Exxon Mobile
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Nowadays, economy stands at a point where no clear signs indicate a clear expansion or contraction; however, the trends show a small rise of the economy. Four of the ten indicators that make up the leading index increased in September. The positive contributors – beginning with the largest positive contributor – were vendor performance, building permits, interest rate spread, and stock prices. The negative contributors – beginning with the largest negative contributor – were average weekly initial claims for unemployment insurance (inverted), index of consumer expectations, real money supply, manufacturers new orders for non-defense capital goods, and manufacturers new orders for consumer goods and materials (The Conference Board). In addition to this, according to PricewaterhouseCoopers most recent Manufacturing Barometer survey, just 46 percent of respondents, compared to 70 percent last quarter, are optimistic about the world economy and only 54 percent, compared to 71 percent last quarter, are optimistic about the U.S. economy. The leading source of this uncertainty is concern over oil and energy prices.
On the other hand, the coincident index, a measure of current economic activity, decreased in September. Septembers decline in the coincident index is also partly due to the effect of the hurricanes as employment and industrial production registered decreases. The negative contributors to the index – beginning with the largest negative contributor – were industrial production and employees on nonagricultural payrolls (The Conference Board). Moreover, almost 58 percent of U.S.-based industrial manufacturers are not planning major new investments in next 12 months. Moreover, 57 percent of U.S.-based industrial manufacturers are not planning to add workers next 12 months, based on PricewaterhouseCoopers survey.
Therefore, a representative fact of the unclear stage of the economy, at this point, is that the U.S. leading index decreased 0.7 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.2 percent in September (The Conference Board).
Industry
I chose to analyze the Oil and Gas industry because the tendency of economy to grow is not clear. Oil and Gas Industry is in the category of defensive industries and has a low risk.
The industry is highly supported by the demographics and very closely monitored by the government because oil and gas industry have a direct impact on the economy. Generally, governments are sensitive in keeping the economy stable and expanding despite the increasing oil and gas prices.(OilOnline.com).
The Oil and Gas industry is very competitive. Therefore, the companies usually merge. Recent mergers and acquisitions also have contributed positively to several corporate balance sheets; for example, two independent refiners, Frontier Oil and Holly, agreed to merge on March 31, 2003 and On April 7, 2004, Westport Resources Corporation agreed to be acquired by Kerr-McGee Corporation in a deal worth about $3.4 billion. The Wall Street Journal said that this deal, ” will create the U.S.s fifth-largest independent oil-and-natural-gas producer.” (OilOnline.com)
Although, there are not any legislative barriers, economic barriers are preventing new entries. High capitalization is the most important issue in barring new entries.
EXXON MOBILE (XOM)
ExxonMobil Corporation is engaged in the petrochemical business. The Company has several divisions and hundreds of affiliates, many with names that include ExxonMobil, Exxon, Esso or Mobil. Divisions and affiliated companies of Exxon Mobil operate or market products in the United States and approximately 200 other countries and territories. 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. Exxon Mobil is a major manufacturer and marketer of basic petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. It also has interests in electric power generation facilities. Affiliates of Exxon Mobil conduct extensive research programs in support of these businesses. (nyse.com)
In 1998, Exxon and Mobil signed a definitive agreement to merge and form a new company called Exxon Mobil Corporation. “This merger will enhance our ability to be an effective global competitor in a volatile world economy and in an industry that is more and more competitive,” said Lee Raymond and Lou Noto, chairmen and chief executive officers of Exxon and Mobil, respectively. After shareholder and regulatory approvals, the merger was completed November 30, 1999. (Exxon.com)
Exhibit 1:
ENERGY COMPANIES RANKED BY SALES
Company
Symbol
Price
Change
Market Cap
BP plc
65.50
1.21%
1.37 T
65.37
Exxon Mobil Corp.
56.65
0.23%
352.50B
Royal Dutch/Shell Group of Companies
Private
Total SA
124.36
1.84%
Chevron Corp.
56.60
-0.05%
127.07B
ConocoPhillips
63.33
-0.27%
87.87B
Petrуleos de Venezuela S.A.
Private
Petrуleos Mexicanos
Private
Eni SpA
131.86
0.80%
Repsol YPF SA
29.14
0.62%
35.58B
13.36
Exxon mobile is the second leader of oil and gas industry, having the second largest market capitalization, $352.50 Billion, of the industry which is a measure of a public companys size. Market capitalization is the total dollar value of all outstanding shares. Its calculated by multiplying the number of shares times the current market price. (Exhibit 1 & 2) (Yahoo Finance)
Exhibit 2:
XOM VS. INDUSTRY LEADERS
Statistic
Industry Leader
XOM Rank
Market Capitalization
1.37 T
352.50B
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