Exxon Mobil's Riches: Fueling Controversy?


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Case Details:

Case Code : BECG064
Case Length : 23 Pages
Period : 2004-2006
Pub. Date : 2006
Teaching Note :Not Available
Organization : Exxon Mobil Corporation
Industry : Oil and Natural Gas
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Exxon Earns Record Profits

In the fourth quarter of 2005, Exxon recorded profits of US$ 10.71 billion - the highest ever quarterly profits in the corporate history of the US (Refer to Table II for Exxon's 2005 quarterly performance). According to the company, in 2005, its average price for crude oil and natural gas in the US were US$ 52.23 a barrel and US$ 11.34 per 1,000 cubic feet respectively.

This was higher than its 2004 prices - US$ 38.85 per barrel for crude oil and US$ 6.61 per 1,000 cubic feet for natural gas, in 2004. According to the company, though the rise in price helped achieve the record level of profit, the company also deserved credit for its ability to complete projects on time as well as keeping its costs in check. "We continue to identify world-class projects, post industry-leading returns, and are well-placed for continued growth. Our record results show a disciplined approach and we continue to deliver superior value to our shareholders," explained Henry Hubble (Hubble), Exxon's vice president of investor relations. Exxon's first quarter profit of US$ 8.40 billion in 2006 was the fifth highest profit ever recorded in the US (Refer to Table III for Exxon's Quarter I Revenue & Profit)...

Criticisms of Exxon

Exxon had trouble digesting its record profits as it was widely criticized by senators, activists and the general public. On March 14, 2006, Exxon along with some other major oil companies was hauled up by the senate to face questions about potential price gouging and expensive mergers in response to the industry's record profits at a time of high gas prices for consumers.

Tillerson defended the various criticisms against it before the Senate Judiciary Committee (SJC) while environmental activists raised anti-Exxon slogans. Shawnee Hoover, the Campaign Director of ExxposeExxon said, "ExxonMobil's outspoken opposition to U.S. energy independence is no surprise. The company is the worst of the worst. Unlike other oil companies, ExxonMobil is refusing to support a national transition off oil and meaningfully invest in clean, renewable energy. Instead, it aggressively pursues policies that keep the U.S. addicted to oil." In November 2005 too, the then CEO, Raymond had to testify before the SJC after Exxon reported its record third quarter profits...

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