Problem:
Please paraphrase this document. Please make the first section an evaluation of the company's financial performance and the second section should be what short- and long-term strategies Exxon should use to improve its performance.
Exxon-Mobil as a Case Study
“The high level of merger activities throughout the world between 1994 and 2000 reflected major change forces. These shocks included technological changes, globalization of markets, intensification of the forms and sources of competition leading to deregulation in major industries, and the changing dynamics of financial markets. Mergers and restructuring in the oil industry reflected these broader forces as well as its own characteristics” (Weston, 2006).
“The Exxon-Mobil combination is an example of a successful merger. Fundamentally, the reasons, structures, and implementation of the transaction reflected the characteristics of the oil and gas industry. The industry increasingly utilizes advanced technology in exploration, production, refining, and in the logistics of its operations. It is international in scope. World demand is sensitive to economic conditions. The weakness in the Asian economies pushed prices below $10 per barrel at the end of 1998. The US recession, which began in March 2001, helped push oil prices from $32 a barrel to $17 a barrel by November 2001” (Weston, 2006).
“Exxon Mobil Corporation or ExxonMobil is the largest publicly traded, integrated oil and gas company in the world, formed on November 30, 1999 by the merger of Exxon and Mobil. It is the sixth-largest company in the world as ranked by the Forbes Global 2000 and the largest company in the U.S. as ranked by the Fortune 500. It is the largest of the six oil "super majors," which also include BP (formerly British Petroleum), Shell, Chevron, ConocoPhillips and Total. It has the highest market value of any publicly traded company in the world, and in 2005 was the most profitable. Its operating profit in 2005 was $.08 per gallon of sales for a total of $36.13 billion (an all-time record for any publicly traded company), slightly less than the gross domestic product of Azerbaijan, while its revenues were slightly less than the GDP of Belgium. ExxonMobil is a component of the Dow Jones Industrial Average” (Wikipedia, 2006).
“The company is bifurcated into a "Downstream" division (marketing, refining, and retail operations) headquartered in Fairfax, Virginia (a Washington DC suburb), and an "Upstream" division (oil exploration, extraction, shipping, and wholesale operations) headquartered in Houston, Texas. Although most internal operations are divided along these lines, the company also has several smaller ancillary divisions for sideline businesses such as Chemicals, Lubricants, Coal & Minerals, etc.” (Wikipedia, 2006).
“In terms of revenue, the company is dominated by its upstream division, which accounts for approximately 70% of revenue. The company employs over 100,000 worldwide with approximately 4,000 people in its Fairfax downstream headquarters and 27,000 people in its Houston upstream headquarters” (Wikipedia, 2006).
“Although price levels of crude oil and natural gas may rise or fall significantly over the short to medium term due to political events, OPEC actions and other factors, industry economics over the long term will continue to be driven by market supply and demand. Accordingly, the Corporation tests the viability of all of its assets based on long-term price projections. The Corporation’s assessment is that its operations will continue to be successful in a variety of market conditions. This is the outcome of disciplined investment and asset management programs. Investment opportunities are tested against a variety of market conditions, including low-price scenarios. As a result, investments that would succeed only in highly favorable price environments are screened out of the investment plan. The Corporation has had an active asset management program in which underperforming assets are either improved to acceptable levels or considered for divestment. The asset management program involves a disciplined, regular review to ensure that all assets are contributing to the Corporation’s strategic and financial objectives. The result has been the creation of a very efficient capital base and has meant that the Corporation has seldom been required to write down the carrying value of assets, even during periods of low commodity prices” (Exxon-Mobil, 2006).