COLOGNE

BUSINESS SCHOOL (CBS)

Competitive Analysis of ExxonMobil

Term Paper for International Planning and Organizational Development

Summer Semester 2016
Lecturer: Dr. Ihar Sahakiants

Raghu Vinod
MA 15 in International Media and Marketing
Student-No. 1155800002

Table of Content

Introduction: Competitive Analysis of ExxonMobil .......................... 1

Chapter 1. Strengths of ExxonMobil ................................................ 2
1.1. Robust research and development capabilities ......................... 2
1.2. Extensive upstream, downstream and chemical operation ....... 2

Chapter 2. Weaknesses of ExxonMobil ............................................ 4
2.1. Declining financial performance and capital .............................. 4
2.2.1 Total Revenue ....................................................................... 4
2.2.2 Return on Capital Employed or ROCE ................................... 4
2.2.3 Net Income ............................................................................ 5
2.2.4 Operating Profit .................................................................... 6
2.2. Increasing financial leverage ...................................................... 6

Chapter 3 & 4 - Opportunities and Threats for ExxonMobil .............. 8
3. Opportunities for Exxon Mobil ...................................................... 8
3.1. Rising global energy demand .................................................. 8
3.2. Increasing demand for LNG globally ....................................... 8
4. Threats facing ExxonMobil ............................................................ 8
4.1 Environmental regulations ....................................................... 8
4.2. Challenging industry environment .......................................... 8

Conclusion: Future Outlook for ExxonMobil .................................. 10

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

List of Figures:

Figure 1: ExxonMobil Total Investments,

FY2011 FY2015
Figure 2: ExxonMobil Total Revenue,
FY2011 - FY2015
Figure 3: ExxonMobil ROCE, FY2011

Page 2
Page 4
Page 5

FY2015

Figure 4: ExxonMobil Net Income,

FY2011 FY2015
Figure 5: ExxonMobil Operating Profit,
FY2011 FY2015
Figure 6: ExxonMobil Total Debt and
Total Capital, FY2011 FY2015

Page 5

Page 6

Figure 7: ExxonMobil Debt to Capital

Ratio, FY2011 FY2015

Page 7

Page 7

List of Tables:

Table 1: SWOT Analysis of ExxonMobil

Table 2: ExxonMobil Debt-to-Capital,
FY2011 FY2015

Page 1

Page 6

Introduction: Competitive Analysis of ExxonMobil

Sustainable development is an important facet of the modern energy sector and this
paper, as part of a group assignment focuses on the strategic aspects of ExxonMobils
business operations outlined in Table 1 and examines the companys strategic value in
the global energy sector.
Table 1: SWOT Analysis of ExxonMobil Corp
Strengths

Weakness

Robust research and development

capabilities
Extensive upstream and downstream

operations

Opportunities

Rising global energy demand
Increasing demand for LNG globally

Source: MarketLine, (2015), p. 29

Declining financial performance and
capital efficiency
Increasing Financial Leverage

Threats

Challenging industry environment
Environmental regulations

Chapter 1. Strengths of ExxonMobil

1.1. Robust research and development capabilities

Global energy demand is expected to rise by about 35 percent to 40 percent between
2010 and 2040 (ExxonMobil, 2016b, p. 64). Given this trend, ExxonMobil has more or
less kept its investment stream constant with the latest figure being US$28.25Billion in
2015. (see Figure 1).

Figure 1: ExxonMobil Total Investments, FY2011 FY2015
31

30.36

30.5
30

30.21

29.72

29.5

28.93

29

28.25

28.5
28
27.5
27

2011

2012

2013

2014

2015

Total Investments and Advances (values in billion USD)

Source: MarketWatch, (2016). Retrieved 2/4/2016 from http://marketwatch.com

1.2. Extensive upstream, downstream and chemical operation

Upstream operations are defined as the exploration, production, and development of

crude oil and natural gas, while downstream operations are transporting, selling
petroleum, crude oil, and natural gas products. (Datamonitor, 2010).
In 2015, Exxons upstream segment recorded earnings of US$7.1Billion down from net
profit of US$20.4Billion in FY2014 while its downstream net earnings increased to
US$6.6Billion, compared to US$3.1Billion in the preceding year (ExxonMobil, 2016a).

Despite not being the mainstream revenue generator for ExxonMobil, the chemicals
segment recorded earnings of US$28.13Billion in FY2015, compared to US$38.17Billion
in FY2014 (Stock Analysis on Net, n.d.).

In the petrochemical segment, ExxonMobil Chemical is an integrated manufacturer and
global marketer of olefins, aromatics, fluids, synthetic rubber, polyethylene,
polypropylene, oriented polypropylene packaging films, plasticizers, synthetic lubricant
base stocks, additives for fuels and lubricants, zeolite catalysts, and other petrochemical
products. During FY2014, the company sold a total of 24.2 million metric tons of
chemical prime products (MarketLine, 2015, p. 4).
Given how many petrochemical products are consumed daily and could generate more
revenues in forthcoming years, Exxon has focused extensively on petrochemicals by
undertaking two notable projects outlined below.

1. Exxon Mobil entered into an agreement with Pratt & Whitney Rocketdyne to develop
next-generation technology to convert coal, coke, or biomass to synthesis gas (carbon
monoxide and hydrogen) (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
participation in China (MarketLine, 2015, p. 8).

Chapter 2. Weaknesses of ExxonMobil

2.1. Declining financial performance and capital

The following financial ratios will help us analyze ExxonMobils financial weaknesses:

2.2.1 Total Revenue

The companys revenues have steadily declined by 45% from US$467.02 Billion in
FY2011 to US$259.49 Billion in FY2015 (see Figure 2).
Figure 2: ExxonMobil Total Revenue, FY2011 - FY2015
467.02
500
451.51
420.83
450
400

394.1

350

259.49

300
250
200
150
100
50
0

2011

2012

2013

2014

2015

Total Revenue (values in billion USD)

Source: Statista, (n.d.). Retrieved on 2/4/2016 from http://statista.com

2.2.2 Return on Capital Employed or ROCE

ROCE measures the performance of the company in respect to the capital employed and
a ROCE of 4.56% in FY2015 reflects Exxon Mobil's inability to deploy its capital in
profitable avenues thereby indicating a need for improving operating efficiency (see
Figure 3).

Figure 3: ExxonMobil ROCE, FY2011 FY2015

ROCE in %
20
18

18.5

16

14.65

14

11.96

12
10
8
6

4.56

4
2
0

2012

2013

2014

2015

Source: NASDAQ (2016b). Retrieved on 3/4/2016 from http://nasdaq.com

2.2.3 Net Income

In FY2015, Net Income was recorded as US$16.15Billion, a 60.67% decrease from
FY2011 (see Figure 4).

Figure 4: ExxonMobil Net Income, FY2011 FY2015
50
45

41.06

44.88

40

32.58

35

32.52

30
25

16.15

20
15
10
5
0
2011

2012

2013

2014

2015

Net Income (values in USD billion)

Source: MarketWatch, (2016). Retrieved 2/4/2016 from http://marketwatch.com

2.2.4 Operating Profit

ExxonMobils operating profit decreased from US$34.08Billion in FY2014 to US$12.883

Million in FY2015 - a 76% decrease (see Figure 5)

Figure 5: ExxonMobil Operating Profit, FY2011 FY2015
60

54.1

50

49.88
40.3

40

34.08

30
20

12.88

10
0

2011

2012

2013

2014

2015

Operating Profit (values in USD billion)

Source: Stock Analysis on Net, (n.d.). Retrieved 1/4/2016 from https://stock-analysison.net

2.2. Increasing financial leverage

With ExxonMobils total debt in FY2015 at $38.68 Billion, the companys net debt to
capital (as a percentage) has increased from 0.10 to 0.18 (see Table 2).
Table 2: ExxonMobil Debt-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
Total debt

19.925
38.687

11.653
29.121

6.891
22.699

7.928
11.581

9.322
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: Stock Analysis on Net, (n.d.). Retrieved on 1/4/2016 from https://stockanalysis-on.net

Figure 6: ExxonMobil Total Debt and Total Capital, FY2011 FY2015

250
200

171.429

177.444

209.498

203.52

196.702

150
100
50

17.033

11.581

38.687

29.121

11.581

0
2011

2012

2013

Total Debt (in billion USD)

2014

2015

Total Capital (in billion USD)

Source: Stock Analysis on Net, (n.d.). Retrieved on 1/4/2016 from https://stockanalysis-on.net

Figure 7: ExxonMobil Debt to Capital Ratio, FY2011 FY2015

Debt to Capital Ratio

0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0

0.18
0.14
0.12
0.1
0.07

2011

2012

2013

2014

2015

Debt to Capital Ratio

Source: Stock Analysis on Net, (n.d.). Retrieved on 1/4/2016 from https://stockanalysis-on.net

Chapter 3 & 4 - Opportunities and Threats for ExxonMobil

3. Opportunities for Exxon Mobil

3.1. Rising global energy demand

According to Exxon Mobils estimates, demand for crude oil is expected to rise by
approximately 30% through 2040 with a growing share of this demand led by developing
economies such as China and India (ExxonMobil, 2014, p. 6).

3.2. Increasing demand for LNG globally

With Asia and Asia Pacific markets continuing to dominate LNG imports at a combined
75% of global demand, Exxon has initiated several key projects to and strengthen its
market presence globally. For example, Exxon Mobil started project in Papua New
Guinea that includes gas production of 6.9 million tons per year (ExxonMobil, 2014, p.
30).

4. Threats facing ExxonMobil

4.1 Environmental regulations

With rising awareness of the damage to the environment caused by oil and energy
sector in the form of global warming and spills, Exxon is subject to various government
environmental regulations and these have led the company to increase investment in
refining infrastructure and production of clean fuels as well as monitor emissions.

4.2. Challenging industry environment

With the price of Brent Crude, the main international benchmark, trading at around
approximately $45.11 a barrel (NASDAQ, 2016a), the reason for historic low oil prices
are outlined below.

United States domestic production has nearly doubled over the last several years
thereby pushing out traditional oil producers to compete for Asian markets and
leading to drop in oil prices (The New York Times, 2016).

Strong US dollar means the United States is no longer importing oil but rather
exporting its own due to extensive shale oil deposits. Consequently, with a
reduction in the outflow of U.S. dollars towards Oil purchases, the U.S dollar
has gotten stronger while value of Oil has dropped due to less demand and
more supply.

With vehicles becoming more energy efficient as well as economic uncertainty

in Europe, demand for fuel is not particularly strong (The New York Times,
2016).

Total oil supply by year-end 2015 was 95.74 million barrels per day and in 2016,
it is expected to rise to over 96.44 million barrels per day (EIA, 2016). This
shows that not only is the market oversupplied, but supply is actually increasing
and consequently, this will continue to put pressure on oil prices and drives it
further down.

Conclusion: Future Outlook for ExxonMobil

With new innovations in renewable sources of energy, increasing use of energy-efficient
and lower emission fuels, fluctuations in oil supply and demand, as well as government
sponsored environmental regulations, ExxonMobils profit margins will continue to stay
face strong headwinds for the foreseeable future.

As this competitive analysis of ExxonMobil is a part of a group work, a follow up to
Competitive Analysis on ExxonMobil - a perspective on changing business context of
ExxonMobil will be available for reference in another publication.




















Word count - 1253

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References

DataMonitor (2012). ExxonMobil Corporation Sustainability Case Study. Reference
Code: EN00001-001

EIA=Energy Information Administration (2016). SHORT-TERM ENERGY AND SUMMER
FUELS OUTLOOK. Retrieved 14/4/2016 from
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-AnnualReport/2014_Summary_Annual_Report.pdf

ExxonMobil (2015). Financial and Operating Review. Retrieved 4/4/2016 from
http://cdn.exxonmobil.com/~/media/global/files/financialreview/2015_exxonmobil_financial_and_operating_review.pdf

ExxonMobil (2016a). ExxonMobil Earns $16.2 Billion in 2015; $2.8 Billion During Fourth
Quarter.
Retrieved
4/1/2016
from
http://news.exxonmobil.com/pressrelease/exxonmobil-earns-162-billion-2015-28-billion-during-fourth-quarter

ExxonMobil (2016b). The Outlook for Energy: A View to 2040. Retrieved 4/4/2016 from
http://cdn.exxonmobil.com/~/media/global/files/outlook-for-energy/2016/2016outlook-for-energy.pdf

MarketLine (2015). Company Profile- Exxon Mobil Corporation. Reference Code:
8AF71533-1BFD-42F6-B766-4F43DE8D664B

MarketWatch (2016). Annual Financials for Exxon Mobil Corp. Retrieved 4/2/2016 from
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

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The New York Times (2016). Oil Prices: Whats Behind the Drop? Simple Economics.
Retrieved 3/4/2016 from http://www.nytimes.com/interactive/2016/business/energyenvironment/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/

Stock Analysis on Net (n.d.). Exxon Mobil Corp. Financial Analysis and Stock Valuation.
Retrieved 1/4/2016 from https://www.stock-analysis-on.net/NYSE/Company/ExxonMobil-Corp

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Affidavit

I herewith declare that the following work I have prepared is my own without
the use of materials other than those cited.



Place: Cologne, Germany
Date: 06.05.2015


Signature

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