ExxonMobil-Strategic-Analysis-Report

Strategic Analysis

Document Summary This document strategically analyzes the Oil and gas producer ExxonMobil and recommends key strategies for their continued growth.

Project Report By Ankur Anand (1212006) Anshuman Singh (1212007) Anu Aggarwal (1212008) Anupam Nanda (1212009) Ashish Goyal (1212010)

Table of Contents 1

Executive Summary ........................................................................................................ 3

2

Company Profile ............................................................................................................. 4

3

2.1

Business Structure ................................................................................................... 4

2.2

Competition: ............................................................................................................ 4

SWOT analysis ................................................................................................................ 5 3.1

Strength: .................................................................................................................. 5

3.2

Weakness ................................................................................................................. 5

3.3

Opportunities ........................................................................................................... 6

3.4

Threats ..................................................................................................................... 6

4

Porter’s Five Forces Analysis for Oil and Gas Industry ................................................... 7

5

Resource Based View Analysis ....................................................................................... 8

6

Key Recommendations overview ................................................................................. 12

7

Recommendations - Change in R&D Strategy .............................................................. 13

8

9

7.1

Reasons & Assumptions ......................................................................................... 13

7.2

Implementation ..................................................................................................... 15

7.3

Timeline, Benefits and Risk .................................................................................... 16

Recommendations – Natural gas Strategy ................................................................... 17 8.1

Reason and assumptions ....................................................................................... 17

8.2

Implementation plan ............................................................................................. 18

8.3

Timelines, benefits and risks .................................................................................. 18

Recommendations – Media Strategy ........................................................................... 19 9.1

Reasons and Assumptions ..................................................................................... 19

9.2

Implementation Plan ............................................................................................. 19

9.3

Benefits .................................................................................................................. 20

10

Financial Analysis.......................................................................................................... 21

11

Alternatives .................................................................................................................. 22

12

References .................................................................................................................... 24

13

Exhibits ......................................................................................................................... 25 13.1

SWOT Analysis........................................................................................................ 25

13.2

Oil & Gas Industry Analysis .................................................................................... 26

13.3

Inputs and Projections for Natural Gas Industry ................................................... 27

13.4

Company Financials and Future Trends ................................................................. 29

1

Executive Summary

We feel ExxonMobil is in a critical transition phase, while their short term financial health is in no significant danger there looms lots of medium and long term threats which could completely disrupt ExxonMobil’s business. However, ExxonMobil is in a unique position to convert these threats into great opportunities and emerge as an even greater company. Global energy industry is going through a transitions phase. Environmental concerns are in the centre stage of world politics more than ever. Oil reserves are declining and demand for Natural Gas is growing. There is a greater push for greener energy and even end consumers are more and more brand conscious. We feel that technology’s role in energy industry is more important than ever. For long term sustainability, companies can no longer afford to be one dimensional and depend solely on Oil. Superior and breakthrough technologies are going to be the differentiating factor between companies. “ Exxon with it current strong financial health and existing R& D infrastructure is in best position to emerge as a global energy leader. Energy is one of the greatest problem mankind is facing; by being a leader in this area Exxon has an opportunity to become truly the greatest company. “

2

Company Profile

ExxonMobil is one of the world’s largest publicly traded international Oil and gas company. It was formed on Nov 30, 1999 by the merger of Exxon and Mobil, both direct descendants of Standard Oil Company formed in 1870. It is largest of the six oil super majors with Revenue of 467 Billion USD in 2011. Company operates over 21 countries (Exhibit 1) and employs 82000 people worldwide.

2.1

Business Structure

Exxon’s business is primarily divided into three divisions:

2.1.1 UPSTREAM: Upstream business is primarily responsible for exploration and production of Oil and Gas. Over 75% of Exxon’s net Income is generated by upstream business (Exhibit 2).

2.1.2 DOWNSTREAM: Downstream business deals with refining and distribution of products derived from Gas and crude Oil.

2.1.3 CHEMICAL BUSINESS: Exxon is one of the world’s largest petrochemical companies. Chemical business generates wide varieties of chemical products.

Net Income 2011

Upstream DownStream Chemical 5% 10% 10%

Exhibit 1

2.2

75% Exhibit 2

Competition:

ExxonMobil’s primary competitors are Royal Dutch Shell, Chevron Corporation and BP.

3

3.1

SWOT analysis

Strength:

Exxon strength lies in its size. It enjoys both the economies of scope and economies of scale. Due to its integrated supply chain and high operational efficiency Exxon has been able to cut down costs in comparison to its competition. Exxon also has a strong presence in Non OCED countries from where the most of the growth in energy demand is expected (Exhibit 3).

Exhibit 3

With the acquisition of XTO, ExxonMobil has entered in natural gas segment also. Exxon has also maintained technical leadership over its traditional rivals on account of superior technologies.

3.2

Weakness

ExxonMobil is considered as “one of the most hated company in USA” on account of its weak media strategies and inappropriate handling of environmentalists. Exxon Valdez oil spill is still fresh in people’s mind. Apart from this, ExxonMobil has been facing declining production in US in recent years, and it is being confronted with high number of legal proceedings.

Net Income 2011 Upstream DownStream

3.3

Opportunities

Most of the growth in world energy demand is expected to come from emerging countries especially India, China and Africa. So ExxonMobil should look to increase investment in these areas for further growth. There is an opportunity in Natural gas segment which is expected to grow fastest among different energy sources. For long term sustainability Exxon should also look to invest in alternate energy sources.

3.4

Threats

Depleting Oil reserve and peak oil theory has raised serious questions about remaining Oil reserves in World. ExxonMobil’s business is highly vulnerable to government policies. In recent years, a push towards greener energy and negative image of oil companies has seen inclination towards negative government policies in Oil sector. Oil reserves outside US are also directly affected by stability of government in those countries. Apart from this any breakthrough advancement in alternate energy can disrupt Exxon’s core business in a significant way.

4

Porter’s Five Forces Analysis for Oil and Gas Industry 1. Threat of New entrants- Threat of new entrants is low because of high capital costs required. Entry barriers are high because of requirements of highly specialized equipment and labour in the oil extraction process. Entry barriers also include proprietary technology, environment regulations, geopolitical factors and the need for industry expertise. 2. Power of Suppliers – Supplier power is high and the suppliers are the oil mining and extraction firms. Much of the oil supply is controlled by OPEC. Also, Exxon has a few oil reserves in unstable countries, which can pose threat to the business. 3. Power of Buyers – Buyer power is low because the demand for oil is high, at the same time oil is a commodity, and buyer can easily shift to other oil companies if Exxon tries to increase the prices. 4. Availability of Substitutes – Substitutes include alternate fuels such as solar power, wind power, nuclear energy, biomass etc. Threat of substitutes is low because these have not been proved as efficient as oil and natural gas. Also, we need to consider other uses of oil than running the vehicles. 5. Rivalry among competitors – Competitor rivalry is very high because of the commoditybased nature of oil business. The exit barriers are also high and the industry growth has been stable but slow. Exxon has a big competitive advantage because of its ability to extract the oil at lower costs owing to operational efficiency.

Pictorial Representation of Porter’s Five Forces

5

Resource Based View Analysis

Exxon’s success attributes largely to the unique resources and capabilities it has and the way it leverages their value to achieve sustainable competitive advantage. Resources and Capabilities Description I. Skills, Expertise - Global Integration – ExxonMobil’s strategies are implemented through global function companies (Exhibit 4) providing a competitive advantage through global ranking of opportunities and deployment of people and other resources in ever changing business conditions.

Exhibit 4

- Operational Excellence - With significant experience in the most sensitive and difficult environments, ExxonMobil has successfully and creatively overcome challenges to succeed in diverse conditions. Over the past five years, the average facilities cost and schedule of 44 ExxonMobiloperated projects came within 5% of the level projected at funding (Exhibit 5)

Net Income 2011

Exhibit 5

- Technological innovation - In the Upstream, ExxonMobil uses seismic and reservoir modelling that it pioneered to explore oil and gas resource and drill accurately to enhance recovery potential. In the Downstream, ExxonMobil employed sophisticated molecular technology to optimize refining of varying quality crude oil.

II. Valuable physical Assets - Oil and gas Acreage - ExxonMobil's natural gas reserves are greater than its oil due to its acquisition of XTO Energy Inc. The company has 24.8 billion oil-equivalent barrels at the end of 2010, which 2.8 billion comes from XTO Energy and is composed by 47% liquids and 53% gas.

- Reserves - In 2010 the ExxonMobil announced additions to its proved reserves totalling to 3.5 billion oil-equivalent barrels, replacing 209% of production. The 10-year average reserves replacement ratio is 121%, with liquids replacement at 95% and gas at 158%.

- Balanced mix of portfolio - ExxonMobil's worldwide presence helps its business to develop a broad portfolio of profitable projects.

Net Income 2011

Upstream DownStream to build upon on existing business experience to capture opportunities in higher growth regions. (Exhibit 6) Chemical Corporate& Fianncing 5% 10% 10% 75%

- Geographic coverage - - with projects in every nook and corner of the world, ExxonMobil is able

Exhibit 6

Financial base - The AAA balance sheet gives credence to ExxonMobil’s financial strength. It is known for its financial management capabilities exercised through rigorous investment controls and emphasis on cost efficiency.

III. Valuable human assets and intellectual capital - Proven managerial know-how- ExxonMobil employs close to 20000 engineers and scientists, nearly 2000 of them hold PhD degrees in range of disciplines. Its commitment to developing new technology is a key reason why ExxonMobil has been granted more than 4000 patents in the US & Europe during the past 4 years.

- High safety rating - ExxonMobil’s commitment to high ethical standards, legal compliance, and integrity is reflected in their global policies and practices. The company has received many awards in Health and safety achievements.

- Experienced work force- ExxonMobil builds on its valuable workforce by hiring and retaining the most qualified people available and maximise their opportunities for success through training and development. (Exhibit 7)

Net Income 2011

10%

Upstream DownStream Chemical Corporate& Fianncing 5% 10% 75%

Exhibit 7

IV. Valuable Intangible Assets - Disciplined investment with long-term focus - ExxonMobil invests more than $1B annually in R&D to safely explore and produce energy to meet demands

V. Alliances - Partnerships - ExxonMobil has a successful history of working with governments and partners around the world to maximize the value of hydrocarbon resources.

- Joint-ventures – ExxonMobil joint venture projects (in California, Russia, Japan etc.) provide it global advantage and add further value to its portfolio.

Net Income 2011

10%

Upstream DownStream Chemical Corporate& Fianncing 5% 10%

ExxonMobil Resource Based View

75%

6

Key Recommendations overview

Our key recommendations for ExxonMobil are as following: 1) Increase investment in R&D from $1B USD to $3B USD and realign R&D operations to focus on cost efficient production of Oil, innovation in Alternate energy and improving energy efficiency. 2) Invest in Oil exploration and create market for Natural Gas. 3) Improve Public relation and Media strategy to change their current public perception of being a Big Bully of energy industry to being an Inspiring Leader. Details about these recommendations are covered in following sections.

7

Recommendations - Change in R&D Strategy

We recommend Exxon to increase its R&D budget from $1B to $3B and realign R&D operations to focus on few key areas.

7.1

Reasons & Assumptions

To understand the reason behind these recommendations we need to look into current global energy situation.

7.1.1 INCREASING PRICE OF OIL PRODUCTION: Oil sources can be divided in two broad categories. a) Conventional Oil sources b) Unconventional Oil Sources

Extra Heavy Oil, 25 Heavy Oil, 15

Conventional Oil, 30

Oil Sands, 30

Exhibit 8 As clear from Exhibit 8, most of the remaining Oil reserves in the world are in form of unconventional Oil sources. Producing Oil from unconventional Oil sources is more labour intensive and technologically difficult, so price of Oil production is high compared to conventional Oil sources. As a result, price of Oil production has been increasing exponentially (Exhibit 9). Even though, in short term, Oil demand is inelastic, in long term it is elastic. This will ultimately result in economic peak point and less demand for Oil.

Exhibit 9 91101101

7.1.2

PUSH FOR ALTERNATE ENERGY:

Environmental concerns have never been that empathically highlighted in the world before. Governments worldwide have accepted it as one of the most critical problem mankind is facing which will result in several government policies that will negatively impact the Oil companies. Today even the end consumer is demanding for greener energy. The fact that producing Oil from Unconventional oil sources results in approx 3-4 times more greenhouse gas emission than conventional oil sources also create serious concerns around negative environmental impact of Oil. This has resulted in push for alternate energy worldwide (Exhibit 10). There has been more research done than ever in areas like Solar, nuclear and bio-fuels. Any breakthrough technology which could make alternate energy sources viable and cost effective could lead to complete disruption of Exxon’s business.

Net Income 2011

10%

Upstream DownStream Chemical Corporate& Fianncing 5% 10% 75%

Exhibit 10 11111111 111

7.2

Implementation

For implementing R&D strategy we recommend following: 1) Increase annual R&D budget from $1b USD to $3b USD. Exxon’s R&D budget currently is only 0.2 % of Total revenue which is not enough. 2) Realign R&D operations to focus on following areas: a) Technologies for cost efficient production of oil from unconventional reserves e.g. Oil Sands. b) Technological innovation in alternate energy sources e.g. bio fuel, Solar. Exxon should target to emerge as a technological leader in this area. c) Technologies targeted for increasing efficiency of Oil. 3) Exxon should partner or possibly acquire some of the existing labs or institute who are currently leading research in alternate energy areas. 4) For increasing Oil efficiency Exxon should partner with major Vehicle manufacturers to produce more energy efficient engines.

Net Income 2011

10%

Upstream DownStream Chemical Corporate& Fianncing 5% 10% 75%

7.3

Timeline, Benefits and Risk

The 3 key recommendations we have suggested are carefully designed to create an optimized R&D portfolio (Exhibit 11). These technologies can be categorized into: a) Incremental - cost efficient production from oil reserves b) Substantial - Increasing energy efficiency c) Breakthrough - Alternate Energy innovations

Risk

Project Benefits

Cost efficient production of oil Improve energy efficiency Alternate energy innovation

High

Breakthrough

Medium

Substantial Low Incremental

Horizon1

Horizon2

Time

Horizon3

Horizon4

Exhibit 11 As clear from exhibit, these technologies varies from short term to long term in terms of time horizon and low risk to high risk in term of risk associated with these. Project associated with alternate energy are long term projects with high risk but at the same time they have high benefits.

Net Income 2011 Upstream DownStream

8

Recommendations – Natural gas Strategy

Exxon has invested $41 billion in acquiring XTO, one of the largest natural gas providers. Unfortunately, Exxon is not profitable in this market as the US market has been depressed (Exhibit 13.3.1). We recommend that it tune its strategy to minimize its present losses and maximize its future returns. We recommend: a. Short term (1 ~ 2 years): Exxon should look to export the natural gas to countries where the demand for natural gas is high. b. Medium term (3 ~ 7 years): Align gas distribution systems to supply natural gas to existing and new electric utility companies. Build the supply chain to provide natural gas to the power generation companies as newer facilities come online. c. Long term (beyond 7 years): Leverage natural gas usage for power generation and transportation.

8.1 8.1.1

Reason and assumptions SHORT TERM

Natural gas prices are expected to remain low in U.S. (Exhibit 13.3.2) due to weak demand in various segments (Exhibit 13.3.3). Exxon should look to export gas to economies which yield higher returns. To be successful Exxon should get into short term contracts for exporting natural gas and that the Government will not restrict this operation.

8.1.2

MEDIUM TERM

Based on the projected additions to the electricity generation capabilities the maximum increase is projected for electricity generation plants that run on natural gas (Exhibit 13.3.4). The increase in demand is in the range of 4 ~ 7 Giga Watts for gas powered generation systems.

8.1.3

LONG TERM

In the long term, transportation and power generation sectors are going to be two major consumers of natural gas. According to a study done by MIT in 2010 (reference #6), it is better to generate electricity from natural gas and then use it to power an electric car as opposed to directly using natural gas in vehicles. This is in line with the projected increase in electric power generation from 2020 onwards (Exhibit 13.3.4).

8.2

Implementation plan

The implementation plan is a multiyear plan which is suggested for Exxon to maximize the returns from their investments in XTO and natural gas market.

8.2.1

EXPLORE OPTIONS TO TAP GLOBAL MARKETS IN THE SHORT TERM

Interact with Government to minimize export restrictions. If it is not possible to export from U.S. then leverage natural gas production in Qatar and Indonesia and scale back production in U.S. Develop joint plans with gas companies from economies where there is a need for this resource.

8.2.2

BUILD COMPETENCIES TO SUPPLY TO POWER GENERATION UTILITIES

In the medium term, Exxon should collaborate with equipment vendors to provide a complete solution for power generation sector. Joint research for efficient production of electricity and reduction in capital expenditure for setting up newer power plants should be explored. Research and Development teams can work on technology to provide a better transport solution for natural gas. Success in this would enable Exxon to leverage its extensive gas station network to become the hub for disbursing natural gas related products.

8.2.3

LEVERAGE R&D TO BUILD HIGH DENSITY TRANSPORTATION SOLUTION FOR TRANSPORTING NATURAL GAS

For the longer run, where natural gas will be the major source of energy, Exxon should have built significant relationships in the power generation industry. This will help it expand and become a major supplier to the electricity generation plants and an extensive network of gas stations can provide transportation supplies like hydrogen fuel cells which is another area of research in Exxon.

8.3

Timelines, benefits and risks

The time horizons for the efforts related to natural gas are as follows: 

1 ~ 2 years: Exxon exploring the option of exporting gas to other countries improves the profitability of its natural gas business but has two inherent risks o Government may not allow export of precious energy resource o Public perception, which is already bad may become verse



3 ~ 7 year: Aggressively collaborating with manufacturers of electricity generation equipment will enable Exxon build in roads into the power generation market and build a solid ground for future growth. The risks include slower adoption of natural gas powered electric power plants.



Beyond 7 years: Exxon should position itself to benefit use of natural gas in electricity generation and transportation. Barring the risk of a newer technology providing better options, this approach will enable Exxon to succeed further.

9

Recommendations – Media Strategy

We recommend Exxon to work on brand building exercise and streamline the spending on their Corporate Social Responsibility activities and change their media strategy.

9.1

Reasons and Assumptions

ExxonMobil is currently perceived as a very big and wealthy firm which is environmentally and socially irresponsible. Many groups blame Exxon for being only concerned with making money and not caring about the ecological damage its activities can cause. Contrary to this, our research suggests that, Exxon CSR spending are approximately $ 300 million, working toward women empowerment, child health and education initiatives and funding multiple NGO’s working for social welfare. Apart from supporting 82 thousand families through direct employment, Exxon is contributing to almost 3.3% of USA GDP and hence empowering people and country. Company is also funding research work to get a cleaner and more efficient form of energy at the expense of its profit margin. A company of such stature is somewhat lagging behind in media management compared to other companies in the same segment. There is a need to have a bigger emphasis on advertising and media activities showcasing its work, so that it can be seen as a responsible and earth-friendly company. The current bad image of Exxon can also impact its influence in government policy making which could further result in significant losses to the company.

9.2

9.2.1

Implementation Plan

MARKETING & BRAND CELL:

Exxon should change its advertising strategy and come up with a new advertising campaign which will focus on its CSR and R&D activities, so that people become aware of all the good work happening in Exxon. Exxon also need to tie up with movies and sport celebrities as their brand ambassador. A tagline like “Strengthening Economy, Strengthening You”. Let’s develop country together” which showcase their position in term of national interest will definitely help in changing the negative perception.

9.2.2

RESEARCH & DEVELOPMENT

Exxon should associate with well-reputed institute and help them set up research labs and fund the research on biomass fuel and technologies to reduce the carbon footprint. This will help Exxon to have a leading position in term of upcoming changes in energy sector and will improve its image.

9.2.3

PUBLIC RELATIONS

Though they have a dedicated PR department but the efforts are not enough. Exxon need to go for PR department reorg and get a team built which can highlight and showcase the amount and effort Exxon is putting for welfare of people and country by giving back part of its profit margin. The unit head should be directly reporting to CEO.

9.3

Benefits

Instead of treating discovery of alternate energy sources as threats to its Oil business, Exxon should take advantage of its technical leadership to convert this as an opportunity. The strategy of increased spending on R&D for alternate energy resources aided with the right kind of media campaign can help Exxon build a new and positive image in the minds of people. Exxon could be seen as a leader in developing greener energy resources. In this process, Exxon can mitigate the threat of emerging renewable energy resources and also can improve its current standing in the green energy markets.

10 Financial Analysis

Exxon is a cost-leader in Oil and Gas segment with average revenue growth of ~10% YOY and ROE growth of 20+%. The profit figures varies with the Oil prices worldwide and with the growing demand of Oil, prices are expected to go higher. [Exhibit: 14.4]As per Oil Producing countries analysis the average increase in demand by 2040 will be 30% above the current demand and prices too will follow the similar trend. Exxon is giving robust revenue of 300,000+ Million since past 7 year with average sales growth as ~9.5%. As oil demand is inelastic in short term, the future projections suggests that company will continue to grow at average revenue growth of ~9.67% in coming 5 year time including all the upstream, downstream and chemical business.

11 Alternatives

1. Focus on Chemical Business: Exxon's chemical business also plays an important part in its growth trajectory and financial performance. The company has shown record chemical earnings of $1.52bn in 2011. It has a unique portfolio of businesses, products marketed in some 150 countries, a superior cost structure and leading-edge technology. ExxonMobil Chemical is the world’s premier petrochemical company. Plastic is being recognised as a product substitute and for use in high performance packaging films. The global demand for plastics is growing at an average rate of 5% and it will touch a figure of 227 million tons by 2015 (Exhibit 12). This demand can be potentially tapped by Exxon. Also the chemical business doesn't face limited access to resources in comparison to the upstream (oil explorations) business of Exxon. Exxon could further boost its business in this area. Even though the returns may not be as great as they are from upstream business but will still be above the cost of capital and still add value to Exxon.

Exhibit 12 2. Exploration of unconventional sources of Oil – Exxon should focus on exploration of unconventional sources of oil. Typical unconventional oil sources are Oil Shale, Coal based liquid supplies, and Biomass based liquid supplies and liquids arising from chemical processing of natural gas. Major source of extra heavy oil and oil sands is Venezuela's Orinoco heavy oil belt with estimated reserves of 1.2 trillion barrels. Global deposits of oil shale range from estimated 2.8 to 3.3 trillion barrels of recoverable oil. There are around 600 known oil shale deposits around the world, including major deposits in the United States of America itself. Tapping into these sources of unconventional oil would benefit Exxon in the future where conventional sources of energy would soon run out. 3. Exploration of New Oil Resources: According to the geological survey vast majority of the oil reserves are in deep water, indicating a commitment to continue exploring. According to a US Geological Survey report published in 2000, there is more oil outside the Middle East than inside the region. Certainly two thirds (predicted reserves in Middle East) is not at all

Net Income 2011 Upstream

accurate (negation to Peak Oil Theory). It's 54% of identified reserves, possibly 40% of ultimately recoverable reserves, and possibly 30% or less if you include unconventional heavy oil fields. This opens future avenues and provides hope for oil & gas major’s like Exxon to spend more on exploration of oil for sustaining the current business growth.

12 References 1) http://www.exxonmobil.com [ For most of the information regarding company and Energy outlook 2040 documents] 2) http://www.wikipedia.org/ [For general information regarding world energy industry] 3) http://www.sbc.slb.com/ [For general strategies on R&D portfolio management] 4) http://www.smartplanet.com/blog/energy-futurist/the-cost-of-new-oil-supply/468 [Source for historic oil production price and graph] 5) http://www.radford.edu/wkovarik/oil/ [For Alternatives on Unconventional oil production] 6) http://www.scientificamerican.com/article.cfm?id=future-oil-deep-water&page=2 [For Alternative strategy on Oil exploration in unexplored regions] 7) http://cipet.gov.in/plastics_statics.html [Global Plastics Demand] 8) https://www.exxonmobil.com/Corporate/Newsroom/Publications/XOMGlobalCap/page_2.h tml [Technological Innovation] 9) http://connection.ebscohost.com/c/articles/60173448/exxonmobil-says-gas-reserves-topoil [Oil and Gas Acreage] 10) http://www.businesswire.com/news/home/20110215006304/en/Exxon-Mobil-CorporationAnnounces-2010-Reserves-Replacement [Reserves] 11) http://www.exxonmobil.com/Corporate/community_ccr_awards_archive.aspx [Safety Rating]

13 Exhibits

13.1 SWOT Analysis Strength

Weakness



Efficient and Integrated Supply chain





High operational efficiency

Negative Branding: perceived as not doing enough for environmental cause



Strong presence in NON OCED countries



R&D not focused on Green energy.



Diversified revenue streams



Declining production: especially in developed economies like US



Strong Financials (CAGR: 12% )



High number of Legal Proceedings



 Strong R&D Unit

Employee dis-satisfaction/ unrest

Opportunities 







Explore new economies like Asia, Latin America and Africa. Increase footprints in Natural Gas area (highest growing energy source - 60% by 2040) Invest and Develop Alternate energy source e.g. Biofuel from Algae Improve operational efficiency i.e. Crude extraction process etc.

Threats ×

Government policies

×

Depletion of conventional oil sources and high cost associated with new oil reserves

×

Competitors gaining ground

×

Global economic slowdown in US & Europe

×

Technological advances creating a more cost effective new alternate energy source.

×

Environmental Regulations

13.2 Oil & Gas Industry Analysis

Overall assessment

Attractiveness

Remark

Low

1 Rivalry among competitors

Barriers to exit

High

2

3

4

x

5 20%

x

20%

Barriers to entry

x

10%

Power of buyers

x

10%

Power of suppliers

x

10%

Threat of substitutes

x

Government action

Overall attractiveness

10%

x

Existence of complements

10%

x

10%

3.4

13.3 Inputs and Projections for Natural Gas Industry 13.3.1 HISTORICAL GAS PRICES

13.3.2 SHORT TERM PROJECTIONS OF GAS PRICES The prices of natural gas are projected to remain in the same range for the short term.

13.3.3 SHORT TERM NATURAL GAS CONSUMPTION IN U.S.

13.3.4 ADDITIONAL ELECTRICITY GENERATION PROJECTIONS Addition of electricity generation capacity in United States based on fuel type, 2010 – 2035 (Gigawatts)

13.4 Company Financials and Future Trends

ExxonMobil (In Million $)

2006

2007

2009

2010

2011

358,955

365,467

390,328

459,579

301,500

370,125

467,029

22.86%

23.25%

1.81%

6.80%

17.74%

-34.40%

22.76%

26.18%

21,510

25,330

36,130

39,500

40,610

45,220

19,280

30,460

41,060

174,278.0

184,767.0

201,795.5

213,675.0

230,548.5

235,067.0

230,687.5

267,916.5

316,781.0

Total Asset

174,278

195,256

208,335

219,015

242,082

228,052

233,323

302,510

331,052

Avg Shareholder Equity

89,915.0

95,835.5

106,471.0

112,515.0

117,803.0

117,363.5

111,767.0

128,704.0

150,617.5

Total Equity

89,915

101,756

111,186

113,844

121,762

112,965

110,569

146,839

154,396

Average Oil Price(In $)

34.6

45.78

58.83

66.45

71.03

97.33

57.18

75.05

88.93

Net Sales Sales Growth (YOY)

2003

2004

237,054

291,252

-

Net profit Avg Total Asset

2005

2008

Investment Required

-

$ 20,978

$ 13,079

$ 10,680

$ 23,067

$ (14,030)

$ 5,271

$ 69,187

$ 28,542

Additional Debt Capacity

-

$ 23,505

$ 32,348

$ 35,514

$ 38,867

$ 45,351

$ 20,514

$ 32,947

$ 45,298

ROE, %

23.92%

26.43%

33.93%

35.11%

34.47%

38.53%

17.25%

23.67%

27.26%

ROS, %

9.07%

8.70%

10.07%

10.81%

10.40%

9.84%

6.39%

8.23%

8.79%

S/A

1.36

1.58

1.78

1.71

1.69

1.96

1.31

1.38

1.47

A/E

1.94

1.93

1.90

1.90

1.96

2.00

2.06

2.08

2.10

Sales Growth (YOY) Sales Growth Exxon 22.86%

23.25%

22.76%

26.18%

17.74% 6.80% 1.81% 2004

2005

2006

2007

2008

2009

2010

2011

-34.40%

Fig: Sales Growth Exxon 2004-2011

Oil Price (in $) 97.33

58.83

66.45

71.03

2006

2007

88.93 75.05 57.18

45.78

2004

2005

2008

2009

Oil Price

Fig: Oil prices trend worldwide 2004-2011

2010

2011

ExxonMobil (In Million $) Net Sales

2012 (Projected)

2013 (Projected)

2014 (Projected)

2015 (Projected)

2016 (Projected)

$

$

$

$

$

Sales Growth (YOY)

512,191 9.67%

Net profit

$

Avg Total Asset Total Asset

561,720 9.67%

616,038 9.67%

53,363

$

$

362,400

$

381,916.28

160,461

$

166,525

$

675,609 9.67%

43,123

$

$

385,024

$

388,131.01

174,231

$

181,936

$

740,940 9.67%

46,865

$

$

336,968

$

342,883.14

Avg Shareholder Equity

$

Total Equity

$

Average Oil Price (In $)

-

Investment Required

$

11,831

$

39,033

$

6,215

$

68,249

$

13,415

Additional Debt Capacity

$

51,552

$

57,632

$

47,435

$

60,535

$

67,574

-

54,049

$

$

422,255

$

463,088

$

456,379.85

$

469,795.21

183,345

$

199,177

$

216,396

184,753

$

213,601

$

219,191

-

-

59,275

-

ROE, %

29.21%

30.63%

23.52%

27.14%

27.39%

ROS, %

9.15%

9.50%

7.00%

8.00%

8.00%

S/A

1.52

1.55

1.60

1.60

1.60

A/E

2.10

2.08

2.10

2.12

2.14