The impact of increasing oil price volatility on ExxonMobil earnings
(Skinner, 2016)The company deals with Esso branded fuels, services, and lubricants. Exxon Mobil Company, the company also has issues and problems that occur from time to time during the company’s endeavors. Some of these problems have a potential impact on the company’s financial results. This project then analysis the particular problems faced and also of different companies that offer the same services and products to the market. Applications of the learning outcomes to the project The purpose of the course is to provide students in administration and non-financial administrators an opportunity to develop a comprehensive understanding of the use and interpretation of basic financial concepts and how they relate to administrative decisions and throughout the project these skills are evident.
The company has gained such a huge impact on the oil market such that its activities, actions, and decisions greatly have an effect on the oil industry as a whole. On the other hand, the financial results of the company are greatly affected by the vast changing prices of oil across markets. Again the company has a huge impact on the Oil market as it has an interconnected relationship with the oil market developments. (Moors, 2013) Being the biggest traded on an open market Oil and Gas Organization it has been able to bring a balance and remove a particular collapse in the prices of crude oil in the market. It gives better prices to crude oil in the market as compared to other companies.
Some of these problems have a potential impact on the company’s financial results. (Lester & Efird, 2016) Description of the problem. From the year 2012, Exxon Mobil Company has noted a decline in its results as a company. Since then and the years following and a great decline in the year 2015 show that the company was not in a good position. This was seen by the fact that the annual revenue dropped from a figure close to $412 billion in the previous year to a figure close to $269 in the year 2015. This will also help it in regaining the lost glory. It is in this regard also the shares of the company has been enjoyed in a very impressive run throughout the previous few months.
From that, the company shares’ price has constantly come down almost 10% from the original and the most expensive price in which it was in the past. A report of the second quarter shows that in the recent but previous rebound in the products of the energy market has been on the increase. This, in turn, leads to a higher and better performance of Exxon Mobil Company. B), the criteria for investing is to be able to make sure that in a company there is always a demonstration of the high return on equity. In this regard, it is viewed that Exxon Mobil’s return on equity over the years has faced a severe drop which by records is from the percentage of 27.
5% in the year 2013 to a figure that is approximately 7. 5% in the year 2016. On the other hand, the return on equity usually tells of how the return on investment by the shareholders has also been on a different line as compared to previous times. The policymakers and the financial analysts have been proven otherwise by the fact that the global growth is constantly becoming low. The global economy has been trucked by the financial crisis. This is since the 2007-2008 financial crisis that since then made a slow growth to the environment. (Energy and Oil Market Outlook: Hearing before the Committee on Energy and Natural Resources, United States Senate, One Hundred Twelfth Congress, First Session, to Receive Testimony on the Energy and Oil Market Outlook for the 112th Congress, February 3, 2011, 2011).
This then led to unsustainable levels of debt and the structural headwinds, and this is both in the private and public sector. Actually, the level of internal divisions within OPEC has already impacted greatly by the volatility which has been experienced in the oil markets something which is not completely behind us. Despite the complicated issues which affect the oil markets, and its supply is still experiencing threats due to the influence of shale energy technology, Exxon MOBIL expects a huge growth in the demand of energy whereby the demand of renewable energy will increase at a high rate. This gives so much hope that energy prices will surely reduce. However, as seen from the long-term projections, they are bound to change especially when the fluidity of all fronts will go high.
Those who expect that the oil prices will go down for a long period of time arguing that the undercurrents of oil supply and demand will shift advantageously as the industry adjusts to the changing environment. This enhancement procedure has served the organization well. ExxonMobil has made and dealt with a viable corporate social duty program and emergency administration structure, which has decreased its past notoriety for oil slicks and other security perils and in addition enhanced how it impacts on its activities, choices, and any slips that have emerged as of late. This is a noteworthy change from the times of the Exxon Valdez oil slick where the organization misused the circumstance and did not impart adequately. (Institute on Securities Regulation, Beller, Lawrence, Lynn, & Practising Law Institute, 2015) The organization is presently known for its imaginative systems and fragment improvement as it has a solid R&D association that is centered on tending to industry needs and partner desires.
It is a worldwide pioneer in its industry with a solid nearness around the globe, including numerous developing markets like the Middle East, India, and China where it is working with these nations to additionally build up their foundations, meet their vitality needs, and help develop their nearby economies through instruction, work creation, and neighborhood generous endeavors. Exxon has different brands that it can make more methodologies for as far as brand augmentation items to additionally expand its portfolio, in this way lessening its dependence on oil and non-renewable energy sources. Threats There is a critical chance to meet expanding requests for vitality in numerous creating economies incorporating those in the Middle East, Asia, South Asia and South East Asia. There is a chance to pick up an initial position in elective vitality markets if the organization can build up the arrangements quicker than the opposition can, adding brand value to the ExxonMobil name.
The organization has a genuine chance to enhance its picture through more exertion in every one of the nations where it works with greater group contribution and other social obligation activities. Exxon has different brands that it can make more methodologies for as far as brand augmentation items to additionally expand its portfolio, in this way lessening its dependence on oil and non-renewable energy sources. Appraisal the stock price of Exxon Mobil at ninety-five dollars and close to thirty times earnings, we can actually state that investors will no longer be purchasing at throwaway prices. Taking a closer look at the long-term history of valuation, it will be of good use to note that this will be the first time such a purchase is exaggerated.
Investing with Exxon Mobile has several advantages, the most beneficial one being better prices than their competitors at not more than S&P 500 average. However, this has been done away with over the days. The fast-growing abyss between the marketplace significance and the essential significance is warmly received. As oil costs and the market execution of Exxon Mobil keep on diverging, it is the ideal opportunity for basic reasoning. To what extent would this be able to bizarrely overstretched dissimilarity genuinely last? Lessons learned from the Assignment The oil market is still in the middle of a historic storm, navigating which is particularly challenging, especially for major energy companies. Exxon Mobil's rally continues to defy fundamentals, earnings growth projections, and oil price movements.
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