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ExxonMobil

Exxon Mobil History

Congress's passage of the Sherman Anti-Trust Act of 1890, eventually led to the dissolution of the Trust in 1892

The Standard Oil Interest was formed and in 1899 the Standard Oil of New Jersey became its holding company.

In May 1911, the United States Supreme Court declared Standard Oil Company of New Jersey an "unreasonable" monopoly and ordered it to dissolve, resulting in 34 distinct and separate companies.

• The Standard Oil Company of New Jersey would become Exxon

• The Standard Oil Company of New York would become Mobil

• 1999 Exxon and Mobil merged and become the world's largest energy corporation

• John D. Rockefeller and partners formed the Standard Oil Company of Ohio in 1870

• In 1882, Rockefeller and partners formed the Standard Oil Trust to unify what then numbered about 40 companies.

• The Trust formed Standard Oil Company of New Jersey New York.

• By 1889, the Trust established itself as a vertically integrated organization.

Strategic Analysis

ExxonMobil is the world’s largest publicly traded international oil and gas company. They are the world’s largest refiner and marketer of petroleum products, and their chemical company ranks among the world’s largest. They operate in most of the world's countries and are best known by their familiar brand names: Exxon, Esso and Mobil. They make the products that drive modern transportation, power cities, lubricate industry and provide petrochemical building blocks that lead to thousands of consumer goods .ExxonMobil uses innovation and technology to deliver energy and petrochemical products to meet the world’s growing demand. Extensive research programs support operations, enable continuous improvement in each of business lines, and explore new and emerging energy sources and technologies.

Vision and Mission

Vision:

Exxon Mobil Corporation aspires to be at the leading edge of competition in every aspect of business. That requires the Corporation's resources — financial, operational, technological, and human to be employed wisely and evaluated regularly

Mission:

Exxon Mobil Corporation is committed to being the world's premier petroleum and petrochemical company. To that end, we must continuously achieve superior financial and operating results while simultaneously adhering to high ethical standards.”

ExxonMobil Brands Customers in the United States have come to respect and rely on Exxon-branded fuels,

services and lubricants for their personal and business needs. Customers around the world have come to respect and rely on Esso-branded fuels,

services and lubricants for their personal and business needs. Marketed around the world, Mobil is known for performance and innovation.  Mobil is

recognized for its advanced technology in fuels, lubricants and services.

BCG Matrix

BCG – Star (Exploration and production (E&P) business)

It is the leading business segment and generates plenty of cash.

E&P also uses large amounts of cash. More specifically, conventional oil E&P has been a “star,” though growth rate has been declining compared to that of natural gas.

BCG – Cash cow (Chemical operation)

ExxonMobil’s Chemical operation has been generating a proportionally high profit with relatively low investment, typical characteristics of a “cash cow”.

Chemical business has been growing at a healthy pace

BCG – Dog (Refinery and manufacturing business)

The refinery and manufacturing business is fundamentally a narrow margin business.

Factoring in the low growth rate makes this segment a “dog.”

The coal operation and the oil transportation businesses are not as attractive as the rest of the businesses.

BCG – Question Mark (E&P)

E&P (e.g. shale oil and gas E&P) is capital intensive and time consuming with technology risks abounding.

The gas E&P is not as profitable as the oil E&P due to lower natural gas prices.

The innovations in E&P technology would make unconventional oil and gas production more affordable in the next few decades, but for now it is not cost effective.

For these reasons, non-conventional E&P and gas E&P are classified as “question mark.”

Acquisitions

ExxonMobil acquired XTO Energy for $24.6 billion in June 2010 for the following strategic rationales:

Growing need for natural gas in the next several decades.

Most of the company’s upstream assets are abroad, and the merger represents a move toward the U.S. market.

Divestiture

The company has been managing downstream assets carefully, as the refining industry is in a declining phase with low margins and profitability is heavily dependent on the oil price.

In 2010, ExxonMobil sold its interest in a lube oil refinery in France and restructured its retail activities to convert to a more efficient branded wholesaler model as in the United States.

Joint venture & alliances

ExxonMobil often seeks foreign partners to:

Surmount tariff barriers and import quotas.

Gain local knowledge about customs and cultural factors and access to distribution outlets.

Overcome governmental regulations and political pressures. For example, BP was the only company in Iran for a considerable length of time. However due to governmental intervention, BP was forced to share their stake with other companies.

The Downstream business is highly competitive and risky with tight margins. Any unused refining capacity would result in reduced margin. To deal with this problem, many oil companies form alliances to optimize the plant utilization, thereby improving margins.

SWOT Analysis

Strengths Capturing the highest-quality exploration OpportunitiesStrong research and developmentCapabilitiesDiversified revenue stream (Geographical diversification) Integrated refining & chemical operations

Weakness Declining net liquids production and oilReservesLitigation and contingencies

Opportunity Demand for shale gasRising global energy demandStrategic cooperation with Rosneft

Threats Risks concerning instability in someoil-producing regionsEnvironmental regulationsEconomic conditions

Strengths

Capturing the highest-quality exploration Opportunities:

The company uses its geosciences capabilities and understanding of the global hydrocarbon potential to identify, evaluate, and prioritize the highest quality resource opportunities.

Strong research and development Capabilities:

Seismic and reservoir modeling technologies enable it to identify new resource opportunities, drill more accurately, and improve recovery. Advanced molecule management technology optimizes the value of every hydrocarbon molecule, while minimizing energy use. Currently focusing on the use of solvents to access undeveloped resources, improve bitumen recovery, lower water use, and reduce greenhouse gas emissions.

Diversified revenue stream (Geographical diversification):

The company’s revenue stream is diversified in terms of geographies. Exxon Mobil divides its geographic divisions as US and non-US. The non-US region covers Canada, the UK, Belgium, France, Italy, Germany, Singapore, and Japan, among other countries. Its worldwide presence reduces exposure to economic conditions or political stability in any one country or region.

Weakness:

Declining net liquids production and oil Reserves:

The upstream division of Exxon has been recording a consistent decline in its production volumes. The production has declined at a CARC of 3%, from 2.6 million barrels per day in FY2007 to 2.2 million barrels per day in FY2012

Litigation and contingencies :

The company is involved in various lawsuits, claims, and legal proceedings arising out of the conduct of its business. Claims - Damages, fines, or penalties in substantial amounts or remediation of environmental contamination.

Opportunities:

• The production of shale gas is expected to form a large component of petroleum production.

• Shale gas production (expected to grow by 113% from 2011 to 2040), is the greatest contributor to natural gas production growth. Its share of total production is expected to increase from 34% in 2011 to 50% in 2040.

• ExxonMobil, during FY2012, completed 1,142.7 net exploration and development wells in the inland lower 48 states.

• Exxon Mobil is well positioned to leverage the increasing demand for shale gas in the US and to exploit opportunities for further market penetration in other countries.

Threats:

Political instability in the exploration and production areas of interests including Africa, the Middle East, and South America. Company’s investments in the Egypt, Libya, and other countries could be adversely affected by heightened political and economic environment risks. Political unrest in Middle Eastern and North African countries is likely to have an impact on Exxon Mobil's production capacity. This is because the company derives the majority of its revenue from production of crude oil and natural gas liquids, and the Middle East and North Africa regions account for a sizable portion of its portfolio.

Porter’s 5 Forces Model

Bargaining power of Supplier (oil mining and extraction firms)

(HIGH)OPEC controls 40% of world’s supply of oil and, thus, has a strong influence on the price of oilUnstable countries that host Exxon oil reserves can seize Exxon’s assets at any time

Threat of new entrants (LOW)High capital costEconomies of scaleDistribution channelsProprietary technologyEnvironmental regulationGeopolitical factorsHigh levels of industry expertise needed to be competitive in the areas of exploration and extractionFixed cost levels are high

Degree of Rivalry(HIGH)

Commodity-based nature of the businessCompetition with other industries that supply chemical, energy, and fuel for both industrial and individual consumersAbility to produce products at a lower cost via operational efficienciesExxonMobil, BP, Chevron, Conoco Philips, and Royal Dutch Shell

Threat of substitutes

(LOW)Photovoltaic sources are limited by technological issues and geothermal sources are limited by geographic availability

Bargaining power of Buyer (Industrial consumers and individual consumers)

(LOW)High volume of demand