Exxon Mobil Corp. - Stocks

Instrument description

Crude oil is recognized as the most important commodity of the world and also often termed ‘Black Gold’ to show its value and significance. Crude oil is refined to make various petroleum products that are then used as fuel for vehicles, to produce electricity, to heat buildings, and as a raw material in making numerous industrial goods.

There are few very popular oil manufacturing and distribution companies in the world, and Exxon Mobil Corp is one of them. Exxon Mobil is a global US brand and one of the largest Oil and Gas company that is publicly traded. The company does extraction, refinement, marketing, and distribution of petroleum and chemical products.

Exxon Mobil has it’s headquarter in Irving, Texas, and it traces its roots to John D. Rockefeller’s company ‘Standard Oil’. The company was founded due to a merger between Exxon (previously called Standard Oil Company of New Jersey) with Mobil (previously known as Standard Oil Company of New York) on November 30, 1999.

Exxon Mobil was incorporated in Texas, and it is one of the largest business company based on revenue. The primary products include four premier brands such as Exxon, Mobil, ExxonMobil Chemical, and Esso. In 1996, Exxon Mobil was the first, and in 2017 it became the sixth-largest business company based on market capitalization.

Exxon Mobil was ranked 9th in Forbes Global 2000 list in 2016 and 10th most profitable company in 2017, according to Fortune 500. The company has almost 75,000 employees, of which over 20,000 consists of engineers and scientists.

Exxon Mobil was ranked 2nd in the Fortune 500 list that analysis the big US companies according to revenue generation. Large financial groups hold almost 55.565 of the company’s shares. Some of the prominent ones include The Vanguard Group (8.15%), BlackRock (6.61%), and State Street Corporation (4.83%).

Exxon Mobil is ranked 14th when it comes to both oil and gas reserves. The company reserves in 2016 reached 20 billion BOE (Barrels of Oil Equivalent). Exxon Mobil has a total of 37 oil refineries in 21 countries of the world, and it is also regarded as the 7th largest oil refiner with a capacity of 6.3 million barrels of oil.

History of Exxon Mobil

In 1882, Standard Oil Trust was formed that included the Standard Oil Company of New Jersey, also called Jersey Standard. In 1899, Jersey Standard became the only sole holding company of Standard Oil Company. In 1911, the entire Standard Oil Company was divided into 34 companies.

In 1926, the Esso brand was introduced as a refined oil product. In 1931, Socony-Vacuum Corporation was formed due to the merger of Vacuum Oil Company with the Standard Oil Company of New York. In 1946, a 30% investment is done in the Arabian American Oil Company (Aramco). There is a 7% stake taken in the Iranian oil production company in 1954.

Mobil Company was formed in 1960, and in 1966, the Mobil Company becomes the official corporate name of Socony-Vacuum. The Jersey Standard (Standard Oil Company of New Jersey) changes its name to Exxon Corporation in 1972. In 1976, the Mobil Oil Company changed its name to Mobil Corporation.

In 1980, there is a rapid increase in oil prices, and Exxon’s revenue crosses $100 billion. In 1984, Mobil bought Superior Oil Company for $5.7 billion and also takes control of large reserves of oil and gas. In 1989, there is a considerable oil spill in Exxon Valdez in Alaska, and roughly 260,000 barrels of crude oil is spilled.

In 1990, Exxon’s headquarter is moved from New York to Irving, Texas. In 1994, the Federal court found Exxon guilty and asked it to pay almost $287 million in compensatory damages and $5 billion on punitive damages. In 1997, Exxon appealed against the punitive damages charge and also posted revenue of $120 billion. In 1998, Exxon merged with Mobil, which is said to be the biggest merger in US history and was valued at staggering $83 billion. The merger was completed in 1999.

Exxon Mobil has done several acquisitions over the years, and some of the major ones was buying

• XTO Energy for $41 billion in 2009
• Celtic Exploration Ltd in October 2012.
• InterOil Corporation in 2016 for $2.5 billion.
• Aromatics Corporation in 2017
• MOM Lubricants in April 2018.

Exxon Mobil has a market capitalization of $370 billion in January 2018, but due to a decline in oil prices, the market cap fell to $319 billion in November 2018. The Exxon Mobil stock has split five times during its business history and as follows

• Once at 2 for 1 split once on July 26, 1976
• Then four times at 2 for 1 split on June 12, 1981, September 15, 1987, April 14, 1997, and July 19, 2001.

The company has not split shares since 2001. Exxon Mobil pays regular and healthy dividends to its shareholders. Due to massive success in 2018, the company increased the quarterly dividend by 7% to add 0.82 cents to dividend payout in June 2018.

Current Business and Investment of Exxon Mobil

Exxon Mobil Corporation primarily functions in the energy sector and manages a diverse range of operations that includes exploration, extraction, refinement, production, transportation, and sale of oil, natural gas, and other petroleum products. Exxon Mobil also produces and sells a variety of commodity petrochemicals that includes aromatics, olefins, polyethylene, polypropylene plastics, and other specialty products.

Exxon Mobil manages exploration, extraction, and production across the six continents of the world that includes the US, Canada, Europe, South America, Asia, and the Oceanic region. The segments of the company include

• Upstream: The Upstream segment overlooks the production of crude oil and natural gas
• Downstream: The Downstream segment manages the refinement and sale of petroleum products
• Chemicals: The Chemical division administers the manufacture and sale of petrochemicals
• Corporate and Financing: This segment is involved in the marketing and promotion of Exxon Mobil power, gas, and natural gas liquids.

Exxon Mobil is also involved in the exploration, mining, and sale of copper, coal, and other minerals. Both the Upstream and Downstream divisions are based in Houston, Texas. Exxon Mobil is the biggest non-government oil company and accounts for 3% of the world’s oil and energy. The company has a daily production of almost 6.2 million barrels a day, regardless of international oil prices. If the oil prices increase, then the company has a chance of increasing its cash flows and revenue.

Risk and Potential in Exxon Mobil Environment

Exxon Mobil has 135 year old history which makes it one of the oldest oil manufacturing and distribution company that developed from a regional kerosene seller into the world’s largest business company. The consistent success and progress shows the effort and performance of the company. Exxon Mobil is known to be proactive when it comes to using technology and innovation to improve the quality of its products and services and having the ability to meet the growing global demand for oil.

Exxon Mobil is a world’s leading brand in the energy and power sector, but as a big corporation, the company must constantly evolve and have a firm grip on its operations. SWOT analysis is a tried and tested tool that enables big organizations to oversee its current market performance, understand the internal and external market dynamics, and plan strategies for future growth. The SWOT analysis of Exxon Mobil is given by

• Strengths

Exxon Mobil enjoys a strong brand name and it is one of the largest business companies based on revenue. The financials of the company have gradually improved over the years. Exxon Mobil has 37 refineries in over 21 countries, which makes it the largest refiner in the world. Exxon Mobil has strong and dynamic Upstream and Downstream operations with a wide range of fuels, lubricants, and other petroleum products. Being the largest refiner also gives an advantage to Exxon Mobil to diversify its portfolio and offer LNG (Liquefied Natural Gas), Shale Gas, Light Gas, Heavy Oil, Artic, and Sour Gas. Exxon Mobil spends heavily on Research and Development (R&D) that enables the company to reduce greenhouse gas emission, lower water usage, and improve bitumen recovery.

• Weaknesses

Exxon Mobil is frequently involved in legal battles and lawsuits all over the world. The legal cases range from fines, penalties, and damages. One of the major cases was an oil spill in Alaska in 1989, which was considered the worst oil spill in history. The company also had to face human rights issues. The business of company is spread all over the world, so managing the employees sometimes is challenging.

• Opportunities

Exxon Mobil most likely will continue to grow as the oil demand will remain. There may be few months of less demand due to recession, inflation, or any ongoing pandemic such as Coronavirus, but the oil markets do get stable, and certain price hikes are also seen. Exxon Mobil needs to grow in providing renewable energy resources because the future is the use of sustainable resources. The company can increase its profits through both LNG and LPG (Liquefied Petroleum Gas) projects.

• Threats

Exxon Mobil faces constant challenge from government regulations and tax policies, global recession, the decline in oil demand and consumption, and, most importantly, from rival oil manufacturing companies. The notable competitors of Exxon Mobil are British Petroleum (BP), Royal Dutch Shell, Chevron, Total SA, and ConocoPhillips. There is also the risk of low oil supply due to any political instability or natural calamity in places where oil is extracted and produced.

Stock Analysis of Exxon Mobil

Exxon Mobil is listed and actively trades on the New York Stock Exchange with the ticker symbol ‘XOM.’ The company is listed under the ‘Energy Minerals’ Sector, and the industry is ‘Integrated Oil.’ Exxon Mobil is also a member of other indices such as Dow Jones Industrial Average (DJIA), S&P-100 Index, and S&P-500 Index.

The all-time high share price of Exxon Mobil was $104.38 on June 23, 2014, and the average price in the last 52 weeks is $57.16.

The oil prices all over the world have declined considerably since February 2020 as the Coronavirus outbreak spread to the entire world. Business, schools, restaurants, and travel got disrupted, and people were asked to stay at home and maintain social distancing. As the businesses and shops closed on a wider scale, the consumption and subsequent demand for oil fell, and prices of oil fell significantly low all around the world.

Exxon Mobil is considering more jobs and spending cuts as the oil prices remain low. At the end of the second quarter, the company posted a loss of revenue of almost 53% to $32.6 billion, the Earnings per Share (EPS) fell 70 cents, and the production fell 7% to 3.6 million BOE per day. The planned asset sales and oil rebound did not happen as the company expected. However, the company is maintaining dividends at 87 cents per share.

Exxon Mobil’s earnings have fallen at an average of 24% for three years, while the growth rate in the three years has been a mere 1%. But the dividend yield of the company has been impressive around 8%. The value of Exxon Mobil’s stock and EPS directly depend on crude oil prices. Exxon Mobil stock is experiencing a downward trend for quite some time, and the share is below the 50-day trading and 200-day trend lines. There is considerable volatility in the share price from which the short term traders can have the possibility to potentially profit.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.