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ExxonMobil: Shareholder Value & Corporate Governance Overview

Explore the history, leadership, and financial performance of ExxonMobil, the world's largest oil company, through mergers, market expansion, and operational insights. Learn about its corporate governance structure and weighted cost of capital analysis.

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ExxonMobil: Shareholder Value & Corporate Governance Overview

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  1. ExxonMobil PRESENTED BY PHIL H. LATIMIER, Ph.D. PHLatimer@aol.com

  2. SHAREHOLDER VALUE & CORPORATE GOVERNANCE FINAL PROJECT PHLatimer@aol.com

  3. History of the Company John D. Rockefeller • 1882 • Standard Oil Trust • Acquirement of Petroleum Interests • 90% of control - Monopoly PHLatimer@aol.com

  4. 1911 • U.S. Supreme Court ordered the dissolution of Standard Oil Trust • 34 Separate Companies “Jersey Standard" and "Socony“ Became Exxon and Mobil PHLatimer@aol.com

  5. Next Two Decades • Building of Business • (Production, pipelines, refining, research) • Since the end of World II • Expanded market – more than 100 countries • 1999 • Exxon + Mobil = ExxonMobil • $76.6 billions Merger • Near $ 8 billions of Saving PHLatimer@aol.com

  6. Nowadays ExxonMobil • Is based in Houston, Texas. • 2003 • Stronger Earning Performance over the History • $21.5 billions - Net Incomes • $30.8 billions - Cash Flow • Sells more than 65 millions gallons of fuel every day. • Operates in over 100 countries. • It is, World wide, the Biggest Oil Company. PHLatimer@aol.com

  7. PHLatimer@aol.com

  8. PHLatimer@aol.com

  9. Corporate Manager’s Rex W. Tillerson, President Lee Raymond, Chairman and Chief Executive Officer Edward G. Galante, Senior Vice President Harry Longwell, Executive Vice President PHLatimer@aol.com

  10. Board • Board Size: - between 10 and 19 members • Election of Directors: - Shareholders Selection • Mandatory Retirement: - No director over 70 years. - Annually evaluation of Performance PHLatimer@aol.com

  11. Standing Committees Compensation Committee • Discharge the Board of Directors responsibilities relating to the evaluation and compensation of the Corporation's Chief Executive Officer and other senior executives. Board Affairs Committee • Monitor compliance with good corporate governance standards • Identification of qualified individuals to become Board members • Recommend to the Board director nominees for election at the annual meeting of shareholders Advisory Committee on Contributions • Provide oversight and direction to the Corporation's overall contributions objectives, policies and programs PHLatimer@aol.com

  12. Standing Committees (cont.) • Finance Committee - Review the Corporation's financial policies, strategies and capital structure - Create reports and recommendations to the Board of Directors • Public Issues Committee - Review the Corporation's policies, programs and practices • Executive Committee - It function when the Board of Directors is not in session. PHLatimer@aol.com

  13. Standing committees (cont.) Audit Committee • Conduction of the Corporation's financial reporting process. • Integrity of the financial statements and other financial information • Corporation's system of internal accounting and financial controls. • Corporation's compliance with legal and regulatory requirements. • Performance of the Corporation's internal audit function. • The independent auditors' qualifications, performance, and independence. • Annual independent audit of the Corporation's financial statements. PHLatimer@aol.com

  14. Book Value Weigths PHLatimer@aol.com

  15. Calculation of the WACC2001 Kd = 6.1% Ki = 3.7% Kp = 4.9% Ks = 5.4% PHLatimer@aol.com

  16. Calculation of the WACC2001 (cont) Kr = 5.5% Kn = 5.9% Ka = 3.2% PHLatimer@aol.com

  17. Calculation of the WACC2002 Kd = 6.2% Ki = 3.7% Kp = 4.3% Ks = 3.3% PHLatimer@aol.com

  18. Calculation of the WACC2002 (cont) Kr = 3.3% Kn = 3.9% Ka = 4.05% PHLatimer@aol.com

  19. Calculation of the WACC2003 Kd = 6.8% Ki = 4.3% Kp = 6.3% Ks = 9.3% PHLatimer@aol.com

  20. Calculation of the WACC2003 (cont) Kr = 9.3% Kn = 10.1% Ka = 5.51% PHLatimer@aol.com

  21. Our Calculation: 5.51% 5.92% PHLatimer@aol.com

  22. Weighted Marginal Cost of Capital2001 • Long Term Debt • at 5.55 % • Common Equity • at 5.93 % • BP Long Term Debt • BP Common Equity • $ 547,000,000 • (Weight .52) • $ 201,000,000 • (Weight .28) • $ 1,056,629,244 • $ 727,451,306 PHLatimer@aol.com

  23. Weighted Marginal Cost of Capital2001 (cont) PHLatimer@aol.com

  24. Weighted Marginal Cost of Capital2002 • Long Term Debt • at 5.6 % • Common Equity • at 3.86 % • BP Long Term Debt • BP Common Equity • $ 396,000,000 • (Weight .49) • $ 199,000,000 • (Weight .31) • $ 811,636,364 • $ 643,670,856 PHLatimer@aol.com

  25. Weighted Marginal Cost of Capital2002 (cont) PHLatimer@aol.com

  26. Weighted Marginal Cost of Capital2003 • Long Term Debt • at 6.4 % • Common Equity • at 10.08 % • BP Long Term Debt • BP Common Equity • $ 434,000,000 • (Weight .38) • $ 127,000,000 • (Weight .35) • $ 1,150,337,258 • $ 358,317,368 PHLatimer@aol.com

  27. Weighted Marginal Cost of Capital2003 (cont) PHLatimer@aol.com

  28. Investment Opportunities Schedule2001 PHLatimer@aol.com

  29. IOS and WMCC Schedules2001 PHLatimer@aol.com

  30. Investment Opportunities Schedule2002 PHLatimer@aol.com

  31. IOS and WMCC Schedules2002 PHLatimer@aol.com

  32. Investment Opportunities Schedule2003 PHLatimer@aol.com

  33. IOS and WMCC Schedules2003 PHLatimer@aol.com

  34. FOREX • Conducts business in many foreign currencies. • Is subject to foreign currency exchange rate risk on: • Cash flows related to sales. • Expenses. • Financing and investment transactions. PHLatimer@aol.com

  35. FOREX • Functional Currency - Primary economic environment in which the subsidiary operates. • Management selects the functional currency after evaluating this economic environment. (US Dollar) PHLatimer@aol.com

  36. FOREX Strategies • Upstream, Downstream and chemicals operations normally use the local currency, except in highly inflationary countries (Latin America, Singapore). • Crude and natural gas use US Dollar. (Malaysia, Indonesia, Angola, Nigeria, Equatorial Guinea and the Middle East) PHLatimer@aol.com

  37. FOREX Strategies • Makes limited use of currency exchange contracts. • Reduce the risk of adverse foreign currency movements related to certain foreign currency debt obligations . PHLatimer@aol.com

  38. FOREX Strategies • Low risk in changes in currency rates: Why? • Corporation size. • Geographic diversity. • Complementary nature of the businesses. PHLatimer@aol.com

  39. ExxonMobil Strategies Increasing Size, Increasing Globally, Increasing Technology • Maximization of Profitability • - Capital Expenditure are focused: • Meet future Product Quality Requirements • Reduce Environmental Affects • Safety Systems • Lower Operational Costs • Produce Higher Values Products • Lower Cost Raw Material PHLatimer@aol.com

  40. Identify and Pursue all attractive perforations opportunities • - Research and Development • - 90% of oil reserves are own by governments. • - Upstream operation in more than 40 countries • Invest in projects that deliver superior return • - 2003: Return of Capital of 21% • - Exxon is well positioned for long-term growth. • - Exploration and Research in alternative energy. • - Invest in oil company (forecast of performance) PHLatimer@aol.com

  41. PHLatimer@aol.com

  42. Maintain Best in Class operations, in all aspects • - Globally integrated Supply Chain • - Strategic Alliances • Provide Quality, value products and service to costumers • Lead Industry in Efficiency and Effectiveness • -2003: $11.5 billions of Return to Shareholders • - Buying crude at different time and in different amounts. PHLatimer@aol.com

  43. Maximize values from leading edge technology • - Annually Investment of $600 millions • Improving and Maintenance of Image • - $103 million in charitable contributions and community development investments (2003) • - More than $2 million in research and partnership grants to global health organizations to combat malaria in African communities (04/23/04) • - Occupational Hazards, positioned ExxonMobil Chemical Oil Company as the American Safest Company. PHLatimer@aol.com

  44. Stock of Major Competitors PHLatimer@aol.com

  45. Market Value PHLatimer@aol.com

  46. Revenues PHLatimer@aol.com

  47. Net Income PHLatimer@aol.com

  48. PHLatimer@aol.com

  49. Presence in More than 100 countries ... • Exxon and Mobil merger • - Vertical Integration • Organizational Structure • - Global Functional Basis • Operational Integreaty Management System • Capitalize on integration with other ExxonMobil business PHLatimer@aol.com

  50. Presence in More than 100 countries ... • Addition of Human Rights to its Portafolio • Involment to Society • Local Employees • Support to Comunities • Global Integration PHLatimer@aol.com

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