Exxon Mobil Corporation (NYSE: XOM), or ExxonMobil, is an American multinational oil and gas corporation. The company is a direct descendant of John. D. Rockefeller’s Standard Oil Company, which was founded in 1882. ExxonMobil is one of the largest publicly traded companies by market capitalization and is the largest oil refinery in the world. ExxonMobil is divided into three global operating divisions – upstream, downstream, and chemicals. The upstream segment explores, develops, produces, and markets gas and power. The downstream segment refines and markets petroleum products, and the chemicals segment manufactures and markets commodity petrochemicals. This case analysis will review ExxonMobil’s comparative financial statements published in the 2010 Annual Report and amended SEC 10-K to assess key factors in the areas of cash flow, equity, operations, profitability, and risk. The analysis will conclude with a recommendation on whether ExxonMobil is a secure long-term investment.
The 2010 Annual Report notes “delivery of superior cash flow” as a financial highlight, driven by operating cash flow management and a disciplined approach to employed capital. Net cash flows generated from operating activities was the largest contributor of cash at $48.4B. This reflects a $20.0B increase from 2009, which is driven by increased net income from higher crude oil and natural gas realizations in the upstream segment and increased margins in the downstream segment. Also, the noncash provision of $14.8B for depreciation and depletion increased by $2.8B from 2009, driven by higher capital investments in the upstream segment. Total operating cash flow of adjusted net income is 106%, which reflects a positive eight point increase over the past five years. This is a healthy sign because it shows that the major source of cash is derived from persistent events that can sufficiently fund operational activities and...