Case Study Analysis: Exxon Mobile (XOM)

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Exxon Mobil Corporation- Exxon Mobile (NYSE: XOM) didn’t have a good start for the year, but the fourth-quarter results helped the company’s share to rise nearly 7% despite not so exciting financial performance. Its shares are now up approximately 3% since year-to-date. The company for the quarter reported earnings of $0.67 per share, a slump of 57% as compared to earnings of $1.56 per share in the fourth-quarter of 2014. This decline in its earnings is driven by weakness in the commodity market that impacted its upstream business significantly. XOM’s average realized crude as well as gas prices for the U.S operation fell 46% and 52% respectively for the quarter as compared to the fourth-quarter of 2014. As a result, its upstream earnings In fact, this favorable volume and mix effect improved its earnings by over $250 million sequentially, despite its lower average realized price for oil and gas. This is one area, the company is looking great. Looking ahead, it plans to accelerate upstream earnings through this favorable volume and mix effect by way of new project execution and work programs coupled with reduced maintenance activities and higher seasonal demand. Also, the company is planning to further reduce operating costs for these new projects that should have positive impact on its upstream earnings in 2016. Reducing operating costs and capital expenditure Exxon Mobil meanwhile continues to focus on core fundamental such as reduction in operating costs and capital expenditure. For instance, the company achieved approximately $11.5 billion in capital and cash operating costs reductions. Also, the company’s ongoing asset management program, yielded $5.1 billion of cash flow from operations and asset For instance, its downstream earnings for the fiscal year 2015 came in at $6.5 billion, an increase of $3.5 billion as compared to earnings of $3.04 billion in 2014. So, the loss in one segment has been fulfilled by the profits in the other segment. This is a good move that should help the company to remain competitive during this weak commodity price environment. This strong growth in its downstream can be attributed to its efforts of diversifying its business to those products that have higher margins. For instance, the company’s refining and marketing margins helped the company to increase its earnings by a whopping $4.1 billion in 2015. This was however offset by volume and mix effect that led to increased maintenance costs and reduced its earnings by $200

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