S E T H P O R T E R

C O M P A N Y A N A L Y S I S : E X X O N M O B I L

Company Analysis: Exxon Mobil Corporation

Company Description

Exxon Mobile is based out of Irving Texas. The address is 5959 Las Colinas Boulevard, Irving, Texas 75039 2298, USA.

The contact information is the following:

Telephone: 1 972 444 1000

Fax: 1 972 44 1348

Website: www.exxonmobile.com (MarketLine Industry, pg.25-29).

About: Exxon Mobil is one of leaders in the Oil & Gas industry. They are considered one of the super majors. A super

major is an Oil & Gas company with capitalization of 100 Billion or more (S&P, pg.3). They are the world's largest publicly traded international oil and gas company (exxonmobile.com).“They are an integrated Oil & Gas company. They are engaged in the exploration and production refining and marketing of Oil & Gas. The company is also a major manufacturer and marketer of commodity petrochemicals. Including olefins, aromatics, polyethylene, and polypropylene plastics and a wide variety of specialty products. They conduct their business across the globe (MarketLine Industry, pg.25).”

As an integrated Oil & Gas company they operate through all three segments of the industry: Upstream, downstream and chemicals.

History: ExxonMobil was known until 1972 as Standard Oil Company, this former oil and natural resources merged

with Mobil Corporation as ExxonMobil in 1999 (Encyclopedia Britannica).ExxonMobil has been in business for over 125 years. They began as a regional marketer of kerosene in the U.S. They evolved grew, and merged with Standard Oil and became largest publically traded petroleum and petrochemical company in the world. They now operate globally and can be found in most of the countries in the world. Their most familiar brand names are the following: Exxon, Esso and Mobile (exxonmobile.com)

Industry Overview

Industry Description: “Companies in this industry develop and operate fields to extract crude oil and natural

gas. Major companies include Apache, ConocoPhillips, and Exxon Mobil (all based in the US), as well as BP (the UK), LUKOIL and Tatneft (Russia), National Iranian Oil Company, PETROBRAS (Brazil), Royal Dutch Shell (the Netherlands), and Saudi Aramco (Saudi Arabia).The global oil and gas exploration and production industry produces about 75 million barrels of oil per day and more than 100,000 billion cubic feet (Bcf) of natural gas annually. The largest oil-producing countries are Russia, Saudi Arabia, and the US. The largest natural gas producers are the US, Russia, Canada, and Iran. The US oil and gas exploration and production industry consists of about 5,000 companies with combined annual revenue of about $290 billion and is expected to have a high-growth rate over the next two years. Key growth drivers include rising demand for energy (Hoover’s Company Profiles).”

Competitive Landscape: The companies involved also deal with many different factors in production,

manufacture and distribution; including weighing the different global economic, political and environmental factors that are tied to profit. An example of this is explained by the S & P Industry Profile: How to Analyze Oil & Gas Production & Marketing, “The fortunes of oil and gas companies are tied to overall supply and demand issues that are reflected in oil and gas prices. Price changes affect industry sectors differently. For example, high prices for oil and natural gas benefit the upstream (exploration and production) companies but hurt the downstream (refiners) in the form of raw material costs (pg.1).” This affects the overall strength and profit of these companies, but many Oil & Gas companies are considered integrated, which means they are involved in all three sectors of the industry. “For integrated oil companies, the business diversification between the upstream and the downstream tends to mitigate the effects of oil and gas price fluctuations. Because they are usually more leveraged to the upstream, such companies general benefit from higher prices for oil and natural gas (pg.1).” This supply and demand runs the industry and the companies and even countries involved (many are state run nationalized institutions) in the Oil and Gas industry.

Products & Services

Exxon Mobil Corporation: Engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products. The company also transports and sells crude oil, natural gas, and petroleum products. It has approximately 37,228 gross and 31,264 net operated wells (Yahoo! Finance). This makes them a vertically integrated company.

Upstream: The upstream explores and produces crude Oil & Natural Gas. This segment of their business has operations in 36 countries and this includes five global companies. Besides Oil & Gas they are also active and engaged in power generation, ExxonMobil has interests in 16 Gigawatts of power generation worldwide including a power plant in China (MarketLine Industry, pg.25).

Midstream & Downstream: The downstream activities include refining, supply and fuels marketing. The refining and supply operations encompass a global network of plants, transportation systems, and distribution centers that provide a range of fuels, lubricants and other products to their global customers. The fuels marketing serve motorists around the world with more than 26.728 service stations and provide one million industrial and wholesale customers with fuel products(MarketLine Industry, pg.26).

Chemicals: This segment of their company manufactures and sells petrochemicals. They are an integrated manufacturer and marketer of olefins, aromatics, fluids, synthetic rubber, polyethylene, polypropylene, orientated polypropylene package films, plasticizers, synthetic base stocks, additives for fuels and lubricants, zeolite catalysts, and other products(MarketLine Industry, pg.26).

Key Employees

Chairman & Ceo: Rex W. Tillerson age 59 a successful engineer who rose through the company after starting in

1975.

2011 compensation: $2,387,000.00 salary, $4,368,000.00 bonus, $34,920,506.00 total compensation.

SVP, Treasurer and Principal Financial Officer : Donald D. (Don) Humphreys age 65.

2011 compensation: $1,171,000.00 salary, $2,994,000.00 bonus, $18,486,060.00 total compensation

SVP: Michael J. (Mike) Dolan age 58. 2011 compensation: $991,250.00 salary, $2,232,000.00 bonus, $15,206,997.00 total compensation

VP; President, ExxonMobil Exploration Company: Stephen M. Greenlee.

Global Environment

Global Overview: “ Exxon Mobil engages in oil and gas exploration, production, supply, transportation, and marketing worldwide. In 2011 it reported proved reserves of 24.9 billion barrels of oil equivalent, including its major holdings in oil sands through Imperial Oil. Exxon Mobil's 36 refineries in 20 countries have a throughput capacity of more than 6.2 million barrels per day. The company supplies refined products to more than 25,000 gas stations in 100 countries. Exxon Mobil is also a major petrochemical producer(Hoover’s Company Profiles).”

Global Holdings: Exxon Mobil has holdings in Europe, the US, and eastern Canada, the company is looking for new opportunities in West Africa (both onshore and off) in South America, and in the former Soviet Union. In 2011 the company agreed to spend $1 billion in a joint venture with Rosneft to explore oil and gas fields in the Black Sea (Hoover’s Company Profiles). Their proven reserves are 11,673 million barrels and 62.1 million acres of exploration in 33 countries. They also own a majority interest in Castle Peak Power Company which generates electricity in Hong Kong and main land China (MarketLine Industry, pg.26).

Global Industry Concerns: Economic, political and geopolitical concerns all are factors in the Oil & Gas industry. This is a supply and demand industry and if any of these become a concern the price for their product can skyrocket immediately, even with the companies’ reserves in play. An example of this in the last year is economic turmoil has led to lower demand. Specifically economic downturn in the EU, China and the US have all had economic issues, but slowly and sanctions on Iran which is threatening to close the Straight of Hormuz, unrest between Israel and Iran and led to higher prices of oil. Also, emerging markets such as India have had slow growth. This directly affects oil demand (S & P, pg.1). This is an extremely complicated market that is affected by countless elements and any of the global elements can change the makeup of ExxonMobil.

Industry & Company Risks

Industry wide risks: Economic, political and geopolitical concerns all are factors in the Oil & Gas industry.

This is a supply and demand industry and if any of these become a concern the price for their product can skyrocket immediately, even with the companies’ reserves in play. Transportation issues such as spillage from a tanker e.g., BP in 2010, the Keystone Pipeline controversy and other issues can cause industry wide impacts.

General Company Risks: The summary of the company market and the factors they face are broken down

into five sections: Buyer power, supplier power, substitutes, degree of rivalry and new entrants. This forms the market for their products. The buyer power is considered moderate as is the Supplier Power, New entrants are assessed as weak within the Oil & Gas market. The capital it takes to enter this market and be competitive against the international markets is extremely difficult to attain. The threat of substitutes within the Oil & Gas market is considered moderate, but in the future this is could change as reserves of Oil & Gas decline in the future. “Since oil and gas companies are typically large integrated players that benefit from the scale of their operations.” They have fierce rivalry within the oil and gas market (MarketLine Industry, pg.19).

ExxonMobil Risks: There are many risks for an integrated Oil & Gas company an example of this is the

transportation of their product. Exxon is being sued for $5 million after one if its pipelines burst, leading to an oil spill in Arkansas. This is a small amount of money for the oil giant but this crude spill can lead to more damage for the company, including clean up costs, lawsuits, loss of revenue, and negative public image which can cause havoc on the bottom line and lead to investors backing out (Google News).

Financial information & Trends

$ Million 2007 2008 2009 2010 2011

Revenues 404,552.0 477,359.0 310,586.0 383.221.0 486,429.0

Loss 40,610.0 45,220.0 19,280.0 30,460.0 41,060.0

Total Assets 242,082.o 228,052.0 233,323.0 302,510.0 331,052.0

TotalLiabilities

116,038.0 110,529.0 117,529.0 149,831.0 170,306.0

Employees 80,800 79,900 80,700 83,600 82,100

Key Financials: ExxonMobil recorded revenues of $486,429 million in the fiscal year ending in December 2011, an

increase of 26.9% compared to fiscal 2010. its net income was $41,060 million in fiscal 2011, compared to a net income of $30,460 million in the preceding year (MarketLine Industry, pg.26). They have grown as a company and have every indication of strong financial growth as the market continues to grow which it is projected to do.

Financial information & Trends

2012 Key Number vs. Competitors:

Exxon Mobil

Royal DutchShell

BP Chevron

Annual Sales $482.30B $481.70B $388.29B $241.91B

Employees 76,900 87,000 85,700 62,000

Market Cap $389.65B $217.39B $132.80B $210.52B

Trends: As projected from the key 2011 stats they are out performing their competitors

And this should hold true into the future with their strong reserves and acreage.

Financial information & Trends

Earning projections:

News & Stocks

Company News: ExxonMobil was facing a drastic cut in their resources through losing access to them in

Nigeria. Nigeria, Africa’s top oil producer, is selling majority stakes in power plants and letting private investors acquire as much as 60 percent holdings in six state-owned transmission and 11 power-distribution companies spun out of the former state- owned utility. ExxonMobil is one of these buyers and made a deal with the government to provide natural gas to power companies while Nigeria also undertook a partial-risk guarantee, backed by the World Bank, to ensure stable gas supply to its biggest plant, the 1,320-megawatts Egbin station in the southwest. The West African nation also started the transfer of power assets to buyers by certifying part payments made by on 15 state-owned companies(BloombergEnergy). The Oil spill previously mentioned in Arkansas has been a embarrassment for the company but they are making inroads and progress in the area.

General Company Stock information: Yahoo! Finances rates Exxon Mobil Corporation as a buy. The

company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. These strengths outweigh the fact that the company shows low profit margins. They also pay dividends and are projected to grow in the future.

Stock current pricing: Exxon Mobil Corporation (XOM) -NYSE 89.30 Up 1.21(1.37%) 4:00PM EDT|After Hours : 89.25 Down 0.05 (0.06%) 6:09PM EDT

Conclusion

Exxon Mobil is one of the giants of the industry. They are strong in their oil and natural gas reserves with

abundant acreage of unproven plays to explore in the future. They are strong in multiple areas across many different industries and areas of the globe. Their public image is strong even with the recent pipeline burst. Their diverse portfolio and interest e.g., chemicals, alternative power, and recent acquisitions in Africa and China project profits and stability in the near future. The financial analysts project growth in the future and as an industry all signs point to continued steady and profitable growth until at least 2018. In an industry that is fiercely competitive they are competing and out performing many of their top competitors; and with an industry that is extremely hard to break into they don’t face the threat of new entrants in the market. Financially this is a steady and profitable company that is low risk and is poised to stay at the top of the market in the future, with their diverse interests and holdings, but their exploration and sales of Oil & Natural gas is still their top priority and is lucrative. Exxon Mobil as an international conglomerate is one the strongest companies in the world and most profitable industries. As an investor is a high priced stock that should show steady growth over time.

Reference

(2013) “BloomberyEnergy.” Retrieved from: http://www.bloomberg.com/energy/

Encyclopedia Britannica Retrieved from: http://www.britannica.com/EBchecked/topic/199234/Exxon-Corporation

(2013). “Exxon Mobile” Retrieved from: http://www.exxonmobil.com/Corporate/default.aspx

(2013) “GoogleNews” Retrieved From: http://www.fool.com/investing/general/2013/04/08/exxonmobil-reminds-us-

of-the-risks-of-pipelines.aspx

(2013) “Hoover’s Company Profiles.”

(June 2012) “Oil & Gas in The United States.” MarketLine Industy Profile. Retrieved from: Business Source Complete.

(2012) Standard & Poor’s Industry Surveys. Retrieved from: Standard & Poor’s net Advantage.

(2013) Yahoo! Finances Retrieved from: http://finance.yahoo.com/q/pr?s=XOM+Profile