Download - ExxonMobil Competitive Analysis
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