------------------------------------------------------------
Total Environmental Expenditures         $673   $477   $407   $387   $343   $306
--------------------------------------------------------------------------------
</TABLE>

MOBIL'S  COMMITMENT AND PRACTICE IS TO CONDUCT ITS OPERATIONS  WITH FULL CONCERN
FOR SAFEGUARDING THE ENVIRONMENT,  EMPLOYEES, CUSTOMERS AND THE PUBLIC--WHEREVER
IT OPERATES.  The company  accomplishes  this through clear,  visible  corporate
policies,  innovative technologies,  sharing best practices,  extensive training
and constant  attention to environmental  matters in its day-to-day  operations.
Environmental  expenditures  are a significant  cost of doing business,  and the
U.S.  and other  countries  continue  to  impose  more  stringent  environmental
requirements.   Although  Mobil  cannot  predict  accurately  how  environmental
expenditures will affect future operations and earnings,  it expects to continue
to incur substantial costs. Mobil believes its costs will not vary significantly
from those of its competitors.
   CAPITAL  EXPENDITURES are additions or modifications to plants and facilities
to limit,  monitor and control emissions and waste generation and to manufacture
products.  The majority of U.S. environmental capital expenditures has been made
to comply  with  federal and state  clean air and water  regulations  as well as
waste-management  requirements.  The  capital  expenditures  incurred  from 1994
through 1996 related mainly to the  manufacture of  reformulated  gasoline/clean
fuels.  As required  in 1995,  Mobil began  selling  clean-burning  reformulated
gasoline in those metropolitan areas designated by the Environmental  Protection
Agency  (EPA)  where  Mobil  markets  gasoline  products.   Additional  emission
reductions are mandated by the year 2000.
   Internationally, capital expenditures were made in response to a growing need
for protecting  ground and surface water and reducing air  emissions.  Worldwide
capital  expenditures for  environmental  matters in 1997 are expected to remain
near the 1996 expenditure level.
   PROTECTION AND COMPLIANCE EXPENDITURES are Mobil's recurring costs associated
with managing  hazardous  substances,  emissions and waste generation in ongoing
operations, and the costs to remediate identified contamination.  The decline in
U.S.  expenditures  reflects  corrective  action  taken in  prior  years to meet
compliance requirements, the use of improved remediation technology and resource
utilization,  and a  continuing  government/industry  trend  toward  utilizing a
risk-based corrective action approach to remediating subsurface contamination.
   Like many other companies,  Mobil periodically receives notices from the EPA,
or  equivalent  state  agencies,  that it has been  designated  as a potentially
responsible party (PRP) for remediation of  hazardous-waste  sites. The majority
of these sites are still under  investigation  by the EPA or the state  agencies
concerned. All PRPs are jointly and severally liable under the federal Superfund
law;  however,  since the early  1980s,  Mobil has been  successful  in  sharing
cleanup  costs with other  financially  sound  companies.  At December 31, 1996,
Mobil had been  successful in resolving its  involvement in 110 of the 257 sites
where it had been  named a PRP.  The number of PRP sites  does not  represent  a
relevant  measure of liability as each company's  involvement in a site can vary
substantially.
   Mobil  believes it has provided  adequate  reserves  for known  environmental
obligations.  However, Mobil may be subject to future environmental  remediation
liabilities relating to assets previously sold, closed facilities,  requirements
not yet identified or the sale or disposition of operating facilities. While the
amounts  could be  material  to Mobil's  earnings  in the  periods in which such
liabilities arise, the extent of such future remediation  requirements and costs
is not subject to  reasonable  estimation.  Based on Mobil's long  experience in
managing  environmental  matters in its businesses,  it does not anticipate that
the  aggregate  level of future  remediation  costs will  increase  above recent
levels so as to  materially  and  adversely  affect its  consolidated  financial
position or liquidity.  See also Note 12 to Financial  Statements on page 47 for
further discussion of environmental liabilities.

28

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA (unaudited)
                                                             1995                                          1996
                                          -------------------------------------------   --------------------------------------------
                                            First   Second    Third  Fourth      Full     FIRST   SECOND    THIRD   FOURTH     FULL
(In millions, except per-share amounts)   Quarter  Quarter  Quarter  Quarter     Year   QUARTER  QUARTER  QUARTER  QUARTER     YEAR
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>     <C>      <C>      <C>      <C>       <C>      <C>      <C>      <C>      <C>    
REVENUES
  Sales and services                      $17,402  $18,700  $18,267  $19,044  $73,413   $18,528  $19,262  $19,852  $22,723  $80,365
  Income from equity investments, asset
       sales, interest and other              225      149      370    1,213    1,957       172      258      474      234    1,138
------------------------------------------------------------------------------------------------------------------------------------
Total Revenues                             17,627   18,849   18,637   20,257   75,370    18,700   19,520   20,326   22,957   81,503
------------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
  Crude oil, products and operating
  supplies and expenses                    10,003   10,598   10,172   10,857   41,630    10,671   11,228   11,788   13,803   47,490
  Exploration expenses                         95       79      102      151      427        76       72      143      221      512
  Selling and general expenses              1,256    1,868    1,274    1,290    5,688     1,126    1,239    1,176    1,646    5,187
  Depreciation, depletion
        and amortization                      669      868      688    1,523    3,748       655      603      645      822    2,725
  Interest and debt discount expense          115      117      119      116      467       116       97      119      123      455
  Taxes other than income taxes             4,259    4,739    4,880    5,141   19,019     4,534    4,693    4,850    4,946   19,023
  Income taxes                                594      401      616      404    2,015       786      805      836      720    3,147
------------------------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses                   16,991   18,670   17,851   19,482   72,994    17,964   18,737   19,557   22,281   78,539
------------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                $   636  $   179  $   786  $   775  $ 2,376   $   736 $    783  $   769  $   676  $ 2,964
------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net Income                                $ 1.57   $  0.42  $  1.95  $  1.93  $  5.87    $ 1.83  $  1.95  $  1.92  $  1.68  $  7.38
Dividends                                 $ 0.85   $ 0.925  $ 0.925  $ 0.925  $ 3.625    $0.925  $  1.00  $  1.00  $  1.00  $ 3.925
------------------------------------------------------------------------------------------------------------------------------------
SPECIAL ITEMS INCLUDED IN NET INCOME
Asset sale gains/(losses)                     --   $   (22) $    --  $   598  $   576        --  $    --  $   129  $    41  $   170
Restructuring provisions                      --      (505)      --      (85)    (590)       --       --       --     (166)    (166)
Staff redesign project implementation         --        --       --       --       --        --      (31)     (28)     (16)     (75)
Asset impairment (FAS 121)                    --        --       --     (487)    (487)       --       --       --      (69)     (69)
Litigation settlement                         --        --       71       --       71        --       --       --       --       --
Tax-related issues                            --        --       --       26       26        --       --       --       --       --
Environmental provision                       --        --       --      (24)     (24)       --       --       --       --       --
LIFO/other inventory adjustments              --        --       --      (13)     (13)       --       --       --       43       43
Other                                         --        --      (29)      --      (29)       --       --       --      (36)     (36)
------------------------------------------------------------------------------------------------------------------------------------
Total Special Items                           --      (527)      42       15     (470)       --      (31)     101     (203)    (133)
------------------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS(1)                     $  636   $   706  $   744  $   760  $ 2,846   $   736  $   814  $   668  $   879  $ 3,097
------------------------------------------------------------------------------------------------------------------------------------
Sales Price per Common Share(2)
  High                                    $93 1/2 $ 102     $103 5/8 $116 5/8 $116 5/8  $118 1/8 $120 1/8 $119 7/8 $125 7/8 $125 7/8
  Low                                     $82 3/4 $  88 1/4 $ 93 1/2 $ 98 1/2 $ 82 3/4  $107 1/2 $108 5/8 $107 3/4 $113 1/4 $107 1/2
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes special items.
(2) The  principal  market for trading of Mobil's  common  stock is the New
    York Stock Exchange.  The stock symbol is "MOB." The reported prices 
    represent a composite of transactions on the New York Stock Exchange, the 
    Chicago,  Pacific, Philadelphia,  Boston and Cincinnati regional exchanges
    and the over-the-counter market.
</FN>
</TABLE>
                                                                              29

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

[Bar Cahrt]

 TOTAL REVENUES VS.
 COSTS AND EXPENSES
(Millions of dollars)

REVENUES ROSE, REFLECTING  
HIGHER PRICES AND HIGHER SALES  
VOLUMES. HIGHER EXPENSES ARE 
DUE TO HIGHER SALES VOLUMES 
AND GROWTH PROGRAMS.

[Bar Chart]

  RETURN ON AVERAGE
SHAREHOLDERS' EQUITY
    (In percent)

RETURN ON AVERAGE SHAREHOLD-
ERS' EQUITY INCREASED TO 16.0%,
THE HIGHEST LEVEL SINCE 1986.

COMMENTARY ON CONSOLIDATED STATEMENT OF INCOME

REVENUES from Sales and Services  increased $6,952 million from 1995, mainly due
to higher  crude oil,  natural  gas and  petroleum  product  prices,  and higher
petroleum  product sales  volumes.  Higher excise and state  gasoline taxes also
contributed to the increase in revenues.  Partly offsetting these increases were
lower  petrochemical  prices and the absence of revenues from divested  chemical
businesses.  The increase in 1995 from 1994 resulted from higher sales  volumes,
higher crude oil and chemical  prices,  and increased  excise and state gasoline
sales taxes,  partly offset by lower U.S. natural gas prices and lower crude oil
production volumes.
   Income from Equity  Investments,  Asset Sales,  Interest and Other  decreased
from 1995 mainly due to a lower level of gains on asset  sales,  lower  earnings
from equity  affiliates and the  nonrecurrence of a litigation  settlement.  The
increase  in 1995  from  1994 was due to gains  from the  sales of the  Plastics
Division  and  mining  assets,  and from  higher  income  at our  joint  venture
petrochemicals operation in Saudi Arabia.
   Total COSTS AND EXPENSES increased by $5,545 million from 1995, primarily due
to higher  costs for crude oil and  products  and  higher  expenses  related  to
increased  volumes and new growth  programs,  partially  offset by benefits from
initiatives.  The increase in 1995 from 1994 was  primarily  due to increases in
volume-related  expenses and increased  charges to  Depreciation,  Depletion and
Amortization, primarily for FAS 121 asset impairments.
   Crude Oil,  Products and  Operating  Supplies and Expenses  increased  $5,860
million  in  1996  from  1995  due  to   increased   worldwide   crude  oil  and
product-related  costs  and  higher  volumes  partly  offset by the  effects  of
divested  businesses.  The  increase in 1995 from 1994 was due to  increases  in
crude oil and product-related costs as well as higher  volume-related  expenses,
mainly in the United  States.  Included in this  expense  category  are research
costs of $275 million in 1994, $252 million in 1995, and $206 million in 1996.
   Exploration  Expenses  increased  in 1996,  primarily  reflecting  higher dry
drilling  expenses  and  Ampolex's  exploration  activities.  Expenses  in  1995
decreased  from  1994 due to  reduced  dry well  costs  resulting  from  greater
drilling success and timing of new well completions.
   Selling and General  Expenses  decreased by $501 million to $5,187 million in
1996, primarily due to a lower level of restructuring charges this year, expense
reductions  resulting from 1995 restructuring  programs,  and the effects of the
divestiture of various  chemical  businesses.  Selling and General Expenses were
higher in 1995  than in 1994,  primarily  due to the 1995  special  charges  for
restructuring programs.
   Depreciation,  Depletion and Amortization  Expenses were $1,023 million lower
in 1996, largely due to the effects of adopting FAS 121 in the fourth quarter of
1995 and the absence of 1995 restructuring-related  asset write-downs.  Expenses
in 1995 increased  from 1994 primarily due to the $774 million charge  resulting
from the adoption of FAS 121 (see Note 6 on page 42),  which was higher than the
1994 asset write-downs.
   Taxes Other than Income Taxes were essentially unchanged in 1996 versus 1995,
as the effects of higher  worldwide  product  sales  volumes  were offset by the
absence of import duties on crude oil  resulting  from the closure of the Woerth
refinery in Germany.  In 1995,  Taxes Other than  Income  Taxes  increased  $1.5
billion from 1994 due to higher U.S. sales volumes, currency translation effects
and higher foreign excise tax rates.
   Income Taxes increased in 1996 over 1995, mainly due to higher pre-tax income
and mix changes in the sources of earnings.  Income Taxes increased in 1995 from
1994, due to higher U.S. pre-tax income.

COMMENTARY ON CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Total  SHAREHOLDERS'  EQUITY rose $1,121 million in 1996. Earnings Retained
in the Business  increased $1,363 million in 1996, as income exceeded common and
preferred  stock  dividends.  The  cost of  Common  Stock  Held in the  Treasury
increased by $281 million in 1996,  as  2,397,700  shares were  purchased on the
open  market to offset the  dilutive  effects  of the  issuance  of shares  upon
exercise of stock options. Return on average shareholders' equity increased from
10.4 % in 1994 (excluding the effect of the change in accounting principle),  to
13.5% in 1995 and to 16.0% in 1996.
     Common stock  dividends  paid were $3.40 per share,  $3.625 per share,  and
$3.925 per share in 1994, 1995 and 1996, respectively.

30

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME

Year ended December 31 (In millions, except per-share amounts)    1994        1995      1996
-------------------------------------------------------------------------------------------------
<S>                                                            <C>         <C>       <C>    
REVENUES
  Sales and services(1)                                        $66,757     $73,413   $80,365
  Income from equity investments, asset sales,
    interest and other                                             626       1,957     1,138
-------------------------------------------------------------------------------------------------
Total Revenues                                                  67,383      75,370    81,503
-------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
  Crude oil, products and operating supplies
        and expenses                                            36,665      41,630    47,490
  Exploration expenses                                             516         427       512
  Selling and general expenses                                   5,453       5,688     5,187
  Depreciation, depletion and amortization                       3,098       3,748     2,725
  Interest and debt discount expense                               461         467       455
  Taxes other than income taxes(1)                              17,512      19,019    19,023
  Income taxes                                                   1,919       2,015     3,147
-------------------------------------------------------------------------------------------------
Total Costs and Expenses                                        65,624      72,994    78,539
-------------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle                     1,759       2,376     2,964
Cumulative Effect of Change in Accounting Principle               (680)         --        --
-------------------------------------------------------------------------------------------------
NET INCOME                                                     $ 1,079     $ 2,376   $ 2,964
-------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE
  Income before change in accounting principle                 $  4.28     $  5.87   $  7.38
  Cumulative effect of change in accounting principle            (1.71)         --        --
-------------------------------------------------------------------------------------------------
  Net income                                                   $  2.57     $  5.87   $  7.38
-------------------------------------------------------------------------------------------------
<FN>
(1) Includes excise and state gasoline taxes: 1994-$7,762 million; 1995-$8,646
    million; 1996-$9,236 million.
</FN>
</TABLE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Year ended December 31 (In millions)                              1994        1995      1996
-------------------------------------------------------------------------------------------------
<S>                                                            <C>         <C>       <C>    
PREFERRED STOCK (ESOP-related)
  -Beginning of year                                           $   763     $   745   $   722
  -End of year, after redemptions                              $   745     $   722   $   686
-------------------------------------------------------------------------------------------------
UNEARNED EMPLOYEE COMPENSATION (ESOP-related)
  -Beginning of year                                           $  (543)    $  (472)  $  (411)
  -End of year, after amortization                             $  (472)    $  (411)  $  (365)
-------------------------------------------------------------------------------------------------
COMMON STOCK
  -Beginning of year                                           $   883     $   885   $   888
  -End of year, after issuance of shares                       $   885     $   888   $   891
-------------------------------------------------------------------------------------------------
CAPITAL SURPLUS
  -Beginning of year                                           $ 1,279     $ 1,325   $ 1,396
  -End of year, after issuance of common shares                $ 1,325     $ 1,396   $ 1,468
-------------------------------------------------------------------------------------------------
EARNINGS RETAINED IN THE BUSINESS
  -Beginning of year                                           $17,191     $16,859   $17,745
  -Net income                                                    1,079       2,376     2,964
  -Common stock dividends                                       (1,353)     (1,434)   (1,547)
  -Preferred stock dividends (ESOP-related)                        (58)        (56)      (54)
-------------------------------------------------------------------------------------------------
  -End of year                                                 $16,859     $17,745   $19,108
-------------------------------------------------------------------------------------------------
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
  -Beginning of year                                           $  (526)    $  (123)  $   (27)
  -End of year, after adjustments                              $  (123)    $   (27)  $   (73)
-------------------------------------------------------------------------------------------------
COMMON STOCK HELD IN TREASURY, AT COST
  -Beginning of year                                           $(1,810)    $(2,073)  $(2,362)
  -End of year, after purchases                                $(2,073)    $(2,362)  $(2,643)
-------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                     $17,146     $17,951   $19,072
-------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements on pages 38-51.

31

<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS

[Bar Chart]

     TOTAL DEBT
(Millions of dollars)

DEBT INCREASED DUE TO THE 
FUNDING OF THE AMPOLEX AND 
TENGIZ ACQUISITIONS.

[Bar Chart]

RETURN ON AVERAGE
CAPITAL EMPLOYED
  (In percent)

RETURN ON AVERAGE CAPITAL 
EMPLOYED ROSE TO 12.7%, THE 
HIGHEST LEVEL SINCE 1981.

COMMENTARY ON CONSOLIDATED BALANCE SHEET

Total CURRENT ASSETS increased $839 million in 1996, primarily reflecting higher
Accounts and Notes  Receivable.  A higher level of Cash and Cash Equivalents was
offset by lower Inventories and a decrease in the Deferred Income Tax balance.
   Cash  and Cash  Equivalents  increased  $310  million  from  last  year.  The
movements that  contributed  to this increase are presented in the  Consolidated
Statement of Cash Flows on page 35.
   Accounts and Notes  Receivable  increased due to higher  worldwide prices and
petroleum product sales volumes, partly offset by the effects of the sale of the
Muehlstein resin trading business.
   Inventories were lower in 1996, mainly reflecting the sale of certain noncore
businesses and decreases in petroleum products.
   Investments  and  Long-term  Receivables  increased  $894  million  to $5,078
million,  primarily due to the  acquisition of a 25% equity  interest in a joint
venture that owns the Tengiz field in the Republic of Kazakstan.
   Net  Properties,  Plants and Equipment  increased  $2,629  million to $27,479
million. Capital expenditures, including the acquisition of Ampolex, were partly
offset by depreciation, depletion and amortization, and asset sales.
   Total CURRENT  LIABILITIES of $15,248 million  increased  $2,194 million from
year-end 1995. This increase reflected higher Short-term Debt,  primarily due to
the funding of the Ampolex acquisition. Accounts Payable increased mainly due to
higher crude oil,  natural gas and product prices,  and higher volumes.  Accrued
Liabilities  increased  primarily due to Tengiz  obligations  and  restructuring
provisions for the Mobil-BP alliance.
   At year-end 1996, the TOTAL DEBT of Mobil and its  consolidated  subsidiaries
was $7,875 million,  an increase of $1,119 million from the prior year.  Mobil's
year-end  debt-to-capitalization  ratio was 29%, up from 27% at  year-end  1995,
primarily  reflecting  the  effects of the  acquisitions  of  Ampolex  and a 25%
interest in Tengiz.
   Deferred  Credits and Other  Noncurrent  Obligations  increased mainly due to
future  obligations  incurred  with  Mobil's  acquisition  of an interest in the
Tengiz field.
   Deferred Income Taxes  increased  primarily due to the acquisition of Ampolex
and accelerated depreciation associated with an increase in spending,  primarily
in international areas.
   Mobil continues to have ready access to global financial  markets,  providing
flexibility to take advantage of growth  opportunities  and low borrowing costs.
At year-end 1996, Mobil had effective shelf registration statements on file with
the  Securities  and Exchange  Commission  (SEC) that would permit the offer and
sale of an aggregate of $1,815 million of debt  securities  pursuant to Rule 415
of the  Securities  Act of  1933.  Also in  place  were a  Euro-Medium-Term-Note
program to facilitate the offering and sale outside the U.S. of an additional $2
billion of debt  securities  in 1997 or later years and a facility  allowing the
issuance in Japan of bonds having a principal amount of 30 billion Japanese yen.
   Total SHAREHOLDERS'  EQUITY rose $1.1 billion (see Commentary on Consolidated
Statement of Changes in Shareholders' Equity on page 30).
   Mobil's  capital and  exploration  expenditures  totaled $6,361  million,  an
increase of $2,093 million from the previous year. At year-end 1996, the unspent
balance of total appropriations for capital expenditures was $4.8 billion. Mobil
is not contractually committed to spend all of this amount but generally expects
to do so over the next several years.

32

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET

At December 31 (In millions)                                1995         1996
--------------------------------------------------------------------------------
<S>                                                       <C>         <C>    
ASSETS
Current Assets
  Cash and cash equivalents                               $  498      $   808
  Accounts and notes receivable                            7,316        8,192
  Inventories                                              3,287        3,017
  Prepaid expenses and other current assets                  642          627
  Deferred income taxes                                      313          251
--------------------------------------------------------------------------------
Total Current Assets                                      12,056       12,895
--------------------------------------------------------------------------------
Investments and Long-term Receivables                      4,184        5,078
Net Properties, Plants and Equipment                      24,850       27,479
Deferred Charges and Other Assets                          1,048          956
--------------------------------------------------------------------------------
TOTAL ASSETS                                             $42,138      $46,408
--------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Short-term debt                                        $ 2,127      $ 3,425
  Accounts payable                                         5,358        5,935
  Accrued liabilities                                      2,703        2,968
  Income, excise, state gasoline and other taxes payable   2,676        2,615
  Deferred income taxes                                      190          305
--------------------------------------------------------------------------------
Total Current Liabilities                                 13,054       15,248
--------------------------------------------------------------------------------
Long-term Debt                                             4,629        4,450
Reserves for Employee Benefits                             1,624        1,681
Accrued Restoration, Removal and Environmental Costs       1,254        1,240
Deferred Credits and Other Noncurrent Obligations            884        1,255
Deferred Income Taxes                                      2,647        3,416
Minority Interest in Subsidiary Companies                     95           46
--------------------------------------------------------------------------------
Total Liabilities                                         24,187       27,336
--------------------------------------------------------------------------------
Shareholders' Equity
  Preferred stock (ESOP-related)--shares issued and outstanding:
   1995-92,864; 1996-88,168                                  722          686
  Unearned employee compensation (ESOP-related)             (411)        (365)
  Common stock--shares issued:
    1995-443,905,531; 1996-445,537,805                       888          891
  Capital surplus                                          1,396        1,468
  Earnings retained in the business                       17,745       19,108
  Cumulative foreign exchange translation adjustment         (27)         (73)
  Common stock held in treasury, at cost--shares:
    1995-49,345,650; 1996-51,743,350                      (2,362)      (2,643)
--------------------------------------------------------------------------------
Total Shareholders' Equity                                17,951       19,072
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $42,138      $46,408
--------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements on pages 38-51.

33

<PAGE>

                       MANAGEMENT DISCUSSION AND ANALYSIS

[Bar Chart]

ASSET SALES PROCEEDS
(Millions of dollars)

MOBIL CONTINUED ITS EMPHASIS
ON SALE OF NONCORE ASSETS; 
PROCEEDS WERE REINVESTED
IN MORE PROFITABLE PROJECTS 
THAT BETTER FIT THE COMPANY'S 
LONG-TERM STRATEGIES.

[Mountain Chart]

INVESTMENT SPENDING
(Millions of dollars)

INVESTMENT SPENDING WAS HIGHER 
IN 1996, PRIMARILY REFLECTING 
THE ACQUISITIONS OF AMPOLEX 
AND TENGIZ.


COMMENTARY ON CONSOLIDATED STATEMENT OF CASH FLOWS

   The Statement of Cash Flows  reports  movements in cash balances from year to
year and  summarizes  the cash provided and used during the year for  operating,
investing and financing  activities.  The impact of changes in foreign  currency
translation  rates has been removed from the amounts reported in this statement.
Therefore, except for Cash and Cash Equivalents, these amounts do not agree with
the differences that would be derived from the changes in Balance Sheet amounts.
   During  1996,  Net Cash  Used in  Investing  Activities  and  Cash  Dividends
exceeded  Net  Cash  from  Operating  Activities  by $449  million.  These  cash
requirements were funded by the issuance of debt.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Cash Requirements--Operating Activities Over (Under) Investing
--------------------------------------------------------------------------------
Year ended December 31 (In millions)                   1994     1995     1996
--------------------------------------------------------------------------------
<S>                                                  <C>      <C>      <C>   
Net cash from operating activities                   $5,362   $5,024   $6,352
Net cash used in investing activities                (3,557)  (2,462)  (5,200)
Cash dividends                                       (1,411)  (1,490)  (1,601)
--------------------------------------------------------------------------------
Excess (shortfall) of cash requirements              $  394   $1,072   $ (449)
--------------------------------------------------------------------------------
</TABLE>

   NET CASH FROM OPERATING ACTIVITIES increased by $1,328 million from 1995. Net
Cash from Operating  Activities is derived by adjusting  reported Net Income for
charges or credits that have no cash effect (primarily  Depreciation,  Depletion
and  Amortization,  Deferred Income Taxes and the Cumulative Effect of Change in
Accounting  Principle)  and cash  items  reported  elsewhere  in this  Statement
(primarily Exploration Expenses).
   NET CASH USED IN INVESTING  ACTIVITIES  increased by $2,738 million from 1995
due to the  acquisitions  of Ampolex  and a 25%  interest in Tengiz and a higher
overall level of capital and exploration  spending.  These were partially offset
by proceeds from asset sales, primarily noncore,  including the land development
business,  certain chemical businesses, a phosphate mine and various Exploration
and  Producing  properties  in  North  America,   including  gas  gathering  and
processing facilities (see Note 3--Acquisitions and Dispositions, page 40).
   NET CASH USED IN FINANCING  ACTIVITIES in 1996 was $861 million versus $2,551
million  in  1995.  This  variance  reflects  the  financing  of the  two  major
acquisitions  of Ampolex  and an  interest in Tengiz,  consistent  with  Mobil's
stated growth strategy in international oil and gas.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
INVESTMENT SPENDING
--------------------------------------------------------------------------------
Year ended December 31 (In millions)                   1994     1995     1996
--------------------------------------------------------------------------------
<S>                                                  <C>      <C>      <C>   
Petroleum Operations
  Exploration & Producing      -- U.S.               $  486   $  758   $  480
                               -- International       1,156    1,489    3,434(1)
  Marketing & Refining         -- U.S.                  572      484      403
                               -- International         725      808    1,151
Chemical                       -- U.S.                  159      165      301
                               -- International          53       55       38
Corporate and Other                                     158       82       42
--------------------------------------------------------------------------------
Total Capital Expenditures                           $3,309   $3,841   $5,849
--------------------------------------------------------------------------------
Exploration Expenses           -- U.S.                  115       72       76
                               -- International         401      355      436
--------------------------------------------------------------------------------
Total Exploration Expenses                              516      427      512
--------------------------------------------------------------------------------
Total Capital Expenditures and Exploration Expenses  $3,825   $4,268   $6,361
--------------------------------------------------------------------------------
Cash Investments in Equity Companies                    102      257      658
--------------------------------------------------------------------------------
Total Investment Spending                            $3,927   $4,525   $7,019
--------------------------------------------------------------------------------
<FN>
(1) Includes $1,394 million for the acquisition of Ampolex.
</FN>
</TABLE>

34

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31 (In millions)                                1994        1995        1996
------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>   
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                      $1,079      $2,376      $2,964
  Adjustments to reconcile to net cash from operating activities
    Depreciation, depletion and amortization                       3,098       3,748       2,725
    Deferred income taxes                                           (210)       (233)        446
    Earnings (greater) less than dividends from
      equity affiliates                                              (40)        (51)        153
    Exploration expenses (includes noncash charges:
      1994-$33; 1995-$26; 1996-$36)                                  516         427         512
    Gain on sales of properties, plants and equipment
      and other assets                                               (68)     (1,041)       (423)
    Decrease (increase) in working capital items (detailed below)    346        (388)       (290)
    Other, net                                                       (39)        186         265
    Cumulative effect of change in accounting principle              680          --          --
------------------------------------------------------------------------------------------------------
Net Cash from Operating Activities                                 5,362       5,024       6,352
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital and exploration expenditures                            (3,825)     (4,268)     (4,967)
  Acquisition of Ampolex Limited, net of $47 cash acquired            --          --      (1,347)
  Proceeds from sales of properties, plants and equipment
    and other assets                                                 349       2,034       1,759
  Payments attributable to investments and
    long-term receivables                                            (81)       (228)       (645)(1)
------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                             (3,557)     (2,462)     (5,200)
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Cash dividends                                                  (1,411)     (1,490)     (1,601)
  Proceeds from borrowings having original terms
    greater than three months                                      1,018       1,739       1,494
  Repayments of borrowings having original terms
    greater than three months                                     (2,076)     (1,594)     (1,215)
  Increase (decrease) in other borrowings                            542        (991)        667
  Proceeds from issuance of common stock                              48          74          75
  Purchase of common stock for treasury                             (263)       (289)       (281)
------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities                             (2,142)     (2,551)       (861)
------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents(2)       41         (44)         19
------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                (296)        (33)        310
Cash and Cash Equivalents--Beginning of Year                         827         531         498
------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS--END OF YEAR                            $  531      $  498      $  808
------------------------------------------------------------------------------------------------------
<FN>
(1) Includes the cash expenditure for the acquisition of a 25% interest in a joint
    venture that owns the Tengiz field.
(2) Cash  equivalents  are  liquid  investments  convertible  to cash  and have
    original maturities of three months or less.
</FN>
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
CHANGES IN WORKING CAPITAL ITEMS Decrease (Increase)
------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>   
  Accounts and notes receivable                                   $  (810)    $  (994)    $(1,199)
  Inventories                                                          29         (66)         91
  Prepaid expenses and other current assets                           (14)        (22)         24
  Accounts payable                                                    813         477         836
  Accrued liabilities                                                 195          83         (19)
  Income, excise, state gasoline and other taxes payable              133         134         (23)
------------------------------------------------------------------------------------------------------
Decrease (Increase) in Working Capital Items                      $   346     $  (388)    $  (290)
------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
MEMO ITEMS
------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>   
  Cash income taxes paid                                          $ 1,948     $ 2,091     $ 2,416
  Cash interest paid                                                  522         556         458
------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements on pages 38-51.

                                                                              35

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
SEGMENT AND GEOGRAPHIC INFORMATION

Year ended December 31 (In millions)                                 1994        1995        1996
------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>   
REVENUES BY SEGMENT
  Petroleum Operations
   Exploration & Producing - Third Party                          $ 6,374     $ 7,028     $ 8,055
                           - Intersegment                           3,819       4,053       4,786
   Marketing & Refining    - Third Party                           56,230      61,376      69,931
                           - Intersegment                             631         986         865
  Chemical                 - Third Party                            4,195       6,155       3,023
                           - Intersegment                             268         235         257
  Corporate and Other                                                 584         811         494
  Intersegment Elimination                                         (4,718)     (5,274)     (5,908)
------------------------------------------------------------------------------------------------------
Total Revenues                                                    $67,383     $75,370     $81,503
------------------------------------------------------------------------------------------------------
REVENUES BY GEOGRAPHIC AREA
  United States            - Third Party                          $22,388     $25,598     $27,447
                           - Intersegment                             405         537         461
  Europe                   - Third Party                           21,094      23,676      25,414
                           - Intersegment                             663         899       1,478
  Asia-Pacific             - Third Party                           15,411      17,160      17,690
                           - Intersegment                             537         796         675
  Other Areas(1)           - Third Party                            7,906       8,125      10,458
                           - Intersegment                           5,378       5,574       5,657
  Corporate and Other                                                 584         811         494
  Intersegment Elimination                                         (6,983)     (7,806)     (8,271)
------------------------------------------------------------------------------------------------------
Total Revenues                                                    $67,383     $75,370     $81,503
------------------------------------------------------------------------------------------------------

At December 31 (In millions)
------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY SEGMENT
  Petroleum Operations
   Exploration & Producing                                        $14,116     $14,393     $18,279
   Marketing & Refining                                            21,767      22,463      23,592
  Chemical                                                          3,672       3,212       2,987
  Corporate and Other                                               2,380       2,510       2,042
  Adjustments                                                        (393)       (440)       (492)
------------------------------------------------------------------------------------------------------
Total Assets                                                      $41,542     $42,138     $46,408
------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY GEOGRAPHIC AREA
  United States                                                   $15,316     $14,268     $13,726
  Europe                                                            9,150       9,920      10,049
  Asia-Pacific                                                      8,674       8,778      11,316
  Other Areas(1)                                                    6,604       7,312       9,965
  Corporate and Other                                               2,380       2,510       2,042
  Adjustments                                                        (582)       (650)       (690)
------------------------------------------------------------------------------------------------------
Total Assets                                                      $41,542     $42,138     $46,408
------------------------------------------------------------------------------------------------------
<FN>
(1) Includes principally Nigeria, Saudi Arabia and Canada.
</FN>
</TABLE>


The  distribution of Mobil's  operations by business segment and geographic area
is presented  above.  Petroleum  Operations  consist of exploration,  producing,
marketing and  refining.  Exploration  & Producing  explores  for,  develops and
produces crude oil and natural gas, and extracts natural gas liquids, sulfur and
carbon  dioxide.  Marketing & Refining is  responsible  for  petroleum  refining
operations  and  the  marketing  of all  refined  petroleum  products.  Chemical
manufactures and sells various petroleum-based chemical products.  Corporate and
Other   includes  the   operations  of  Real  Estate  and  Mining  and  Minerals
(substantially   all  of  these   businesses  were  sold  in  1996),   corporate
administrative expenses and other items.

36

<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS

                                                   UNITED STATES EARNINGS WERE 
                                                   UP, LARGELY DUE TO HIGHER 
                                                   HYDROCARBON PRICES.

<TABLE>
<CAPTION>
SEGMENT AND GEOGRAPHIC INFORMATION (continued)

Year ended December 31 (In millions)                                 1994       1995         1996
------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>   
EARNINGS BY SEGMENT
  Pre-tax Operating Profits
   Petroleum Operations
    Exploration & Producing                                       $ 2,737     $ 2,410     $ 5,075
    Marketing & Refining                                            1,359         894       1,338
   Chemical                                                            82       1,551         342
------------------------------------------------------------------------------------------------------
  Total Pre-tax Operating Profits                                   4,178       4,855       6,755
  Income Taxes                                                     (2,112)     (2,173)     (3,427)
------------------------------------------------------------------------------------------------------
  Segment Earnings                                                  2,066       2,682       3,328
  Corporate and Other (Net of income taxes)                           (98)        (11)       (122)
  Net Financing Expense (Net of income taxes)                        (209)       (295)       (242)
  Cumulative Effect of Change in Accounting
    Principle (Net of income taxes)                                  (680)         --          --
------------------------------------------------------------------------------------------------------
Net Income                                                        $ 1,079      $ 2,376    $ 2,964
------------------------------------------------------------------------------------------------------
EARNINGS BY GEOGRAPHIC AREA (Net of Income Taxes)
  United States                                                   $   302      $   827    $ 1,293
  Europe                                                              380          323        357
  Asia-Pacific                                                      1,029        1,193      1,096
  Other Areas(1)                                                      355          339        582
------------------------------------------------------------------------------------------------------
  Geographic Earnings                                               2,066        2,682      3,328
  Corporate and Other                                                 (98)         (11)      (122)
  Net Financing Expense                                              (209)        (295)      (242)
  Cumulative Effect of Change in Accounting Principle                (680)          --         --
------------------------------------------------------------------------------------------------------
Net Income                                                        $ 1,079      $ 2,376    $ 2,964
------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES BY SEGMENT
  Petroleum Operations
   Exploration & Producing                                        $ 1,642      $ 2,247    $ 3,914
   Marketing & Refining                                             1,297        1,292      1,554
  Chemical                                                            212          220        339
------------------------------------------------------------------------------------------------------
  Segment Capital Expenditures                                      3,151        3,759      5,807
  Corporate and Other                                                 158           82         42
------------------------------------------------------------------------------------------------------
Total Capital Expenditures                                        $ 3,309      $ 3,841    $ 5,849
------------------------------------------------------------------------------------------------------
DEPRECIATION, DEPLETION AND AMORTIZATION BY SEGMENT
  Petroleum Operations
   Exploration & Producing                                        $ 1,907      $ 2,230    $ 1,596
   Marketing & Refining                                               923        1,168        966
  Chemical                                                            226          290        126
------------------------------------------------------------------------------------------------------
  Segment Depreciation, Depletion and Amortization                  3,056        3,688      2,688
  Corporate and Other                                                  42           60         37
------------------------------------------------------------------------------------------------------
Total Depreciation, Depletion and Amortization                    $ 3,098      $ 3,748    $ 2,725
------------------------------------------------------------------------------------------------------
<FN>
(1) Includes principally Nigeria, Saudi Arabia and Canada.
</FN>
</TABLE>

   Significant  investments in companies  owned 50% or less are accounted for on
the equity method. Mobil's share of the net income of such companies is included
in Revenues. Information on these affiliates is presented in Note 4 on page 41.
   Intersegment  and  intergeographic  revenues  are sales to other  business or
geographic  segments  within Mobil and are at  estimated  market  prices.  These
intercompany  transactions  are eliminated for  consolidation  purposes.  Income
taxes are allocated to segments and  geographic  areas on the basis of operating
results.

                                                                              37

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

1. MAJOR ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The  consolidated  financial  statements  include the accounts of all  companies
owned more than 50%.  Significant  investments in affiliated companies owned 50%
or less are accounted for on the equity basis. Investments in other companies in
which  Mobil  owns  less  than a  majority  interest  are  stated  at cost  less
applicable reserves.  Investments that represent direct interests in the assets,
liabilities  and  operations  of ventures are reported as Mobil's  share of each
account in the venture. Intercompany transactions are eliminated.
USE OF ESTIMATES
The  financial  statements,  which are  prepared in  conformity  with  generally
accepted  accounting  principles,  include  amounts that are based,  in part, on
management's best estimates and judgments.
INVENTORIES
Substantially  all crude oil and  product  inventories  are  valued at cost
under  the  last-in,  first-out  (LIFO)  method.  Other  inventories,  primarily
materials and supplies, are valued generally at average cost.
OIL AND GAS  ACCOUNTING  
Mobil follows the  successful  efforts method of accounting for oil and gas
exploration  and producing  activities.  Under this method,  direct  acquisition
costs of unproved mineral rights are capitalized and then amortized as described
below. Payments made in lieu of drilling on nonproducing  leaseholds are charged
to expense currently. Geological and geophysical costs are charged to expense as
incurred. Costs of all development wells and of exploratory wells that result in
additions to proved reserves are capitalized.
DEPRECIATION, DEPLETION AND AMORTIZATION 
Annual charges to income for  depreciation  are computed on a straight-line
basis over the useful  lives of the assets.  Costs of producing  properties  are
generally  accumulated by field.  Depletion of these costs and  amortization  of
capitalized,  intangible  drilling costs are calculated on a  unit-of-production
basis.
     Capitalized  acquisition  costs of significant  unproved mineral rights are
assessed periodically on a property-by-property basis to determine whether their
values have been impaired; where impairment is indicated, a loss is recognized.
     Capitalized   acquisition  costs  of  other  unproved  mineral  rights  are
amortized over the expected holding period. When a mineral right is surrendered,
any  unamortized  cost is charged to expense.  When a property is  determined to
contain proved reserves,  the mineral right then becomes subject to depletion on
a  unit-of-production  basis. When assets that are part of a composite group are
retired,  sold,  abandoned or otherwise disposed of, the cost is charged against
accumulated  depreciation,  depletion and  amortization.  Where  depreciation is
accumulated  for  specific  assets,  gains or losses on disposal are included in
income  currently.   
RESTORATION, REMOVAL AND ENVIRONMENTAL LIABILITIES  
The  estimated   costs  of  restoration  and  removal  of  major  producing
facilities  are  accrued  on a  unit-of-production  basis  over  the life of the
property.  The  estimated  future  costs  for  known  environmental  remediation
requirements  are accrued when it is probable that a liability has been incurred
and the amount of remediation costs can be reasonably  estimated.  These amounts
are  the  undiscounted,   future  estimated  costs  under  existing   regulatory
requirements and using existing technology.
DERIVATIVE FINANCIAL INSTRUMENTS
Mobil uses  derivative  financial  instruments  primarily  for  purposes of
hedging  its  exposure  to  fluctuations  in interest  rates,  foreign  currency
exchange  rates  and  hydrocarbon  prices.   Gains  and  losses  are  recognized
concurrent  with  the  recognition  of the  economic  impact  of the  underlying
exposures using either the accrual or deferral  method of accounting.  Under the
accrual method,  which is used for swaps,  differentials  in the swapped amounts
are recorded as adjustments of the underlying periodic cash flows that are being
hedged.  Under the deferral  method,  gains and losses resulting from changes in
value of derivative  instruments  are deferred and recognized in the same period
as the gains and losses of the items being hedged.

38

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

1. MAJOR ACCOUNTING POLICIES (concluded)
FOREIGN CURRENCY TRANSLATION
The functional  currency for most foreign operations is the local currency.  The
cumulative effects of translating the balance sheet accounts from the functional
currency  into the U.S.  dollar at current  exchange  rates are  included in the
Cumulative Foreign Exchange Translation  Adjustment in Shareholders' Equity. The
U.S.  dollar  is  used as the  functional  currency  for  operations  in  highly
inflationary  foreign economies and for exploration and producing  operations in
Indonesia,  Nigeria  and  Australia.  For all  operations,  gains or losses from
remeasuring  foreign  currency  transactions  into the  functional  currency are
included in income.

2. ALLIANCES AND RESTRUCTURINGS
ALLIANCE WITH BP
Mobil and The British  Petroleum  Company p.l.c. (BP) agreed to form a strategic
alliance that will combine their European refining and marketing  operations for
fuels  and  lubricants.  The  alliance  will  be  implemented  through  separate
operating businesses for fuels and for lubricants in each of the countries where
Mobil and BP affiliates are already active or may develop future  business.  The
43 countries  covered by the  alliance  include the 15 European  Union  nations,
together  with  Switzerland,  Turkey,  Cyprus,  all of the  countries of Eastern
Europe,  and Russia west of the Urals.  The  businesses  in the United  Kingdom,
Turkey,  and  Portugal  commenced  operations  in the  fourth  quarter  of 1996.
Businesses in the remaining countries will be implemented in 1997.
     In each country, Mobil will have a 30% interest in the fuels business and a
51% interest in the lubricants  business.  Employees and management teams of the
two  companies  were  realigned  so that  BP  manages  and  operates  the  fuels
businesses and Mobil manages and operates the lubricants businesses.  Commercial
and financial  strategy for the alliance is  coordinated  by a committee with an
equal number of  representatives  from each company.  Mobil reports its share of
the alliance assets, liabilities, revenues and operating expenses.
     The  implementation  of the  alliance  will  result in the  elimination  of
approximately  2,700  positions  from the combined work forces of the companies,
the  rationalization  of certain  marketing  assets and the  disposal of surplus
facilities.  In 1996, Mobil recorded restructuring charges of $184 million ($145
million  after tax)  primarily  for  employee  separation  costs and  facilities
closure  costs.  Cash  outlays  associated  with these  provisions  will be made
throughout  1997 and 1998.  
ALLIANCE WITH  PANENERGY 
In 1996,  Mobil  Natural Gas Inc., a subsidiary of Mobil  Corporation,  and
PanEnergy  Trading and  Marketing  Services,  Inc.,  a  subsidiary  of PanEnergy
Corporation,  formed a joint  venture  to market  both  equity  and third  party
natural gas. This venture, conducting business as PanEnergy Marketing, L.L.C. in
the United States, and PanEnergy Marketing, L.P. in Canada, is being operated by
PanEnergy.  PanEnergy  has a 60% equity  interest in both natural gas  marketing
entities with Mobil owning the remaining 40% interest.
     Under the terms of the agreement,  Mobil will process its U.S. and Canadian
equity natural gas production with PanEnergy for an initial period of ten years.
In addition,  in a separate  transaction,  Mobil sold its  domestic  natural gas
gathering  and  processing  assets to PanEnergy in 1996 for  approximately  $300
million, resulting in a gain of $104 million ($62 million after tax).
OTHER RESTRUCTURINGS
During  1995 and 1996,  Mobil  implemented  five  major  restructuring  programs
affecting  worldwide  staff  support  services,  U.S.  upstream  and  downstream
businesses,  and European refining and lubricant blending operations,  resulting
in the  elimination  of  about  7,000  positions  and  the  closure  of  certain
facilities. Provisions for these and other smaller programs totaled $911 million
($590 million after tax) and were charged to income in 1995 as the programs were
announced.  An  additional  provision of $11 million ($7 million  after tax) was
charged  to  income  in  1996,   mainly  for  additional   cash  outlays  for  a
larger-than-expected number of work force reductions.

                                                                              39

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS


2. ALLIANCES AND RESTRUCTURINGS (concluded)
     Following is an update on the progress of these plans:
     Staff Support Services -This program was implemented in 1996 and resulted
in work force  reductions of about 5,000 employees.  Cash outlays for this pro-
gram primarily related to employee separation benefits, totaled $226 million at
December 31, 1996. The remaining  reserve  balance of $98 million is expected to
be spent in 1997 for ongoing employee separation benefits. Noncash costs, mainly
to write-down surplus facilities and equipment in the U.S. and United Kingdom to
estimated realizable value, totaled $68 million ($52 million after tax) in 1995.
     Other Programs -The U.S. upstream and downstream programs were completed in
1996 and resulted in work force reductions of approximately 1,350 employees. The
European refining and lubricant blending  restructurings were completed in 1996,
and resulted in work force  reductions of about 650 employees at year-end.  Cash
spending for these  programs  totaled $212 million at December 31, 1996,  mainly
for employee  separations  and facility  shutdown costs.  The remaining  reserve
balance of $125  million is expected  to be spent in 1997 for  ongoing  employee
separation benefits.  Noncash costs for writing off the investment at the Woerth
refinery and for other plant write-offs  totaled $161 million ($76 million after
tax) in 1995.

3. ACQUISITIONS AND DISPOSITIONS
In 1996,  Mobil  Exploration  and  Producing  Australia  Pty Ltd, an  Australian
subsidiary of Mobil,  acquired Ampolex Limited (Ampolex),  an Australian oil and
gas  company,  for $1,394  million.  This  acquisition  was  recorded  using the
purchase  accounting  method for business  combinations  with the purchase price
being allocated to the assets  acquired and liabilities  assumed on the basis of
estimated fair value. Had Ampolex been  consolidated  since the beginning of the
year, the impact on the financial statements would not have been significant.
     In 1996,  Mobil acquired a 25% equity interest in a joint venture that owns
the Tengiz oil field in the Republic of Kazakstan.  To date, Mobil has paid $546
million and has recorded its  obligation  for the remaining $555 million that is
payable in  installments  through the year 2000,  upon reaching  certain project
milestones.
     In 1996, Mobil sold its land development business and various other noncore
assets, including: 1) Tucker Housewares, the Composite Products Division and the
Muehlstein  resin trading  business  (units of Mobil  Chemical),  2) a phosphate
mine, 3) a 20-acre commercial development and hotel in Reston,  Virginia, and 4)
various  Exploration  & Producing  properties  in North  America,  including gas
gathering and  processing  facilities in the United  States.  Total proceeds for
these and other assets sold in 1996 were $1,759 million.
     In 1995,  Mobil  Chemical  sold its Plastics  Division  for $1.27  billion,
generating  a gain on sale of assets in excess of $500  million  after tax.  The
Plastics  Division  was a marketer and  manufacturer  of plastic  packaging  and
consumer  products in North America.  Total proceeds from this and other smaller
sales, including various noncore oil and gas properties,  were $2,034 million in
1995.
     Net pre-tax  gains from asset sales are  included on the line  "Income from
equity investments,  asset sales, interest and other" on the Consolidated Income
Statement (see page 31). These sales are part of Mobil's  long-term  strategy of
redirecting its investments to its core petroleum and petrochemicals businesses.

40

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

4. SUMMARY  FINANCIAL  INFORMATION OF UNCONSOLIDATED  EQUITY AFFILIATES  
Summary financial information for affiliated companies (owned 50% or less) 
accounted for on the equity  method is shown in the table below.  Mobil's  
investment in these companies  is included in  Investments  and  Long-term  
Receivables.  The equity affiliates  are  primarily  engaged in  producing,  
refining  and  marketing  in Germany,  the Middle East,  Kazakstan,  Japan and 
elsewhere in the  Asia-Pacific region,  gas marketing in the U.S. and 
petrochemical  and lube  manufacturing in the Middle East. Also included are 
interests in several pipeline ventures. 
     Undistributed  earnings  of the  equity  affiliates  included  in  Earnings
Retained in the  Business  were $544  million at December  31,  1996.  Dividends
received from these  companies  were $203 million in 1994,  $346 million in 1995
and $432 million in 1996.
     Accounts and Notes  Receivable  in the  Consolidated  Balance Sheet include
$227 million and $359 million at December  31, 1995 and 1996,  respectively,  of
amounts due from equity  affiliates.  Accounts  Payable include $531 million and
$609  million at  December  31, 1995 and 1996,  respectively,  of amounts due to
equity affiliates.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
EQUITY METHOD AFFILIATES (In millions)  1994                   1995                 1996
------------------------------------------------------------------------------------------------
                               Total  Mobil Share     Total  Mobil Share   TOTAL  MOBIL SHARE
------------------------------------------------------------------------------------------------
<S>                        <C>        <C>          <C>        <C>       <C>        <C>     
Current assets             $  8,559   $  2,639     $  8,345   $  2,678  $  9,784   $  3,237
Noncurrent assets            11,366      3,637       12,220      3,735    16,224      5,260
Current liabilities          (7,865)    (2,493)      (8,027)    (2,643)   (9,817)    (3,354)
Long-term debt               (2,271)      (822)      (2,520)      (758)   (4,455)    (1,117)
Other liabilities            (2,101)      (576)      (2,122)      (595)   (2,064)      (605)
------------------------------------------------------------------------------------------------
Net assets                 $  7,688   $  2,385     $  7,896   $  2,417  $  9,672   $  3,421
------------------------------------------------------------------------------------------------
Gross revenues             $ 27,600   $  8,696     $ 31,324   $  9,835  $ 32,296   $ 10,337
------------------------------------------------------------------------------------------------
Income before taxes          $1,175   $    349     $  1,360   $    466  $  1,307   $    429
Net income                      578        187(1)     1,088        397       969        279
------------------------------------------------------------------------------------------------
Capital expenditures       $  1,711   $    421     $  1,650   $    337  $  2,044   $    435
------------------------------------------------------------------------------------------------
<FN>
(1) Includes  $56  million  charge  related  to the LCM  change  in  accounting
    principle (see Note 5 on pages 41-42).
</FN>
</TABLE>


5. INVENTORIES
Inventories  valued  at cost  under  the LIFO  method  represented  about 60% of
Mobil's worldwide consolidated inventories, both at December 31, 1995, and 1996.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
INVENTORIES (In millions)
--------------------------------------------------------------------------------
At December 31                                           1995              1996
--------------------------------------------------------------------------------
<S>                                                    <C>               <C>   
Crude oil and petroleum products                       $2,371            $2,314
Chemical products                                         298               260
Other, mainly materials and supplies                      618               443
--------------------------------------------------------------------------------
Total                                                  $3,287            $3,017
--------------------------------------------------------------------------------
</TABLE>
   At  December  31,  1995,  the  worldwide  excess of market over book value of
inventories  valued  under the LIFO method was $1,188  million.  At December 31,
1996, the worldwide excess of market over book value of inventories valued under
the LIFO method was $1,621 million ($1,187 million--U.S.;  $214 million--Europe;
$178 million--Asia-Pacific; and $42 million--Other Areas).

                                                                              41

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

5. INVENTORIES (Concluded)
   Effective  January 1, 1994, Mobil changed the method of accounting it uses to
apply  the  lower of cost or market  (LCM)  test for its  crude oil and  product
inventories.  The LCM  test is now  measured,  and the  results  are  recognized
separately,  on a  country-by-country  basis,  and any resulting  write-downs to
market are recorded as permanent  adjustments to the last-in,  first-out  (LIFO)
cost of inventory.  Previously,  Mobil aggregated its worldwide inventories into
one  pool  for  the  determination  of the LCM  measurement.  The  $680  million
after-tax  charge to 1994 net income  represents the  cumulative  effect of this
accounting change as of January 1, 1994. The new method of applying the LCM test
to the  book  value of  inventories  is  preferable  because  Mobil's  financial
statements will better reflect local market conditions and exchange rates in the
countries in which Mobil operates.
   If Mobil had not changed its accounting  method,  it would have been required
to restore to 1994 income the $250 million after-tax LCM charge taken in 1993 as
local currency crude oil and product prices rose above year-end 1993 levels.

6. PROPERTIES, PLANTS AND EQUIPMENT
Properties,   plants  and  equipment  are  stated  at  cost,  less   accumulated
depreciation,  depletion  and  amortization  of $26,869  million at December 31,
1995, and $27,648 million at December 31, 1996.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PROPERTIES, PLANTS AND EQUIPMENT (In millions)     1995              1996
--------------------------------------------------------------------------------
At December 31                                 Net     Gross      NET     GROSS
--------------------------------------------------------------------------------
<S>                                        <C>       <C>      <C>       <C>    
Petroleum Operations
   Exploration & Producing                 $11,452   $27,612  $14,000   $30,472
   Marketing                                 4,904     7,496    5,213     8,030
   Refining                                  5,179    10,002    5,251    10,545
   Other Marketing & Refining Activities     1,244     2,843    1,003     2,583
Chemical                                     1,530     2,886    1,662     2,919
Corporate and Other                            541       880      350       578
--------------------------------------------------------------------------------
Total                                      $24,850   $51,719  $27,479   $55,127
--------------------------------------------------------------------------------
</TABLE>

   In the fourth  quarter of 1995,  Mobil  adopted FAS 121,  Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of,
resulting  in a  before-tax,  $774  million  noncash  charge  to  "Depreciation,
depletion  and  amortization"  on the  Consolidated  Statement  of Income  ($487
million  after tax).  The charge  relates to  impairment  of upstream  producing
properties, primarily in the U.S. and Canada.
   Prior to the adoption of FAS 121, the  company's  policy was to write down to
breakeven significant  properties  determined to be permanently impaired.  Under
this pre-FAS 121 policy,  significant  fields (defined as $50 million or more of
net book value) were  evaluated  separately  and written  down to  breakeven  if
expected  operating  results were not projected to recover the carrying value of
the field. Smaller properties were considered on a worldwide basis. The adoption
of FAS 121 required  that the company  change its former  policy to a policy of:
(1) assessing all producing  fields,  without  regard to the carrying value of a
field, on a field-by-field  basis;  (2) using  breakeven,  based on undiscounted
cash flows, for the recognition test; and (3) measuring impairment based on fair
values rather than undiscounted breakeven values.

42

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

7. LEASES
Mobil  leases  real  estate,  service  stations,  pipelines,  tankers  and other
equipment through noncancelable capital and operating leases.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
RENTAL EXPENSE (In millions)
--------------------------------------------------------------------------------
Year ended December 31                             1994        1995        1996
--------------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>   
Minimum rentals                                  $1,121      $1,195      $1,260
Contingent rentals                                   71          97          55
--------------------------------------------------------------------------------
Total                                             1,192       1,292       1,315
Less: sublease rental income                        172         187         188
--------------------------------------------------------------------------------
Net rental expense                               $1,020      $1,105      $1,127
--------------------------------------------------------------------------------
</TABLE>

   Contingent  lease  rentals for operating  and capital  leases are  determined
generally by volumetric  measurement  or sales revenue.  Some rental  agreements
contain  escalation  provisions that may require  higher,  future rent payments.
Mobil does not expect  that such rent  increases,  if any,  will have a material
effect on future earnings.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUTURE MINIMUM LEASE PAYMENTS UNDER NONCANCELABLE LEASES (In millions)
--------------------------------------------------------------------------------
At December 31, 1996                Operating Leases  Capital Lease Obligations
--------------------------------------------------------------------------------
<S>                                         <C>                       <C>   
1997                                        $  312                    $ 59
1998                                           259                      67
1999                                           207                      65
2000                                           162                      11
2001                                           133                      10
Later years                                  1,629                     125
--------------------------------------------------------------------------------
Future minimum lease payments               $2,702                    $337
--------------------------------------------------------------------------------
Less: executory costs                                                    1
      interest                                                          89
--------------------------------------------------------------------------------
Total capital lease obligations                                        247
Less: short-term portion of capital lease obligations                   39
--------------------------------------------------------------------------------
Long-term portion of capital lease obligations                        $208
--------------------------------------------------------------------------------
</TABLE>

   Future  minimum  lease  payments  have not been  reduced  by  future  minimum
sublease rentals of $86 million under operating leases.  Capital leases included
in Net Properties,  Plants and Equipment were $312 million at December 31, 1995,
and $243 million at December 31, 1996.

8. SHORT-TERM DEBT
At December  31,  1996,  Mobil had $645  million of unused  short-term  lines of
credit  supporting  commercial  paper  borrowing  arrangements.  A total of $369
million of these unused lines is subject to annual commitment fees.  Interest on
borrowings under these lines is based on the London Interbank  Offered Rate, the
Domestic Certificate of Deposit Rate or a specified prime rate, as selected from
time to time by Mobil.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Short-term debt (In millions)                        1995                        1996
------------------------------------------------------------------------------------------------
At December 31                           Amount   Interest Rate(1)   AMOUNT   INTEREST RATE(1)
------------------------------------------------------------------------------------------------
Notes and loans payable
<S>                                      <C>          <C>            <C>         <C>    
  Commercial paper                       $  853       6 3/8%         $1,634      5 7/8%
  Banks and Other                           766       7    %            894      6 5/8%
------------------------------------------------------------------------------------------------
Total notes and loans payable             1,619                       2,528
------------------------------------------------------------------------------------------------
Long-term debt maturing within one year     508                         897
------------------------------------------------------------------------------------------------
Total short-term debt                    $2,127                      $3,425
------------------------------------------------------------------------------------------------
<FN>
(1) Percentages shown in the table are weighted average interest rates at the end
    of the year.
</FN>
</TABLE>

                                                                              43

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

OUR DEBT-TO-CAPITALZATION RATIO
OF 29% PROVIDES FINANCIAL FLEXI-
BILITY TO INCREASE INVESTMENT 
SPENDING WHEN ECONOMIC OPPORTUN-
ITIES ARISE.

9. LONG-TERM DEBT
The table below summarizes  Mobil's  consolidated  Long-term Debt. A significant
portion of this debt is issued by subsidiaries and is guaranteed by Mobil.
   At year-end  1996,  Mobil had shelf  registrations  on file with the SEC that
would  permit  the  offer  and  sale  of  $1,815  million  of  debt  securities.
Additionally,  at December 31, 1996, the ESOP Trust had a shelf  registration on
file  with  the SEC  permitting  the  offer  and  sale of $190  million  of debt
securities,  guaranteed by Mobil.  Subsequent to year-end, the ESOP Trust issued
$35 million  principal amount of fixed rate notes with the proceeds used to fund
a portion of the  scheduled  principal  and  interest  payments on its  existing
indebtedness.  The proceeds of any additional debt securities issued by the ESOP
Trust  would  similarly  be used to refund its  existing  indebtedness.  Also at
year-end 1996, shelf  registrations  allowing the issuance of U.S. $2 billion of
Euro-Medium-Term  Notes  and  bonds  having a  principal  amount  of 30  billion
Japanese yen were in place.
   Long-term  debt that  becomes  due during  the next five years is:  1997-$897
million;  1998-$745 million; 1999-$908 million; 2000-$350 million; and 2001-$363
million.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
LONG-TERM DEBt (In millions)
--------------------------------------------------------------------------------
At December 31                                         1995           1996
--------------------------------------------------------------------------------
<S>                                                 <C>             <C>      
6 1/2% notes due 1996                               $   148         $   --   
6 1/2% notes due 1997                                   148            148   
6.025% notes due 1998                                    --            200
7 1/4% notes due 1999                                   172            162(1)
8 5/8% notes due 2006                                    --            250
7 5/8% debentures due 2033                              250            240(1)
8% debentures due 2032                                  250            250
8 1/8% Canadian dollar Eurobonds due 1998               111            111
    (swapped into 6.8% U.S. $ debt)
8 3/8% notes due 2001                                   200            200
8 5/8% debentures due 2021                              250            250
9% Canadian dollar Eurobonds due 1997                   110            110
    (swapped into 7.0% U.S. $ debt)
9% European Currency Unit Eurobonds due 1997            148            148
    (swapped into 7.0% U.S. $ debt)
9 5/8% U.K. sterling Eurobonds due 1999                 170            187
Variable rate notes due 1999 (6.8%)(2)                  107            110
Japanese yen loans due 2003-2005 (2.6%)(2)              438            388
ESOP Trust debentures/notes due 2000-2004 (8.6%)(2)     578            525
Variable rate project financing due 1998 (6.6%)(2)      157            105
Industrial revenue bonds due 1998-2030 (5.7%)(2)        390            491
Other foreign currencies due 1996-2030 (6.5%)(2)      1,087          1,090
Other due 1997-2008 (7.9%)(2)                           149            135
Capital lease obligations                               274            247
--------------------------------------------------------------------------------
Total                                                 5,137          5,347
Less: long-term debt maturing within one year           508            897
--------------------------------------------------------------------------------
Total long-term debt                                 $4,629         $4,450
--------------------------------------------------------------------------------
<FN>
(1) Net of repurchases.
(2) The  percentages  shown in  parentheses  in the table are  weighted  average
    interest rates at December 31, 1996.
</FN>
</TABLE>

44

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Mobil uses  derivative  financial  instruments  to manage risks  resulting  from
fluctuations  in  underlying   interest  rates,   foreign  exchange  rates,  and
hydrocarbon  prices.  Because Mobil  operates in the  international  oil and gas
markets and has  significant  financing  requirements,  it has exposure to these
risks,  which  can  affect  the cost of  operating,  investing,  and  financing.
Derivative   instruments   creating  essentially  equal  and  offsetting  market
exposures  are  used  to help  manage  these  risks.  The  derivative  financial
instruments  held by  Mobil  are not  leveraged  and are  principally  held  for
purposes other than trading.
   In addition to creating  market risks that offset the risks  associated  with
the underlying  business  exposures,  derivative  instruments  also give rise to
credit risk due to possible nonperformance by counter-parties.  However, through
its ongoing  control  procedures,  Mobil  monitors the  creditworthiness  of its
counter-parties  and  its  existing  exposures  to  them  under  the  derivative
instruments. The overall exposure to credit risk is considered to be minimal.
   Debt-related  Derivative Instruments - Mobil has entered into interest rate
swaps,  cross  currency  interest  rate swaps,  futures,  and  forward  exchange
contracts.  These financial instruments have the effect of changing the interest
rate and currency of the original  borrowings  with the  objective of minimizing
Mobil's borrowing costs. The maturities of most of these instruments are closely
matched to the maturities of the underlying debt. The notional principal amounts
of these  derivative  instruments  were  $5,797  million  and $4,053  million at
December  31,  1995 and  1996,  respectively.  These  activities  resulted  in a
substantial  portion of the fixed interest rate debt being swapped into floating
interest rate debt as of December 31, 1995 and 1996.
   Interest  differentials  paid or received under interest rate swaps and cross
currency  interest rate swaps are  recognized  over the life of the contracts as
adjustments to the effective yields of the underlying debt.  Futures and foreign
exchange  contracts are valued at current  rates.  Gains and losses on contracts
related to debt principal and current interest are recorded in income. Gains and
losses  related to future period  interest are deferred and recognized in income
in the period to which they relate.
   The fair value of Mobil's debt portfolio was $6,646 million  ($6,746  million
debt less $100 million derivatives) and $7,825 million ($7,784 million debt plus
$41 million derivatives) at December 31, 1995 and 1996, respectively. These fair
values were greater than the carrying  value by $139 million and $106 million at
December  31,  1995  and  1996,  respectively.  This  change  was due to a small
increase in long-term interest rates in 1996.
   Nondebt-related  Instruments  - Mobil has  entered  into  forward  exchange
contracts and currency  options to hedge U.S.  dollar  payables for purchases of
crude oil and petroleum  products,  firm commitments for capital  projects,  the
cash return from net investments in foreign affiliates to be remitted within the
coming year, and local currency  taxes.  Changes in the value of these financial
instruments  offset the foreign  exchange  gains and losses of the  transactions
they are hedging. The notional principal amounts of the nondebt-related currency
instruments  were $8,969  million and $10,075  million at December  31, 1995 and
1996,  respectively,  and substantially all of them have maturities of less than
one year.  The fair value of  nondebt-related  financial  instruments  generally
approximates carrying value.
   Mobil has also entered into commodity derivative  financial  instruments that
can  only be  settled  in cash.  The  notional  amounts  outstanding  for  these
contracts  were $1,653 million and $1,404 million at December 31, 1995 and 1996,
respectively. Fair value approximates carrying value.
   Risk Based Measurements - In its risk management activities, Mobil measures
its value at risk  using  simulation  techniques  that  project  probability  of
expected  changes in values from market  movements on financial  exposures  that
vary from management's  defined benchmarks.  These benchmarks are standards that
have been  established  by  management  and  represent  the risk  profile of the
environment  in which Mobil  operates  and the assets  that are being  financed.
Value at risk is defined as the  maximum  potential  gain or loss from a one-day
market  movement in interest  and  currency  rates that would cover 99.7% of all
such movements  measured against the benchmarks.  At December 31, 1995 and 1996,
the value at risk in Mobil's debt and currency  portfolio,  as measured  against
these defined benchmarks, was $5 million.

                                                                              45

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

11. TAXES

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
TOTAL TAXES (In millions)                    1994                          1995                          1996
--------------------------------------------------------------------------------------------------------------------------
Year ended December 31              U.S.   Foreign     Total      U.S.   Foreign     Total      U.S.   FOREIGN     TOTAL
--------------------------------------------------------------------------------------------------------------------------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>    
Excise and state gasoline        $ 3,669   $ 4,093   $ 7,762   $ 3,972   $ 4,674   $ 8,646   $ 4,207   $ 5,029   $ 9,236
Import duties                         --     9,067     9,067        --     9,657     9,657        --     9,130     9,130
Property, production, payroll
  and other                          442       241       683       427       289       716       385       272       657
--------------------------------------------------------------------------------------------------------------------------
Total other than income taxes      4,111    13,401    17,512     4,399    14,620    19,019     4,592    14,431    19,023
--------------------------------------------------------------------------------------------------------------------------
Income taxes(1)
  U.S. state and local                63        --        63       113        --       113        63        --        63
  U.S. federal and foreign
    -current                         125     1,941     2,066       336     1,799     2,135       217     2,421     2,638
    -deferred                       (184)      (26)     (210)     (140)      (93)     (233)      163       283       446
--------------------------------------------------------------------------------------------------------------------------
Total income taxes                     4     1,915     1,919       309     1,706     2,015       443     2,704     3,147
--------------------------------------------------------------------------------------------------------------------------
Total taxes                      $ 4,115   $15,316   $19,431   $ 4,708   $16,326   $21,034   $ 5,035   $17,135   $22,170
--------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes tax benefits of $358 million  related to the  cumulative  effect of
    change in accounting principle in 1994.
</FN>
</TABLE>

Income from U.S. operations before income taxes was $481 million in 1994, $1,261
million  in 1995 and $1,939  million in 1996.  Income  from  foreign  operations
before income taxes for the same three years was $3,697 million,  $3,594 million
and $4,816  million,  respectively.  The loss from  Corporate  and Other and Net
Financing Expense before income taxes for the same three years was $500 million,
$464 million and $644 million, respectively.
   Deferred income taxes are provided for the temporary  differences between the
financial statement and tax bases of Mobil's assets and liabilities,  and relate
primarily  to  depreciation,  intangible  drilling  costs,  and  provisions  for
restoration,  removal and environmental costs, and employee benefits. Mobil does
not provide  deferred taxes for amounts that could result from the remittance of
undistributed  earnings  of foreign  affiliates  since it is  generally  Mobil's
intention to continue reinvesting these earnings indefinitely.  Mobil's share of
the  undistributed  earnings  of  consolidated  subsidiaries  and equity  method
affiliates,  which could be subject to additional income taxes if remitted,  was
approximately  $3.0 billion at December 31, 1996. If such  dividends  were to be
remitted,  foreign  tax credits  available  under  present law would  reduce the
amount of U.S. taxes payable.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
DEFERRED TAXES (In millions)
--------------------------------------------------------------------------------
At December 31                                    1995              1996
--------------------------------------------------------------------------------
<S>                                             <C>               <C>   
Deferred tax liabilities
  Depreciation and amortization                 $3,898            $4,034
  Other                                            582(1)          1,287
--------------------------------------------------------------------------------
Total deferred tax liabilities                   4,480             5,321
--------------------------------------------------------------------------------
Deferred tax assets
  Book reserves                                  1,485             1,442
  Tax credits available for carry-forward 
    (primarily without expiration)                 839               827
--------------------------------------------------------------------------------
Total deferred tax assets                        2,324             2,269
--------------------------------------------------------------------------------
Valuation allowance                               (368)(1)          (418)
--------------------------------------------------------------------------------
Net deferred tax liabilities                    $2,524            $3,470
--------------------------------------------------------------------------------
<FN>
(1) Prior year data reclassified to conform with current year presentation.
</FN>
</TABLE>

46

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

11. TAXES (concluded)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
RECONCILIATION OF U.S. STATUTORY
  RATE TO ACTUAL TAX RATE (In millions)   1994          1995           1996
--------------------------------------------------------------------------------
Year ended December 31               Amount     %  Amount      %  Amount      %
--------------------------------------------------------------------------------
<S>                                 <C>     <C>    <C>     <C>    <C>     <C>  
Income before taxes and change in
  accounting principle              $3,678  100.0  $4,391  100.0  $6,111  100.0
--------------------------------------------------------------------------------
Theoretical tax at U.S. rate         1,287   35.0   1,537   35.0   2,139   35.0
Foreign taxes in excess of
  U.S. statutory rate                  661   18.0     611   13.9   1,108   18.1
Other items, net                       (29)  (0.8)   (133)  (3.0)   (100)  (1.6)
--------------------------------------------------------------------------------
Total income taxes                  $1,919   52.2  $2,015   45.9  $3,147   51.5
--------------------------------------------------------------------------------
</TABLE>

12. RESTORATION, REMOVAL AND ENVIRONMENTAL LIABILITIES
Exploration  and  producing  properties  must  generally  be  restored  to their
original  condition when the oil or gas reserves are depleted and/or  operations
cease.   At  December  31,  1995  and  1996,  $835  million  and  $864  million,
respectively, had been accrued for restoration and removal costs, mainly related
to offshore producing facilities.
   Mobil accrues for its best estimate of the future costs associated with known
environmental  remediation  requirements  at  its  service  stations,  marketing
terminals,  refineries and plants,  and at certain  Superfund sites. At December
31, 1995 and 1996, the accumulated  reserve for environmental  remediation costs
was $519 million and $460 million,  respectively. Of these amounts, $100 million
and $84 million were included in current accrued liabilities in the Consolidated
Balance Sheet.  Amounts  accrued with respect to Superfund waste disposal sites,
which are not material,  are based on the company's best estimate of its portion
of the costs of remediating such sites.

13. FOREIGN CURRENCY
Foreign  exchange  transaction  gains of $70 million in 1994, $8 million in 1995
and losses of $17 million in 1996 were included in income. These include amounts
applicable to companies accounted for on the equity method.
         The effect of foreign  currency  translation  on Mobil's  balance sheet
accounts is shown below.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Cumulative foreign exchange translation adjustment (In millions)
--------------------------------------------------------------------------------
At December 31                                        1994      1995      1996
--------------------------------------------------------------------------------
<S>                                                  <C>       <C>      <C>    
Properties, plants and equipment, net                $(273)    $(124)   $  (27)
Deferred income taxes                                 (199)     (252)     (256)
Working capital, debt and other items, net             349       349       210
--------------------------------------------------------------------------------
Total                                                $(123)    $ (27)   $  (73)
--------------------------------------------------------------------------------
</TABLE>

14. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Mobil  Oil's  Employees  Savings  Plan  includes  an  ESOP  covering  most  U.S.
employees. In 1989 the ESOP Trust, supported by Mobil guarantees,  borrowed $800
million. The ESOP Trust used the proceeds of the loan to purchase 102,894 shares
of Series B ESOP  Convertible  Preferred Stock from Mobil.  Each preferred share
has a  liquidation  value of $7,775,  is  convertible  into 100 shares of common
stock  and is  entitled  to 100  votes.  Dividends  on the  preferred  stock are
cumulative and payable at an annual rate of $600 per share.  The ESOP Trust uses
the  preferred  dividends  not  allocated  to employees  to make  principal  and
interest payments on the notes. As debt service exceeds the dividends,  Mobil is
required  to fund the  excess.  In 1994,  1995 and  1996,  this  excess  was $29
million, $50 million and $47 million, respectively.
   The  guaranteed  ESOP  borrowing  is  included  in Mobil's  debt.  The future
compensation  to be earned by employees is classified in  Shareholders'  Equity.
These  amounts are reduced and expense is  recognized  as the debt is repaid and
shares are earned by  employees.  In 1994,  1995 and 1996,  total ESOP-  related
expenses were $32 million, $54 million and $49 million, respectively.
   Interest  incurred on ESOP debt in 1994,  1995 and 1996 was $58 million,  $54
million and $48 million, respectively.

47

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

15. EMPLOYEE BENEFITS
Employee  benefits  that  Mobil  provides  in  the  U.S.  are  contributory  and
noncontributory  medical and dental plans,  pension plans, group life insurance,
savings plans, an employee stock ownership plan,  disability  plans for sickness
and accidents,  and termination  plans.  Mobil's  international  affiliates also
provide  various  pension  and  other  employee   benefit  plans.   Mobil  makes
contributions to funded plans and provides book reserves for unfunded plans.
   Mobil also provides  certain  postretirement  health care and life  insurance
benefits for most U.S.  retirees,  if they are working for the company when they
become eligible for retirement. Premium costs are shared on a plan-by-plan basis
between  Mobil and the  participants.  Postretirement  health care  benefits are
provided  both before and after  eligibility  for Medicare.  The life  insurance
plans  provide for a single lump sum payment to a  designated  beneficiary.  The
amount of the lump sum payment  varies  depending on  employment  date,  age and
years since  retirement.  There is no material  obligation  for Mobil to provide
postretirement  benefits  for  international  retirees  because they are covered
primarily by local government programs.
   The charge to Mobil's  income for U.S.  postretirement  health  care and life
insurance  plans was $67 million in 1994, $60 million in 1995 and $64 million in
1996.
   The components of Mobil's net postretirement benefit expense for U.S. plans
and the status of Mobil's  U.S.  postretirement  benefit  plans and the  amounts
recognized in the Consolidated Balance Sheet are detailed below:
  
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Postretirement benefit expense, excluding pensions (In millions)    Health Care      Life Insurance
-------------------------------------------------------------------------------------------------------
Year ended December 31                                          1994  1995  1996  1994   1995   1996
-------------------------------------------------------------------------------------------------------
<S>                                                             <C>   <C>   <C>   <C>    <C>    <C> 
Benefits earned by employees during the year                    $ 11  $  8  $ 10  $  2   $  1   $  2
Interest cost on accumulated postretirement benefit obligations   29    28    27    27     28     26
Actual (earnings) on assets                                       --    --    --    (1)    --     --
Amortization of unrecognized amounts                              (1)   (5)   (1)   --     --     --
-------------------------------------------------------------------------------------------------------
Net postretirement benefit expense                              $ 39  $ 31  $ 36  $ 28   $ 29   $ 28
-------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
STATUS OF POSTRETIREMENT BENEFIT PLANS (In millions)                Health Care      Life Insurance
-------------------------------------------------------------------------------------------------------
At December 31                                                        1995  1996         1995   1996
-------------------------------------------------------------------------------------------------------
<S>                                                                   <C>   <C>          <C>    <C> 
ACTUARIAL PRESENT VALUE OF ACCUMULATED
 POSTRETIREMENT BENEFIT OBLIGATIONS
  Retirees                                                            $242  $315         $312   $302
  Other fully eligible plan participants                                52    37           53     34
  Other active plan participants                                       113    96           24     18
-------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligations                        $407  $448         $389   $354
-------------------------------------------------------------------------------------------------------
BOOK RESERVES                                                         $443  $457         $353   $359
-------------------------------------------------------------------------------------------------------
BOOK RESERVES GREATER (LESS) THAN
 ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATIONS                       $ 36  $  9         $(36)  $  5
-------------------------------------------------------------------------------------------------------
Consisting of:
  Unrecognized prior service costs                                    $ 11  $ 10         $ --   $ --
  Unrecognized net gain (loss)                                          25    (1)         (36)     5
-------------------------------------------------------------------------------------------------------
<FN>
  At  December  31,  1996,  the health  care cost trend  used to  calculate  the
accumulated  postretirement  benefit obligations is 9.1% for 1997 and is assumed
to decrease  gradually  over 8 years to 5.5%.  At December 31, 1995,  the health
care cost trend rate was  assumed to be 9.7% for 1996,  declining  gradually  to
5.5% after 9 years. A 1% increase in the assumed health care cost trend rate for
each year would  increase the 1996 net  postretirement  benefit  expense and the
accumulated  postretirement  benefit  obligation  as of December  31,  1996,  by
approximately $5 million and $46 million, respectively.
  The discount rate used in determining the  postretirement  benefit  obligation
was 7.25% in 1996 and 7.0% in 1995.
</FN>
</TABLE>

48

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

                                             PENSION PLAN ASSETS AND 
                                             BOOK RESERVES EXCEEDED 
                                             ACCUMULATED BENEFIT OBLIGATIONS
                                             BY $1,111 MILLION AT THE END OF 
                                             1996.

15. EMPLOYEE BENEFITS (concluded)
   The   majority   of   full-time   U.S.   employees   are  covered  by  funded
noncontributory  pension  plans.  These plans are  primarily  final  average pay
plans.  Mobil's  funding for these plans is based on the  projected  unit credit
actuarial cost method.
   Mobil's  international  employees  are covered by pension and similar  plans.
Coverage and benefits vary from country to country.  Mobil's funding policy also
varies, in line with local commercial, actuarial and taxation practices.
   The worldwide  charge to Mobil's income for pension plans was $214 million in
1994, $192 million in 1995 and $208 million in 1996.
   The  components  of net pension  expense for Mobil's  plans and the status of
Mobil's  pension plans and the amounts  recognized in the  Consolidated  Balance
Sheet are detailed below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
PENSION EXPENSE (In millions)                                   U.S. Plans             International Plans
---------------------------------------------------------------------------------------------------------------
Year ended December 31                                    1994     1995     1996     1994     1995     1996
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>      <C>      <C>      <C>      <C>      <C>  
Benefits earned by employees during the year             $ 107    $  76    $  92    $  91    $  85    $  84
Interest cost on projected benefit obligations             194      190      185      117      125      128
Actual (earnings) loss on assets                            (4)    (638)    (334)      30     (143)    (101)
Deferral of actual earnings on assets
   greater (less) than expected returns                   (224)     418       94     (103)      68       24
Amortization of unrecognized amounts                       (12)     (10)     (16)      18       21       52
---------------------------------------------------------------------------------------------------------------
Net pension expense                                      $  61    $  36    $  21    $ 153    $ 156    $ 187
---------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
STATUS OF PENSION PLANS (In millions)                             U.S. Plans              International Plans
---------------------------------------------------------------------------------------------------------------
At December 31                                                  1995        1996              1995     1996
---------------------------------------------------------------------------------------------------------------
<S>                                                               <C>     <C>                <C>      <C>   
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
  Vested                                                          $2,169  $2,026             $1,602   $1,679
  Non-vested                                                         173     146                126      129
---------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations                                    2,342   2,172              1,728    1,808
Additional amounts related to projected pay increases                498     398                418      438
---------------------------------------------------------------------------------------------------------------
Projected benefit obligations                                     $2,840  $2,570             $2,146   $2,246
---------------------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES
  Plan assets at fair value, primarily in equity
    and fixed income securities                                   $2,919  $2,750             $1,044   $1,145
  Book reserves                                                      132     136              1,043    1,060
---------------------------------------------------------------------------------------------------------------
Total assets and book reserves                                    $3,051  $2,886             $2,087   $2,205
---------------------------------------------------------------------------------------------------------------
ASSETS AND BOOK RESERVES GREATER (LESS)
  THAN PROJECTED BENEFIT OBLIGATIONS                              $  211  $  316             $  (59)  $  (41)
---------------------------------------------------------------------------------------------------------------
Consisting of:
  Unrecognized net asset (liability) at date of
    initial application of FAS 87                                 $  181  $  150             $  (52)  $  (26)
  Unrecognized prior service cost                                   (164)   (178)               (66)     (27)
  Unrecognized net gain (loss)                                        57     192               (169)    (213)
  Minimum liability and pre-funded expenses                          137     152                228      225
---------------------------------------------------------------------------------------------------------------
Assets and book reserves greater (less) than
  projected benefit obligations                                   $  211  $  316             $  (59)  $  (41)
---------------------------------------------------------------------------------------------------------------
WEIGHTED  AVERAGE RATES USED IN DETERMINING  
  THE ACTUARIAL  PRESENT VALUE OF THE
  PROJECTED BENEFIT OBLIGATIONS (percent)
  Discount rate                                                     7.00    7.25                7.3      6.9
  Rate of increase in future compensation levels                    4.00    4.00                5.3      5.3
EXPECTED LONG-TERM RATE OF RETURN ON PLAN ASSETS
  USED IN DETERMINING CURRENT YEAR EXPENSE (percent)                9.00    9.00                8.7      8.4
---------------------------------------------------------------------------------------------------------------
Memo: assets and book reserves greater than
  accumulated benefit obligations                                 $  709  $  714             $  359   $  397
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              49
<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

16. STOCK-BASED COMPENSATION PLANS
Under the 1995 Mobil Incentive  Compensation and Stock Ownership Plan (the Plan)
approved by  shareholders,  options may be granted to key  employees to purchase
annually a maximum of 0.9% of the total common shares  outstanding at the end of
the year preceding each year of its five-year life (less the number of shares of
restricted  stock granted and the number of equivalent  share units  allotted as
long-term  incentive awards under the Plan),  cumulative from the effective date
of the Plan. No additional  options may be granted  under earlier  plans.  Stock
options have a maximum term of 10 years,  are granted at 100% of the fair market
value of Mobil  common  stock at the time of the award,  and may be exercised to
purchase  stock after vesting  requirements  have been met.  Stock  appreciation
rights (SARs),  where applicable,  permit the holder to receive stock, cash or a
combination  thereof  equal to the amount by which the fair market  value at the
time of relinquishment of the option exceeds the option price.
   Based on the  December  31, 1996,  number of shares  outstanding,  there were
5,614,174  shares or share units  available  for option  grants and other awards
referred to above in 1997.  Based on the  December  31,  1995,  number of shares
outstanding,  there were  4,341,973  shares or share units  available for option
grants and other awards referred to above in 1996.
   There  were  129,270  and  370,635  shares  under  option in the 1981 plan at
January 1, 1995 and 1994, respectively, of which 127,720 and 237,665 shares were
exercised during 1995 and 1994,  respectively,  and 3,700 shares expired or were
cancelled in 1994,  and the remaining  shares  expired or were  canceled  during
1995.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
STOCK OPTION TRANSACTIONS                                1986 Plan            1991 Plan                  1995 Plan
--------------------------------------------------------------------------------------------------------------------------
                                                     Shares Weighted       Shares    Weighted         Shares   Weighted
                                                             Average                  Average                   Average
                                                              Price                    Price                      Price
--------------------------------------------------------------------------------------------------------------------------
January 1, 1994-shares under option               5,298,517   $52.37    6,006,817     $ 62.88
--------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>       <C>           <C>          <C>          <C>  
Changes during 1994
  Options granted                                                       2,143,100       80.69
  Options granted                                                       1,121,000       86.06
  Options expired or canceled                                             (27,818)      74.34
  Options exercised                                (553,849)   47.04     (309,696)      62.81
  SARs exercised                                   (267,702)   55.05      (73,047)      61.44
--------------------------------------------------------------------------------------------------------------------------
December 31, 1994-shares under option             4,476,966   $52.88    8,860,356     $ 70.10
--------------------------------------------------------------------------------------------------------------------------
Changes during 1995
  Options granted                                                                                  2,677,350    $ 87.31
  Options granted                                                                                      7,000     100.63
  Options expired or canceled                                             (26,231)      85.68        (12,900      87.31
  Options exercised                              (1,000,891)   49.03     (534,270)      65.26         (1,220)     87.31
  SARs exercised                                   (121,749)   56.95     (109,444)      62.87
--------------------------------------------------------------------------------------------------------------------------
December 31, 1995-shares under option             3,354,326   $53.87    8,190,411     $ 70.46      2,670,230    $ 87.35
--------------------------------------------------------------------------------------------------------------------------
Changes during 1996
  Options granted                                                                                  2,217,850     115.00
  Options granted                                                                                     20,000     115.06
  Options expired or canceled                          (500)   28.78      (22,350)      86.06        (51,750)    103.58
  Options exercised                                (896,502)   49.35     (715,739)      68.19        (58,910)     87.31
  SARs exercised                                    (41,444)   62.63      (28,446)      62.05
--------------------------------------------------------------------------------------------------------------------------
December 31, 1996-shares under option             2,415,880   $55.41    7,423,876     $ 70.67      4,797,420    $100.07
  Weighted average contractual life (years)            2.54                  6.00                       8.46
  Range of exercise price                      $44.19-64.25          $61.44-86.06              $87.31-115.06
--------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1994          4,476,966   $52.88    5,125,425     $ 63.22
--------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1995          3,354,326   $53.87    6,517,350     $ 66.96        184,280    $ 87.31
--------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31, 1996          2,415,880   $55.41    6,442,376     $ 68.32        609,770    $ 88.74
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

The effect of stock options on the company's  consolidated  financial statements
is not significant.

50

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

17. CAPITAL STOCK
At December 31, 1996, 600,000,000 shares of $2.00 par value preferred stock
were authorized, and 445,357,805 shares were issued, including 51,743,350 shares
held in the treasury.
     At December 31, 1996,  30,000,000 shares of $1.00 par value preferred stock
were  authorized,  of which  6,000,000  shares of Series A Junior  Participating
Preferred Stock were authorized for issuance upon exercise of certain  preferred
stock purchase  rights (no shares issued or  outstanding)  and 102,894 shares of
Series B ESOP  Convertible  Preferred  Stock were  authorized  for issuance.  At
December 31, 1995 and 1996,  respectively,  92,864 and 88,168 shares of Series B
ESOP Convertible  Preferred Stock were outstanding.  During 1995 and 1996, 2,914
and 4,696 of such shares, respectively, were redeemed.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
CHANGES IN SHARES OF COMMON STOCK OUTSTANDING
----------------------------------------------------------------------------------------------------
Year ended December 31                                         1994           1995           1996
----------------------------------------------------------------------------------------------------
<S>                                                     <C>            <C>            <C>        
Common shares outstanding- beginning of year            398,167,941    395,987,017    394,559,881
Purchase of common stock for treasury                    (3,198,000)    (2,996,350)    (2,397,700)
Exercise of stock options and stock appreciation rights   1,014,245      1,554,945      1,599,816
Incentive compensation awards and restricted stock            2,831         14,269         32,458
----------------------------------------------------------------------------------------------------
Common shares outstanding- end of year                  395,987,017    394,559,881    393,794,455
----------------------------------------------------------------------------------------------------
</TABLE>

   Subsequent  to year  end,  Mobil's  Board of  Directors  voted  to split  the
company's  outstanding  common stock, two shares for one. This action is subject
to Mobil stockholders approving an increase in the authorized common stock, from
600,000,000  shares  of $2.00  par  value to  1,200,000,000  shares of $1.00 par
value, at the company's annual meeting scheduled for May 8, 1997. In addition, a
special distribution of Series B ESOP Convertible  Preferred Stock would be made
that would double the number of shares of that stock  outstanding  and halve the
liquidation value per share to $3,887.50.
   The accompanying  consolidated financial statements have not been adjusted to
reflect the effects of the proposed stock splits.

18. COMMITMENTS AND CONTINGENT LIABILITIES
Substantial  commitments  are made in the  normal  course  of  business  for the
purchase  of  crude  oil  and  petroleum   products,   and  the  acquisition  or
construction  of properties,  plants and equipment  (including  tankers for time
charter to Mobil).
   Mobil has guaranteed  $125 million of the  obligations  of others,  excluding
$276 million of certain cross-guarantees, primarily foreign customs duties, made
with other responsible  companies in the ordinary course of business.  Mobil has
also  indirectly  guaranteed  repayment  of  approximately  $500 million of debt
issued by  companies  in which  Mobil  has an  interest  in the  event  projects
financed with that debt are not completed as specified in the project completion
guarantee agreements.  In addition, Mobil has guaranteed specified revenues from
crude oil,  product and carbon dioxide  shipments under agreements with pipeline
companies in which it holds stock  interests.  If these  companies are unable to
meet certain obligations,  Mobil may be required to advance funds against future
transportation charges. No material loss is anticipated under these guarantees.
   Mobil and its  subsidiaries  are  engaged in various  litigations  and have a
number of unresolved  claims pending.  The amounts claimed are substantial,  and
the  ultimate  liability  in respect of such  litigations  and claims  cannot be
determined  at this time.  Mobil has  provided in its  accounts  for these items
based  on  management's  best  judgment.  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.

                                                                              51

<PAGE>

REPORTS

REPORT OF MANAGEMENT
The management of Mobil  Corporation  has the  responsibility  for preparing the
accompanying  financial statements and for their integrity and objectivity.  The
statements,  which include amounts that are based, in part, on management's best
estimates and judgments,  were prepared in conformity  with  generally  accepted
accounting principles.
   Mobil  maintains a system of internal  accounting  controls  and a program of
internal  auditing that we believe  provide us with  reasonable  assurance  that
Mobil's  assets  are  protected  and that  published  financial  statements  are
reliable and free of material misstatement.
   The Audit  Committee of the Board of Directors,  composed solely of directors
who are not  officers or  employees,  meets  regularly  with  Mobil's  financial
management and counsel,  with Mobil's General Auditor,  and with the independent
auditors.  These meetings include discussion of internal accounting controls and
the quality of financial  reporting.  The  independent  auditors and the General
Auditor have free and  independent  access to the Audit Committee to discuss the
results of their  audits or any other  matters  relating  to  Mobil's  financial
affairs.
   The accompanying consolidated financial statements have been audited by Ernst
& Young  LLP,  independent  auditors,  whose  appointment  was  approved  by the
shareholders. Ernst & Young's audit report follows.



/S/LUCIO A. NOTO                              /S/THOMAS C. DELOACH, JR.
   Lucio A. Noto                                 Thomas C. DeLoach, Jr.
   Chairman and Chief Executive Officer          Senior Vice President and
                                                 Chief Financial Officer


REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
MOBIL CORPORATION
We  have  audited  the  accompanying   consolidated   balance  sheets  of  Mobil
Corporation  as of  December  31, 1995 and 1996,  and the  related  consolidated
statements of income,  changes in shareholders'  equity, and cash flows for each
of the three years in the period ended December 31, 1996, appearing on pages 31,
33, and 35 through 51. These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.
   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
   In our opinion, the financial statements referred to above present fairly, in
all material respects,  the consolidated financial position of Mobil Corporation
at December 31, 1995 and 1996,  and the  consolidated  results of its operations
and its cash flows for each of the three years in the period ended  December 31,
1996, in conformity with generally accepted accounting principles.
   As  discussed  in  Note  6  to  the  financial  statements,  in  1995,  Mobil
Corporation  changed its method of accounting  for the  impairment of long-lived
assets. As discussed in Note 5 to the financial statements, in 1994, the Company
changed  the  method of  accounting  it uses to value its crude oil and  product
inventories at the lower of cost or market.



/S/ERNST & YOUNG LLP
   Fairfax, Virginia
   February 28, 1997

52

<PAGE>

                           SUPPLEMENTARY INFORMATION

OIL AND GAS PRODUCING ACTIVITIES (unaudited)
THE ACCOMPANYING  TABLES SET FORTH  INFORMATION  CONCERNING  MOBIL'S OIL AND GAS
PRODUCING ACTIVITIES AT DECEMBER 31, 1994, 1995 AND 1996, AND FOR THE YEARS THEN
ENDED, AS REQUIRED BY FINANCIAL  ACCOUNTING STANDARD (FAS) 69, DISCLOSURES ABOUT
OIL AND GAS PRODUCING ACTIVITIES.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE 1: ESTIMATED QUANTITIES OF NET PROVED OIL AND NATURAL GAS LIQUIDS RESERVES (Millions of barrels)
------------------------------------------------------------------------------------------------------------------------------------
                                   United States         Europe         Asia-Pacific        Other Areas               Total
                                 -----------------  ----------------  ----------------   ------------------     ------------------
Year ended December 31           1994   1995  1996  1994  1995  1996  1994  1995  1996   1994   1995   1996     1994   1995   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>    <C>     <C>   <C>   <C>   <C>   <C>   <C>   <C>  <C>    <C>    <C>      <C>    <C>    <C>  
Net proved reserves of fully 
consolidated companies:
  Beginning of year             1,116  1,052   986   357   401   373   204   175   103  1,132  1,291  1,426    2,809  2,919  2,888
  Revisions                        (3)    (9)   (8)    5   (13)    7     6   (37)    5     62    105     69       70     46     73
  Improved recovery                49     32    40   101    20     9    --    --    --    130     21     49      280     73     98
  Purchases                         2     11     4    --    24    --     2    --    54      5      2     10        9     37     68
  Sales                            (9)    (6)  (36)   --    --    (6)   --    --    --     (2)    (4)   (31)     (11)   (10)   (73)
  Extensions, discoveries
    and other additions             7      9    12     1     5    40    --    --    --     49     89    113       57    103    165
  Production                     (110)  (103)  (96)  (63)  (64)  (57)  (37)  (35)  (39)   (85)   (78)   (98)    (295)  (280)  (290)
------------------------------------------------------------------------------------------------------------------------------------
  End of year                   1,052    986   902   401   373   366   175   103    123 1,291  1,426  1,538    2,919  2,888  2,929
------------------------------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
  Beginning of year                --     --    --     2     2     2     8     7     --   524    516    529      534    525    531
  Revisions                        --     --    --    --    --    --    --     1     --    --     (4)     9       --     (3)     9
  Purchases                        --     --    --    --    --    --    --    --     --    --     --    336(2)    --     --    336
  Sales                            --     --    --    --    --    --    --    (7)    --    --     --    --        --     (7)    --
  Extensions, discoveries
    and other additions            --     --    --    --    --    --    --    --     --     8     32    --         8     32     --
  Production                       --     --    --    --    --    --    (1)   (1)    --   (16)   (15)  (23)      (17)   (16)   (23)
------------------------------------------------------------------------------------------------------------------------------------
  End of year                      --     --    --     2     2     2     7    --     --   516    529   851       525    531     853
------------------------------------------------------------------------------------------------------------------------------------
Total net proved reserves       1,052    986   902   403   375   368   182   103    123 1,807  1,955 2,389     3,444  3,419   3,782
------------------------------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
   Beginning of year              871    826   816   196   215   184   196   165     93   790    809   910     2,053  2,015   2,003
   End of year                    826    816   759   215   184   204   165    93     91   809    910   967     2,015  2,003   2,021
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents  Mobil's share of net proved reserves of investees  accounted for
    on the equity method. 
(2) Acquisition of a 25% interest in a joint venture that owns the Tengiz field
    in the Republic of Kazakstan.
</FN>
</TABLE>


Mobil's  estimated net proved  reserves and changes  thereto for the years 1994,
1995 and 1996 are  presented  in Tables 1 and 2. The  estimates  represent  only
those  volumes  considered  to be  proved  reserves  and  include  fields  where
additional investment may be required to recover these reserves.
   Definitions  used in  developing  these data are in  accordance  with the SEC
guidelines,  which  state:  "Proved  oil and  gas  reserves  are  the  estimated
quantities of crude oil,  natural gas and natural gas liquids  which  geological
and engineering data demonstrate with reasonable  certainty to be recoverable in
future  years  from known  reservoirs  under  existing  economic  and  operating
conditions,  i.e., prices and costs as of the date the estimate is made." Proved
developed  reserves are recoverable from existing wells with existing  equipment
and operating  methods.  These reserve  estimates are subject to revisions  over
time as more  information  becomes  available.  In the past, some revisions have
been  significant.  The  company's  net proved  reserves  exclude  royalties and
interests  owned by others,  and  natural  gas liquids  volumes  received  under
natural gas processing contracts.

                                                                              53

<PAGE>

                           SUPPLEMENTARY INFORMATION

<TABLE>
<CAPTION>
OIL AND GAS PRODUCING ACTIVITIES (unaudited) (continued)
------------------------------------------------------------------------------------------------------------------------------------
TABLE 2: ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES (Billions of cubic feet)
------------------------------------------------------------------------------------------------------------------------------------
                                   United States         Europe         Asia-Pacific        Other Areas               Total
                                 -----------------  ----------------  ----------------   ------------------     ------------------

Year ended December 31           1994   1995  1996  1994  1995  1996  1994  1995  1996   1994   1995   1996     1994   1995   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>    <C>     <C>   <C>   <C>   <C>   <C>   <C>   <C>  <C>    <C>    <C>      <C>    <C>    <C>  
Net proved reserves of fully 
consolidated companies:
  Beginning of year             5,372  5,055  5,061 4,021 4,251 4,188 6,058  5,607  4,896  1,508  1,744  1,784 16,959 16,657 15,929
  Revisions                       164    317    (43)  234   110   (15)   51   (198)  (338)     9     50    (42)   458    279   (438)
  Improved recovery                30     51     20    --    18    10    --     --     --      5     61     19     35    130     49
  Purchases                         8     42      6    20    15    --    34     --     92     32      1    368     94     58    466
  Sales                           (64)   (52)  (173)   --   (42)   --    --     --     --    (51)   (19)  (182)  (115)  (113)  (355)
  Extensions, discoveries
    and other additions           117    173     16   322   237   452    71     54     --    410    105    190    920    569    658
  Production                     (572)  (525)  (488) (346) (401  (434) (607)  (567)  (579)  (169)  (158)  (163)(1,694)(1,651)(1,664)
------------------------------------------------------------------------------------------------------------------------------------
  End of year                   5,055  5,061  4,399 4,251 4,188 4,201 5,607  4,896  4,071  1,744  1,784  1,974 16,657 15,929 14,645
------------------------------------------------------------------------------------------------------------------------------------
Net proved reserves of
equity companies:(1)
  Beginning of year                --     --     --    33    33    34    97     94     --    594    891  2,005    724  1,018  2,039
  Revisions                        --     --     --     2     4     3     4     --     --     --     --    (36)     6      4    (33)
  Purchases                        --     --     --    --    --    --    --     --     --     --     --    467(2)  --     --    467
  Sales                            --     --     --    --    --    --    --    (88)    --     --     --     --     --    (88)    --
  Extensions, discoveries
    and other additions            --     --     --     2     2    2     --     --     --    297  1,114     --    299  1,116      2
  Production                       --     --     --    (4)   (5)  (5)    (7)    (6)    --     --     --    (10)   (11)   (11)   (15)
------------------------------------------------------------------------------------------------------------------------------------
  End of year                      --     --     --    33    34   34     94     --     --    891  2,005  2,426  1,018  2,039  2,460
------------------------------------------------------------------------------------------------------------------------------------
Total net proved reserves       5,055  5,061  4,399 4,284 4,222 4,235 5,701  4,896  4,071  2,635  3,789  4,400 17,675 17,968 17,105
------------------------------------------------------------------------------------------------------------------------------------
Net proved developed reserves
of fully consolidated companies:
  Beginning of year             4,158  3,902  3,923 2,932 3,081 3,094 4,325  3,810  3,018  1,307  1,223  1,212 12,722 12,016 11,247
  End of year                   3,902  3,923  3,826 3,081 3,094 2,907 3,810  3,018  2,175  1,223  1,212  1,138 12,016 11,247 10,046
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents  Mobil's share of net proved reserves of investees  accounted for
    on the equity method.  
(2) Acquisition of a 25% interest in a joint venture that owns the Tengiz field
    in the Republic of Kazakstan.
</FN>
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE 3: CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES (In millions)
------------------------------------------------------------------------------------------------------------------------------------
                                  United States(1)       Europe         Asia-Pacific        Other Areas               Total(1)
                                 -----------------  ----------------  ----------------   ------------------     ------------------
Year ended December 31           1994   1995  1996  1994  1995  1996  1994  1995  1996   1994   1995   1996     1994   1995   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>     <C>     <C>     <C>    <C>    <C>    <C>    <C>    <C>    <C>     <C>   <C>    <C>     <C>     <C>    
Capitalized costs:
  Unproved properties $   254 $   212 $   197 $   11 $   11 $   58 $   14 $   13 $  273 $  108  $ 137 $  324 $   387 $   373 $   852
  Proved properties,
  wells, plants
  and other equipment  15,988  13,638  12,535  6,929  7,119  7,639  2,098  2,149  3,854  4,430  4,533  5,592  29,445  27,439  29,620
------------------------------------------------------------------------------------------------------------------------------------
Total capitalized
  costs                16,242  13,850  12,732  6,940  7,130  7,697  2,112  2,162  4,127  4,538  4,670  5,916  29,832  27,812  30,472
Accumulated
  depreciation,
  depletion and
  amortization         11,033   9,181   8,623  3,993  4,123  4,593  1,274  1,457  1,742  2,026  1,599  1,514  18,326  16,360  16,472
------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs   5,209   4,669   4,109  2,947  3,007  3,104    838    705  2,385  2,512  3,071  4,402  11,506  11,452  14,000
------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs
  of equity
  companies(2)             --      --      --     28     37     34     30      1      1    168    269  1,558     226     307   1,593
------------------------------------------------------------------------------------------------------------------------------------
Total                 $ 5,209 $ 4,669 $ 4,109 $2,975 $3,044 $3,138 $  868 $  706 $2,386 $2,680 $3,340 $5,960 $11,732 $11,759 $15,593
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Prior year data  restated to conform  with current  year  presentation.  
(2) Represents Mobil's share of net capitalized costs of investees  accounted 
    for on the equity method.
</FN>
</TABLE>

Table 3 summarizes the aggregate amount of capitalized  costs related to oil and
gas producing  activities and related  accumulated  depreciation,  depletion and
amortization at December 31, 1994, 1995 and 1996. Capitalized costs include: (1)
mineral  interests in properties;  (2) wells,  plants and related  equipment and
facilities;  and  (3)  support  equipment  and  facilities  used  in oil and gas
producing activities.

54

<PAGE>

                           SUPPLEMENTARY INFORMATION

OIL AND GAS PRODUCING ACTIVITIES (unaudited) (continued)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE 4: COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES (In millions)
------------------------------------------------------------------------------------------------------------------------------------
                                   United States         Europe         Asia-Pacific        Other Areas               Total
                                 -----------------  ----------------  ----------------   ------------------     ------------------
Year ended December 31           1994   1995  1996  1994  1995  1996  1994  1995  1996   1994   1995   1996     1994   1995   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>    <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>      <C>  <C>     <C>    <C>    <C>    <C>   
Property acquisition costs:(1)
  Unproved properties            $ 17   $ 28  $  8  $ --  $ --  $ 46  $  3  $ --  $  260   $ 12 $   34  $  122 $   32 $   62 $   436
  Proved properties                 8      9    57    10     4    --     4    --   1,455     --     16     388     22     29   1,900
------------------------------------------------------------------------------------------------------------------------------------
Total acquisition costs            25     37    65    10     4    46     7    --   1,715     12     50     510     54     91   2,336
Exploration costs                 199    183   122   174   177   192    87    72      79    188    193     215    648    625     608
Development costs                 365    593   417   319   421   398   265    78     273    474    833     981  1,423  1,925   2,069
------------------------------------------------------------------------------------------------------------------------------------
Total expenditures                589    813   604   503   602   636   359   150   2,067    674  1,076   1,706  2,125  2,641   5,013
------------------------------------------------------------------------------------------------------------------------------------
Property acquisition,
  exploration and
  development costs of
  equity companies(2)              --     --    --    12    11     8     2     8       4     84     57   1,297     98     76   1,309
------------------------------------------------------------------------------------------------------------------------------------
 Total                           $589   $813  $604  $515  $613  $644  $361  $158  $2,071 $758   $1,133  $3,003 $2,223 $2,717  $6,322
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Primarily as a result of recording  deferred  taxes of $506 million,
     the total costs allocated to property for the Ampolex  acquisition  
     exceeded the net purchase price by $690 million ($607 million-Asia-Pacific;
     and $83 million-Other).
(2) Represents Mobil's investment in companies accounted for on the equity 
    method.
</FN>
</TABLE>

The table  above  sets  forth  certain  costs  incurred,  both  capitalized  and
expensed,  in oil and  gas  producing  activities.  Property  acquisition  costs
represent   costs  incurred  to  purchase  or  lease  oil  and  gas  properties.
Exploration  costs include costs of geological  and  geophysical  activities and
drilling of exploratory wells. Expenditures to drill and equip development wells
and construct production facilities to extract,  treat and store oil and gas are
included in development  costs.  Exploration and development  costs also include
depreciation of support equipment and facilities used in these activities rather
than the acquisition costs for support equipment.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE 5: RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (In millions)
------------------------------------------------------------------------------------------------------------------------------------
                                   United States         Europe         Asia-Pacific        Other Areas               Total
                                 -----------------  ----------------  ----------------   ------------------     ------------------
Year ended December 31           1994   1995  1996  1994  1995  1996  1994  1995  1996   1994   1995   1996     1994   1995   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>   
Results of Operations
Revenues:
  Trade sales            $  890 $  678 $1,027 $1,486 $1,357 $1,535 $1,367 $1,429 $1,811 $  494 $  411 $  464 $4,237 $3,875 $4,837
  Intercompany sales      1,331  1,330  1,458    456    815    841    350    339    369  1,003  1,022  1,727  3,140  3,506  4,395
------------------------------------------------------------------------------------------------------------------------------------
Total revenues(1)         2,221  2,008  2,485  1,942  2,172  2,376  1,717  1,768  2,180  1,497  1,433  2,191  7,377  7,381  9,232
Production (lifting) costs (946)  (982)  (937)  (660)  (719)  (734)  (261)  (239)  (288)  (507)  (619)  (702)(2,374)(2,559)(2,661)
Exploration expenses       (115)   (72)   (76)  (145)  (128)  (158)  (104)   (77)  (156)  (152)  (150)  (122)  (516)  (427)  (512)
Depreciation, depletion
  and amortization         (949)(1,161)  (638)  (428)  (466)  (471)  (230)  (205)  (305)  (300)  (398)  (182)(1,907) 2,230)(1,596)
Other operating revenues
  and (expenses)            (31)    32    263     66    123     96     (6)    (8)     6    110     77    190    139    224    555
Income tax expense          (55)    68   (367)  (459)  (551)   638)  (667)  (717)  (878)  (480)  (365)(1,083)(1,661)(1,565)(2,966)
------------------------------------------------------------------------------------------------------------------------------------
Results of operations for
    producing activities    125   (107)   730    316    431    471    449    522    559    168    (22)   292  1,058    824  2,052
------------------------------------------------------------------------------------------------------------------------------------
Results of operations for
  producing activities of
  equity companies(2)        --     --      7      2      3      4      1      4     (3)    15     14     49     18     21     57
------------------------------------------------------------------------------------------------------------------------------------
Total                    $  125 $ (107)$  737 $  318 $  434 $  475 $  450 $  526 $  556 $  183  $  (8) $ 341 $1,076 $  845 $2,109
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Revenues in this table will not agree with Exploration & Producing Segment
    Revenues (pages 22 and 36) because revenues from operations that are 
    ancillary to oil and gas producing activities have been classified as Other
    Operating Revenues and Expenses for this presentation.
(2) Represents Mobil's share of results of operations for producing activities
    of investees accounted for on the equity method.
</FN>
</TABLE>


Mobil's  results of  operations  for  producing  activities  for the years ended
December 31, 1994,  1995 and 1996,  are shown above.  Revenues  include sales to
unaffiliated  parties and sales or transfers  (essentially at third-party  sales
prices) to Mobil's other operations. All revenues reported in this table are net
of royalty  interests  of others.  Production  (lifting)  costs and  exploration
expenses are determined as defined by accounting standards.

55

<PAGE>

                           SUPPLEMENTARY INFORMATION

OIL AND GAS PRODUCING ACTIVITIES (unaudited) (concluded)

FAS 69  requires  disclosure  with  respect to future net cash flows from future
production  of net  proved,  developed  and  undeveloped  reserves.  Future cash
inflows are computed by applying  year-end prices to estimated future production
of net proved  reserves.  Future price changes are considered only to the extent
they are covered by contractual agreements in existence at year-end. Development
and  production  costs  are  based on  year-end  estimated  future  expenditures
incurred in developing and producing net proved reserves,  assuming continuation
of existing  economic  conditions.  Future  income  taxes are  calculated  using
year-end  statutory  tax rates.  Discounted  future net cash flows are  computed
using a discount factor of 10%.
   The  standardized  measure  data are not  intended to replace the  historical
cost-based financial data included in the audited financial statements. As such,
many of the data disclosed in this section represent estimates,  assumptions and
computations  that are subject to continual  change as the future  unfolds.  For
example,  significant  changes  in  year-end  prices  from  1995 to 1996 and the
aquisitions of Ampolex and Tengiz  contributed to the higher  discounted  future
net cash flow  amount  for  1996.  Accordingly,  Mobil  cautions  investors  and
analysts that the data are of questionable utility for decision making.
   Tables 6 and 7 below set forth the standardized  measure of discounted future
net cash flows relating to proved oil and gas reserves,  and quantify the causes
of the changes in the  standardized  measure of the cash flows relating to those
reserves.  Since the  estimates  reflect  proved  reserves  only,  they  exclude
revenues that could result from unproved  reserves that could become  productive
in later years.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE 6: STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (In millions)
------------------------------------------------------------------------------------------------------------------------------------
                                United States               Europe                Asia-Pacific     
                            ---------------------    --------------------    --------------------  
At December 31              1994     1995    1996    1994    1995    1996    1994    1995    1996  
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>      
Future cash inflows      $22,051  $23,763 $33,036 $16,415 $16,064 $19,869 $13,409 $11,565 $14,416  
Future production
  costs                   (9,329)  (9,312) (8,125) (5,214) (4,822) (4,374) (2,959) (2,026) (2,196) 
Future development
  costs                   (1,775)  (1,644) (1,200) (1,131) (1,203) (1,202)   (754)   (764) (1,030) 
Future income
  tax expenses            (3,120)  (3,928) (7,968) (4,883) (5,156) (7,830) (4,541) (3,951) (4,599) 
------------------------------------------------------------------------------------------------------------------------------------
Future net cash flows      7,827    8,879  15,743   5,187   4,883   6,463   5,155   4,824   6,591  
10% annual discount
  for estimated timing
  of cash flows          (3,266)   (3,928  (6,919) (1,732) (1,534) (2,091) (2,367) (2,017) (2,578) 
------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
  of discounted future
  net cash flows           4,561    4,951   8,824   3,455   3,349   4,372   2,788   2,807   4,013  
------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
  of discounted future
  net cash flows of
  equity companies(1)         --       --      --      21      23      35      21      --      --  
------------------------------------------------------------------------------------------------------------------------------------
Total                    $ 4,561 $  4,951 $ 8,824 $ 3,476 $ 3,372 $ 4,407 $ 2,809 $ 2,807 $ 4,013  
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents  Mobil's share of standardized  measure of discounted  future net
    cash flows of investees accounted for on the equity method.
</FN>
</TABLE>

<TABLE>
<CAPTION>
TABLE 6 (Continued)
------------------------------------------------------------------------------------------------------------------------------------
TABLE 6: STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (In millions)
------------------------------------------------------------------------------------------------------------------------------------
                                 Other Areas                Total
                            --------------------    ---------------------
At December 31              1994    1995    1996    1994    1995     1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>     <C>     <C>     <C>     <C>     
Future cash inflows      $20,206 $24,543 $39,107 $72,081 $75,935 $106,428
Future production
  costs                   (7,315) (8,589) (9,952)(24,817)(24,749) (24,647)
Future development
  costs                   (1,414) (1,866) (5,006) (5,074) (5,477)  (8,438)
Future income
  tax expenses            (7,299) (9,344)(15,536)(19,843)(22,379) (35,933)
------------------------------------------------------------------------------------------------------------------------------------
Future net cash flows      4,178   4,744   8,613  22,347  23,330   37,410
10% annual discount
  for estimated timing
  of cash flows           (2,087) (2,252) (3,834) (9,452) (9,731) (15,422)
------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
  of discounted future
  net cash flows           2,091   2,492   4,779  12,895 13,599    21,988
------------------------------------------------------------------------------------------------------------------------------------
Standardized measure
  of discounted future
  net cash flows of
  equity companies(1)        434     460   1,845     476    483     1,880
------------------------------------------------------------------------------------------------------------------------------------
Total                    $ 2,525 $ 2,952 $ 6,624 $13,371 $14,082 $ 23,868
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents  Mobil's share of standardized  measure of discounted  future net
    cash flows of investees accounted for on the equity method.
</FN>
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
TABLE 7: CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (In millions)
--------------------------------------------------------------------------------------------------------------------
Year ended December 31                                                         1994           1995           1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>            <C>     
Beginning of year                                                          $ 12,214       $ 13,371       $ 14,082
Changes resulting from:
  Sales and transfers of production, net of production costs                 (5,003)        (4,822)        (6,571)
  Net changes in prices and in development and production costs                 559            862         15,191
  Extensions, discoveries, additions and purchases, less related costs          864          1,078          2,577
  Development costs incurred during the period                                1,423          1,925          2,069
  Revisions of previous quantity estimates                                    2,204            731            633
  Accretion of discount                                                       2,184          2,406          2,625
  Net change in income taxes                                                 (1,276)        (1,477)        (8,135)
  Other                                                                         202              8          1,397
--------------------------------------------------------------------------------------------------------------------
End of year                                                                $ 13,371       $ 14,082       $ 23,868
--------------------------------------------------------------------------------------------------------------------
</TABLE>

56

<PAGE>

                           SUPPLEMENTARY INFORMATION

                                                                [Mountain Chart]

                                                           YEAR-END MARKET PRICE
                                                              PER COMMON SHARE
                                                                  (Dollars)

                                                 OVER THE PAST 10 YEARS, MOBIL'S
                                                 STOCK PRICE HAS INCREASED AT
                                                 AN ANNUALIZED RATE OF 12%.

                                                                [Mountain Chart]

                                                    DEBT-TO-CAPITALIZATION RATIO
                                                             (In percent)

                                              MOBIL'S DEBT-TO-CAPITALIZATION
                                              RATIO OF 29% PROVIDES FLEXIBIL-
                                              ITY  TO INCREASE INVESTMENT
                                              SPENDING WHEN OPPORTUNITIES ARISE.

<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY

(In millions, except for per-share amounts)                        1992          1993             1994            1995         1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>              <C>             <C>          <C>      
REVENUES                                                      $  64,456     $  63,975        $  67,383       $  75,370    $  81,503
------------------------------------------------------------------------------------------------------------------------------------
INCOME, EXCLUDING THE EFFECTS OF CHANGE IN
  ACCOUNTING PRINCIPLE(S)                                     $   1,308(1)  $  2,084         $   2,964(1)    $   2,376    $   2,964
------------------------------------------------------------------------------------------------------------------------------------
SEGMENT EARNINGS:
Petroleum Operations
  Exploration & Producing -United States                      $     348     $    363         $     125       $    (107)         737
                          -International                          1,042        1,289               951             952        1,372
------------------------------------------------------------------------------------------------------------------------------------
  Total Exploration & Producing                                   1,390         1,652            1,076             845        2,109
------------------------------------------------------------------------------------------------------------------------------------
  Marketing & Refining    -United States                           (145)          151              241             226          407
                          -International                            329           554              647             447          506
------------------------------------------------------------------------------------------------------------------------------------
  Total Marketing & Refining                                        184           705              888             673          913
------------------------------------------------------------------------------------------------------------------------------------
Total Petroleum Operations                                        1,574         2,357            1,964           1,518        3,022
Chemical                                                            136            44              102           1,164          306
------------------------------------------------------------------------------------------------------------------------------------
Segment Earnings                                                  1,710         2,401            2,066           2,682        3,328
Corporate and Other                                                 (86)         (190)             (98)            (11)        (122)
Net Financing Expense                                              (316)         (127)            (209)           (295)        (242)
------------------------------------------------------------------------------------------------------------------------------------
Income Before Change in Accounting Principle(s)                   1,308         2,084            1,759           2,376        2,964
Cumulative Effect of Change in Accounting Principle(s)             (446)(2)        --             (680)(2)          --           --
------------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                    $     862     $   2,084        $   1,079       $   2,376    $   2,964
------------------------------------------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE (based on average shares outstanding)
  Income Before Change in Accounting Principle(s)             $    3.13     $    5.07        $    4.28       $    5.87    $    7.38
  Net Income                                                  $    2.01     $    5.07        $    2.57       $    5.87    $    7.38
NET INCOME AS PERCENT OF
  Average shareholders' equity                                     7.8%(1)      12.3%            10.4%(1)        13.5%        16.0%
  Average capital employed(3)                                      6.8%(1)       9.7%             8.4%(1)        10.9%        12.7%
  Revenues                                                         2.0%(1)       3.3%             2.6%(1)         3.2%         3.6%
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SPENDING                                           $   4,491     $   3,687        $   3,927       $   4,525    $   7,019
------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET POSITION AT YEAR-END
  Current assets                                              $  10,956     $  11,217        $  11,181       $  12,056    $  12,895
  Net properties, plants and equipment                           25,075        25,037           25,503          24,850       27,479
  Total assets                                                   40,561        40,733           41,542          42,138       46,408
  Current liabilities                                            12,629        12,351           13,418          13,054       15,248
  Long-term debt                                                  5,042         5,027            4,714           4,629        4,450
  Shareholders' equity                                           16,540        17,237           17,146          17,951       19,072
      Per common share(4)                                     $   41.06     $   42.74        $   42.61       $   44.71    $   47.62
------------------------------------------------------------------------------------------------------------------------------------
DEBT-TO-CAPITALIZATION RATIO(5)                                     34%           32%              31%             27%          29%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING (thousands of shares)         398,517       399,154          397,955         395,444      394,146
------------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING (thousands of shares, year-end)       398,816       398,168          395,987         394,560      393,794
------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS OF COMMON STOCK (year-end)                         208,800       200,100          193,900         188,800      185,600
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DIVIDENDS                                        $   1,276     $   1,298        $   1,353       $   1,434    $   1,547
  As percent of net income less preferred dividends                102%(1)        64%              80%(1)          62%          53%
  Per share                                                   $    3.20     $    3.25        $    3.40       $   3.625    $   3.925
------------------------------------------------------------------------------------------------------------------------------------
YEAR-END MARKET PRICE PER COMMON SHARE                        $  63 1/8     $  79 1/8        $  84 1/4       $ 111 3/4    $ 122 1/4
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes  cumulative  effect of adopting  FAS 106 and 109 ($446  million) in
    1992; LCM ($680 million) in 1994. 
(2) Accounting  changes:  FAS 106 and 109 in 1992; LCM in 1994. 
(3) Net income plus income  applicable to minority  interests plus interest 
    expense,  net of tax, divided by the sum of average  shareholders' equity, 
    minority interests and debt. 
(4) Shareholders' equity less the effect of the ESOP-related accounts (preferred
    stock and unearned employee  compensation), divided by the number of common
    shares outstanding at year-end.
(5) Total  debt  divided  by the sum of total  debt,  shareholders'  equity  and
    minority interests.
</FN>
</TABLE>

                                                                            57

<PAGE>

                           SUPPLEMENTARY INFORMATION

[Bar Chart]

  NET CRUDE OIL AND
NGL* PROVED RESERVES
(Millions of barrels)

LIQUIDS RESERVES INCREASED
PRIMARILY DUE TO THE ACQUISI-
TIONS OF AMPOLEX AND AN INTER-
EST IN THE TENGIZ FIELD.

[Bar Chart]

    NET NATURAL GAS
    PROVED RESERVES
(Billions of cubic feet)

MOBIL'S NATURAL GAS RESERVES
REPRESENT MORE THAN A 10 YEAR
SUPPLY AT CURRENT PRODUCTION
LEVELS.

<TABLE>
<CAPTION>
FIVE-YEAR OPERATING HIGHLIGHTS (Unaudited)
                                                                       1992       1993       1994       1995       1996
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>        <C>        <C>        <C>        <C>  
NET PRODUCTION OF CRUDE OIL AND NGL(1)
 (thousands of barrels daily)
  United States                                                         311        305        300        282        262
  Canada                                                                 59         58         57         53         50
  Indonesia                                                              94         90         77         77         66
  Nigeria                                                               132        169        175        157        209
  Norway                                                                102         95         95         91         83
  United Kingdom                                                         50         58         70         75         65
  Other fully consolidated areas                                         11          9         33         30         57
  Equity companies(2)                                                    57         54         47         45         62
--------------------------------------------------------------------------------------------------------------------------
  Worldwide                                                             816        838        854        810        854
--------------------------------------------------------------------------------------------------------------------------
NET PRODUCTION OF NATURAL GAS (millions of cubic feet daily)
--------------------------------------------------------------------------------------------------------------------------
  United States                                                       1,641      1,529      1,568      1,439      1,333
  Canada                                                                510        492        461        432        416
  Germany                                                               351        362        368        404        463
  Indonesia                                                           1,654      1,658      1,654      1,542      1,556
  United Kingdom                                                        260        390        470        577        618
  Other fully consolidated areas                                        143        135        120        129        161
  Equity companies(2)                                                    45         44         29         31         40
--------------------------------------------------------------------------------------------------------------------------
  Worldwide                                                           4,604      4,610      4,670      4,554      4,587
    Barrels of oil equivalent (thousands of barrels daily)(3)           837        837        847        826        831
--------------------------------------------------------------------------------------------------------------------------
TOTAL PRODUCTION (thousands of barrels daily of oil equivalent)(3)    1,653      1,675      1,701      1,636      1,685
--------------------------------------------------------------------------------------------------------------------------
NET RESERVES OF CRUDE OIL AND NGL (millions of barrels)
  United States                                                       1,168      1,116      1,052        986        902
  Europe                                                                353        357        401        373        366
  Asia-Pacific                                                          227        204        175        103        123
  Other fully consolidated areas                                      1,083      1,132      1,291      1,426      1,538
  Equity companies(2)                                                   541        534        525        531        853
--------------------------------------------------------------------------------------------------------------------------
  Worldwide                                                           3,372      3,343      3,444      3,419      3,782
--------------------------------------------------------------------------------------------------------------------------
NET RESERVES OF NATURAL GAS (billions of cubic feet)
  United States                                                       5,971      5,372      5,055      5,061      4,399
  Europe                                                              3,508      4,021      4,251      4,188      4,201
  Asia-Pacific                                                        6,400      6,058      5,607      4,896      4,071
  Other fully consolidated areas                                      1,824      1,508      1,744      1,784      1,974
  Equity companies(2)                                                   103        724      1,018      2,039      2,460
--------------------------------------------------------------------------------------------------------------------------
  Worldwide                                                          17,806     17,683     17,675     17,968     17,105
    Barrels of oil equivalent (millions of barrels)(3)                3,236      3,212      3,204      3,261      3,099
--------------------------------------------------------------------------------------------------------------------------
TOTAL RESERVES (millions of barrels of oil equivalent)(3)             6,608      6,555      6,648      6,680      6,881
--------------------------------------------------------------------------------------------------------------------------
RESERVES REPLACEMENT PERCENTAGE(3)(4)                                   69%        91%       115%       105%       133%
--------------------------------------------------------------------------------------------------------------------------
AVERAGE U.S. SALES PRICE/TRANSFER VALUE(5)
  Crude Oil (per barrel)                                             $15.73     $13.54     $12.91     $14.52     $17.40
  NGL (per barrel)                                                    11.84      11.25      10.37       9.94      13.16
  Natural Gas (per thousand cubic feet)(6)                             1.67       2.01       1.72       1.41       2.17
--------------------------------------------------------------------------------------------------------------------------
AVERAGE INTERNATIONAL SALES PRICE/
  TRANSFER VALUE(5)
  Crude Oil (per barrel)                                             $19.11     $16.99     $15.66     $16.94     $20.81
  Natural Gas (per thousand cubic feet)                                2.74       2.62       2.44       2.47       2.66
--------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Natural gas liquids.
(2) Represents  Mobil's share of investees  accounted for on the equity method.
(3) Natural gas  volumes  have been  converted  to oil  equivalent  barrels and
    restated on a BTU basis with 5,503,  5,506, 5,516, 5,510 and 5,519 cubic
    feet of gas per barrel in 1992,  1993, 1994, 1995 and 1996,  respectively.  
(4) Reserves replacement percentage is calculated by dividing the net
    adjustments to reserves for the year plus the annual production by the
    annual  production.  
(5) Transfer values are  essentially  equal to  third-party  sales. 
(6) Prior years'  prices restated to reflect current year presentation of
    wellhead price.
</FN>
</TABLE>

58

<PAGE>

                           SUPPLEMENTARY INFORMATION

                                                                     [Bar Chart]

                                                           REFINERY RUNS VS.
                                                       PETROLEUM PRODUCT SALES
                                                    (Thousands of barrels daily)

                                                    REFINERY RUNS AND PRODUCT
                                                    SALES CONTINUED TO TREND UP-
                                                    WARD, REFLECTING AN EXPAN-
                                                    SION OF CAPACITY AND SUCCESS
                                                    OF GROWTH PROGRAMS.


                                                                [Mountain Chart]

                                                             NUMBER OF EMPLOYEES
                                                                (At year-end)

                                                   IMPLEMENTATION OF RESTRUCTUR-
                                                   ING PROGRAMS AND THE EFFECTS
                                                   OF ASSETS SALES REDUCED THE
                                                   NUMBER OF EMPLOYEES.

<TABLE>
<CAPTION>
FIVE-YEAR OPERATING HIGHLIGHTS (unaudited) (concluded)
                                                          1992            1993            1994          1995             1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>             <C>            <C>    
PETROLEUM PRODUCT SALES(1) (thousands of barrels daily)
  United States                                            999           1,080           1,172         1,286            1,362
  Europe                                                   790             810             810           807              827
  Asia-Pacific(2)                                          645             730             777           799              800
  Other Areas                                              310             314             316           330              379
------------------------------------------------------------------------------------------------------------------------------------
  Worldwide                                              2,744           2,934           3,075          3,222           3,368
------------------------------------------------------------------------------------------------------------------------------------
PETROLEUM PRODUCT SALES(1) (millions of dollars)
  United States                                        $10,070         $10,181         $10,492        $11,904         $14,254
  Europe                                                15,685          14,555          14,395         15,421          17,008
  Asia-Pacific(2)                                        9,770          10,619          11,466         12,426          13,258
  Other Areas                                            3,551           3,382           3,707          3,974           4,708
------------------------------------------------------------------------------------------------------------------------------------
  Worldwide                                            $39,076          38,737         $40,060        $43,725         $49,228
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE UNITED STATES PRODUCT PRICE (per gallon)(3)       65.6(cent)      61.5(cent)      58.4(cent)      60.4(cent)     68.1(cent)
------------------------------------------------------------------------------------------------------------------------------------
REFINERY RUNS (thousands of barrels daily)
  United States                                            796             836             857             895            921
  Europe                                                   403             446             420             411            324
  Asia-Pacific(4)                                          529             607             622             657            705
  Other Areas                                              158             163             163             149            183
------------------------------------------------------------------------------------------------------------------------------------
  Runs for Mobil by Mobil                                1,886           2,052           2,062           2,112          2,133
  Runs for Mobil by Others                                  37              20              20               9              9
------------------------------------------------------------------------------------------------------------------------------------
  Worldwide Runs for Mobil                               1,923           2,072           2,082           2,121          2,142
------------------------------------------------------------------------------------------------------------------------------------
CHEMICAL SALES BY PRODUCT CATEGORY (millions of dollars)
  Petrochemicals                                       $ 1,733         $ 1,608         $ 2,088         $ 2,914        $ 1,876
  Films Products                                           670             580             653             764            766
  Chemical Products                                         59              81             101             115            126
  Plastics/Other                                         1,111           1,139           1,193           1,155             78
------------------------------------------------------------------------------------------------------------------------------------
  Net sales to trade                                   $ 3,573         $ 3,408         $ 4,035         $ 4,948        $ 2,846
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF EMPLOYEES (year-end)
  Petroleum Operations-United States                    22,200          21,600          20,300          18,400         13,200
                      -International                    25,800          25,200          25,200          24,300         20,000 
  Chemical            -United States                    10,200           9,700           8,100           3,500          2,500
                      -International                     1,900           2,100           1,800           1,600          1,600
  Other               -United States                     3,100           2,800           2,700           2,200          4,400(5)
                      -International                       500             500             400             400          1,300(5)
 -----------------------------------------------------------------------------------------------------------------------------------
 Total                                                  63,700          61,900          58,500          50,400         43,000
 -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes supply/other product sales.
(2) Includes primarily Australia, China, Hong Kong, Japan, Malaysia, New Zealand
    and Singapore.
(3) Represents the average amount Mobil charges dealers, service stations, etc.
    for petroleum products,  including gasoline.  Excise taxes and other items
    included in the "pump" price consumers pay for gasoline are not reflected in
    this amount.
(4) Includes Australia, Japan, New Zealand and Singapore.
(5) In 1996, Mobil reorganized its staff support groups, now shown in Other.
</FN>
</TABLE>

Mobil  markets  autogasoline  through  over  18,000  retail  outlets  in over 60
countries.  Petroleum  product  sales  (including  supply and other  sales) have
increased 23% based on daily volume since 1992.
   Mobil has 5 refineries in the U.S. that represent  about 45% of its worldwide
capacity.  Outside  the U.S.,  Mobil  has  operating  interests  in 16 crude oil
refineries.
   Mobil  operates 30 chemical  facilities in 11 countries,  and chemical  sales
extend to more than 100 countries.  Mobil is a 50% partner in a complex in Saudi
Arabia that produces polyethylene and ethylene glycol.

59

<PAGE>

                             SHAREHOLDER INFORMATION

   THE TICKER  SYMBOL FOR MOBIL on the New York Stock  Exchange is MOB.
   THE 1997 ANNUAL MEETING for shareholders  will be held Thursday,  May 8, at
10 a.m. in the Grand Ballroom, Hyatt Regency Reston, Reston, Virginia.
   DIVIDEND PAYMENTS on common stock are paid quarterly following declaration by
the Board of  Directors.  The next four  tentative  payment  dates are: June 10,
1997; September 10, 1997; December 10, 1997, and March 10, 1998.
   DIRECT   REGISTRATION   SYSTEM  offers  new   investors   and   participating
shareholders  another way to register  their  shares  without  having a physical
certificate  issued.  For information call ChaseMellon  Shareholder  Services at
1-800-648-9291.
   MOBIL'S STOCK PURCHASE AND DIVIDEND REINVESTMENT PLAN allows new investors to
buy  Mobil  common  stock for as little  as $250 and  existing  shareholders  to
automatically  reinvest  dividends--both  without paying  commissions or service
fees.  Once  enrolled,  you can make  purchases  through  monthly cash  deposits
ranging from $10 to $7,500. Optional cash deposits are invested weekly. For more
information,  request a  prospectus  on  Mobil's  Stock  Purchase  and  Dividend
Reinvestment  Plan from:  ChaseMellon  Shareholder  Services,  L.L.C.,  Dividend
Reinvestment  Services,  P.O.Box 750, Pittsburgh,  Pennsylvania 15230. Telephone
1-800-648-9291, or visit Mobil's Internet site.
   QUESTIONS  ABOUT  DIVIDEND  CHECKS,  electronic  payment of dividends,  stock
certificates,  address changes,  account consolidation,  transfer procedures and
year-end tax  information?  Write:  ChaseMellon  Shareholder  Services,  L.L.C.,
Shareholder Relations, P.O.Box 590, Ridgefield Park, New Jersey 07660. Telephone
1-800-648-9291 (Telecommunications Device for the Deaf 1-800-231-5469).
   SHAREHOLDERS OR OTHERS WANTING GENERAL INFORMATION should write: Secretary's
Department, Room 2D915, Mobil Corporation, 3225 Gallows Road, Fairfax, Virginia
22037-0001. Telephone 1-703-846-3898.
   PUBLICATIONS AVAILABLE TO SHAREHOLDERS:
   Mobil's Annual Report on Form 10-K,  filed with the Securities and Exchange
Commission.
   1996 Mobil Fact Book, a  supplement  to the annual  report with  additional
financial and operating data.
   Quarterly Earnings Press Releases.
   Meeting our  Commitments:  Mobil's EHS  Performance  Report,  an account of
Mobil's environmental, health and safety performance (available May 1997).
   Mobil in Nigeria and Mobil in Indonesia.
   For  copies,   visit  Mobil's  Internet  Site,  call  Mobil  Publications  at
1-800-293-5796, or write: Secretary's Department, Room 2D915, Mobil Corporation,
3225 Gallows Road, Fairfax, Virginia 22037-0001.
   ANALYSTS AND INSTITUTIONAL  INVESTORS wanting  information about Mobil should
write:  Investor  Relations,  Room 2D804, Mobil Corporation,  3225 Gallows Road,
Fairfax, Virginia 22037-0001. Telephone 1-703-846-3955.
   AUDITORS: Ernst & Young LLP, Fairfax Square
Tower II, 8075 Leesburg Pike, Vienna, Virginia 22182-2709.
   TRANSFER AGENT AND REGISTRAR IN THE U.S.:  ChaseMellon  Shareholder Services,
L.L.C.,  Overpeck Centre, 85 Challenger Road, Ridgefield Park, New Jersey 07660.
Telephone    1-800-648-9291    (Telecommunications    Device    for   the   Deaf
1-800-231-5469).
   TRANSFER AGENT AND REGISTRAR IN CANADA: Montreal Trust Company of Canada, 151
Front Street West, 8th Floor, Toronto, Ontario M5J 2N1, Canada. Telephone
1-416-981-9500. Montreal Trust Company of Canada, Western Gas Tower, 530 8th
Avenue, S.W., Calgary, Alberta T2P 3S8, Canada. Telephone 1-403-267-6800.
   BENEFITS  AND  CONTRIBUTIONS:  Information  on  employee  benefits  plans  is
contained in plan  descriptions,  annual reports and other  materials  regularly
furnished to  employees  under the Employee  Retirement  Income  Security Act of
1974.  A statement  of  charitable  contributions  by Mobil  Foundation  Inc. is
prepared annually.
   INTERNET ADDRESS: http://www.mobil.com


 An  important  part of the  operations  covered by this report is carried on by
 operating  divisions,  subsidiaries  and  affiliates  under the  direction  and
 control of their own managements. Except as otherwise indicated by the context,
 this  report  uses such terms as "Mobil,"  "corporation,"  "company,"  "we" and
 "our,"   sometimes  for  the  parent   corporation   and  all  such  divisions,
 subsidiaries  and  affiliates  collectively,  and  sometimes for one or more of
 them.  Duplicate  mailings of this annual report may be eliminated by sending a
 written  request to:  ChaseMellon  Shareholder  Services,  L.L.C.,  Shareholder
 Relations,  P.O.  Box 590,  Ridgefield  Park,  New  Jersey  07660.  Eliminating
 duplicate mailings will not affect your dividend, proxy statement or proxy card
 mailings.

 Mobil Annual Report 1996 is printed on recycled and recyclable paper. *

* Recycled Symbol

60

<PAGE>

BOARD OF DIRECTORS

[Photograph - Page 61]

Heimbold    Hoenmans             Fites   Branscomb  Schwartz     Swanson
                     Vallance  Renna     Johnson        Sanford        Jacobson
                  Munro          Peters       Noto  Kaplan

--------------------------------------------------------------------------------
LEWIS M. BRANSCOMB
Elected 1978, Aetna Professor, Public Policy and Corporate Management, Emeritus,
John F. Kennedy School of Government, Harvard University. Committees: Audit
(Chmn.), Public Issues

DONALD V. FITES
Elected 1990, Chairman and Chief Executive Officer, Caterpillar Inc. Committees:
Management Compensation and Organization, Directors and Board Affairs

CHARLES  A. HEIMBOLD JR.
Elected 1995, Chairman and Chief Executive Officer, Bristol-Myers Squibb.
Committees: Audit, Directors and Board Affairs


PAUL J. HOENMANS
Elected 1985, Executive Vice President, Mobil  Corporation. Joined Mobil 1954.
Committee: Executive

ALLEN F. JACOBSON
Elected 1988, Former Chairman of the Board and Chief Executive Officer, 3M.
Committees: Directors and Board Affairs (Chmn.), Management Compensation and
Organization

SAMUEL C. JOHNSON
Elected 1981, Chairman of the Board, S. C. Johnson & Son, Inc. Committees:
Management Compensation and Organization, Public Issues (Chmn.)

HELENE L. KAPLAN
Elected 1989, Of Counsel, Skadden, Arps, Slate, Meagher & Flom. Committees:
Audit, Directors and Board Affairs

J. RICHARD MUNRO
Elected 1989, Chairman of the Board, Genentech.
Committees: Management Compensation and Organization, Public Issues

LUCIO A. NOTO
Elected 1988, Chairman of the Board, President and Chief Executive Officer.
Joined Mobil 1962. Committee: Executive (Chmn.)

AULANA L. PETERS
Elected 1992, Partner, Gibson, Dunn & Crutcher. Committees: Audit, Public Issues

EUGENE A. RENNA
Elected 1986, Executive Vice President, Mobil Corporation. Joined Mobil 1968.
Committee: Executive

CHARLES S. SANFORD JR.
Elected 1990,  Former Chairman and Chief Executive  Officer,  Bankers Trust
Company.  Committees:  Management  Compensation and Organization,  Directors and
Board Affairs

ROBERT G. SCHWARTZ
Elected 1987,  Former Chairman of the Board,  President and Chief Executive
Officer, Metropolitan Life Insurance Co. Committees: Management Compensation and
Organization (Chmn.), Public Issues

ROBERT O. SWANSON
Elected 1991, Executive Vice President, Mobil
Corporation. Joined Mobil 1958. Committee: Executive

IAIN D.T. VALLANCE
Elected 1996, Chairman, British Telecommunications plc. Committees:  Audit,
Public Issues

                           MOBIL CORPORATION OFFICERS

LUCIO A. NOTO
Chairman of the Board, President and Chief Executive Officer

PAUL J. HOENMANS
Executive Vice President

EUGENE A. RENNA
Executive Vice President

ROBERT O. SWANSON
Executive Vice President

THOMAS C.DELOACH JR.
Senior Vice President and
Chief Financial Officer

ROBERT F. AMRHEIN
Vice President

ALDIS V. LIVENTALS
Vice President

SAMUEL H. GILLESPIE III
Vice President and General Counsel

WALTER R. ARNHEIM
Treasurer

CHARLES H. DUBOIS
Secretary

M. FRANCES KEETH
Controller

                                                                              61
<PAGE>

                                MOBIL CORPORATION
                 3225 GALLOWS ROAD, FAIRFAX, VIRGINIA 22037-0001


[Artwork BC]

<PAGE>

                           GRAPHIC APPENDIX LIST - 1996

Front Cover - Drawing of head and upper portion of Mobil Pegasus logo, in red, 
              fills most of the page.  To the right hand side of the page, above
              the Pegasus' head, are the words, "Mobil" and "The energy to make 
              a difference".  At the bottom right hand side of the cover are the
              words "1996 Annual Report".

Inside front cover - Left Side appearing vertically from bottom of page to top 
                     are enlarged letters -- "Returns to Shareholders".  Words 
                     "Average Annual" appear at middle left of page above a 
                      graph.

                      One Graph - middle left side.
                      Average annual returns to shareholders, Mobil share--price
                      appreciation plus reinvested dividends vs. Competitors, 
                      and S&P 500--1 year, 5 years, 10 years.

                      Center of page appearing from vertically from bottom of 
                      page to top are enlarged letters --  "Highlights" with 
                      "Financial" appearing above a table of "Financial 
                      Highlights".

                      Upper right side of page "Contents" appearing vertically 
                      from middle to top of page in enlarged letters. Table of 
                      Contents appears to the right.
 
Page 1 -  Top. Enlarged letters, "Mobil: The energy to make a difference."

          Photo.
          Left column, upper page:  Lucio A. Noto, Chairman, President
          and Chief Executive Officer

          Right side, vertical from bottom to top are enlarged letters -- 
          "Letter to Shareholders."
 
Page 4 -  Left Side appearing from bottom page to top are enlarged letters -- 
          "At a Glance" beside the word "Mobil"

          Upper middle is "Red Pegasus" logo in white circle background.

          Photo.
          Lower right side: Modern, floating production platform.

Page 5 -  Photo.
          Upper left side. Mobil tanker truck transporting motor fuels.

          Photo.
          Left middle-page Mobil employees reviewing molecular image on 
          computer screen.


Page  6 - Enlarged letters -- "Partnerships" vertically from bottom to top of 
          left margin.

          Photo.
          Upper middle-page: Mobil-PanEnergy gas marketing venture employees 
          working in a busy trading room.

Page 7 - Middle-page: Mobil-British Petroleum joint venture logo.

Page 8 - Enlarged letters -- "Growth" vertically from bottom to top of left 
         margin.

         Photo.
         Upper middle-page across onto next page: Mobil employees at work on a 
         drilling platform in Equatorial Guinea.
 
Page 9 -  Lower middle page - Map of West African coast.

Page 10 - Enlarged letters --  "Expansion" vertically from bottom to top of 
          left margin.

          Photo.
          Lower right side:  A tanker loading Qatar's first LNG exports.

Page 11 - Lower right side: Map of the Arabian Gulf showing the location of 
          Qatar and the North Field.

Page 12 - Enlarged letters -- "Service" vertically from bottom to top of left 
          margin.
 
          Middle of Page: Mobil Speedpass advertisement: "The Fastest Way to 
          Get Gas" Key ring transmitter pictured.

Page 13 - Photo.
          Full page: Customers and cashier at Mobil's "On the Run" convenience 
          store.

Page 14 - Enlarged letters --  "Opportunity" vertically from bottom to top of 
          left margin.
 
          Photo.
          Upper right side across onto next page: An oil field in Venezuela's 
          Orinoco Oil Belt.

          Photo.
          Lower middle-page: Map of Venezuela and surrounding countries.

Page 15 - Upper right side: Map of Asia-Pacific Region.

Page 16 - Enlarged letters --"Technology" vertically from bottom to top of left 
          margin.
 



          Photo.
          Center of page: Model of a molecule.

Page 17 -  Enlarged letters --  "Commitment" vertically from bottom to top of 
           right margin.
 
           Center of Page - Mobil environmental logo featuring sun, mountains 
           and ocean.

Page 18 -  Enlarged letters --"Financial" vertically from bottom to top of 
           right margin.
 
Page 20  - Two Bar Graphs:
 
           Top
           Income of Mobil (millions of dollars) for years 1992 through 1996 
           (excludes the LCM accounting method change in 1994).

           Bottom
           Total return to shareholders (per $100 invested on 12/31/91), S&P 
           500 and Mobil -- share price appreciation plus reinvested dividends 
           -- for years 1992 through 1996.

Page 21 -  One Bar Graph
           Annual dividends per share of common stock (dollars) for years 1987 
           through 1996.

Page 22 -  Two Bar Graphs:

           Top
           Mobil's Upstream Net Income and Operating Earnings, (millions of 
           dollars) for years 1994 through 1996.

           Bottom
           U.S. and international net production of oil and gas (thousands of 
           barrels daily of oil equivalent) for the years 1994 through 1996.

Page 23 -  Two Bar Graphs:
           Top
           Mobil's U.S. and international average crude oil sales prices, 
           (dollars per barrel) for years 1994 through 1996.

           Bottom
           Mobil's U.S. and international average natural gas sales prices, 
           (dollars per thousand cubic feet) for years 1994 through 1996.






<PAGE>
Page 24 - Two Bar Graphs:

          Top
          Mobil's Downstream Net Income and Operating Earnings, (millions of 
          dollars) for years 1994 through 1996.

          Bottom
          Mobil's U.S. and international refinery runs, (thousands of barrels 
          daily) for years 1994 through 1996.

Page 25 - Two Bar Graphs:

          Top
          Mobil's U.S. and international Downstream petroleum product sales 
          volumes, (thousands of barrels daily) for years 1994 through 1996.

          Bottom
          Mobil's U.S. and international Downstream petroleum product sales 
          revenues, (millions of dollars) for years 1994 through 1996.

Page 26 - Two Bar Graphs:
 
          Top
          Mobil's Chemical segment net income and Operating Earnings, (in 
          millions of dollars) are presented for years 1994 through 1996.
 
          Bottom
          Mobil's Chemical segment net sales to trade, (Petrochemicals and 
          Other in millions of dollars) are presented for years 1994 through 
          1996.

Page 30 - Two Bar Graphs:
          Top
          Total Revenues and Total Costs and Expenses for Mobil (millions of
          dollars) for years 1994 through 1996.

          Bottom
          Mobil's return on average shareholders' equity (in percent) for
          years 1994 through 1996 (excludes LCM accounting method change
          in 1994).

Page 32 - Two Bar Graphs:
          Top
          Total Debt of Mobil, U.S. and international (millions of dollars)
          for years 1994 through 1996.


<PAGE>
          Bottom
          Mobil's return on average capital employed (in percent) for years
          1994 through 1996 (excludes LCM accounting method change in 1994).

Page 34 - Bar Graph - Top
          Proceeds from sales of assets (millions of dollars) for years 1994
          through 1996.

          Mountain Graph - Bottom
          Mobil capital expenditures, exploration expenses and equity 
          investments (millions of dollars) for years 1994 through 1996.


Page 57 - Two Mountain Graphs:
          Top
          Year-end Market price per share of common stock (dollars) for years
          1986 through 1996.

          Bottom
          Debt-to-capitalization ratio (in percent) for years 1986 through
          1996.

Page 58 - Two Bar Graphs:
          Top
          Net crude oil and natural gas liquids proved reserves of Mobil
          (millions of barrels) for years 1992 through 1996.

          Bottom
          Net natural gas proved reserves of Mobil (billions of cubic feet) for
          years 1992 through 1996.


Page 59 - Bar Graph - Top
          Refinery Runs vs. Petroleum Product Sales (thousands of barrels
          daily) for years 1992 through 1996.

          Mountain Graph - Bottom
          Number of Employees (At year-end) for Mobil for years 1992 through
          1996, split between Petroleum Operations segment, Chemical segment
          and Other.

Page 60 - Enlarged letters appears "Shareholder Information" from bottom to top 
          of left margin.
 

Page 61 - Enlarged letters appears "Board of Directors" from bottom to top of 
          left margin.

 
          Photo
         (Inside Back  Fifteen-member group photo of Mobil's Board of Directors.
         Cover)


Back cover - Drawing of the wings of Mobil Pegasus in red fills most of the
             page.  Centered above the Pegasus' wings are the words, "Mobil
             Corporation," the address, and the telephone number.


<PAGE>