Introduction
Today’s column treats with my support for the well-sustained assertion to the effect that ExxonMobil, in the second half of the 2010s and certainly all of 2020, had become a classic zombie firm, as defined in last week’s column as a business, finance and economics concept. Among the several scores of studies of zombie firms that are readily available online, ExxonMobil is one of the — if not the most — frequently cited examples of an iconic US firm that has become a zombie.
This literature highlights the fact that, as defined last week, there are over 600 zombie firms identified in the United States. In addition, the combined indebtedness of these firms is estimated to be as much as 2.66 trillion US dollars. This sum is approximately 10 percent of the US GDP.
The next Section offers a dramatic statement by CNN Business on ExxonMobil, made at the end of 2020. The statement harps about the havoc wreaked on ExxonMobil during the 2020 pandemic year – the first full production year following Guyana’s First Oil.
CNN on ExxonMobil
Writing under the compelling header “Exxon in Crisis, Angry Shareholders are Rebelling,” Matt Egan has asserted that “for decades Exxon Mobil [was] an unstoppable machine and the envy of the oil industry.” As things stood back in December 2020, he said “that machine has broken down.” He drew attention to activist challenges on its climate policies by Engine 1, the activist shareholder grouping, supported by the Church of England in their aspirations along with D E Shaw, the hedge fund, and the California Teachers Retirement System. The central focus of the rebel groups is change in the composition of the Board of Directors.
Egan had concluded: “Once the world’s most valuable public company Exxon has crumbled by a staggering 266 billion US dollars since mid-2014. Exxon is losing money for the first time in decades and got kicked out of the Dow Jones Industrial Average after 92 years in that exclusive index.”
In the next Section I review some basic financial data for ExxonMobil. These are available at the time of writing this column [January28, 2022]. They basically offer readers a ten-year timeline of key magnitudes [share price, total assets, total revenue, net income, and number of employees] for the decade 2011 to 2020, available online. Other selective financial data will be provided in the Section following that.
Financial Profile- ExxonMobil
Share Price
Back in 2011 the price of an ExxonMobil share was US$79.71. In 2014 this price peaked during the decade, reaching US$97.27. By 2020 this bottomed out at a decade low of US$44.52
Total Assets
ExxonMobil’s assets had a total valuation of US$331 billion in 2011. This total peaked at US$363 billion in 2019. By 2020 this sum was US$333 billion. The range over the decade was relatively small. That is US$32 billion or about 10%.
Total Revenue
In 2011 total ExxonMobil revenue was US$486 billion. This fell to US$208 billion in 2016, or less than half the value at the outset of the series in 2011. By 2020 this was further reduced to only US$181 billion, a fall of US$305 billion!
Net Income
ExxonMobil’s net income earned back in 2011 was US$41 billion. By 2016, this income was dramatically down to US$8 billion. Net Income averaged less than US$20 billion between 2017 and 2019 [less than half the total in 2011.] By the next year this turned into a loss of US$22 billion
ExxonMobil Employees
In 2011 ExxonMobil Corporation had a total of 82.1 thousand employees. This number fell to a low of 69.6 thousand in 2017.At the end of 2020 the total was 70 thousand.
For readers’ convenience, I have summarized this series of data [2011 to 2020] in a simple schedule that will appear at the start of next week’s column. The reason for this is that the remaining space in today’s column does not allow the schedule to be added here. I use this space here in order to provide in its place some added data related principally for the period since 2020 that would aid readers’ appreciation of the zombification of ExxonMobil.
Conclusion: Related Financial Indicators
The first indicator I refer to in this closing section is ExxonMobil’s financial indebtedness. Recent data reveal this total was US$10 billion, back in 2010. A decade later in 2020, this total had more than quadrupled to reach US$45 billion. In January 2022, the total indebtedness being cited in financial circles is approximately US$68 billion- a whopping increase of US$12 billion The debt/equity ratio is about 0.34.
ExxonMobil’s current or liquidity ratio reveals similar signs of corporate vulnerability and therefore risk. This ratio has been typically less than 1.0 in recent years, thereby indicating the firm’s inability to cover its cash and near-term liabilities. Recent ratios are: 2018=0.84; 2019=0.78; 2020=0.80. The annual fluctuation of the indicator compounds the vulnerability these data convey.
Other related recent information strongly suggests that ExxonMobil’s break-even price for crude oil production and sales is US$45 per barrel. This price indicates to ExxonMobil where on the price spectrum for crude oil the corporation can cover its costs of production and marketing. The firm’s well-advertised target price for crude oil is US$80 per barrel.
These other related financial information supports the thesis undergirding Pillar B. That is, ExxonMobil is a company caught up in a process of zombification— a status, which I was at pains to observe in last week’s column, that is neither one of perpetual limbo, nor a terminal condition. The debate has started on the query: is ExxonMobil presently situated for a turnaround? I explore the answer to this next week.
