ExxonMobil Company Analysis

Caitlin Huber
March 15th, 2015
MGT 300-102

Introduction
ExxonMobil is a company that focuses on the production and sale of crude oil and natural
gas. This includes byproducts such as petroleum. The company also manufactures and markets
petrochemicals, including aromatics and plastics, and has interests in power generation facilities.
The current CEO, Rex Tillerson, has steered the company into taking measures to prevent and
minimize the impact on the environment. (ExxonMobil, 2015)
Financial Analysis
The current ROA for ExxonMobil is 9.30% based on the end of the fiscal year on 12/31/2014.
According to this information, the debt to equity ratio is 0.17% and the current ratio of liquidity is 0.82%
(Mergent Ratios, 2014). The average industry ROA is 7.03% when the ROA of the top competitors was
averaged. Using this same method, the debt to equity ratio is .35% and the current ratio is 1.21%
(Business Insights Financial, 2014).
Based on these findings, ExxonMobil is trailing behind the industry average and major
competitors in the liquidity, prompting questions on their ability to pay off their debt obligations. On the
other hand, however, the debt-equity ratio is significantly lower than the industry standard, adding a new
side to the previous information. When combining this with the evidence that the ROA for ExxonMobil is
higher than the industry standard, it shows that ExxonMobil is doing well financially and is making
sufficient income to continue their business.

Issue
The major issue facing ExxonMobil is the rising demand for energy that will continue to
grow well into the future. According to the U.S. Energy Information administration, the worlds
consumption of energy is supposed to grow by 56% between 2010 and 2040. Most of this energy
consumption will come from countries where the demand is driven by strong economic growth,
such as Asia, Africa, and South America. Despite the rapid growth of alternate energy sources,

fossil fuels remain the main source of the worlds energy, and will remain so through 2040 (EIA,
2013). This is a unique opportunity for ExxonMobil to continue to improve its profits and branch
out to cover this increase in demand.
Impact
This can have a significant effect on ExxonMobils profit margins, both positively and
negatively. The positive effect is wide reaching if dealt with correctly. For example, the
increasing demand for energy will cause other companies to search for less expensive ways to
conduct business. This will lead them to seek out different methods, such as picking impact
resins over metals to package emulsion paint (ExxonMobil Plastic, 2013). If dealt with properly,
these opportunities could bring ExxonMobil more profit across all areas. If not handled,
however, competitors will likely step up and be on the forefront of this new demand.
Cause
One of the main causes of the rise in demand is the growth from non-OECD
(Organization for Economic Cooperation and Development). These countries, which include
most of Asia, Africa, and South America, will continue to expand from major economic growth
and prosperity (EIA, 2013). New businesses and laws all contribute to this expansion and create
a demand for energy that was not previously seen in many of the countries involved. Not only is
the rising economy a cause, but also the increase in dependence on technology and electrical
resources.
Recommendations
There are several things that ExxonMobil can do to make sure they make the most of the
increase in energy demand. It is recommended that they start new projects with far-reaching
effects as well as continuing to diversify the companys holdings.
While ExxonMobil is more than sufficiently handling the demand for energy at present,
the best option for the company is to continue to increase output to prepare for the rising in

energy demand. While these steps are already being taken, such as beginning production in
Penisular Malaysia, further expansion is necessary (ExxonMobil Production, 2014). The
development of the Damar field is expected to meet the demand in Malaysia, it is only one step
in what must be several in ExxonMobils journey to meet with demands.
Other efforts, such as applying for a patent involving systems and methods for valuation
and validation, are also good steps in the right direction. This patent directly involves planning
and operations for liquified natural gas portfolios and projects and is an excellent example of the
direction ExxonMobil should move in (ExxonMobil Upstream, 2014). These projects will
continue to have far-reaching effects for the company in all holdings and similar endeavors
should be started to ensure that ExxonMobil has every advantage in the decades to come to
handle the rise in demand.
Another important step that ExxonMobil should take to meet the rising challenge is
continue to diversify its holdings for security reasons. These efforts have rewarded the company
in the past. When the price of oil fell, stock companies that produced plastic had a significant
increase in profits (X-Ray, 2015). This diversity helped buoy the company during the crisis and
will continue to do so. It is recommended that ExxonMobil continue to diversify to other
businesses to make sure that they have a solid handle on whatever direction the energy demand
goes in.
To ensure that these courses of action happen sufficiently, it becomes a task for all levels
of management. Production and legal parts of the organization are key to make sure that not only
do these expansions happen, but that they happen in a way that keeps the company out of the
courtroom and away from lawsuits. Middle level managers will be key in finding these
opportunities and analyzing their potential. They will need to report these chance to the top level
managers to make sure that the decisions are considered on all sides to be the best option for the

company. Once such expansions are made, it will be up to the first-line managers to make sure
that the opportunities continue to be rewarding well into the future.

Reference page
EIA projects world energy consumption will increase 56% by 2040. (2013). Retrieved March 08,
2015, from http://www.eia.gov/todayinenergy/detail.cfm?id=12251
E.L. (2015). Everything you want to know about falling oil prices. The Economist. Retrieved
from http://www.economist.com/blogs/economist-explains/2015/03/economistexplains-14
ExxonMobil. (n.d.). Retrieved March 06, 2015, from http://corporate.exxonmobil.com/
ExxonMobil Begins Production from Damar Gas Development. (2014). Worldwide Energy,
26(3), 67.
Exxon Mobil Corporation SWOT Analysis. (2015). ExxonMobil Corporation SWOT Analysis, 19. Retrieved March 04, 2015, from http://eds.a.ebscohost.com/ehost/detail/detail?
vid=5&sid=092412cf-b56c-4cc1-a07daf946993edd8%40sessionmgr4003&hid=4108&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZz
Y29wZT1zaXRl#db=bth&AN=100939842
ExxonMobil Essentials. (2015). Retrieved March 18, 2015, from
http://bi.galegroup.com/essentials/company/308156?u=naal_usam
ExxonMobil Upstream Research Files. (n.d.). Retrieved March 19, 2015, from
http://bi.galegroup.com/essentials/article/GALE
%7CA390878683/e6569949cebda57e8bfa2ab4ce4874a1?u=naal_usam
Ratios : Exxon Mobil Corp. (2014). Retrieved March 19, 2015, from
http://www.mergentonline.com/companyfinancials.php?
pagetype=ratios&compnumber=2907
XOM Financial Analysis. (2014). Retrieved March 19, 2015, from
http://bi.galegroup.com/essentials/remoteLink?id=308156&displayGroup=Fundamental-

Analysis&url=http%3A%2F%2Finvreports.galegroup.com%2Freuters
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X-Ray: Exxon Mobil. (2015). Retrieved March 18, 2015, from http://eds.b.ebscohost.com/
ehost/pdfviewer/pdfviewer?sid=1d812588-c846-437e-849f-1b5a335e334c
%40sessionmgr113&vid=1&hid=122
Wolfe, J. (2011). John Doe VIII et al. v. Exxon Mobil. American Lawyer, 33(8), 37.

Appendix
Updated SWOT
Strengths

Weaknesses

Diverse revenue stream

Strong research capabilities

Litigations and court issues

Opportunities

Threats

Rising demand for energy

Addition of new oil projects

Downhill oil industry

Strengths
ExxonMobil has an extremely diverse revenue stream, including both oil production, plastic
production, and natural gas production. This has helped strengthen the company and its
shareholders substantially (X-Ray, 2015).
ExxonMobil also has several research projects underway, helping them prepare for the future and
separate them from the competition. These research projects, including a patent for methods of
valuation in regards to liquified natural gas, shows that the company is planning for the future
(ExxonMobil Upstream, 2014).
Weaknesses
ExxonMobil has become involved in several lawsuits regarding different parts of its business.
Some of the proceedings want fines or penalties while others require remediation of
environmental contamination or a change in company policy (Wolfe, 2011). These issues
adversely affect the image of the company and the profitability.
Opportunities
The continued rise in demand for energy, projected to increase over 50% by the EIA, is a major
issue for ExxonMobil to deal with. If the company can meet with the demands of countries

around the world, it can capitalize on the increase and improve its profits for decades to come
(EIA, 2013).
Another opportunity is the growth of company projects and capacity. Not only is ExxonMobil
researching ways to improve current holdings (ExxonMobil Upstream, 2014), but it is also
expanding current holdings to meet rising needs (ExxonMobil Production, 2014).
Threats
One of the major threats facing the company is the poor industry environment. The past year has
seen oil prices drop dramatically, cutting into the companys profit margins. The lack of demand
and increased supply ensures that this problem will remain a main concern for ExxonMobil
(E.L., 2015).