Posted: May 13th, 2015
Exxon Mobil oil and Gas Company
Exxon Mobil Oil and Gas Company
Executive Summary
Exxon Mobil Corporation is an Oil and Gas company incorporated in the United States of American. The company was formed on 30 November 1999 after the merger of Mobil and Exxon to create a new corporation called ExxonMobil Corporation. The corporation has its headquarters in Irving, Texas. According to Forbes Global 2000 list the company is ranked number one in terms of revenue and the largest traded companies in the world. By the year 2007 the company had a net reserve of 72 billion oil equivalents in production. It’s also been ranked the world largest oil refiner with over 37 oil refineries in 21 countries all around the world.The company controls more than 3% of the world production of oil and about 1% of the world gas production. The company has over 82,000 employees throughout the brunches worldwide. Over the years, the company has grown and, it is now among the top ranked. A report in 2012 show that the company has grown so much that it is single handled can be able to determine America’s foreign policy and the whole nation fate. The company however due to its massive production control over the world has had a bad reputation of not caring about climate change. It’s notorious for drilling in major conflict areas and countries for example in Chad and the slow response to its oil spill in Alaska (Vassiliou, 2009).
Table of Contents
Merger between Mobil and Exxon companies. 5
Exxon Mobil financial earnings. 8
ExxonMobil Corporation Return on Average Capital Employed. 8
Comparison of Exxon Mobil with other companies. 10
Investing in Exxon Mobil Corporation. 11
Introduction
Exxon Mobil, Esso, and Mobil are companies that branched from ExxonMobil Company; which is a descendant of Standard Oil Company. ExxonMobil is a company that resulted when Exxon and Mobil formed a merger on 30th, November 1999. The company is also affiliated with Imperial Oil Company that is situated in Canada. Measuring by revenue, ExxonMobil is the world’s largest company, when evaluating using market capitalization, it is among the largest worldwide. The company in 2012 was ranked as by Forbes Global 2000 as the number one. The company is recognized not only in the state but also worldwide. The company has over 82,000 employees throughout the brunches worldwide (Harrison &Coussens, 2007).
Exxon
Exxon was a company incorporated in the United States of America in the early 1970s. It started as a trademark of Jersey Standard oil going by the brand name Esso, Enco and Humble brands before it was restricted from using the names on the American market. In the 1960s and 1970s, the company found it challenge to promoting itself; this is because unlike competitor companies, Shell and Texaco, Exxon as using different branding names. For this reason, the company decided to change the company’s name from Enco or Esso to Exxon and the corporate name changed to Exxon Corporation from Standard oil of New Jersey (Owen, 1995).
Mobil
Mobil Company was formed after the breakup of Standard oil in 1911; in 1920 the company changed its name from Socony to Mobil Oil. In 1931, the Company formed a merger with Vacuum oil to form Socony Vacuum. This company was operating in over 50 countries before it was dissolved in 1962 (Mobil Corporation, 1997). In 1963, the company changed its brand name to Mobil; this was during the 100th year celebration (Vassiliou, 2009). During World War II Mobil maintained as one of the largest oil company in United States, the company produced enough gasoline to be used by the Americas government during the world war. The company also produces petroleum products according to the automobile power that were coming up; the company was known to be innovative and was always coming p with new ideas (Mobil Corporation, 1997).
Merger between Mobil and Exxon companies
The merger between Mobil and Exxon was viewed as the largest merger ever undertaken. The merger presented revenue of $130.95 billion, $5.63 billion net income, and a total of 21 barrels. There was a bit of friction with antitrust but, it was concluded that the merger did not eliminate competitors as the company had other competitors in the field and the market were open for any other entrepreneur that will want to join (Weijermars, 2011). According to the report given by ExxonMobil the reason of the merger is to offer consumers with the best service in the industry, by offering new and improved machineries, and all the old refineries will either be closed down or be replaced with new refineries (Kaszynski, 2000). ExxonMobil used the merger to stay ahead of the competition. By the two companies coming together, there will be the reduction of cost when it comes to research, recovery and exploration (Parra, 2004).
The combining of the two different cultures, from Exxon and Mobile was not easy. Both companies had their strengths, engineering, and finance was Exxon Oil Company strength, while on the other hand, Mobile strength according to previous history was Deal making and marketing. Just as Lee Raymond a rigid leader, Exxon related the same way with Mobil. Due to the large market share and stability in business, Exxon automatically was the dominant company of ExxonMobil. According to the report realized by ExxonMobil in 2000, ExxonMobil highlighted how the merger had decrease expense, increased revenues, and there was a tremendous improvement in main global asset capital productivity (Skjaerseth, &Skodvin, 2003).
The report from the company of 2000, the company reported revenue enhancement of $900 million that was expected to be realized and grow during the years that follow. ExxonMobil merger used two key components, continuous base efficiencies and Synergies. The strategies that the company has put in place to deliver the set target and still be a head of the competition is aggressive asset management, selective investment, reduce capital working requirements, and refinement of its efficient capital structure. Today ExxonMobil is one of the largest oil and gas production in the world. The company offers both products and services not only for consumer use, but also for business use (Beattie, 2002).
The combining of the two different cultures, from Exxon and Mobile was not easy. Both companies had their strengths, engineering, and finance was Exxon Oil Company strength, while on the other hand, Mobile strength according to previous history was Deal making and marketing. Just as Lee Raymond a rigid leader, Exxon related the same way with Mobil. Due to the large market share and stability in business, Exxon automatically was the dominant company of ExxonMobil. According to the report realized by ExxonMobil in 2000, ExxonMobil highlighted how the merger had decrease expense, increased revenues, and there was a tremendous improvement in main global asset capital productivity (Skjaerseth, &Skodvin, 2003).
SWOT Analysis
ExxonMobil is the leading oil and gas production in the industry, with an enormous market share and a large number of asset capitals. The company also holds large share of revenue and has a wide market all over the world (Capitol.Net, 2010). Since it has been there for a long time, customers have a sense of security. On the down side, the company is not only accused of polluting the environment but it also has a record under the human right section of the of employee right, where the company is said to be under a cloud (Sawyer, 2012). This gave the company negative publicity, and it was not handled with care by the directors of the company. The performance in U.S is continually becoming weak upstream (Harrison &Coussens, 2007).
With the demand of energy demand increasing in economies developing countries at the same time, demand of liquefied natural gas all over the world. The company still has an opportunity to increase in terms of capital investments (Rayner, 2004). There has been recession of the economies that are developing this might lead to the rates of India and China energy consumption reducing and in the end affect ExxonMobil. There have numerous campaigns from different organization to go green. These campaigns aim to conserve the environment and conserve energy (Freedman, 1995).
Exxon Mobil financial earnings
The table below shows the financial earnings of ExxonMobil Corporation from the year 2005 to 2010 in Million Dollars the company has earned. The total revenue of the company has been increasing from 358,955 million dollars in 2005 to 383,221 million dollars in 2010. The net income of the company has also seen a growth when compared with 36,130 million dollars in 2005 to 45,220 in 2008 but a decline in 2010. The company’s total asset has seen a growth over the years with 208,335 million dollars in2005 to 233,323million dollars in 2010.
| Financial Data in USD millions of ExxonMobil Corporation | ||||||
| Year-end | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Total revenue | 358 955 | 365 467 | 390 328 | 459 579 | 301 586 | 383 221 |
| Net income | 36 130 | 39 500 | 40 610 | 45 220 | 19 280 | 30 460 |
| Total assets | 208 335 | 219 015 | 242 082 | 228 052 | 233 323 | |
| Total debt | 7 991 | 8 347 | 9 566 | 9 425 | 9 605 | |
Source: ExxonMobil Five Year Financial Overview.
ExxonMobil Corporation Return on Average Capital Employed
ExxonMobil Corporation has been on a growing tread over the years. A close analysis of its financial information reveals an increase on the return on average capital employed. The net income attributed to the company has increased from 19,280 million dollars in 2009 to 41,060 million dollars in 2011. This has on the other hand had a positive and promising growth on the return on average capital employed ratio from 16.3% in 2009 to 21.7% in 2010 and finally 24.2% in 2011. It’s an indication of return to investors who invest in the company (Henry, 2008).
Return on average capital employed 2011 2010 2009
(Millions of dollars)
Net income attributable to ExxonMobil $ 41,060 $ 30,460 $ 19,280
Financing costs (after tax)
Gross third-party debt (153) (803) (303)
ExxonMobil share of equity companies (219) (333) (285)
All other financing costs – net 116 35 (483)
Total financing costs (256) (1,101) (1,071)
Earnings excluding financing costs $ 41,316 $ 31,561 $ 20,351
Average capital employed $170,721 $145,217 $125,050
Return on average capital employed – corporate total24.2% 21.7% 16.3%
Return on Equity (ROE)
The table below shows the ExxonMobil Corporation return on equity ratio information from the year 2007 to year 2011.
Return on Equity (ROE)
2011 2010 2009 2008 2007
Selected Financial Data (USD $ in millions)
Net income attributable to ExxonMobil 41,060 30,460 19,280 45,22040,610
ExxonMobil share of equity 154,396 146,839 110,569 112,965 121,762
ROE, Comparison to Industry
Exxon Mobil Corp.1 26.59% 20.74% 17.44% 40.03% 33.35%
Industry, Oil & Gas 17.87% 13.70%11.68% 20.32% 23.88%
Source: Based on data from Exxon Mobil Corp. Annual Reports
Comparison of Exxon Mobil with other companies
When a comparison is done between ExxonMobil and other oil industry players the net income the company earns is so high and its one of the reason the corporation is ranked the best in the world. The table below shows a comparison of ExxonMobil Corporation net income earned from 2007 to 2011 with other companies in the oil and gas sector around the world (Keillor & Wilkinson, 2011).
Net Incomes of the Five Major Oil Companies
(Millions of dollars)
2007 2008 2009 2010 2011
ExxonMobil 40,610 45,220 19,280 30,460 41,060
Chevron 18,688 23,93110,483 19,024 26,895
BP plc.17,287 25,593 16,578-3,719 25,700
Royal Dutch Shell plc. 27,564 26,277 12,518 20,127 28,625
ConocoPhillips 11,891 -16,998 4,858 11,358 12,436
Total 116,040 104,023 63,717 77,250 132,916
Source: Oil Daily, Profit Profile Supplements, various dates and company earnings reports.
Returns to Investors for the Five Major Oil Companies, 2011
The table below shows a comparison of returns to investors between different oil and gas industry players around the world. ExxonMobil is ranked the best when it comes to the amount of dividend paid to investors in billion dollars in 2011.
Returns to Investors for the five major oil companies in 2011
(Billions of dollars)
Share
Repurchase Dividends
ExxonMobil 22.0 9.02
Chevron N/A 6.0
BP plc. N/A 4.07
Royal Dutch Shell plc. 1.1 10.5
ConocoPhillips 11.1 3.6
Source: Company earnings reports.
Investing in Exxon Mobil Corporation
The company has been in the market for a long time and this is assurance that the company is not about to collapse. When it comes to paying dividends to the investors, the company has been recorded as having dividends that increase every year. ExxonMobil was titled by Apple (APPL) as one of the most valuable firms in the State. The company is among the leading energy company in U.S and poses impressive earnings. The company has invested in various countries and if one country has financial drop, the other countries will boost the income. The company has a great return on average capital employed of 24.2% in 2011 and every investor will get a good return for any capital invested in the company. The profitability of the corporation is on the rise combined with a large capital reserve which will keep the company growing over the years. The company dividend when compared with other companies in the same industry is the best with a share repurchase value of 22 billion dollars in 2011 and a dividend pay value of 9.02 billion dollars to its investors (Reuvid, 2011).
Conclusion
ExxonMobil Corporation is a company that is formed by horizontal merger from Exxon and Mobil Oil Companies (Arnold, 2010). These companies are the direct descendant of Standard Oil Company that was a monopolistic company and was forced to shut down and dissolve into 34 branches. Both Exxon and Mobil were doing well in terms of market share and production. Despite the stiff competition in the industry, both companies managed to grow and extend not only in the state but also in other parts of the world. These two companies were known for different things Exxon was known for finance and engineering while Mobil had praises of how it could market and make deals. When these two companies came together, antitrust thought that it should intervene since both companies have large capital share.
These two companies by merging did not close the gasoline market but rather increased that level of competition. The company has taking advantage of the merger not only to increase profit, but also to do research on the areas that they can improve to give the needed product and services to consumers. The company also plans to expand all through the world and continue being the top oil and gas producing company (Damodaran, 2012).
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