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Free Example of Exxon Mobil Essay

ExxonMobil Corporation operates in the oil and gas industry. It was formed in 1999 after the merger between Exxon and Mobil that were large players in the industry. Their parent company was Standard Oil, which was founded in 1870. Mobil Company was established in1952 and it was mainly engaged in the trade of aromatics, olefins, ethylene and polyethylene. Exxon Chemical Company was grounded in 1965 and by 1999 it was a major marketer of polyethylene, elastomers, aromatics and olefins as well. Exxon Mobil sells its petroleum products through the Esso/Exxon service stations. In addition, it also sells aviation fuel at major airports throughout the globe (Coll 56). This company is also famous for the lubricant products that are manufactured and marketed throughout the world: Mobil 1 is the leading passenger vehicle lubricant in the whole world; Mobil Delvac is a heavy-duty lubricant that is mainly used on heavy-duty enginesThe chief executive officer of ExxonMobil is Rex Tillerson. He has been the chair and chief executive officer of ExxonMobil since 2006. Previously, he functioned as a president of Exxon Yemen Inc. Moreover, he was also the president of Esso Exploration and Production Khorat Inc. The head quarters of ExxonMobil are in Irving, TX and this has been the head office of the company since the early 1990s after the move from Rockerfella Plaza in Manhattan to Las Colinas. The main geographical areas of the products manufactured by ExxonMobil are global since it supplies oil and gas production under the brand Exxon, Mobil and Esso to all countries. Three operating divisions known as Upstream, Downstream and Chemical supply its products. Upstream and Chemical Divisions are based in Houston, TX and Downstream Division is based in Fairfax, VA. The fiscal year of ExxonMobil runs from January to December and the latest fiscal year of ExxonMobil ended December 30, 2012. The independent auditor of ExxonMobil is PricewaterhouseCoopers. When they reviewed the financial statements of ExxonMobil, they stated that all the information presented in the financial statements of this company show a fair representation of ExxonMobil’s financial position. As of March 7, 2013, the stock price of ExxonMobil was at 89.56. The dividend per share of ExxonMobil as of December 2012 was $2.28 per share.

Industry Situation and Company Plans

The increasing global demand of energy  has caused a boom in the oil and gas sector. According to the statistics released by economics, this sector is expected to grow by 1.4 million barrels per day in 2013. It shows that the good performance will have a positive impact on the success of ExxonMobil. This company started The Outlook project in order to ensure that it managed to sustain future energy needs.  The Outlook claims that residential and commercial sectors will cause an increase in energy demand by about 30 percent (Paton 4)and the transportation sector is expected to cause an increase in energy needs by 40 percent. Another key trend common in the oil and energy sphere is the importance of addressing environmental sustainability issues. Due to this, oil and gas companies are required to adhere to the performance indicators while having their oil and gas exploration projects. Companies are also required to review and prepare adequate sustainability reports and to conduct environmental audits so that they are able to evaluate the risks and liabilities that may occur. Oil and gas companies should also adhere to the Kyoto Protocol solutions so that they are able to develop adequate climate change strategies.

Exxon Mobil ensures environmental sustainability through its revised Operations Integrity Management Systems. This company always evaluates risks and opportunities that are related to health, social, environmental, cultural and economic matters through starting Environmental, Socioeconomic and Health Impact Assessment (ESHIA). By means of this assessment it is able to solicit feedback on the projects that it may have undertaken. In case ExxonMobil violates any sustainability principles during its exploration activities, it compensates what may have been affected. This company has also started initiatives to reduce air omissions in order to ensure environmental sustainability. Although the combined emissions of organic compounds that are volatile such as nitrogen oxide and sulfur dioxide increased by 5 percent in 2011, these levels decreased by 26 percent compared to the recorded levels in 2007. By the end of 2012, ExxonMobil had managed to reduce its nitrogen oxide and sulfur dioxide levels. This company started a five year research program in an attempt of reducing the level of emissions. It collaborated with the Health Effects Institute in order to research which constituents in the operations impact the health significantly.

Another common trend in the oil and gas industry is that companies are concentrating on introducing efficient saving energy means  that can help to ensure that there is a reduction in the green house gas emission. Currently, oil and natural gas account for the supply of about 60 percent of the energy needs in America. Since the global energy needs have been increasing, ExxonMobil should ensure that it adopts efficient energy methods to meet the needs. ExxonMobil decided to introduce Outlook for Energy 2040 in order to ensure that the energy supply is certain. They also have invested over $185 billion into the projects to ensure energy efficiency (ExxonMobil 3). In the Downstream and Chemical Divisions, ExxonMobil introduced Global Energy Management Systems that made them to improve energy efficiency by nine percent in all the refining operations in its chemical manufacturing plants.

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Financial Statements Income Statement

The financial statements of ExxonMobil are presented in a multi-step format that utilizes multiple subtractions while determining the net income from operations and shows the gross profit figure. The gross margin for the year ended December 2012 in this company was 178, 625,000,000. In contrast, it was 179,627,000,000 in 2011 and 149, 470,000,000 in 2010. This shows that its gross margins reduced in 2012 compared to the gross margins in 2011. However, the gross margin of 2012 was higher than that of 2010. The decrease in gross margins was caused by the high inflation costs. The rising costs of revenue also caused a reduction in the gross margins that were earned in 2012. The income earned from operations in 2012 was 79,053,000,000 and in 2011, the income earned was 73,504,000 while in 2010 it was 53,128,000,000. It shows that the income from operations in this company has been on an upward trend since 2010. An increase in revenues in 2012 was attributed to the fact that research and development expenses in this year reduced to 81,844,000,000 compared to the figure incurred in 2011 that 88,459,000 while the costs incurred 2010 79,348,000,000. The selling and administrative expenses in 2012 were also lower compared to the expenses that were incurred in 2011 and 2010. In 2012, the selling and administrative expenses were 1,840,000,000. In 2011, the expenses incurred were 2,081,000,000 while in 2010 they were 2,144,000,000.

The net income of ExxonMobil in the year 2012 was 44,800,000. In 2011, this figure was 41,060,000,000 while in 2010 it stood at 30,460,000,000. The high net income in 2012 is attributed by the high operating income earned in 2012 that amounted to 79,053,000,000. The income tax expense of 2012 was also lower compared to the income tax expense of 2011. In 2012, it stood at 31,045,000 while in 2011 it was 31,051,000,000. However, the minority interest of 2012 was 2,801,000,000 while in 2011 it was 1,146,000,000. In 2010 it was 938,000,000. The interest expense in 2012 was 327,000,000. In 2011, it was 247,000,000 while in 2010 it was 259,000,000.

Balance Sheet of ExxonMobil of 2012 and 2011can be used to show:

Total assets = total liabilities + total stockholder’s equity

2012      333,795,000,000= 167,932,000,000 + 165,863,000,000

2011      331,052,000,000= 176,156,000,000 + 154,396,000,000

Statements of Cash Flows

The cash flow from operating activities in 2012 was 56,170,000,000. The total cash flow from operating activities in 2011 was 55,345,000,000. In both 2012 and 2011, the cash flows from operating activities were more than the net income of both years. This is because the net income in 2012 and 2011 were 44,880,000,000 and 41,060,000,000. ExxonMobil is investing a lot of cash in expansion projects in order to increase its investment portfolio. Since 2010, the amount of cash flow directed in its investing activities has been increasing. In 2010, the capital expenditure was 34,271,000,000. In contrast, the capital expenditure in 2011 and 2010 was 30,975,000,000 and 26,871,000,000. However, the cash flow from its investing activities decreased in 2012 compared to the cash flow received in 2011. In 2012, the cash flow received from investment activities was 25,601,000,000. In 2011, the total recorded cash flow was 22,165,000,000. The decrease in cash flow earned can be attributed to the huge capital expenditure in 2012 compared to capital expenditure in 2011. The largest source of financing in both 2012 and 2011 was the sale purchase of stock. Cash has generally decreased in the past two years. In 2011, cash amounted to 4,839,000,000. In contrast, the cash in 2012 was 3,082,000,000.

ExxonMobil considered several accounting policies while preparing its financial statements. One of them is the revenue recognition accounting policy. According to this policy, revenues should be recognized when products are shipped or delivered to the customer. This company sells natural gas, crude oil and petroleum under short term contracts. However, it may also sell the products under long term agreements having adjustments in price. In both cases, revenues are recognized after the products are delivered to the customers. It assumes that customers take into account all the risks and rewards of the delivered product. Considering the accounting principle of property, plant and equipment of this company, amortization, depletion and depreciation is based on the cost less the salvage value of the asset (ExxonMobil 4). The methods used to depreciate assets are straight line method and unit of production method. ExxonMobil uses LIFO method to evaluate  its inventory. According to this method of accounting, inventory that is acquired or produced last should be disposed or sold first.

Overall, ExxonMobil performs strongly in the oil and gas industry seen in the fact that the company is earning the highest revenues. In addition, it has continued to improve its environmental sustainability initiatives by cutting down on the amount of volatile emission. The cash flow statements of this company reflect that it is committing a significant amount of its cash to investment projects. The overall earnings of this company are also high compared to the other companies in the oil and gas industry.

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