It has been a year since the new CEO has been on the job, and the organization has seen sustainable growth. The former CEO came out of retirement to be elected the Chairwoman of the Board of Directors. At a recent meeting of the Board of Directors, the Chairwoman of the Board discussed the possible investment opportunities in the energy industry. She has asked you to prepare a case study on an energy company to establish if it is a good choice to include in the company’s investment portfolio.
Using CTU Library resources, choose a company in the energy industry and prepare a case study that addresses the following points:
Introduction: Including a description of the company, its industry, and its business context.
Organizational analysis: Including the company’s leadership, market, operations, finances, performance, and regulatory environment.
Critical incidents: Including any stories of the organization’s challenges or achievements. How did it overcome the challenges? How did it accomplish its achievements?
Investment potential: Including any of its current issues that need to be addressed or its potential goals for growth.
Recommendation: Including how the investment might help the organization to address its current issues or realize its potential for growth.
Exxon Mobil Capstone Optimizing Organizations
Exxon Mobil is an American multinational corporation with its headquarters in Texas. The corporation commenced operations in the 1870s as Standard Oil Company. Through acquisitions, partnerships, and expansion programs, the company transformed into a multinational corporation and became one of the largest oil and gas producers in the world. As mentioned, Exxon Mobil is in the oil and gas industry. The company deals with oil production and oil development. The latter involves the manufacture of lubricants as well as petrochemicals meant for industrial use. The major goal of the company is to become the world’s largest oil and gas company, while ensuring conformance to outlined ethical standards. The company employs modern technologies and innovation to help in meeting the world’s increasing demand for energy. The company also aims at achieving a superior financial performance for the benefit of investors, shareholders, and other stakeholders. This study is an analysis of Exxon Mobil’s suitability as an attractive investment to include in the company’s investment portfolio.
Exxon Mobil’s leadership comprises of the Board of Directors, Corporate Officers, Board Committees, Board directors, and Contact Directors (Exxon Mobil, 2017a). Darren Woods is Exxon Mobil’s Chief Executive Officer (CEO) and the current Chairman of the Board. Woods became the CEO and Chairman of the Board in 2017. Prior to this, Woods had served in various top positions in the company. For instance, he served as the President in 2016, Senior Vice President between 2014 and 2016, and as Vice President between 2012 and 2014 (Exxon Mobil, 2017a). Wood’ long tenure at Exxon Mobil’s leadership has enabled him to acquire immense knowledge and experience in the oil and gas industry.
Exxon Mobil has two categories of market operations: upstream business and downstream business. Upstream business operations involve oil exploration and development of oil fields. Downstream operations involve the manufacture of different petrochemicals and in various parts of the world. Exxon Mobil has established four brands under which it markets all products. The four brands are Esso, Exxon, Mobil, and ExxonMobil Chemical.
Exxon Mobil made earning of $7.84 billion in 2016 compared to earnings of $16.150 in 2015 (Exxon Mobil Annual Report, 2016). Experts attribute the decline in earnings to a sustained downturn in commodity prices in 2016 and charges incurred due to goodwill impairment (Addison, 2015). The cash flow from operations and asset sales declined slightly from $32.520 billion in 2015 to $26.357 billion in 2016. Total debt increased from $38.687 billion in 2015 to $42.762 in 2016 (Exxon Mobil Annual Report, 2016). Despite the drop in overall performance in 2015 compared to 2016, Exxon Mobil still declared dividends of $2.98 per common share compared to 2015 when the dividend declared was $2.88 per common share.
It is possible to evaluate Exxon Mobil’s performance by examining key financial ratios. Some of the key ratios are debt to capital ratio, return on average capital employed, and current ratio (Exxon Mobil Annual Report, 2016). The debt to capital ratio was 19.7 percent in 2016 compared 18.0 percent in 2015. The debt to capital ratio indicates that the company’s total debt does not exceed its capital (Gibson, 2012). As such, the company may not have problems repaying debts. The return on average capital employed is 3.9 percent. This indicates that each dollar of capital employed gives returns of $0.039. The current ratio is 0.87 meaning the company has 0.87 more current assets compared to current liabilities. With regard to overall production, the company increased liquids volumes by 11.9 percent during 2015 (Addison, 2015). The increase came as a result of new oil developments in Canada, Angola, Papua New Guinea, United States, and Indonesia.
Since Exxon Mobil is in the oil and gas industry, there is need to conduct operations in a manner that has the least impact to the environment. Exxon Mobil has continuously monitors environmental risks that may emerge from its oil exploration, mining, and manufacturing activities. The company monitors five key areas during its operations. These are air emissions, biodiversity and ecosystem, water systems, oil spillage, and rehabilitation. Exxon Mobil has established a process known as Environmental Aspects Assessment (EAA). This enables the company to monitor continually the social and environmental risks that result from the company’s activities.
Exxon Mobil has faced a number of critical incidences relating to environmental pollution and disruption of the natural ecosystems. One of the earliest critical incidences occurred in 1989 while an oil tanker carrying oil spilt over 10 million gallons of oil along the Alaskan coastline (Gill, Picou, & Ritchie, 2012). Efforts by Exxon Mobil to contain the oil spill were largely unsuccessful, leading to widespread environmental pollution. The company responded to this incident through cleanup and paying fines to those affected by the oil spillage. Another incident occurred in 2013 through an oil spillage in the Arkansas region. In resolving the issue, Exxon Mobil agreed to pay $5 million as compensation to those affected (“Arkansas Business,” 2015). The money will help to improved water quality in the Arkansas region.
Exxon Mobil holds great potential for future investments. The company has been a leader in developing new energy technologies in its entire operational history. Exxon Mobil invests over $1 billion annually in research and development alone (Exxon Mobil, 2017). This has led to the development of new and innovative mining and refining technologies. The company is currently advancing on various technologies including green energy technologies and new technologies aimed at reducing greenhouse gas (GHG) emissions. The green energy technologies are mainly biofuel-related. Exxon Mobil is currently sponsoring research on commercial viability of using algae to turn lipids into low-emission biofuel for use in transportation (“Synthetic Genomics,” 2017). Since there are strong similarities in the biofuel-making process and fuel refining technologies, there is hope that biofuels may help supplement conventional oil in future.
The current investment in new energy technologies may help the company realize its potential for growth. There is a strong possibility that Exxon Mobil might be able to develop a new technology that allows for commercial production of biofuels in the near future. Currently, the company is financing research on algae strains that are capable of producing high amount of lipids while multiplying at a higher rate (“MSU partners with ExxonMobil,” 2015). Through genetic engineering technology, the company holds a higher chance of developing the algae strain that produce high amount of lipids. This would allow the company to supplement its current supplies of diesel and gasoline. The production of biofuels holds the potential for reducing greenhouse gas emissions.
Addison, V. (2015). Exxon mobil grows production, but profits fall. Oil and Gas Investor this Week, 23(31), 1.
Exxon Mobil Annual Report. (2016). Exxon Mobil 2016 Summary Annual Report. Retrieved from http://cdn.exxonmobil.com/~/media/global/files/summary-annual- report/2016_summary_annual_report.pdf
Exxon Mobil firms to pay $5M for mayflower oil spill. (2015). Arkansas Business, 32(17), 6.
Exxon Mobil. (2017). Exxon Mobil: research and development. Retrieved from http://corporate.exxonmobil.com/en/energy/research-and-development/innovating- energy-solutions/research-and-development-highlights
Exxon Mobil. (2017a). Corporate Governance. Retrieved from http://corporate.exxonmobil.com/en/investors/corporate-governance
Exxon Mobil. (2017b). Worldwide Operations. Retrieved from http://corporate.exxonmobil.com/en/company/worldwide-operations/brands-and- products/overview
Gibson, C. H. (2012). Financial reporting and analysis. Boston, MA: Cengage Learning.
Gill, D. A., Picou, J. S., & Ritchie, L. A. (2012). The exxon valdez and BP oil spills: A comparison of initial social and psychological impacts. American Behavioral Scientist, 56(1), 3-23. doi:10.1177/0002764211408585
MSU partners with ExxonMobil to advance biofuel research. (2015). NewsRx Health & Science, , 440.
Synthetic Genomics and ExxonMobil Renew Algae Biofuels Research Pact.” Entertainment Close-up, 25 Jan. 2017. General OneFile,