exxonmobil project work

HISTORY

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ACCOUNTING, FINANCE & CONTROL PROJECT WORK

ExxonMobil is the world’s second largest publicly traded international oil and gas company.

“We hold an industry-‐leading inventory of global oil and gas resources. We are the world’s largest refiner and marketer of petroleum products, and our chemical company ranks among the world’s largest. We apply science and innovation to find better, safer and cleaner ways to deliver

the energy the world needs.”

ALESSANDRO CHIAVARI/10393412

ETTORE CERABOLINI/10356491

SIMONE CORTI/10341362

EMRE BUYUK/10476157

HISTORY

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HISTORY

In 1859, Colonel Edwin Drake and Uncle Billy Smith drill the first successful oil well in

Titusville, Pennsylvania. The colonel's discovery triggers an oil boom that parallels the gold rush

of a decade earlier. ExxonMobil Corp. was formed in 1999 by the merger of two major oil

companies, Exxon and Mobil. Both Exxon and Mobil were descendants of the John D.

Rockefeller Corporation, the Standard Oil, which was established in 1870.

Over the last 125 years ExxonMobil has evolved from a regional marketer of kerosene in the

U.S. to the largest publicly traded petroleum and petrochemical enterprise in the world.

OVERVIEW

“As a top company in the Oil and Gas industry, ExxonMobil specialize in producing Fuels,

Lubricants and Petrochemicals.”

It is not necessarily the oil standard, but ExxonMobil is the world's largest integrated oil

company (ahead of Royal Dutch Shell and BP). ExxonMobil engages in oil and gas exploration,

production, supply, transportation, and marketing worldwide. In 2013, the company reported

proved reserves of 25.2 billion barrels of oil equivalent, including its major holdings in oil sands

through Imperial Oil. ExxonMobil's 31 refineries in 17 countries have a throughput capacity of

5.3 million barrels per day. The company supplies refined products to more than 19,000 gas

stations worldwide (including almost 10,000 in the US). ExxonMobil is also a major

petrochemical producer.

RANKINGS Top 3 Competitors

5th Place in Fortune Global 500 Royal Dutch Shell plc

S&P 500 BP P.L.C.

Dow Jones Industrials Chevron Corporation

Dow Jones Global Titans

2nd Place in FT 500

HISTORY

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“We strive to be responsible corporate citizens, and our success along that

path is underpinned by our technological expertise, operational excellence,

safety performance and unwavering ethical standards.” Rex W. Tillerson

The Board appoints Committees to help carry out its duties. In particular, Board Committees

work on key issues in greater detail than would be possible at full Board meetings. Each

Committee reviews the results of its meetings with the full Board.

EXXONMOBIL AS AN INDUSTRY

ExxonMobil Corp. explores, develops and distributes crude oil and natural gas. The company

through its divisions and affiliated companies, engages in its principal business, is energy,

involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum

products and transportation and sale of crude oil, natural gas and petroleum products. It

manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene

and polypropylene plastics and a variety of specialty products. The company also has interests in

electric power generation facilities. It operates business under three segments: Upstream,

Downstream and Chemical.

The Upstream segment is organized and operates to explore for and produce crude oil and

natural gas.

The Downstream segment manufactures and sells petroleum products. The refining and

supply operations encompasses global network of manufacturing plants, transportation systems,

Management Board Board Committees

Andrew P. Swiger Audit Committee Charter

Darren W. Woods Compensation Committee Charter

Jack P. Williams Board Affairs Committee Charter

Mark W. Albers Finance Committee Charter

Michael J. Dola Public Issues and Contributions Committee Charter

Rex W. Tillerson (CEO) Executive Committee Charter

HISTORY

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and distribution centers provides fuels, lubricants, and other high-value products and feedstocks

to customers.

The Chemical segment operates to manufacture and sell petrochemicals. It supplies olefins,

polyolefin's, aromatics, and a wide variety of other petrochemicals.

Worldwide, ExxonMobil markets fuels and lubricants under three brands:

Exxon: Exxon-branded fuels, services and lubricants based in US. In 1955,

Socony-Vacuum became Socony Mobil Oil Co. and, in 1966, simply Mobil

Oil Corp. A decade later, the newly incorporated Mobil Corp. absorbed

Mobil Oil as a wholly owned subsidiary. Jersey Standard changed its name to

Exxon Corp. in 1972 and established Exxon as a trademark throughout the United States. In

other parts of the world, Exxon and its affiliated companies continued to use its Esso trademark.

Esso: Esso-branded fuels, services and lubricants around the world. Esso

began life as the Anglo American Oil Company in 1888. It was the first foreign

affiliate of John D Rockefeller's US Company the Standard Oil Trust.

Mobil: Marketed around the world, Mobil is known for performance and

innovation. Mobil is recognized for its advanced technology in fuels,

lubricants and services.

Key Financials Million of US$

Revenues 407,666

Profits 32,580

Assets 346,808

Stakeholders

Suppliers ≈160,000

Employees ≈75,000

Countries 120

Shareholders ≈2.5 Million

STRATEGY OF EXXONMOBIL CORPORATION

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ExxonMobil has a steadfast commitment in becoming the world’s premiere publicly owned

petroleum and petrochemical company. As of 2014 data, Exxon is ranked 2nd by net income

among the major international oil and gas companies. To accomplish this goal, two minor

strategies can be defined, as stated in the letter to the shareholders.

First strategy of those is to increase long-term value of the company by delivering profitable

growth: a result that can be achieved only by sustaining operational excellence and selectively

invest in high-value opportunities.

The other step that should be taken in order to attain the main goal is emerging as the leader in

all the activities Exxon is involved into, starting from their three main divisions: Upstream,

Downstream and Chemicals.

As we mentioned earlier, ExxonMobil Corp. consists of multiple divisions and companies.

Those divisions and affiliated companies of the company operate or market products in the

United States and other countries of the world. Their principal business is energy, involving

exploration for, and production of, crude oil and natural gas, manufacture of petroleum products

and transportation and sale of crude oil, natural gas and petroleum products.

"Taking on the world's toughest energy challenges."

The saying above is accepted as main slogan of the company and shows us the company’s

ambition in the energy sector they operate.

Mission Statement of the Company:

“ExxonMobil Corporation is committed to being the world's premier petroleum and

petrochemical company. To that end, we must continuously achieve superior financial and

operating results while simultaneously adhering to high ethical standards.”

Further to its mission statement, Exxon Mobil explains its strategy under four main point of

view: Shareholders, Customers, Employees and Communities, respectively. The highlighted

points from those glances are;

Shareholders: We are committed to enhancing the long-term value of the investment dollars

entrusted to us by our shareholders.

Customers: Success depends on our ability to consistently satisfy ever changing customer

preferences.


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Employees: We are committed to maintaining a safe work environment enriched by diversity

and characterized by open communication, trust, and fair treatment.

Communities: We commit to be a good corporate citizen in all the places we operate

worldwide.

From the Exxon Mobil mission statement, we can see that Exxon Mobil Corporation is

focusing on three aspects, which is premier, financial and ethical standard. For the premier

perspective, they are recruited the potential and retain the high quality people because they know

that the high quality of employees is the company’s greatest strength and will make the

corporation well positioned for ongoing success in the long term. This investment is one of the

Exxon Mobil guiding principles: “The exceptional quality of our workforce provides a valuable

competitive edge. To build on this advantage, we will strive to hire and retain the most qualified

people available and to maximize their opportunities for the success through training and

development.” Moreover, by developing the quality employees, automatically, company will

provide the high quality product and achieve the customer satisfaction throughout the world.

Exxon Mobil has also given importance substantially to its main segments: Upstream,

Downstream and Chemical when the company built its strategy; furthermore, those segments’

strategies should be taken into account.

According to data from annual report 2013 of the company,

Upstream segment’s strategies can be summarized into:

1. Apply effective risk management, safety, and operational excellence

2. Identify and selectively capture the highest-quality resources

3. Exercise a disciplined approach to investing and cost management

4. Develop and apply high-impact technologies

5 .Maximize profitability of existing oil and gas production

Downstream segment’s strategies are ordered as:

1. Maintain best-in-class operations

2. Provide quality, valued products and services to our customers

3. Lead industry in efficiency and effectiveness

4. Capitalize on integration across ExxonMobil businesses

5. Maintain capital discipline


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6. Maximize value from leading-edge technologies

Chemical segment’s strategies can be highlighted:

1. Consistently deliver best-in-class operational performance

2. Focus on businesses that capitalize on core competencies

3. Build proprietary technology positions

4. Capture full benefits of integration across ExxonMobil operations

5. Selectively invest in advantaged projects As we can clearly see from the strategies of company, Operational Excellence is underlined

multiple times. The point of Exxon Mobil’s view on this matter tells us “Operational excellence

begins with exceptional employees. Backed by comprehensive management systems, the men and

women of ExxonMobil form the foundation for strong operational performance. We are proud of

the culture of excellence reflected in the daily accomplishments of our employees around the

world. It is a culture built by decades of past and current employees’ dedication to doing the

right things, the right way, and not accepting compromises to our values.”

Apart from the point that has done above, it is also mentioned in the annual report 2013,

“Operational excellence underpins everything we do at ExxonMobil and is critical to delivering

profitable growth. Driven by our talented and committed workforce, proven management

systems are rigorously employed at ExxonMobil facilities across the globe and are incorporated

into daily operations. These systems enable continuous improvement in safety performance,

increased reliability, and lower operating costs.”

All in all, respecting the main and minor strategies of the company related to every

perspective, we came up with the following Balanced Scorecard. Furthermore, we found

distinctive indicators in order to assess the position of the company due to achieve its strategies

linked to fundamental aim.

M ETHODOLOGY

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METHODOLOGY

This Balanced Scorecard we adopted follows the methodology proposed by Kaplan and

Norton. We started from the understanding of the Vision and main corporate Strategy of

ExxonMobil and subsequently moved toward the specific indicator. While respecting the Kaplan

and Norton division in 4 parts we were also focused on finding indicators that could, whenever

possible, give a valuable insight of the tre main sectors in which ExxonMobil operates, that can

be considerate like specific industries themselves: Upstream, Downstream, Chemicals. Moving

into each perspective the reader will find a brief description of each of the indicator provided

along with the explained formula used in the calculation, if needed. Together with the description

and the formula there will be a “Methodology” paragraph that explains why that indicator has

been chosen. In the final part of each indicator’s section are shown the calculations (when some

data has to be manipulated), results (which can appear both in tables or in graphs), and when

available the comparison with British Petroleum (BP), chosen as a peer competitor.

In order to make it easier to the reader to have a comprehensive view of the company and of

the scorecard we collected every critical thought made upon the indicators directly into the final

chapter, called “Critical Analysis”.

M ETHODOLOGY

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Being the world’s premiere petroleum and petrochemical

company

FINAN

CIAL

PE

RSPE

CTIVE

Increasing long-‐term value

Becoming leader in each of its activity

Enhancing Generation of Cash

Increasing Operational Profitability

Investing in High-‐Value

Opportunities

FCFF ROCE CAPEX REVENUES

CUSTOMER

PE

RSPE

CTIVE

Stabilizing Market Share

Increasing Sales

Adding New Product Groups

Increasing Worldwide Visibility

Market Share

Sales Volume Brand Equity Value

Raising Shareholders’

Value

EPS

Product Portfolio

Reducing Logistics Cost

Distance of Delivery

Providing Better Environ.

Improving Downstream

Volume

Balancing Extraction Capacity

Increasing Chemical Production

Oper. Excellence

GHG Emissions

Refining Cap. & Utilization

Rate

Production Repl. Rate

Chemicals Production Capacity

Extraction cost per barrel

INTERN

AL

PERS

PECT

IVE

LEAR

ING &

GRO

WTH

PER

.

Employment of diverse workforce

Increasing Safety in Workplace

Keeping up with the Environmental

Balance

Employment Rates by region, gender,

minority

Process/Personnel Safety Events

Spill Incidents

FINANCIAL PERSPECTIVE

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INCREASING GENERATION OF CASH – FCFF The Free Cash Flow to Firm is a measure of financial performance that expresses the net

amount of cash that is generated for the firm, allocated to all of its investors, and consists of

expenses, taxes and changes in net working capital and investments.

FCFF = EBIT ∗ 1− Tax Rate + D&A± ∆NWC± CapEx

Where: Tax Rate is the average company’s tax rate. D&A stands for depreciation and

amortization. ∆𝑁𝑊𝐶 is the change in Net Working Capital (payables, receivables, inventory).

𝐶𝑎𝑝𝐸𝑥 is the capital expenditure in fixed assets (e.g. new plants, maintenance of existing ones).

Methodology

FCFF is one of the primary concepts in valuing a company, as it is a clear measure of the

ability of the company to generate more cash than it spends. This indicator fits very well the oil

and gas companies because it enables to compare companies by setting aside the very high level

of costs associated with non-cash items, such as depreciation, depletion, amortization.

Furthermore, commodity prices, which are related to supply, demand and political scenarios, can

move up or down significantly in the short-mid period; a risk that needs to be mitigated. To this

end, stable cash flows can prove a company’s ability to hedge risks without impairing operations.

Calculations, Results & Comparison

ExxonMobil 2009 2010 2011 2012 2013 Cash Flow from Operations (CFO) 28.440 48.410 55.350 56.170 44.910 – Capital Expenditures (CapEx) 22.430 26.870 30.980 34.270 33.670 Interest Expense 548 259 247 327 132 Tax Rate 43% 41% 42% 39% 42% Free Cash Flow to Firm 6.248 21.645 24.475 22.029 11.295

British Petroleum 2009 2010 2011 2012 2013 Cash Flow from Operations (CFO) 17.760 8.820 13.820 12.920 13.500 – Capital Expenditures (CapEx) 13.230 11.930 11.130 14.650 15.690 Interest Expense 460 454 492 533 540 Tax Rate 39% N/A 39% 48% 24% Free Cash Flow to Firm 4.711 N/A 2.882 -1.472 -2.061

All the data are in million of US$

Table 1


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INCREASING OPERATIONAL PROFITABILITY – ROCE Return on Capital Employed is a financial ratio that measures a company’s profitability and

the efficiency at which its capital is employed. It is accrual based, as its numerator is EBIT.

ROCE =EBIT

Capital Employed

The Capital Employed as shown in the denominator is the sum of shareholders’ equity and

debt liabilities, and can be calculated as: Total Assets – Current Liabilities. Instead of using the

capital employed at an arbitrary point of time we prefer to use the Average Capital Employed,

taking the average of the opening and closing capital of the year.

Methodology

ROCE is a performance measure ratio used in capital-intensive and long-term oriented

industries, such as Oil and Gas, to show whether the capital has been used wisely or not. It is

used to compare the performance of two businesses and for assessing whether a business

generates enough returns to pay for its cost of its capital. Thus, ROCE should always be higher

than the rate at which the company is borrowing; otherwise any incremental borrowing will

reduce shareholders’ earnings.

The main drawback of ROCE is that it measures return against the book value of assets in the

business. As these are depreciated the ROCE will increase even though cash flow has remained

the same. Thus, older businesses with depreciated assets will tend to have higher ROCE than

newer, possibly better businesses. In addition, while cash flow is affected by inflation, the book

value of assets is not. Consequently revenues increase with inflation while capital employed

generally does not (as the book value of assets is not affected by inflation).


ExxonMobil 2009 2010 2011 2012 2013 Total Assets 233.320 302.510 331.050 333.800 346.810 – Current Liabilities 52.060 62.630 77.510 64.140 71.720 = XOM Capital Employed 181.260 239.880 253.540 269.660 275.090 Average Capital Employed

210.570 246.710 261.600 272.375

EBIT

42.560 58.210 57.540 43.770 ROCE 20% 24% 22% 16%


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British Petroleum 2009 2010 2011 2012 2013 Total Assets 146.120 173.900 188.580 184.850 184.570 – Current Liabilities 36.730 52.910 53.910 46.960 43.960 = Capital Employed 109.390 120.990 134.670 137.890 140.610 Average Capital Employed

115.190 127.830 136.280 139.250

EBIT

17.950 21.110 12.860 13.290 ROCE 16% 17% 9% 10%


Table 2

INCREASE SHAREHOLDERS’ VALUE – EPS

It represents the portion of a company’s profit allocated to each outstanding share of common

stock. It is calculated as follows:

EPS =Net Income− Dividends on Preferred Stock

Average Outstanding Shares

Preferred stock rights have precedence over common stock. Therefore, dividends declared on

preferred shares are subtracted before calculating the EPS.

Methodology

EPS is the key indicator when we focus on the shareholders’ value as this ratio is a main

driver of the stock price: even though cash flow and free cash flow are more instructive, the

market pays attention to and reacts to earnings.


ExxonMobil 2009 2010 2011 2012 2013 Net Income After Extraordinaries 19.280 30.460 41.060 44.880 32.580 Basic Shares Outstanding 4.830 4.890 4.870 4.630 4.420 EPS 3,99 6,23 8,43 9,69 7,37

British Petroleum 2009 2010 2011 2012 2013 Net Income After Extraordinaries 10.620 -2.410 16.030 6.950 15000 Preferred Dividends 1,28 1,3 1,25 1,26 1,28 Net Income Available to Common 10.620 -2.410 16.030 6.950 150 Basic Shares Outstanding 18.730 18.790 18.900 19.030 18.930 EPS 0,57 -0,13 0,85 0,37 0,01

ExxonMobil does not allow preferred stock. Net Income are in million of US$.

Table 3


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INVESTING IN HIGH-VALUE OPPORTUNITIES – CAPEX AND EARNINGS Capital Expenditure (CapEx) is a measure of the funds used by a company to acquire or

upgrade physical assets such as property, industrial buildings or equipment (fixed assets). CapEx

can be calculated as follows, but ExxonMobil already published the data in the “Financial and

Operating Review”.

New PPE = Old PPE + CapEx − Depreciation.

(PPE = Investments in Plant, Property and Equipment).

Methodology

In order to understand the direction of the company, an important information is to see where

the company is spending money and how the earning are affected by the investments. Even

though the overall ROCE already provides a valuable measurement, the management of the

company also needs absolute data which is related to the specific division.


ExxonMobil 2009 2010 2011 2012 2013

CapEx Upstream 20.704 27.319 33.091 36.084 38.231 Downstream 3.196 2.505 2.120 2.262 2.413 Chemicals 3.148 2.215 1.450 1.418 1.832

Earnings Upstream 17.107 24.097 34.439 29.895 26.841 Downstream 1.781 3.567 4.459 13.190 3.449 Chemicals 2.309 4.913 4.383 3.898 3.828


Table 4

Bars represent CapEx and are quoted on the left axis, lines (Earnings) are quoted on the right one.

Figure 1

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2009 2010 2011 2012 2013

Earnings – M

illion of US$

Capital Expen

ditures –

Million of

US$

Upstream Downstream Chemicals

CUSTOM ERS’ PERSPECTIVE

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CUSTOMERS’ PERSPECTIVE

STABILIZING MARKET SHARE – MARKET SHARE PERCENTAGE Market share percentage describes the part of the market under control of the company in

comparison to the overall market.

MS (%) = 100 * (unit sales) / (total market unit sales)

Methodology

Market share is a key indicator for attractiveness of the company, because it well describe

trends in customers’ choices among company and competitors. It helps to evaluate primary and

selective demand in market. Being a relative indicator, it well fits its role, since it bypass

problems that can rise from the variance that characterizes oil market.

Standing to the available data, MS(%) has to be proxied with two different formulas for the

upstream and downstream sections.

MSup (%) = 100 * (average production per day) / (Global production per day)

MSdwn (%) = 100 * (throughput per day) / (Global consumption per day)


ExxonMobil 2009 2010 2011 2012 2013 Upstream Liquids production (net, thousands of barrels per day) 2.387 2.422 2.312 2.185 2.202

Upstream Oil-equivalent production (natural gas production) (net, thousands of barrels per day)

3.932 4.447 4.506 4.239 4.175

Downstream Refinery throughput (, thousands of barrels per day) 5.350 5.253 5.214 5.014 4.585

World Liquid Fuels Production (thousands of barrels per day) 84.493 87.375 87.920 89.765 90.153 World Liquid Fuels Consumption (thousands of barrels per day) 84.688 87.335 88.483 89.135 90.475 MSup(%) 7,48% 7,86% 7,75% 7,16% 7,07% MSdwn(%) 6,32% 6,01% 5,89% 5,85% 5,07%


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British Petroleum 2009 2010 2011 2012 2013 Upstream Total hydrocarbons (thousands of barrels per day) 2.492 2.460 2.319 2.225

Downstream Refinery Throughput (thousands of barrels per day) 2.426 2.352 2.354 1.791

MSup(%)

2,85% 2,80% 2,58% 2,47% MSdwn(%)

2,78% 2,66% 2,98% 1,98%

Table 5

INCREASING SALES – SALES VOLUMES Sales volume are data collectible from public documents such as official annual reports. In the

case of petroleum products and chemicals they are presented in thousands of barrels per day or

thousands of tonnes.

Methodology

Sales volume is an absolute index that gives an idea on how much appealing are the

Company’s products for the customers, and a growth in this parameter represent an effective

growth of the overall company name. The big drawback of such an index is that it becomes less

meaningful when huge fluctuations in relevant variables out of control of the company occur.


While BP doesn’t have a Chemicals division, a direct comparison can’t be truly done, since

BP provides its sales volume in a global value of thousands of barrels per day, while XOM

propose the volume sales shifted between thousands of barrels per day of petroleum product

sales and thousands of tons of chemical prime product sales.

ExxonMobil 2009 2010 2011 2012 2013 Petroleum product sales (thousands of barrels per day) 6.428 6.414 6.413 6,174 5,887 Chemical prime product sales (thousands of tons) 24.825 25.891 25.006 24,157 24,063

British Petroleum 2009 2010 2011 2012 2013 Total refined product and crude oil sales (thousands of barrels per day) 7.585 7.308 7.175 7.711

Table 6


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REDUCING LOGISTIC COSTS – DISTANCE OF DELIVERY

The average distance of delivery from production represents the interconnection between

different Company’s departments. As it says it’s the average distance between the places where

the refinery physically takes place and the selling stores.

Methodology

It allows understanding how geographically interconnected production and delivery

departments are. A high value of the indicator presumes high costs of connection & stock,

suggesting a higher risk of stockout too.


There are not available public data about the Company’s network, and a quantitative value

could be computed only internally. Although a wider view can be analyzed, looking at the

divisions geography around the world. The two following maps well describe how the two

companies tend to serve with all the divisions the well-known and flourish markets, while they

prefer to consolidate only the upstream in weaker and developing markets.


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ADDıNG NEW PRODUCT GROUPS – PORTFOLIO OF PRODUCTS The size of the portfolio is the number of products the Company offers in a specific field.

Methodology

The Portfolio describes the differentiation of the products and the number of the potential

customers. From a customer point of view, it also tastes the quality itself, since a big range of

very technical products is directly related on the D&R invested in it and the results achievable.


ExxonMobil Chemicals division has a portfolio that covers polyethylene products,

hydrocarbon fluid and oxygenated fluid, polypropylene, plasticizers, butyl rubber, synthetic

fluids & lubricant, polymer modifiers, chemical intermediates, specialty elastomers and

tackifying resins. Overall ExxonMobil Chemicals counts 30 different trademark polymers

products & 37 different trademark chemicals & fluids, for a total portfolio size of 67 different

products.

British Petroleum has not a Chemicals division and neither has products in all the markets

ExxonMobil compete. Indeed the only Chemicals market in which British Petroleum compete is

synthetic fluids & lubricant, with a smaller portfolio.


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INCREASıNG WORLDWıDE VıSıBıLıTY – BRAND EQUıTY VALUE Brands embody a core promise of values and benefits consistently delivered. Brands provide

clarity and guidance for choices made by companies, consumers, investors and others

stakeholders.

Methodology

At the heart of a brand’s value is its ability to appeal to relevant customers and potential

customers. Even if in the past this value was not relevant for an Oil&gas industry, nowadays it is

becoming more and more important to know what the customer think about the company and the

strength of the brand itself. In this aspect ExxonMobil continued to build its brand around

technical excellence, being the go-to company for the world’s most difficult and risky

exploration. But nowadays even ExxonMobil uses a less technical, more consumer friendly voice.


Calculations are made by financial analysts as Forbes or Bloomberg or otherwise by

specialized Brand analyst such as Millward Brown.

INTERNAL PROCESS PERSPECTIVE

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PROVIDING BETTER ENVIRONMENT - GHG EMISSION

Greenhouse Gas emissions have a strong

warming effect on the climate but have a

relatively short lifetimes in the atmosphere.

Oil&Gas companies generate GHG gases in

almost every aspect of their work, from the

finding, extracting and processing of

hydrocarbon resources, to the transforming and

delivery of these resources to customers.

It is measured in metric tons of Greenhouse

gas emission/ 100 metric tons of throughput or

production

Methodology

Instead of using the Net equity CO2

equivalent emission we think this ratio is more

effective for a quick understanding of the

percentage of emission made by ExxonMobil

facilities, so to understand how much of the gas

they are producing are environmental effective or

not.


ExxonMobil in figures: we can see that the 2013 results

are quite the same of the 2012, so to emphasize the

continuous but slowly process to reduce the GHG emission

through every process of the company.

As for the BP there isn’t the normalized indicator but

only the Net Overall Indicator. As you can see in the next

pair of data images, the two data are very different, but this


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has to be related to the quantity of oil processed by the two companies.

BALANCING EXTRACTION CAPACITY - PRODUCTION REPLACEMENT RATE

The reserve-replacement ratio measures the amount of proved reserves added to a company's

reserve base during the year relative to the amount of oil and gas produced.

It is calculated as extensions and discoveries, improved recovery, revisions, purchases and

sales of proved reserves, divided by production

Methodology

This is one of the primary metrics used to assess an oil and gas company because it measures

the amount of added proved reserves relative to the amount of hydrocarbon produced.

It is a very important ratio because if for instance it falls below 100%, then the company is

depleting its own reserves and will eventually run out of oil.

See how the definition of proved reserves is: “Quantity of energy sources estimated with

reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from

well established or known reservoirs with the existing equipment and under the existing

operating conditions”


ExxonMobil 2013 Replacement Rate: 103% 1,6 billion proven BOE (barrels oil-

equivalent) added

BP 2013 Replacement Rate: 129% 1,5 billion proven BOE added

OPERATIONAL EXCELLENCE - EXTRACTION COST PER BARREL

Cost substained by the company, including the operating and capital costs, to extract one

single barrel of crude oil in the upstream segment. We calculated it backwards as follows:

Extraction cost per barrel = Revenues per barrel – Earnings per barrel

Methodology

The cost of pumping a barrel of oil out of the ground depends on a variety of factors,

including the size and accessibility of the field, political factors (for example in the Iraq region),


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also the difference between onshore and offshore extraction is one of the major creator of the

difference in the cost.

In the following we’ve reported the worldwide average of costs, earnings and revenues,

calculated on the base of the data for every geographical division used by the companies.

This data is very important to see how a company is able to sustain the lower costs, so to

make the higher margin. It is also very important to a company to maintain the costs under the

BEP (Break even point) so to make no losses on the oil.

This indicator in conjunction with production figures is used to examine revenue and costs on

a per-unit-of-production basis. Revenue per barrel of oil equivalent (BOE) of production is tied

closely to the prevailing market price for oil and gas.


(dollars per barrel of net oil-‐equivalent production)

ExxonMobil 2009 2010 2011 2012 2013 Revenues 45,58 53,04 68,11 68,68 69,66 Earnings 11,76 14,71 20,80 19,12 17,45 Average Total Costs 33,82 38,33 47,31 49,56 52,21

(dollars per barrel of net oil-‐equivalent production)

British Petroleum 2009 2010 2011 2012 2013 Revenues 56,26 73,41 101,29 102,10 99,24 Earnings 11,08 15,33 16,97 15,70 14,55 Average Total Costs 45,18 58,08 84,32 86,40 84,69

Profit Margin 2009 2010 2011 2012 2013 ExxonMobil 26% 28% 31% 28% 25% British Petroleum 20% 21% 17% 15% 15%

(thousands of barrels per day)

Net Oil Production 2009 2010 2011 2012 2013 US 384 408 423 418 431 Canada /South America 267 263 252 251 280 Outside America 1671 1693 1586 1466 1964


22

IMPROVING DOWNSTREAM VOLUME – REFINING CAPACITY & UTILIZATION RATE

Refining capacity is the stream-day capability to process inputs to atmospheric distillation

units under normal operating conditions, less the impact of shutdowns for regular repair and

maintenance activities, averaged over an extended period of time.

The refinery utilization is calculated as the annual throughput (thousands of barrels per day)

divided by the average crude distillation capacity, expressed as a percentage.

Methodology

ExxonMobil hold an ownership interest in 31 refineries with distillation capacity of 5.3

million barrels per day and lubricant basestock capacity of 126 thousand barrels per day. They

are an industry leader in integration with more than 75 percent of the refining operations

integrated with chemical or lubricant production, which provides unique optimization capability

across the entire value chain.

These annual averages include partial-year impacts for capacity additions or deletions during

the year. Any idle capacity that cannot be made operable in a month or less has been excluded.

Capacity volumes include 100 percent of the capacity of refinery facilities managed by

ExxonMobil or majority-owned subsidiaries. At facilities of companies owned 50 percent or less,

the greater of either that portion of capacity normally available to ExxonMobil or ExxonMobil's

equity interest is included.

The throughput of all the refineries is not the maximum capacity, so it has to be calculated

how much a company uses its own refinery in comparison to the ideal capacity


Data is showed in the following page’s graph, called “Figure 2”.

INCREASING CHEMICAL PRODUCTION – CHEMICAL PRODUCTION CAPACITY

ExxonMobil Chemical is one of the largest chemical companies in the world, with a unique

portfolio of commodity and specialty businesses. The company has world-scale manufacturing

facilities in all major regions of the world, and their products serve as the building blocks for a

wide variety of everyday consumer and industrial products.


23

Methodology

Worldwide chemical demand growth improved in 2013.Most chemical demand growth is in

Asia Pacific, driven by manufacturing of industrial and consumer products both for worldwide

export and to serve the growing Asian middle class. Asia Pacific has accounted for more than

two-thirds of global chemical demand growth since 2000, and we expect this trend to continue.

Over the next decade, ExxonMobil expects global chemical demand to grow by 50 percent,

driven by improving prosperity in developing countries

Growing chemical demand is spurring new capacity investments around the globe,

particularly in North America with its abundant supplies of natural gas liquids. This has greatly

improved the global competitiveness of existing assets, enabling North American producers to

export chemical products competitively to growth markets around the world.

So taking into account the demand, the total production of chemical in ExxonMobil facilities

has to be increased year by year and Exxon is going to do it increasing capacity of exhisting

facilities and also building new facilities in particular in North America and also in developing

countries where an expansion is being progressed that will increase the site’s ethylene and

polymer capacity, and add ethylene glycol production. Also to be consi

Figure 2

-‐

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

2009 2010 2011 2012 2013

Thou

sand

s of B

arrels per day

North America

Europe

Asia Pacific

Middle East/Other

Total worldwide

BP


24

dered that Singapore is now ExxonMobil largest integrated petrochemical complex and

accounts for about one-fourth of the company’s global chemical capacity.


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2009 2010 2011 2012 2013

Worldwide Produc@on Volumes (thousands of tonnes)

Ethylene

Polyethylene

Polypropylene

Paraxylene

LEARNING & GROW TH PERSPECTIVE

25

LEARNING & GROWTH PERSPECTIVE

ExxonMobil builds relationships with a diverse group of stakeholders through timely and

transparent communication. Many people, organizations and communities are impacted directly

by — and have a direct impact on — ExxonMobil’s business. Energy issues are complicated,

and their stakeholders represent multiple viewpoints. The dialogue the company develop with

their stakeholders helps them understand all points of view and maintain a global perspective on

their most material issues. This, in turn, helps them continue to improve their company and

remain a responsible corporate citizen. Three significant strategies are explained below due to

clarify the position of the company for achieving these goals:

SAFETY IN WORKPLACE – SAFETY EVENTS Personnel and process safety incidents are taken as an indicator for assessing the workplace

safety.

Personnel Safety: When compared with 2012, the company’s workforce lost-time incident

rate decreased by nearly 9 percent. Since the inclusion of XTO Energy in 2011, they have

reduced their workforce lost-time incident rate by 45 percent. However, 6 workers were fatally

injured in 5 incidents related to Exxon Mobil operations in 2013.

Process Safety: Process safety refers to equipment, procedures and training that prevent the

uncontrolled release of hydrocarbons and hazardous substances. During 2013, Exxon Mobil had

61 Tier 1 -represents incidents resulting in a loss of primary containment- process safety events.

After careful analysis, the company determined human factors, procedures and preventive

maintenance were the primary contributing elements to the occurrence of these events, allowing

them to develop and enhance prevention strategies more effectively. As well as the safety events,

the graphs below demonstrate the figures for loss of primary containment:


26

Methodology

It is clear that figures in incidents in workplace happened during 2013 allow us to assess the

position of the company through comparisons with its competitor, British Petroleum, in terms of

desired safety level in workplace. That is the reason why we have chosen a non-financial

indicator which basically gives us the figures and let us compare both figures.

Results and Comparisons: In 2013, British

Petroleum (BP) reported 6 fatalities. According Tier 1

process safety events, the graph collected from the

company’s website shows us the BP’s figures in safety

events happened over 4 years.

DıVERSıFıCATıON ıN EMPLOYMENT – EMPLOYMENT RATES BY REGıON, GENDER AND MıNORıTY

ExxonMobil has operations around the world, and

they foster the ideas, perspectives, skills, knowledge

and cultures of the company’s diverse employees.

Currently, about 75 thousand people are employed by

the company and as every international company,

Exxon Mobil also encourages diversification in their

workforce palate. We are easily able to see abundance

of data from their annual report which supports this

strategy the company pursue enthusiastically. We,

therefore, chose employment ratios by geographic

region and by women and minorities as an indicator.

The regional allocation of employments is shown in the pie graph and the employees in US

are made up the biggest piece of the pie which constitutes 30.6 thousand people, almost half of


27

the cumulative employee number. The smallest number is allocated to Latin America, as 3.9

thousand workers.

ExxonMobil promotes leadership opportunities

for women and works to improve the gender

balance within the company through all aspects of

the employment relationship, including

recruitment, hiring, training, promotions, transfers,

and wage and salary administration. Furthermore,

to increase the representation of minorities in

company’s U.S. operations and our hiring

programs include outreach to identify diverse

candidates.

Methodology

Figures in employment by region as well as women and minority numbers are the significant

elements in terms of defining diversity. In that sense, we have chosen this non-financial indicator

to assess Exxon Mobil in order to position among its competitors.

Results and Comparisons: According to

annual report of BP, A total of 22% of group

leaders came from countries other than the UK and

the US in 2013. This was 14% in 2000. Moreover,

we can see from the annual report of BP that

management was made up about 27 percent of

women in 2013. When it comes to minorities in

group leadership, 28 percent of the leaders

belonged to this category in 2013.


28

KEEPıNG UP WıTH THE ENVıRONMENTAL BALANCE – SPıLL INCıDENTS Exxon Mobil is focused on implementing

preventive measures to avoid spill incidents and

ensuring a rapid response if spills do occur. Spill

performance, thus, should be taken as an

indicator.

Exxon Mobil transport approximately 2.7

million barrels of petroleum and chemical

products through approximately 8,000 miles of

pipelines throughout the world every day.

According to annual reports, the total volume of hydrocarbons spilled to soil and water was

11,000 barrels in 2013; more than 60 percent was recovered at the spill sites. The number of

hydrocarbon spills greater than 1 barrel in 2013 was 7 percent lower than in 2012.

Methodology

One of the key factors of operating without harming the environment is to avoid spill

incidents so that we have taken spill performance as an indicator.

Results and Comparisons: The resources

of BP shows that the number of oil spills over

one barrel (159 litres, 42 US gallons) that

reached land and water, decreased to 74 spills.

Plus, the graph below demonstrates the figures

in spilled oil to land and water.

CRITICAL ANALYSIS

29

CRITICAL ANALYSIS

As it can be read over the report, ExxonMobil achieved strong financial and operating results

in 2013 and continued to advance a unique and balanced set of profitable growth opportunities

across its businesses.

The company achieved strong operating and financial performance this year despite global

economic challenges and uncertainty. Earnings were lower in 2013, in line with industry

conditions, while its leadership position within the industry continues in many key areas. In

particular, a sustained focus on safety and the collective commitment of company employees and

contractors around the world resulted in improved overall safety performance versus 2012.

ExxonMobil also has maintained its relentless focus on operational excellence and risk

management.

The company delivered earnings of $32.6 billion and a return on capital employed of 17

percent. Robust operating cash flow enabled ExxonMobil to fund $42.5 billion in capital and

exploration expenditures to advance large, new projects and bring energy to world markets,

while distributing $25.9 billion to shareholders in the form of dividends and share purchases to

reduce shares outstanding. Over the last five years, ExxonMobil distributed $131 billion to its

shareholders, while dividends per share have increased by 59 percent, including an 11 percent

increase in the second quarter of 2013.

By looking into details, we established a few critical highlights with respect to financial

perspective. First of all, comparing the free cash flow of Exxon and BP, we can notice that

Exxon has been healthier during the last years, providing shareholders' with always increasing

dividends and probably building a solid financial base. However a decreasing Free cash flow is a

negative sign as it's symptom of margin (as you can see from table1 costs remain quite stable). In

most companies this can be caused by a loss in a competitive advantage, but given the nature of

the commodity industry, that is also due to the decrease in the price per barrel. Moreover, in

terms of increasing operational profitability, we believe that ExxonMobil continues to provide

high return on capital employed ratios, (60% higher than BP). Even if this ratio has slightly

decreased in the last two years, it still remains an evidence of the strong commitment that

ExxonMobil makes high value investments.

To this end, those sub strategies of Exxon should be highlighted:

CRITICAL ANALYSIS

30

1. Selectivity not velocity in their approach to capital investment – it is not about how much

you spend but also what you spend on that counts.

2. Commitment to driving capital productivity

3. A strong focus on operating excellence

Moreover, Exxon’s EPS has been increasing continuously from 2009 except for 2013. As a

result, this allowed its price per share to rise higher that it was before the 2009 financial crisis.

The same criticism cannot be done for BP which has not recovered yet; it has lost market

capacity.

Finally, Exxon has adopted different strategies for the investments in the three main divisions.

For what concerns the Upstream, they have increased the Capital Expenditure steadily from 2009

to 2013. This increase does not have a clear effect on the immediate earnings, as they went down

from the $34 billion in 2011 to almost $27 billion in 2013. An explanation for this could be the

price of barrel, that affects for sure the earnings; moreover Exxon's strong long-term focus may

cause short-term profit to decrease, in fact Exxon went into high-value projects (e.g. the joint-

venture with Rosneft about technologically advanced drills in Antarctica) that will not bring

earnings or competitive advantages as long as the price of oil stays low, but they will surely do

afterwards. Downstream and Chemicals on the opposite side show a negative trend (2009-2013)

in CapEx which has no clear effect of the earnings. That may be the sign that energy efficiency

and the proprietary technologies developed and owned by Exxon in these two work-intensive

areas has brought a competitive advantage in these industries.

Considering the customer perspective, we made following statements to clarify the company’s

position. First, both XOM and BP global market shares of upstream and downstream are slowly

decreasing with the rise of the world demand and consumption. This trend suggests that other

competitors are emerging or have increased their production, but overall the results can confirm

a stable market share detained by ExxonMobil. Next, the XOM goal of increasing sales have not

been reached, since sales have been diminishing since 2010, with a warning loss between 2012

and 2013. On the other hand BP experienced differently: managing a smaller amount of products,

it has been able to increase the size of sales of a relevant value between 2012 and 2013,

achieving better results than 2010. In addition, while the index cannot be computed,

considerations on the geography of divisions could be interesting. In fact, what emerges from the

maps is that both BP and XOM have very solid networks in developed markets of North America,

CRITICAL ANALYSIS

31

Europe, Arabia, China and Australia. It aligns perfectly with the try to reduce logistic costs

where the markets are well known. For less profitable or emerging markets both the companies

are trying to consolidate the upstream presence, but they do not seem to agree on the location of

the best investments: if both are in south America, XOM is also investing in south-central Africa,

while BP is more orientated to Mediterranean Africa. As well, ExxonMobil portfolio is a heavy

one, full of technical products, with a huge range of choices also when customers are dealing

with single particular fields. Overall an index that suggests very positive conclusions in terms of

customers’ perspective.

We can make following comments with respect to internal perspective. The results of Exxon

shows how upstream and downstream produce the overall major quantity of CO2 gasses, but it is

the chemical industry that has the higher normalized emission. Moreover, the Production Cost

per barrel is very important figure because the Earnings for an Oil and Gas producer, such as

ExxonMobil, are directly correlated to it: Earnings = (Extraction Volume) x (Price per Barrel -

Production Cost per Barrel). It is clear that as long that price of a barrel stays higher than its cost

at a certain oil well, that well remains profitable and operations continue. On the other hand, if

international supply and demand cause the price to fall, it may happen that extracting oil at

certain wells is more expensive than the possible revenue, hence production at those wells will

be stopped. Exxon’s average comprehensive cost is $52,21 per barrel, which is significantly

lower than British Petroleum, $84,69 per barrel, but is still an high production cost with respect

to the current oil price. In US its production costs are quite low, at $34 per barrel, while outside

US, where most of the extraction is located, they almost reach $60 per barrel. This means that

two thirds of Exxon’s production are now harmed by the falling oil prices, and if they don’t

recover the oversupply will be an issue that may have a serious impact on the financial statistics

for the next few months/years. Brand value is a typical indicator given to the companies by

external surveys, as for the one that we at the end take as a reliable source, it is the second Oil &

Gas company by brand value but it’s also one of the only two public company listed on the top

100 Forbes Brand Value, so it is a great achievement for the reach of new stakeholders for the

company.

Finally, further comments could be made about learning and growth perspective. According

to observations we made, ExxonMobil and BP both experienced 6 fatalities in 2013; moreover,

BP had experienced merely 20 safety events whereas 61 safety events were occurred during

ExxonMobil operations in 2013. Additionally, ExxonMobil had caused 330 spills while 74 spills

CRITICAL ANALYSIS

32

were experienced by British Petroleum. However, the drilling capacities should be considered to

make a fair comparison.

exxonmobil project work

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