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ExxonMobil PRESENTED BY PHIL H. LATIMIER, Ph.D.

ExxonMobil PRESENTED BY PHIL H. LATIMIER, Ph.D. SHAREHOLDER VALUE & CORPORATE GOVERNANCE. FINAL PROJECT. History of the Company. John D. Rockefeller. 1882 Standard Oil Trust Acquirement of Petroleum Interests 90% of control - Monopoly. 1911.

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ExxonMobil PRESENTED BY PHIL H. LATIMIER, Ph.D.

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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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