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Products: Exxon Mobil Corporation (XOM)

Crude Oil and NGLs(Crude Oil and NGLs)
Gas and Power Marketing(Gas and Power Marketing)
Natural Gas(Natural Gas)
Chemicals(Chemicals)
Refined Petroleum Products(Refined Petroleum Products)

Crude Oil and NGLs

What is being offered?

Crude Oil and NGL production is part of Exxon Mobil's upstream activities that are reported in the Exploration and Production (E&P) division. Upstream activities include oil and natural gas exploration, field development, and production.

Who are the clients?

Exxon sells certain amounts of crude oil and natural gas liquids produced in the open market to other third parties. A portion is also transferred to the Refining and Marketing division where the oil is refined into different products for various uses.

What do customers care about?

Customers are largely concerned about whether oil & gas companies will be able to meet their demand needs in terms of production capacity as well as what the realized prices will be at any given time.

Competitors

Exxon's upstream operations competes with other major oil & gas producers such as BP, ConocoPhillips, and Chevron.

Exxon's Strengths

1. Strong Global Presence

Exxon is involved in the principal aspects of the oil and gas industry in most of the countries around the world. This geographical diversity of the company partially insulates it from operational and financial risks arising from regional regulatory and geopolitical uncertainties.

2. Large Base of Proved Reserves

At the end of 2016, Exxon's total crude oil and NGL reserves stood at almost 9.29 billion barrels, which basically means that the company held enough reserves at the end of last year to continue to produce crude oil and NGLs for at least 16 more years at last year's rate without any net reserve additions.

Sources of Income

The main source of income in the Exploration and Production division is derived from the sale of crude oil and natural gas liquids (NGL). The average price realized is derived primarily through the demand and supply of these products which then determines average prices. The average prices included in our analysis only include those of Exxon's subsidiaries and not of equity accounted entities for which Exxon has an ownership stake in.

Crude Oil and Natural Gas Liquids Produced

Crude Oil and Natural Gas Liquids Produced refers to the quantity of liquids produced by Exxon Mobil's consolidated subsidiaries in terms of barrels per day.

Exxon's Crude Oil and Natural Gas Liquids produced decreased from 1.8 million barrels per day in 2009 to 1.5 million barrels per day (bpd)in 2013. However, over the last 2-3 years, the company has seen a sharp rise in its liquid production, despite the ongoing slump in the commodity markets. The company's liquid production rose from 1.5 million bpd in 2014 to 1.6 million bpd in 2016 but fell slightly to 1.56 million bpd in 2017.

Chart: Crude Oil and Natural Gas Liquids Produced

Average Crude Oil and NGL Sales Price

The average liquid sales price refers to the price realized for crude oil and natural gas liquids (NGL) by subsidiaries of Exxon Mobil™s upstream division. It is effectively the weighted average of the price the company receives on its crude oil and NGL sales across the world. This is dependent on global crude oil prices and the company's proportion of sales in different countries.

Oil prices in global markets are generally influenced by:

  • Oil supply
  • Oil demand
  • Oil reserves
  • Global political uncertainties

Average Crude Oil and NGL Sales Price ($ per unit)

Exxon's average liquid sales price increased from $48.23 per barrel in 2005 to $91 in 2008, before declining to $57.90 in 2009 as the world faced one of the worse economic downturns in recent decades. The global economy recovered in 2010, pushing prices to $74 for the year. Oil prices rose sharply in 2011 to $101 mainly because of a shut down of Libyan production and unrest in other OPEC (Organization of Petroleum Exporting Countries) countries. Prices remained around the $100 level in 2012 and 2013 as well.

However, recently, global benchmark crude oil prices have declined sharply on slower demand growth and rising supplies. According to the International Energy Agency's (IEA) estimates, the growth in global oil demand hit a 5-year low in 2014. This coincided with record growth in crude oil supply from non-OPEC countries, primarily the U.S., at 1.9 million barrels per day. As a result, the price of the front-month Brent crude oil futures contract on the ICE declined by more than 48% in the second half of 2014 and is currently trading around $60/barrel. Exxon's Average Crude Oil and NGL Sales Price declined to $87.40 per barrel in 2014. The oil glut continued in 2015, causing the commodity prices to fall more than 50% during the year. As a result, Exxon's price realization dropped to almost $45 per barrel in 2015. It fell further to $38 per barrel in 2016 due to the persistently low commodity prices during the year. However, 2017 saw sharp recovery and the figure stood at $49.

Chart: Average Crude Oil and NGL Sales Price ($ per unit)

Gas and Power Marketing

What is being offered?

Natural Gas Trading involves the trading of Natural gas. It involves the buying and selling of natural gas to make a profit or to compensate if they have less of a quantity of a product produced. Gas & Power Marketing consists of marketing activities related to Natural Gas and Power to various utilities.

Competitors

Exxon's trading and marketing operations competes with other major oil & gas producers such as BP, ConocoPhillips, and Chevron.

Exxon's Strengths

1. Strong Global Presence

Exxon is involved in the principal aspects of the oil and gas industry in most of the countries around the world. This geographical diversity of the company partially insulates it from operational and financial risks arising from regional regulatory and geopolitical uncertainties.

Sources of Income

The main source of income in this division is through natural gas trading and marketing. Trading income is the difference in the sale and cost price for various products. Gas & Power Marketing income isn't realized in a direct manner, its contribution goes in the value addition of Gas and Power products.

Gas and Power Marketing Revenues

Gas & Power Marketing Revenues refers to revenues from Exxon's upstream activities apart from the production of natural gas, crude oil, and natural gas liquids. These revenues consists primarily of natural gas and power marketing and oil & gas transportation revenues.

Gas & Power Marketing Revenues has steadily increased over the recent past from around $14.6 billion in 2009 to $27 billion in 2011. In 2012 and 2013, the figure dipped marginally to around $24 billion. However, Exxon's Gas & Power Marketing Revenues fell by almost 21% to $18 billion in 2014 due to the sale of certain midstream assets by the company and a sharp decline in oil prices. It fell further to $12 billion in 2015, and to $11 billion in 2016. The figure jumped to over $13 billion in 2017.

Chart: Gas and Power Marketing Revenues

Natural Gas

What is being offered?

Natural Gas is part of the upstream division that is reported in the Exploration and Production (E&P) segment. Upstream activities include oil and natural gas exploration, field development, and production.

Who are the clients?

Exxon Mobil sells amounts of natural gas produced in the open market to other third parties.

What do customers care about?

Customers are largely concerned about the firm's oil & gas production capacity and the average realized price for natural gas sales

Competitors

Exxon Mobil's natural gas operations compete with those of other major oil & gas producers such as BP, ConocoPhillips, and Chevron.

Exxon's strengths

1. Strong Global Presence

Exxon is involved in the principal aspects of the oil and gas industry in most of the countries around the world. This geographical diversity of the company partially insulates it from operational and financial risks arising from regional regulatory and geopolitical uncertainties.

2. Large Base of Proved Reserves

At the end of 2016, Exxon's total natural gas reserves stood at over 56.5 trillion cubic feet, which basically means that the company held enough reserves at the end of last year to continue to produce natural gas for at least 25 more years at last year's rate without any net reserve additions.

Sources of Income

The main source of income in the Natural Gas division is the sale of Natural Gas. The price realized is a weighted average realization based on the countries in which the commodity is sold and demand/supply factors.

The average prices given only include those of Exxon subsidiaries and not of equity accounted entities in which Exxon has an ownership stake.

Natural Gas Production

Natural Gas Production refers to the total quantity of natural gas produced by Exxon's subsidiaries in a given year in terms of millions of units, where one unit is equal to 1,000 cubic feet per day.

Exxon's Natural Gas production increased from 6.1 million units in 2005, to 6.52 million units in 2007, before declining to 5.96 million units in 2008 and further declining in 2009. Production fell in 2008 due to the expropriation of the firm's assets in Venezuela and divestments.

Natural Gas Production reached an all-time high of 7.22 million units in 2010, keeping up with the increasing global demand for natural gas and because of the acquisition of XTO Energy. Production of natural gas has increased in 2011 as well, rising to 8.25 million units. In 2012 and 2013, however, a sharp drop in natural gas prices forced Exxon Mobil to curtail production in order to maintain its overall margins. The trend continued in 2014 as the company's natural gas production fell to almost 6.5 million units. It fell further to 6.2 million units in 2015 due to the continued weakness in commodity prices during the year. It remained mostly flat in 2016 as the weakness in commodity markets prevailed. However, with recovery in 2017, production increased slightly to 6.4 million units.

Chart: Natural Gas Production

Average Natural Gas Sales Price

The Average Natural Gas Sales Price refers to the average realized price Exxon Mobil's Subsidiaries recognize from the sale of natural gas it produces. It is represented in US dollar per thousand cubic feet. The market generally determines the price of natural gas at any given point which is driven by supply and demand factors. When gas demand increases and supply is short, prices tend to shoot up.

The market factors that influence prices include:

  1. The current supply of natural gas for sale as well as the future anticipated supply of natural gas
  2. Temperature changes and the duration of these temperature changes
  3. The amount of natural gas available in storage
  4. Current and anticipated demand for natural gas
  5. Cost to get the natural gas to homes for residential usage or industries for commercial usage
  6. The price of oil

Apart from market related factors there are other reasons why natural gases prices may fluctuate significantly as well. These include:

  1. Interstate pipeline charges:
    • Pipeline costs represent the costs associated with the pipes that transport natural gas. These charges are approved by the Federal Energy Regulatory Commission (FERC) and seldom fluctuate.
  2. Pipeline refunds:
    • Utilities may be allowed / required to pass on to consumers slight surcharges or credits based on their performance under gas cost incentive mechanisms. They generally tend to be small relative to commodity, pipeline, and distribution service costs.
  3. Local distribution service rates approved by the PSC: 
    • These are the rates that reflect the utility’s cost of maintaining and operating its local system for distributing natural gas to homes and businesses. These rates change only when the PSC has a formal rate proceeding for the utility.

Average Natural Gas Sales Price ($ per 1,000)

Natural gas prices dipped from $6.08 per Thousand cubic feet (Mcf)in 2006 to $5.29 per Mcf in 2007 before increasing to $7.54 per Mcf in 2008 due to a spike in energy prices following the rise in price of crude oil. Natural gas prices dropped sharply in 2009 to $4 per Mcf because of the drop in energy prices following the slowdown. Gas prices recovered over the next two years, rising to $4.64/Mcf in 2011. In 2012, the prices dipped sharply as increased supply due to the shale gas boom overran demand in North America. In 2013, average price realized by Exxon's subsidiaries on the sale of one Mcf of natural gas increased to $4.60 as U.S. natural gas prices increased due to improved demand outlook and cut-backs by gas producers.

In 2014, the company's average natural gas price realization stood at $4.68 per Mcf. However, the prices dropped to $2.95 per Mcf in 2015 because of the turmoil in the commodity markets. It fell further to $2.25 per Mcf in 2016 due to the continued weakness in commodity prices. With recovery in market in 2017, the price increased to $3.04 per Mcf.

Chart: Average Natural Gas Sales Price ($ per 1,000)

Chemicals

What is being offered?

Exxon is a major manufacturer and marketer of petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, as well as a wide variety of specialty products. The chemicals business is integrated with the downstream business which gives it access to a wide variety of feedstock.

Who are the clients?

Exxon sells chemicals to various other companies which use them to make different products.

What do customers care about?

Customers are concerned about the quality and quantity of chemicals produced at any time to meet demand as well as the average sales price for these products.

Competitors

Exxon competes with other major Oil and Gas companies which are in the business of producing petrochemicals. They include BP, Royal Dutch Shell, Chevron, and others.

Exxon's strengths

1. Feedstock advantage through vertical integration

The segment's integration with the upstream, transportation, and downstream divisions gives it easy access to a wide variety of feedstock at low prices.

2. Global reach

The firm has petrochemical manufacturing facilities across the globe, which enables it to provide easier access of manufactured products to customers.

3. Full integration across all Exxon's operations

More than 75% of the firm's refining capacity is integrated with its chemical and lubricant manufacturing facilities, which makes it an industry leader in the domain. Also, its expertise in power generation enables it to maintain high standards in energy efficiency.

4. Technology leadership

Exxon Mobil is an industry leader in its technological capabilities. This gives it a cost advantage in raw material costs, while also maintaining premium product quality and process efficiency.

Sources of Income

The main source of income is derived from the sales of various petrochemical products including ethylene, polyethylene and paraxylene to other chemical companies, retail chemical stores, etc.

Chemicals Revenues per Metric Ton

This represents the amount of revenues earned by Exxon Mobil per metric ton of chemical products sold.

Revenues per Metric Ton historically have been closely linked to oil prices as crude and natural gas are the main raw materials used in the petrochemical industry. Revenues per Metric Ton of petrochemicals increased from $1,610 in 2005 to $1,944 in 2007. Prices then rose 19% in 2008 to touch $2,324/ton. Prices declined almost 30% in 2009 with the fall in crude prices and then rose to $2,072 in 2010. Prices in 2012 stood significantly higher at around $2,520. In 2013 and 2014, Exxon's estimated revenue per metric ton of chemical products sold declined slightly to $2,463 and $2,327, respectively.

However, it declined sharply to $1,619 per ton in 2015, and continued to fall to $1,445 per ton in 2016. However, the figure rebounded to $1,633 in 2017.

Chart: Chemicals Revenues per Metric Ton

Refined Petroleum Products

What is being offered?

The Refined Products and Marketing division is responsible for the manufacture, marketing, sales, and transportation of various refined products, including Gasoline, Aviation Fuel, Fuel Oil, and Middle distillates. These products are sold through four main channels namely retail, industrial, wholesale, and aviation and marine.

Who are the clients?

Exxon markets its fuel products to millions of customers worldwide through its retail service stations and three global business-to-business segments —- Industrial, Wholesale, and Aviation and Marine.

What do customers care about?

Customers are concerned about the quantity of products refined and sold and the average price of refined products. In sectors such as the aviation industry, quality is also an important factor.

Competitors

Competition comes from other major refining companies such as Shell, Chevron, BP, etc.

Exxon's strengths

1. Strong global presence

The firm has refineries across the globe, which enables it to provide easier access of refined products to customers.

2. Large refining capacity

Exxon Mobil is the world's largest refiner, with the most distillation, conversion, and lube base-stock production capacity. Its refineries are 60% larger than the industry average, which gives it cost advantages over competitors due to economies of scale.

3. Strong brands

Exxon's refined products are marketed and sold under three strong, well established brands: Exxon, Mobil, and Esso. The company also leverages the brands' retail and marketing expertise to generate maximum value from its refined product sales.

Sources of Income

The main source of income is derived from the sale of various refined products through different channels.

Refined Petroleum Products Revenues

The Estimated Revenue per Barrel is the average revenue earned by Exxon Mobil on the sale of a single barrel of refined product. It is derived by dividing the company's total downstream sales revenue (including inter-segment sales revenue) by the total number of barrels of refined products sold by it in a given year.

Refining revenues per barrel are strongly correlated to oil prices. The Estimated Revenue per Barrel touched $188 in 2008 because of high oil prices in that year before falling to $128 in 2009. However, the recovery in oil prices drove Exxon's refined products revenue per barrel to $194 by 2013. In 2014, Exxon's Estimated Revenue per Barrel declined to just over $177 per barrel because of the fall in oil prices and dropped further to $106 per barrel in 2015.

It continued to decline and averaged at $93 per barrel in 2016. However, the figure increased to $110 in 2017.

Chart: Refined Petroleum Products Revenues