“ExxonMobil is the world’s second largest publicly traded company when measured by market capitalization” (Exxon Mobil Corporation Announces 2007 Reserves Replacement).

Introduction

This work is dedicated to the learning of the analysis of a public American firm, which contains general review of the firm’s background and its competitive position and a detailed analysis of its financial performance. I have chosen an oil company Exxon Mobil, which is of interest to me. Exxon Mobil is the world’s largest integrated oil company (ahead of Royal Dutch Shell and BP). It will be also compared with the British Petroleum company.

Part I

1. 1.     Background

The petroleum industry daily faces with a challenge of keeping the environment clean while producing, transporting, refining and marketing. More than 65 percent of America’s energy is supplied by oil and natural gas industry of United States of America.  However, some risk is involved with supplying homes, businesses, schools, hospitals, and the corner gasoline station, thereby such risk is seemed to be occurred. Exxon Mobil is the world’s largest integrated oil company (ahead of Royal Dutch Shell and BP). Over the last 125 years, ExxonMobil has evolved from a regional marketer of kerosene in the U.S. to the largest publicly traded petroleum and petrochemical enterprise in the world.

According to Bender, Exxon is a direct descendant of the Standard Oil Company of Ohio, the corporation John D. Rockefeller started in 1870, and 5 years after he began refining oil in Cleveland, by 1878 Standard Oil, in collusion with other Rockefeller companies, controlled about 85% of the country’s oil industry (32). Such total control was achieved by monopolizing nearly every transportation facility in the oil regions of the country. Certainly, by 1907 this company controlled 67 companies in all phases of the oil industry. Nowadays 3 of the “7 sisters”(the world’s largest oil companies) are definitely products of that split: Exxon, Standard Oil of California (Chevron), and Mobil Oil.

2. Industry Characteristics and Trends

145 thousands employees are working in the ExxonMobil and they are committed to the pursuit of operational excellence. This organization does this by delivering safe, reliable operations, improving energy efficiency, and maintaining strong business controls. Gibb stated that maximizing the value of resources – through disciplined investments, developing breakthrough technologies, improving processes, and integrated operations – generates the most benefit for resource owners, society, and our shareholders (152). However, all the company’s activity can be divided into such process:

• Exploration (strategy is to identify, evaluate, pursue, and capture the highest quality opportunities around the world);
• Development (focusing on disciplined investment decisions and industry-leading project execution to deliver superior returns from Upstream projects);
• Production (the most cost-effective technology and operations management systems are applied to maximize the commercial recovery of hydrocarbons);
• Natural Gas and Power Marketing (network of commercial experts and knowledge of global energy markets are used for capture the full value of growing gas and power markets);
• Chemical (it is a high degree of raw material integration)and others.

The ExxonMobil holds exploration and production acreage in 38 countries of all over the world and definitely conducts production operations in 23 countries around the world. During past five years, this company has invested more than $5 billion in technology, which led them to the high quality of products they produce.

Next graph depicts the percentage of jobs since July 2008, the following has occurred.

1. 3.  Competition

For the beginning, I want to show you the top of ExxonMobil corporation competitors.

The ExxonMobil has competitors in different spheres the company works in. further still, all these spheres were described earlier in this paper. It is said to big companies have large economies of scale in production, rather small ones may compete by producing specialty products (a large number), or even by operating a single plant highly efficiently.

According to recently statistics, the main competitor of the ExxonMobil Company is the British Petroleum Company.

BP or BO (Big Oil) is the world’s third-largest integrated oil concern (after Exxon Mobil and Royal Dutch Shell). It should be mentioned that BP explores for oil and gas in nearly 30 countries and already has proved reserves of 18.2 billion barrels of oil equivalent. However, in the United States of America BP is seemed to be the largest oil and gas producer in the, a top refiner, who processes more than 3.8 million barrels of crude oil per day.

Part II

1. 1.     Revenue growth

In this part is discussed revenue of the ExxonMobil Company.

However, the main competitor’s income statements of this company (BP) are such:

The ExxonMobil Company’s total revenue for the each year from 2002 to 2006 is rather high. In the year 2002 it was 204506 millions dollars, however, in the 2003 it grew on 32548 millions dollars. In 2006, the revenue was over 377600 millions dollars.

2. DuPont Rations 

Wall stated ExxonMobil’s reserves were 72 billion oil-equivalent barrels at the end of 2007 and, at current rates of production, expected to last over 14 years.  The reserve additions made during this period comprise a diversity of resource types and have broad geographical representation (112). ROI in 2008 year was: ROI = 45.22 billion/ 3.7 billion * 3.7 billion/ 228.052 billion = 45.22 billion/228.052 billion = 0.16 billions.

Roe in 2008 was ROE = 45,220.0 million/3.7 billion * 3.7 billion/228.052 billion * 228.052 billion/112.965 billion = 0.4 billion.

3. Other Relevant Ratios

According to a report of the Congressional Research Service, the windfall profit tax of the 1980s reduced domestic oil production as much as 6 percent, and increased imports as much as 16 percent. However, in a March 1999 report, the Council for Economic Priorities ranked Exxon as the 2nd most environmentally sound oil company.

4.    Conclusion

Hidy stated that the world’s largest industrial corporation, Exxon operates in over 100 noncommunist countries throughout the world. Its principal properties in the western hemisphere are in Texas, Louisiana, and Illinois, but it also has major production facilities in the Canadian provinces of British Columbia and the Northwest Territories (133).

a.    Financial Performance

There is a Financial important data below, which is definitely important in learning company’s activity.

Exxon Mobil Corporation Balance Sheet helps to understand how profitable and successful the corporation is:

b.    Recommendations

It will be helpful to gain next information about the ExxonMobil Company. “With a 10-year average replacement ratio of 112 percent, ExxonMobil has continued to replace annual production with new, quality reserves additions,” said Rex Tillerson, Exxon Mobil Corporation’s chairman and chief executive officer.

Part III

1.    Shareholder Performance

Exxon Mobil Corporation Balance Sheet

ExxonMobil’s statements, plans, actions, and investments on climate change and clean energy lag behind competitors like BP and Royal Dutch Shell. ExxonMobil’s shareholders bear a substantial financial and competitive risk because of the company’s lack of strategic focus on R&D and deployment of clean, renewable energy technologies. Next the ExxonMobil Corporation’s ownership will be depicted.

a.    Price

However, stable tax policies are critical to meeting America’s growing energy needs. Such taxes play a great role in attracting this scale of investment. It should be noticed that in the past five years, this enormous company’s (ExxonMobil) total U.S. tax expenses tax payment has increased as oil prices have increased. It is obvious, during tempting to some, raising taxes on energy companies, mostly while periods of high prices, may be counterproductive. Moreover, with consumers of America feeling the impact of higher fuel prices, no change would be made to tax policy, which may influence them even further.

From 2004 to 2008 our U.S. tax bill ($67.6 billion), including all forms of taxation, exceeded our U.S. earnings ($49.0 billion) by $18.6 billion.

b.    Return

While ExxonMobil’s worldwide profits have grown, their worldwide income taxes have grown even more. From 2004 to 2008, their earnings grew by 79%, but our income taxes grew by 130%.

c.    P/E

ExxonMobil’s P/E is average for its industry. Exxon Mobil Corporation Stock Quote (NYSE: XOM):

d.    Valuation

Current valuation of the ExxonMobil Corporation can be illustrated by next table:

 Valuation Ratios:

Stock

Industry

S&P 500

Stock's 5Yr Average

Price/Earnings

16.4

8.6

11.4

12.1

Price/Book

2.8

1.9

2.2

3.6

Price/Sales

1.0

0.6

0.9

1.1

Price/Cash Flow

11.1

5.2

3.5

7.5

Dividend Yield %

2.6

2.6

1.9

__

Forward Price/Earnings

9.1

__

13.9

PEG Ratio

1.5

__

1.6

PEG Payback (Yrs)

6.5

__

__

2. Recommendations 

Talking about ExxonMobil Corporation’s environment, should be mentioned that it was criticized by major environmental advocacy groups. Moreover, Greenpeace listed Exxon as №1 Climate Criminal (it was in 2003). ExxonMobil has alleged crimes consist of the sabotage of efforts to operate with climate change. However, the fraudulent manipulation of peer reviewed scientific researches and organizations, misleading and outright lying to the population of the United States of America, its government officials and the global community in general. Definitely, this company is the world’s largest integrated oil company.

References

1       Bender, Rob, and Tammy Cannoy-Bender. An Unauthorized Guide to: Mobil Collectibles — Chasing the Red Horse. Atglen, Pennsylvania: Schiffer Publishing Company, 1999.

2       Gibb, George S., and Evelyn H. Knowlton. The Resurgent Years, 1911-1927: History of Standard Oil Company (New Jersey). New York: Harper & Brothers Publishers, 1956.

3       Sternberg, Bob.  The Exxon Valdez Oil Spill : Ten years after The wounds remain raw as Alaskans try to collect $5 billion from Exxon. Minneapolis lawyer Brian O’Neill is leading their fight.
Star Tribune: Newspaper of the Twin Cities.  (Minneapolis, MN), March 7, 1999 , p. 1A .

4       Groppelli, Angelico A.; Ehsan Nikbakht (2000). Finance, 4th ed. Barron’s Educational Series, Inc.. pp. 444–445

5       Wall, Bennett H. Growth in a Changing Environment: A History of Standard Oil Company (New Jersey) 1950-1972 and Exxon Corporation (1972–1975). New York: McGraw-Hill Book Company, 1988.

6        Hidy, Ralph W., and Muriel E. Hidy. Pioneering in Big Business, 1882-1911: History of Standard Oil Company (New Jersey). New York: Harper & Brothers Publishers, 1955.