Investment Analysis and Recommendation Paper
Current largest publicly traded company with 390.47 billion USD market’s value, ExxonMobil is a leading global oil and gas firm. It possesses a corporate governance strategy that ensures the recruitment of a competent board of trustees and executive managers as well as the avoidance of unnecessary risk taking. Financial analyses reveal a financial strong and healthy firm with the best asset management and profitability ratios in the oil and gas industry (10.82% for the return on asset and 28.69% for the return on equity) and this with the lowest financial leverage ratio of 6.75%. With such low debt to equity ratio, its probability of financial distress is estimated to be 1%. The firm capital structure follows the pecking-order theory and despite significant retained earnings, ExxonMobil is among the best dividend paying companies. While consistent improved financial performance, extensive research and development activities, geographical diversification, integrated refining and chemical operations and industry leading position constitute the main strength of the firm, several pending litigations can impede the development of its business. However, if ExxonMobil takes the appropriate measures to mitigate environmental and regulatory issues such as water contamination and stricter regulation for deep offshore drilling, the company has a promising future with its extensive proved undeveloped reserves, the unconventional assets expansion and the upcoming LNG projects. We recommend therefore investing in ExxonMobil stocks.
ExxonMobil is an American multinational and integrated global oil and gas company headquartered in Texas, United States. ExxonMobil operates through three reportable business segments: Upstream, Downstream and Chemical. The company’s principal business is energy, involving exploration and production of crude oil and natural gas, refining, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. Exxon Mobil also has interests in electric power generation facilities as well as extensive research programs in support of its business. With the annual revenue of 486.43 billion USD during the fiscal year 2011, an increase of 26.93% over 2010, ExxonMobil has become since 2012 the world’s largest company by revenues and in 2013 the largest publicly traded company by market capitalization (ExxonMobil, 2011). The company’s current proved oil and gas reserves are 9.4 billion oil-equivalent barrels. Although all the above information seem to present ExxonMobil as an attractive company to invest in, the author will analyze different aspects such as corporate management, financial health, growth rate, capital budgeting strategy to evaluate the worthiness of an investment with the world’s largest oil and gas producer. Corporate Governance at ExxonMobil
A thorough analysis is required before buying shares or approving corporates’ loans. Such analysis starts with the assessment of the firm’s proxy statement. Despite its briefness, it presents a thorough description of the business relationships, the background and compensation profile of corporate officers as well as the future of the firm. A proxy statement produced on April 12, 2012 by ExxonMobil was analyzed. It presents the current corporate governance status, the burning issues shareholders will vote on, and outlines the professional and experience requirements for the board director and executive managers. With financial expertise, experience as the CEO of a significant company or organization or as a next-level executive with responsibilities for global operations, experience managing large, complex organizations; or experience on one or more boards of significant public or non-profit organizations; and, expertise resulting from significant academic, scientific, or research activities as board members’ requirements,...
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