Exxon-Mobil is one of the largest oil and gas companies of the world.
Nowadays, this company operates worldwide and is considered to be one of the leading companies in its segment of the market. It is not a secret that the company tends to expand in the international markets. Naturally, the company can produce a profound impact on the development of oil and gas industry in different countries of the world. At the same time, it is really difficult to achieve positive results while operating in a highly competitive environment. Nevertheless, Exxon-Mobil is characterized by a good performance and its development in recent years may be characterized as stable and it is even possible to speak about the opportunities to the further growth of the company.
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First of all, it should be said that the company was formed in 1999 in the result of the merger of two giants of the world oil and gas industry, Exxon and Mobil which were two separate companies before this merger. After the merger, in 2000, the newly formed company Exxon-Mobil was ranked by the Forbes Global 2000 as the largest company in the world in the market value. To put it more precisely, moreover, the company is the largest company in the world by revenue.
It is necessary to underline that at the present moment the company continues to develop dynamically and shows positive trends in its growth. In this respect, it is worthy of mention that within the last five years since 2002 to 2006 the company’s sales and other operating revenues have increased substantially. In 2002, its sales and other operating revenues constituted USD 200,949 millions, while in 2006, the revenues increased to USD 365,467 millions. Naturally, such a growth is quite substantial, taking into consideration the fact that Exxon-Mobil merged in 1999. Anyway, such increase of revenues indicates to the positive dynamics of the development of the company.
At the same time, it is necessary to underline that the net income of the company more than tripled within the same period, i.e. from 2002 to 2006. To put it more precisely, in 2002 the net income of Exxon Mobil constituted USD 11,460 millions only, while, in 2006, the net income of the company has reached USD 39,500 millions. Obviously, such results demonstrates that the company has really benefited from the merger and, in fact, it is due to the unification of Exxon and Mobil the company has managed to provide the substantial growth of its revenues and net income.
No wonder, the share price of Exxon Mobile increase respectively to the growth of its revenues and net income. To put it more precisely, by the end of 2006, the share price of the company constituted USD 76,63, while in 2002, its share price was just USD 34,94. In other words, again the company performed practically the double growth in its share price within a period of five years.
Also, it is worthy of mention that the company tends to enlarge its presence in the world oil and gas market. In actuality, its leading position in the world provides the company with excellent opportunities to enter new regions and explore new oil and gas fields. This strategy seems to be quite perspective since the company can benefit from it substantially as it receives better opportunities to exploit the new resources in new regions.
In this respect, it should be said that the company’s capital and exploration expenditures constituted USD 19,855 millions in 2006 that is considerably larger sum compared to USD 13,955 in 2002. This increase in expenditures is another evidence of the fact that the company is focused on the exploration of new fields in order to provide the possibility for the steady growth of the company in the future.
In actuality, it is probably the only logical strategy that the Exxon-Mobil could chose because it operates in the industry of oil and gas. Since both oil and gas are scarce resources, it is vitally important to the company to gain a possibly larger share of the market and explore larger areas in order to be able to exploit the existing resources which were unavailable in the past. In fact, the investments in the explorations are strategically important because, despite the current leading position of the company in the world, this is the question of its survivability in the future when the resources will grow more and more exhausted.
Nevertheless, it should be said that, at the present moment, the position of the company is quite stable and shareholders benefit from it greatly. It is worthy of mention that the cash dividends to Exxon-Mobil shareholders constituted USD 7,628 millions in 2006 compared to USD 6,217 in 2002. naturally, the shareholders of the company are interested in the further development of Exxon-Mobil in order to maintain the high level of dividends but it is obvious that the need of the further explorations and investments in the production will be more and more costly.
Consequently, it is possible to presuppose that the company will pay more attention to the investments in exploration.
Naturally, taking into consideration the potential threats to the oil and gas industry in the future caused by scarcity of the resources, Exxon-Mobil naturally attempts to secure its position in the market. In this respect, it seems to be quite logical that the company has decided to place its preferred stocks in order to secure its position in the market. It is necessary to point out that such a step was motivated by the attempt of the company to convince the shareholders that Exxon-Mobil will continue the stable development in the future and that the company is absolutely sure in its future market perspectives to the extent that it readily provides the additional rights compared to common stocks. To put it more precisely, this type of security provides the core right of preference in dividends. This right may be viewed as a guarantee to the shareholders that their interests will be protected and that their dividends will be paid off stably. The latter is important because it is argued that the growth of cash dividends is relatively slow, especially compared to the considerable growth of the company’s revenues and net income. In such a situation, many shareholders are really disturbed about the perspective of losing while keeping shares of Exxon-Mobil, or at least, many shareholders are dissatisfied with the gap that exists between the growth of the company’s revenues and net income, on the one hand, and the growth of dividends, on the other.
Thus, taking into account all above mentioned, it is possible to conclude that nowadays, Exxon-Mobil is the leading company in the oil and gas industry. Moreover, after the merger in 1999 the company made a considerable progress and, at the present moment, it is the world largest company which positions in the world market is extremely strong. Nevertheless, it is still necessary to remember about the threat to the future of the company’s progress mentioned above, i.e. scarce oil and gas resources. At the same time, there is also a potential threat of the growing competition since, in the situation of scarcity of resources, the dominant position of a company may be easily deteriorated if it does not pay enough attention to the development of its explorations and attempts to save costs here. However, all these threats, being serious enough, are still the threat that the company may face in the future, while at the present moment Exxon-Mobil just keeps working and improving its position in the market.
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