COLOGNEBUSINESSSCHOOL(CBS)

CompetitiveAnalysisofExxonMobil

TermPaperfor“InternationalPlanningandOrganizationalDevelopment”SummerSemester2016Lecturer:Dr.IharSahakiantsRaghuVinodMA15inInternationalMediaandMarketingStudent-No.1155800002

TableofContent

Introduction:CompetitiveAnalysisofExxonMobil..........................1

Chapter1.StrengthsofExxonMobil................................................21.1.Robustresearchanddevelopmentcapabilities.........................21.2.Extensiveupstream,downstreamandchemicaloperation.......2

Chapter2.WeaknessesofExxonMobil............................................42.1.Decliningfinancialperformanceandcapital..............................42.2.1TotalRevenue.......................................................................42.2.2ReturnonCapitalEmployedorROCE...................................42.2.3NetIncome............................................................................52.2.4OperatingProfit....................................................................6

2.2.Increasingfinancialleverage......................................................6

Chapter3&4-OpportunitiesandThreatsforExxonMobil..............83.OpportunitiesforExxonMobil......................................................83.1.Risingglobalenergydemand..................................................83.2.IncreasingdemandforLNGglobally.......................................8

4.ThreatsfacingExxonMobil............................................................84.1Environmentalregulations.......................................................84.2.Challengingindustryenvironment..........................................8

Conclusion:FutureOutlookforExxonMobil..................................10

References:...................................................................................11

ListofFigures:Figure1:ExxonMobilTotalInvestments,FY2011–FY2015

Page2

Figure2:ExxonMobilTotalRevenue,FY2011-FY2015

Page4

Figure3:ExxonMobilROCE,FY2011–FY2015

Page5

Figure4:ExxonMobilNetIncome,FY2011–FY2015

Page5

Figure5:ExxonMobilOperatingProfit,FY2011–FY2015

Page6

Figure6:ExxonMobil–TotalDebtandTotalCapital,FY2011–FY2015

Page7

Figure7:ExxonMobil–DebttoCapitalRatio,FY2011–FY2015

Page7

ListofTables:Table1:SWOTAnalysisofExxonMobilTable2:ExxonMobilDebt-to-Capital,FY2011–FY2015

Page1

Page6

1

Introduction:CompetitiveAnalysisofExxonMobilSustainabledevelopment isan importantfacetofthemodernenergysectorandthis

paper,aspartofagroupassignmentfocusesonthestrategicaspectsofExxonMobil’s

businessoperationsoutlinedinTable1andexaminesthecompany’sstrategicvaluein

theglobalenergysector.

Table1:SWOTAnalysisofExxonMobilCorp

Source:MarketLine,(2015),p.29

Strengths Weakness• Robustresearchanddevelopment

capabilities�• Extensiveupstreamanddownstream

operations

• Decliningfinancialperformanceand

capitalefficiency• IncreasingFinancialLeverage

Opportunities Threats

• Risingglobalenergydemand• IncreasingdemandforLNGglobally

• Challengingindustryenvironment�• Environmentalregulations

2

Chapter1.StrengthsofExxonMobil

1.1.RobustresearchanddevelopmentcapabilitiesGlobalenergydemandisexpectedtorisebyabout35percentto40percentbetween

2010and2040(ExxonMobil,2016b,p.64).Giventhistrend,ExxonMobilhasmoreor

lesskeptitsinvestmentstreamconstantwiththelatestfigurebeingUS$28.25Billionin

2015.(seeFigure1).

Figure1:ExxonMobilTotalInvestments,FY2011–FY2015

Source:MarketWatch,(2016).Retrieved2/4/2016fromhttp://marketwatch.com

1.2.Extensiveupstream,downstreamandchemicaloperationUpstreamoperationsaredefinedastheexploration,production,anddevelopmentof

crude oil and natural gas, while downstream operations are transporting, selling

petroleum,crudeoil,andnaturalgasproducts.(Datamonitor,2010).

In2015,Exxon’supstreamsegmentrecordedearningsofUS$7.1Billiondownfromnet

profit of US$20.4Billion in FY2014 while its downstream net earnings increased to

US$6.6Billion,comparedtoUS$3.1Billionintheprecedingyear(ExxonMobil,2016a).

29.72

30.36 30.21

28.93

28.25

27

27.5

28

28.5

29

29.5

30

30.5

31

2011 2012 2013 2014 2015

TotalInvestmentsandAdvances(valuesinbillionUSD)

3

Despitenotbeing themainstream revenuegenerator for ExxonMobil, the chemicals

segmentrecordedearningsofUS$28.13BillioninFY2015,comparedtoUS$38.17Billion

inFY2014(StockAnalysisonNet,n.d.).

Inthepetrochemicalsegment,ExxonMobilChemicalisanintegratedmanufacturerand

global marketer of olefins, aromatics, fluids, synthetic rubber, polyethylene,

polypropylene,orientedpolypropylenepackagingfilms,plasticizers,syntheticlubricant

basestocks,additivesforfuelsandlubricants,zeolitecatalysts,andotherpetrochemical

products. During FY2014, the company sold a total of 24.2 million metric tons of

chemicalprimeproducts (MarketLine,2015,p.4).

Givenhowmanypetrochemicalproductsareconsumeddailyandcouldgeneratemore

revenues in forthcoming years, Exxon has focused extensively on petrochemicals by

undertakingtwonotableprojectsoutlinedbelow.

1.ExxonMobilenteredintoanagreementwithPratt&WhitneyRocketdynetodevelop

next-generationtechnologytoconvertcoal,coke,orbiomasstosynthesisgas(carbon

monoxideandhydrogen)(MarketLine,2015,p.7).

2. With a total investment of about $5 billion, ExxonMobil's set up its first fully

integrated refining, petrochemicals, and fuels marketing project with foreign

participationinChina(MarketLine,2015,p.8).

4

Chapter2.WeaknessesofExxonMobil

2.1.DecliningfinancialperformanceandcapitalThefollowingfinancialratioswillhelpusanalyzeExxonMobil’sfinancialweaknesses:

2.2.1TotalRevenue

Thecompany’srevenueshavesteadilydeclinedby45%fromUS$467.02Billionin

FY2011toUS$259.49BillioninFY2015(seeFigure2).

Figure2:ExxonMobilTotalRevenue,FY2011-FY2015

Source:Statista,(n.d.).Retrievedon2/4/2016fromhttp://statista.com

2.2.2ReturnonCapitalEmployedorROCEROCEmeasurestheperformanceofthecompanyinrespecttothecapitalemployedand

a ROCE of 4.56% in FY2015 reflects Exxon Mobil's inability to deploy its capital in

profitable avenues thereby indicating a need for improvingoperating efficiency (see

Figure3).

467.02 451.51420.83

394.1

259.49

0

50

100

150

200

250

300

350

400

450

500

2011 2012 2013 2014 2015

TotalRevenue(valuesinbillionUSD)

5

Figure3:ExxonMobilROCE,FY2011–FY2015

Source:NASDAQ(2016b).Retrievedon3/4/2016fromhttp://nasdaq.com

2.2.3NetIncomeIn FY2015, Net Income was recorded as US$16.15Billion, a 60.67% decrease from

FY2011(seeFigure4).

Figure4:ExxonMobilNetIncome,FY2011–FY2015

Source:MarketWatch,(2016).Retrieved2/4/2016fromhttp://marketwatch.com

18.5

14.65

11.96

4.56

0

2

4

6

8

10

12

14

16

18

20

2012 2013 2014 2015

ROCEin%

41.0644.88

32.58 32.52

16.15

0

5

10

15

20

25

30

35

40

45

50

2011 2012 2013 2014 2015

NetIncome(valuesinUSDbillion)

6

2.2.4OperatingProfitExxonMobil’soperatingprofitdecreasedfromUS$34.08BillioninFY2014toUS$12.883

MillioninFY2015-a76%decrease(seeFigure5)

Figure5:ExxonMobilOperatingProfit,FY2011–FY2015

Source:StockAnalysisonNet,(n.d.).Retrieved1/4/2016fromhttps://stock-analysis-on.net

2.2.IncreasingfinancialleverageWithExxonMobil’s totaldebt inFY2015at$38.68Billion, thecompany’snetdebt to

capital(asapercentage)hasincreasedfrom0.10to0.18(seeTable2).

Table2:ExxonMobilDebt-to-Capital,FY2011–FY2015

(USD $ in Billions) 2015 2014 2013 2012 2011

Notes and loans payable 18.762 17.468 15.808 3.653 7.711

Long-term debt 19.925 11.653 6.891 7.928 9.322 Total debt 38.687 29.121 22.699 11.581 17.033

Total ExxonMobil share of equity 170.811 174.399 174.003 165.863 154.396

Total capital 209.498 203.520 196.702 177.444 171.429

Debt to capital ratio 0.18 0.14 0.12 0.07 0.10 Source:StockAnalysisonNet,(n.d.).Retrievedon1/4/2016fromhttps://stock-analysis-on.net

54.149.88

40.334.08

12.88

0

10

20

30

40

50

60

2011 2012 2013 2014 2015

OperatingProfit(valuesinUSDbillion)

7

Figure6:ExxonMobil–TotalDebtandTotalCapital,FY2011–FY2015

Source:StockAnalysisonNet,(n.d.).Retrievedon1/4/2016fromhttps://stock-analysis-on.net

Figure7:ExxonMobil–DebttoCapitalRatio,FY2011–FY2015

Source:StockAnalysisonNet,(n.d.).Retrievedon1/4/2016fromhttps://stock-analysis-on.net

17.033 11.581 11.58129.121 38.687

171.429 177.444196.702 203.52 209.498

0

50

100

150

200

250

2011 2012 2013 2014 2015

TotalDebt(inbillionUSD) TotalCapital(inbillionUSD)

0.1

0.07

0.120.14

0.18

00.020.040.060.080.1

0.120.140.160.180.2

2011 2012 2013 2014 2015

DebttoCapitalRatio

DebttoCapitalRatio

8

Chapter3&4-OpportunitiesandThreatsforExxonMobil

3.OpportunitiesforExxonMobil

3.1.RisingglobalenergydemandAccording to Exxon Mobil’s estimates, demand for crude oil is expected to rise by

approximately30%through2040withagrowingshareofthisdemandledbydeveloping

economiessuchasChinaandIndia(ExxonMobil,2014,p.6).

3.2.IncreasingdemandforLNGgloballyWithAsiaandAsiaPacificmarketscontinuingtodominateLNGimportsatacombined

75%ofglobaldemand,Exxonhas initiatedseveralkeyprojects toandstrengthen its

market presence globally. For example, Exxon Mobil started project in Papua New

Guineathatincludesgasproductionof6.9milliontonsperyear(ExxonMobil,2014,p.

30).

4.ThreatsfacingExxonMobil

4.1EnvironmentalregulationsWith rising awareness of the damage to the environment caused by oil and energy

sectorintheformofglobalwarmingandspills,Exxonissubjecttovariousgovernment

environmentalregulationsandthesehaveledthecompanytoincreaseinvestmentin

refininginfrastructureandproductionofcleanfuelsaswellasmonitoremissions.

4.2.ChallengingindustryenvironmentWith thepriceofBrentCrude, themain internationalbenchmark, tradingat around

approximately$45.11abarrel(NASDAQ,2016a),thereasonforhistoriclowoilprices

areoutlinedbelow.

• UnitedStatesdomesticproductionhasnearlydoubledoverthelastseveralyears

therebypushingouttraditionaloilproducerstocompeteforAsianmarketsand

leadingtodropinoilprices(TheNewYorkTimes,2016).

9

• StrongUSdollarmeanstheUnitedStatesisnolongerimportingoilbutrather

exportingitsownduetoextensiveshaleoildeposits.Consequently,witha

reductionintheoutflowofU.S.dollarstowardsOilpurchases,theU.Sdollar

hasgottenstrongerwhilevalueofOilhasdroppedduetolessdemandand

moresupply.

• Withvehiclesbecomingmoreenergyefficientaswellaseconomicuncertainty

inEurope,demandforfuelisnotparticularlystrong(TheNewYorkTimes,

2016).

• Totaloilsupplybyyear-end2015was95.74millionbarrelsperdayandin2016,

itisexpectedtorisetoover96.44millionbarrelsperday(EIA,2016).This

showsthatnotonlyisthemarketoversupplied,butsupplyisactuallyincreasing

andconsequently,thiswillcontinuetoputpressureonoilpricesanddrivesit

furtherdown.

10

Conclusion:FutureOutlookforExxonMobilWithnewinnovationsinrenewablesourcesofenergy,increasinguseofenergy-efficient

andloweremissionfuels,fluctuationsinoilsupplyanddemand,aswellasgovernment

sponsoredenvironmentalregulations,ExxonMobil’sprofitmarginswillcontinuetostay

facestrongheadwindsfortheforeseeablefuture.

As this competitive analysis of ExxonMobil is a part of a groupwork, a followup to

CompetitiveAnalysisonExxonMobil - aperspectiveonchangingbusiness contextof

ExxonMobilwillbeavailableforreferenceinanotherpublication.

Wordcount-1253

11

ReferencesDataMonitor (2012). ExxonMobil Corporation Sustainability Case Study. Reference

Code:EN00001-001

EIA=EnergyInformationAdministration(2016).SHORT-TERMENERGYANDSUMMER

FUELSOUTLOOK.Retrieved14/4/2016from

https://www.eia.gov/forecasts/steo/report/global_oil.cfm

ExxonMobil (2014). Summary Annual Report 2014. Retrieved 4/4/2016 from

http://cdn.exxonmobil.com/~/media/Global/Files/Summary-Annual-

Report/2014_Summary_Annual_Report.pdf

ExxonMobil (2015). Financial and Operating Review. Retrieved 4/4/2016 from

http://cdn.exxonmobil.com/~/media/global/files/financial-

review/2015_exxonmobil_financial_and_operating_review.pdf

ExxonMobil(2016a).ExxonMobilEarns$16.2Billionin2015;$2.8BillionDuringFourth

Quarter. Retrieved 4/1/2016 from http://news.exxonmobil.com/press-

release/exxonmobil-earns-162-billion-2015-28-billion-during-fourth-quarter

ExxonMobil(2016b).TheOutlookforEnergy:AViewto2040.Retrieved4/4/2016from

http://cdn.exxonmobil.com/~/media/global/files/outlook-for-energy/2016/2016-

outlook-for-energy.pdf

MarketLine (2015). Company Profile- Exxon Mobil Corporation. Reference Code:

8AF71533-1BFD-42F6-B766-4F43DE8D664B

MarketWatch(2016).AnnualFinancialsforExxonMobilCorp.Retrieved4/2/2016from

http://www.marketwatch.com/investing/stock/xom/financials

NASDAQ (2016a). Crude Oil. Retrieved 24/4/2016 from

http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=5y

NASDAQ (2016b). XOM - Company Financials. Retrieved 3/4/2016 from

http://www.nasdaq.com/symbol/xom/financials

12

TheNewYork Times (2016).Oil Prices:What’s Behind theDrop? Simple Economics.

Retrieved3/4/2016fromhttp://www.nytimes.com/interactive/2016/business/energy-

environment/oil-prices.html

Statista (n.d.). ExxonMobil's revenue from 2001 to 2015. Retrieved 2/4/2016 from

http://www.statista.com/statistics/264119/revenue-of-exxon-mobil-since-2002/

StockAnalysisonNet(n.d.).ExxonMobilCorp.FinancialAnalysisandStockValuation.Retrieved 1/4/2016 from https://www.stock-analysis-on.net/NYSE/Company/Exxon-

Mobil-Corp

13

Affidavit

IherewithdeclarethatthefollowingworkIhavepreparedismyownwithouttheuseofmaterialsotherthanthosecited.

Place:Cologne,Germany

Date:06.05.2015

Signature