Introduction ExxonMobil, as we know it, came about from a merger in 1999. The original company, Imperial Oil, originated in Canada in the late 1800’s. Based on timeline history that can be viewed on the Exxon Mobil website, Imperial Oil as well as several other independent oil companies would ultimately be bought and taken over by the soon to be renamed Standard Oil. Running concurrently with Standard Oil in the early 1900’s was Mobil Oil. Mobil Oil would also be in positions to buy and take over smaller independent oil companies. In 1999 the two combined resources and merged into ExxonMobil. Industry and Competition
ExxonMobil is in the industry of oil and gas. They are considered one of the world’s largest traded international oil and gas companies in the public market. ExxonMobil maintains an overwhelming inventory of global oil and gas resources. They are considered one of the world’s primary players in refining and marketing petroleum products, and are establishing themselves as a chemical and technology company. ExxonMobil is currently operating in 47 countries in one of the above capacities as well as marketing to more than 120 countries (ExxonMobil, 2012, p4). Their portfolio currently includes a network of refineries, chemical businesses, and world-class projects that involve active exploration in 40 countries.
The financial statements support a positive investment decision; if you have patience and are not looking for a quick return. Historically, ExxonMobil has returned constant profits (Moskowitz, 2013, Table 1). Their financial statements support the claims that they know what they are doing not only with their industry, but with their assets. When you compare returns and ratios for ExxonMobil with their two nearest competitors, BP plc and Chevron Corporation, ExxonMobil continues to be in the lead and outperform the others in fundamental financial areas as noted by the returns posted (Moskowitz, 2013, Table 2).
Fiscal Year| 2009| 2010| 2011| 2012| Revenue $ in millions| 310,586| 383,221| 486,429| 482,295| Diluted EPS| 3.98| 6.22| 8.42| 9.70| Table 1 | ExxonMobil| BP| Chevron| Profit Margin| 10.86%| 6.05%| 11.89%| Return on Investment| 28.26%| 18.32%| 19.47%| Operating Cash Flow| 50.48 billion| 20.96 billion| 36.14 billion| Debt-to-Equity| .08| .35| .10| Table 2 Making the Decision Assessing the negatives with the positives can make this decision seem one-sided. Moskowitz points out in his article (Moskowitz, 2012, p1) that domestic demand is weak and revenue declined for year ending 2012. Again, if you are not looking for quick returns and turnovers, ExxonMobil seems to be a winner for long-term investors. ExxonMobil reports small but consistent dividends. Their return on investment is over 25%.
They have an operating cash flow in excess of $50 billion. Their management team is skilled with asset and capital allocation as well as with debt management. Their current CEO, Rex Tillerson, has the approval of almost 90% of the employees. Mr. Tillerson has been in the CEO position since 2006, and with the Exxon organization in some capacity since 1975 (Moskowitz, 2012, p1).
Last April, 2012, Exxon was put under a microscope in the investment world. Warren Buffett, legendary investor and businessman, sold all of his interest in the company. While T. Boone Pickens, legendary oil investor and businessman, retained over 94,000 shares in Exxon (Sharma, 2012, p4). This is the perfect example of the Wall Street man vs. the oil baron. Mr. Boone Pickens has ground floor knowledge of the oil industry.
“Although low natural gas prices in the short term are worrying some investors, it will eventually benefit bigger firms like Exxon as a lot of smaller debt laden natural gas producers will go out of business and Exxon can get their natural gas assets cheap” (Sharma, 2012, p4). This is the basis for takeovers and acquisitions. As the smaller companies die out and are no longer able to stay operational, the larger companies such as ExxonMobil, BP, Shell, and Chevron buy them for a fraction of what their true value is. Conclusion
ExxonMobil continues to be on the fast track of progress with no apparent slowing down. Their expansion in the industry includes refineries, chemical plants, and product logistics. ExxonMobil currently has active cites or business operations worldwide. ExxonMobil has strategic management in place to handle all forms of commerce related to maintaining the stability of the company as well as the financial position. With ongoing participation in worldwide projects, ExxonMobil is ensuring themselves a secure position at the top in the industry they are not only a part of, but continue to expand.
References ExxonMobil Corporation. (2012). 2012 Financial and operating review. Retrieved from http://www.exxonmobil.com/Corporate/ Moskowitz, D. (2013). Is Exxon Mobil a good investment in any environment? Wall St. Cheat Sheet. Retrieved from http://wallstcheatsheet.com/stocks/is-exxon-mobil-a-good-investment-in-any-environment Sharma, A. (2012). Investing in Exxon: Who should u follow? Buffett or Boone Pickens. The Motley Fool. Retrieved from http://beta.fool.com/theanalystblog/2012/04/25/investing-exxon-who-should-you-follow-buffett-or-boone-pickens
Figure 1. Taken from ExxonMobil Corporation 2012 Financial and operating review. Table 1. Taken from Wall St. Cheat Sheet. Table 2. Taken from Wall St. Cheat Sheet.