118-PROJECT-SAMPLE PART I-TEXT

118-PROJECT-SAMPLE PART I-TEXT - Exxon Mobil Exxon Mobil...

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Exxon Mobil 1 Exxon Mobil (XOM) Financial Analysis PART A ECONOMIC CHARACTERISTICS I. Demand Price Sensitivity In the Sub-Industry of Integrated Oil and Gas, consumers are relatively price sensitive due to the nature of the market. High-energy prices decrease consumers’ purchasing power and force budget-conscious consumers to change their habits to reduce oil use. Although many corporations cannot limit their use of energy, they are also trying to minimize their cost by using energy efficient products since the days of cheap gasoline are over, according to Standard & Poor’s (S&P), and that prices are likely to increase over the long term (Pg.3). In facing the rapid increase of oil prices, Exxon Mobil (XOM), the world’s largest publicly held corporation, saw a 2.4% decline in oil production from year 2006 to 2007. This is due to the production limits set by Organization of Petroleum Exporting Countries (OPEC) where Exxon Mobil operates. In response to the decline in production, Exxon has decided to get out of the retail gasoline business and sell their low-margin stations to gasoline distributors. About 75% of Exxon Mobil's, roughly 12,000 stations in the U.S., are owned by branded distributors, who buy Exxon Mobil products and pay to use the name (Exxon Sells US Gas Stations to Distributors). Similar to that of Exxon Mobil, the oil production of Chevron (CVX), the world’s fifth largest non-governmental oil company, is also affected by the high-energy prices. Its oil output fell to the lowest level since 2005 due to the reduction of its share of output in countries like Nigeria and Indonesia. As a consequence, Chevron must increase output by 190,000 barrels a day, or 7.5 percent, for the rest of this year to meet its 2008 production target of 2.65 million barrels a day ( Chevron Reports Oil Output Slips ). Growth Profile As the global demand for energy continues to grow rapidly, local demand tends to decline as a result of high prices and a slowing U.S. economy. As of July 2008, Energy Information Administration (EIA) projected that U.S. gasoline demand would decline about 0.97% in 2008 and 0.11% in 2009, versus growth of 0.65% in 2007. The EIA also estimated that U.S. distillate demand would decline 1.66% in 2008 and remain near this level in 2009, versus a gain of 1.68% in 2007 (S&P Pg.8). Additionally, the demand growth over the next five years in the Organization for Economic Co-operation and Development (OECD) countries is expected to rise only slightly, and this oil demand
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Exxon Mobil 2 weakness is being offset by the strength in Asia and the Middle East. Strong economic and industrial production growth increased developing countries’ oil demand, associating with 90% of the demand growth. Global insight estimated that global oil demand growth would average 0.53 million b/d in 2008 and 0.60 million b/d in 2009, with the expansion of about 1.5 million b/d each year from 2008 to 2013. Consequently, by the end of 2013, global oil demand is expected to be almost evenly
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118-PROJECT-SAMPLE PART I-TEXT - Exxon Mobil Exxon Mobil...

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