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 Contd...

Exxon's View

Exxon defended its high profits by explaining its viewpoint through newspaper ads. The oil industry too defended Exxon's record profits through a media blitz.

A full-page ad in the New York Times on January 26, 2006, posted by the American Petroleum Institute (API) was aimed at convincing the public that the US$ 10.7 billion fourth quarter profits of Exxon involved a reasonable rate of return. The ad displayed a chart showing how many cents of profit various industries had made over the previous five years for each dollar of sales (Refer to Table V for cents earned per dollar of sales for different industries).

The ad went on to say: "What many may find surprising is that, on average over the past five years, the profitability of America's oil and natural gas industry is far less than many other major industries, like banks, pharmaceuticals and real estate"...

The Way Ahead

Some analysts felt that the criticisms that had started as a PR problem for Exxon could quickly snowball into something more punitive from the US Congress. New York Democrat Charles Schumer felt that Exxon could face a new phase of scrutiny.

There were already bills moving through the US Senate to limit oil company mergers in the future or reduce some of their earnings through a windfall profits tax. Some analysts felt that Exxon could face increased regulation and a windfall profits tax if the Democrats won control of the House or Senate in the election to be held in November 2006.

Wall Street analysts expected that in 2006, Exxon would spend approximately US$ 15 billion on exploration and production, buy back at least US$ 20 billion in stock, and pay US$ 8 billion in dividends. However, Exxon's biggest challenge would be fulfilling its promise to increase output from 4.1 million barrels a day to 5 million by 2010...

Exhibits

Exhibit I A: The 2006 Fortune 500 - America's Top Ten Corporations by Revenues
Exhibit I B: The 2006 Fortune 500 - America's Top Ten Corporations by Profits
Exhibit II: Exxon's Financial Position (in US$ Billion, expect share prices)
Exhibit III: Greenpeace vs Exxon - A Timeline
Exhibit IV: Exxon's Investments 2001-2005
Exhibit V: Exxon's Guiding Principles for Standards of Business Conduct
Exhibit VI: Exxon's Environment Policy
Exhibit VII: Some Awards Won by Exxon


 

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