IntroductionPresented report is a result of group project implementation. It is based on the analysis of two bigcompanies, namely Exxonmobil and BP, operating in oil and gas industry. The time frameworkof the report is 2007-2011.BP, British Petrolium or Beyond petroleum as of May, 2001, is one of the world‟s leadinginternational gas and oil companies. Its core business includes providing fuel for transportation(petroleum, motor fuels and aviation fuels), energy for heat and light and petrochemical productsfor everyday items. The core BP brands are Castrol (motor oil and lubricants), BP, ARCO (fuel /US West Coast), ARAL (fuel stations / Germany), AMPM (convenience shops / Western USA)and Wild Bean Café.As to the business model of BP, the company covers the entire hydrocarbon chain, that is, BPexplores and goes all the way up to supplying energy and other products. The way includes gasand oil exploration, field development and production, transportation, storage and processing,refining, transportation, manufacturing and marketing.BP is also involved in alternative energy business. The aim of this business is to focus on thenew forms of fuel and power, which consume less carbon and are called lower-carbon products.It has invested 7 billion US dollars into this business (BP 2012).With its proved reserves of 17.7 billion of barrel equivalent (Ibid.), BP is considered to be one ofthe largest suppliers of oil products all over the world. Owning 16 oil refineries which refine2.35 million barrels on a daily basis (figure of 2011), BP is striving to reach its maximum outputin production (Ibid.).As at December 31, the number of employees working in BP reached the figure of 83, 400.BP‟s revenue for 2011 was 375,517 million US dollars, total assets of the company made up290,920 million US dollars and total equity was 111,460 million US dollars (Ibid.).Exxonmobil is the largest oil and gas company in the world. Its core business is providingpetroleum products such as fuel oil, gasoline, diesel, jet fuel, lubes and others; energy andpetrochemical products. The Exxonmobil corporation consists of ten separate companies whichform three segments, the Upstream which deals with oil exploration, extraction, shipping and
wholesale operations; the Downstream which does marketing, refining and retail operations; andThe Chemical business which involves production of building blocks which are used to makeplastic bottles, packaging materials, car bumpers, polyester fiber and other consumer goods.Being the leader practically in all aspects of oil and petrochemical industry Exxonmobil ispresented in most countries of the world and its explorations of oil and gas are continuouslymade on six continents. Exxonmobil‟s core brands are Exxon, Esso and Mobil.Exxonmobil has 37 oil refineries in 21 countries which refine 6.3 million barrels daily. With itsproved reserves of 22.4 billions of barrel equivalent (figure of 2011), Exxonmobil is one of theworld‟s leaders in terms of oil reservoirs (Exxonmobile 2012).As at December 31, the number of employees working in Exxonmobil reached 99, 100.Exxonmobil is the largest in the world by revenue, its revenue for 2011 made up 486, 429million US dollars, total assets of the company amounted to 349,00 million US dollars and totalequity was calculated as 154,396 million US dollars (Ibid.).The objectives of the report are: to assess the financial position of both companies in theframework of global oil and gas industry, to compare the positions and to comment on theresults, to provide recommendations based on the analysis.In order to reach the objectives the structure of report includes executive summary, introduction,industrial analysis, companies analysis, balanced scorecard and conclusion.
CHAPTER I: INDUSTRY ANALYSISThis short outlook of oil and gas industry was made for quick acquaintance with the industryonly as the main purpose of the current report is not oil and gas industry itself. So the chapter isincluded as a brief introduction of oil and gas sector.Oil and gas industry is one of the key players in terms of world economy. The industry includesmainly exploration and production (the upstream sector), and refining (downstream sector) ofcrude oil and natural gas. The industry provides 60% of customers energy needs (PetroleumOnline 2012).Global energy consumption increased by 2.5 % in 2011. It is comparable with the historicalaverage, but considerably less than 5.1% in 2010 (BP Statistical Review of World Energy 2012).The growth of energy consumption of the developing economies is the main reason all of the netgrowth in energy consumption. According to BP Statistical Review of World Energy “All of thenet growth took place in emerging economies, with China alone accounting for 71% of globalenergy consumption growth” (Ibid.). At the same time OECD demand has decreased again.Fossil fuels continue to lead in energy consumption, posses 87% market share. Oil continues todominate the consumption, at 33.1% of global energy consumption, but also continues to lose itsmarket share, which reached the bottom since 1965 (Ibid.). In spite of beneficial prices for oil,even producing regions of the Middle East and Africa showed weak consumption growthbecause of disorders in the region. As for refined products, middle distillates remained the leaderagain in terms of volume.Natural gas consumption showed a slight growth by 2.2% (Ibid.). North America was the onlyregion that demonstrated the above-average growth due to the low prices. Natural gasconsumption considerably increased in China, Saudi Arabia and Japan, but dramatically droppedin EU.
Top World Oil Consumers, 2011 (Thousand Barrels per Day) 2,293 2,400 United States 2,230 China 2,725 18,949 Japan 2,793 India 2,986 Saudi Arabia 3,426 Brasil 4,464 Russia 8,924 Germany Canada Korea, SouthFigure 1.1 Top World Oil Consumers, 2011Source: U.S. Energy Information Administration, Countries Overview Top World Natural Gas Consumers, 2011 (Billion Cubic Meters) 683.3 700 600 500 414.1 400 300 137.5 129 100.3 99.5 94.28 83.94 200 82.48 77.8 100 0Figure 1.2 Top World Natural Gas Consumers, 2011Source: CIA World Factbook
Oil production increased despite of the loss of suppliers in Libya due to large increases amongMiddle Eastern OPEC members, with large increases in Saudi Arabia, the UAE, Kuwait andIraq. The US showed a significant non-OPEC production rise, along with Canada, Russia andColumbia. Such traditional suppliers as the UK and Norway showed continued decrease.Natural gas production rose slightly with the US remaining the world‟s largest producer andrapid growth in Qatar‟s, Russia‟s and Turkmenistan‟s output. Meanwhile the production inLibya, the UK and the EU declined. Top World Oil Producers, 2011 (Thousand Barrels per Day) 2,687 Saudi Arabia 2,959 2,682 11,153 Russia 3,088 United States 3,600 China 10,229 Iran 4,234 Canada 4,289 United Arab Emirates 10,128 Mexico Brazil KuwaitFigure 1.3 Top World Oil Producers, 2011Source: U.S. Energy Information Administration, Countries Overview
Top World Natural Gas Producers, 2011 (Billion Cubic Meters) 700 611 588.9 600 500 400 300 152.3 138.5 116.7 106.3 102.5 200 85.17 85.14 83.94 100 0Figure 1.4 Top World Natural Gas Producers, 2011Source: CIA World FactbookGlobal oil and gas trade both experienced growth in 2011 (2% and 4% respectively). AgainChina responded for about two-thirds of growth in oil trade. Middle East countries responded forabout four-fifth of growth in oil exports. Crude oil trade made up 70% of global trade in 2011,while refined products accounted for about 60%of the growth in global trade. LNG shipmentsgrew significantly compared to natural gas pipeline shipments, accounting for about a third ofglobal gas trade. Pipeline shipments increased in China (from Turkmenistan), Ukraine (fromRussia), and Turkey (from Russia and Iran) (BP Statistical Review of World Energy 2012).
Top World Oil Net Exporters, 2011 (Thousand Barrels per Day) Saudi Arabia 1,752 1,490 Russia 1,817 1,752 8,167 United Arab Emirates 2,206 Kuwait 2,343 7,504 Nigeria 2,601 Iran 2,242 Iraq Norway Angola VenezuelaFigure 1.5 Top World Oil Net Exporters, 2011Source: U.S. Energy Information Administration, Countries Overview Top World Oil Net Importers, 2011 (Thousand Barrels per Day) 1,292 1,346 United States 1,697 948 China 8,822 Japan 2,170 India 2,235 Germany 2,489 4,635 Korea, South France 4,329 Spain Italy NetherlandsFigure 1.6 Top World Oil Net Importers, 2011Source: U.S. Energy Information Administration, Countries Overview
Top World Natural Gas Exporters, 2011 (Billion Cubic Meters) 199.9 200 150 99.75 94.81 92.4 100 57.75 55.28 42.33 32.2 30.79 50 24.7 0Figure 1.7 Top World Natural Gas Exporters, 2011Source: CIA World Factbook Top World Natural Gas Importers, 2011 (Billion Cubic Meters) 120 105.8 99.63 98.01 100 70.2 80 53.63 60 46.2 42.38 38.2 38.04 36.71 40 20 0Figure 1.8 Top World Natural Gas Importers, 2011Source: CIA World FactbookIt is often speculated about lack of global oil and gas reserves. Due to OPEC‟s World OilOutlook “the world has more than enough oil resources to satisfy consumer demand for many
decades” (OPEC 2012). Now they are estimated to be four trillion barrels (Ibid.). Technologicaldevelopment let companies benefit more from the recoveries from producing fields and let themreach new both OPEC and non-OPEC areas that still have not been explored.The main features that characterize the industry nowadays and the main challenges the industryis facing are as follows. A so-called shale gas “revolution” is taking place in the industry. It isobvious that the resource could play an important role in the global energy sector. But outsidethe US it hasn‟t still moved from the very beginning of its development. The future of theresource remains unshaped. There is a great concern about the shortage of well-skilled labor inthe industry. Due to the survey provided by the Economist Intelligence Unit, this is named as oneof the major barriers to future growth by the industry top-managers (Economist Intelligence Unit2012). The industry is highly contingent on demand and supply, the price differs in terms ofresource quality (e.g. Canadian light or heavy blend). Power of earning and money flow staymore or less higher compared with other industries, caused mainly by price increases and, to aless extent, by production increases, though prices in the upstream sector are highly volatile dueto significant cost involved in the pre-production and production processes and often roughestimates of recoverable resources. The above mentioned Big Spenders survey showed that thelargest part of industry professionals name the upstream sector as a potential for future growth(Ibid.). In the downstream sector the positive changes have taken place, but mainly in the US,where the profitability of refining has improved. The rise of car drivers in developing countriesgives the sector a chance for future growth, but such challenges as energy and environmentalpolicies changes, new “bio” fuels, and other technological gains continue playing a substantialrole in sector‟s demand and price-making.In spite of global financial crises and troubles in world economy, the oil and gas industryconfidence is increasing, and many industry key-players show a rising will to invest in upstreamoperations. It is a positive feature of a today‟s oil and gas industry. The opportunities of a profitgrowth are now seen by leading industry players in such regions as North America, Far East,South-East Asia and Latin America.The last two years (2010-2011) were full of significant events for global energy. The disorders of“Arab Spring” shook oil and gas markets, influencing heavily the prices due to supplydisruptions. Oil prices in 2011 peaked up to the historical maximum. The earthquake andtsunami in Japan, being a great disaster showed a burning need to review the approach to nuclearenergy, which couldn‟t but affect other fuels. 2010 oil spill in the Gulf of Mexico resulted in
toughening in regulatory issues such as drilling permits. The above-mentioned survey showedthat increasing regulation becomes a main challenge for the companies as regarded by more than30% responders (Ibid.).Table 1.1 The World’s Biggest Public Companies in Oil and Gas Operation Industry(values calculated April 2012)Rank Company Country Sales Profits Assets Market (billion (billion (billion Value USD) USD) USD) (billion USD)1 Exxon Mobile United 433.5 41.1 331.1 407.4 States4 Royal Dutch Shell Netherlands 470.2 30.9 340.5 227.67 PetroChina China 301.1 20.6 304.7 294.710 Petrobras - Brazil 145.9 20.1 319.4 180 Petroleo Brasil11 BP United 375.5 25.7 292.5 147.4 Kingdom12 Shevron United 236.3 26.9 209.5 218 States15 Gazprom Russia 117.6 31.7 302.6 159.818 Total France 216.2 15.9 213 132.424 Sinopec – China 391.4 11.6 179.8 104.2 China Petroleum27 ConocoPhillips United 230.9 12.4 153.2 98.8 StatesSource: Forbes, The World‟s Biggest Public Companies
CHAPTER II: EXXON MOBILE AND BP PLC COMPANY ANALYSIS2.1. PrefaceThe current part of the report presents the company analysis including ratio analysis, horizontaland vertical analysis (Scheme ####).Horizontal analysis is the tool which clearly demonstrate the relations between the compositionof main financial statements and the effectiveness of the company‟s activity.Vertical analysis is one of the best methods to show the trend in company‟s financial position,which is usually a result of appropriate management policy of the company.In this report, we merge horizontal and vertical analysis to demonstrate the key facts of thecompany‟s financial position and to reveal the weak and strong features of the companies.The main part of the horizontal and vertical analysis will be attributed to assets and liabilitiesstructure and its changes during the 5 years period. Assets and liabilities structure is one of theimportant indicators which affect theefficiency of companies, there is noreasonable asset structure, companies Company Analysiswill be unable to obtain the greatestbenefit. Assets structure refers to liquid Vertical and Horizontalassets and fixed assets, intangible assets Analysis Ratio Analysis CAPMand long-term investments and othernon-proportional relationship between current assets. In this paper, we analyze the proportion ofcurrent and non-current assets to total assets and current and non-current liabilities to totalliabilities. Also the relationship between assets and liabilities will be shown.We analyze only two components (current and non-current) of assets and liabilities becauseXOM and BP Plc are companies with large-scale operations and there is no sense to payattention to the other components of assets and liabilities.However, we will show some others components just to highlight some aspects of the operationsnuances of the companies.
Ratio analysis is used to obtain a quick indication of financial performance of the companies inseveral key areas. The ratios are categorized as Liquidity Ratios, Profitability Ratios, Short-termOperating Activity Ratios, Long-term Debt-and-Solvency Ratios, Long-term Investment Activityand Market Value Ratios. The approach of decomposition of Return of Assets Ratio (ROA) byusing the DuPont system was also applied to indicate the factors influencing to the sensitivity ofROA.In addition, Ratios had been used to compare the financial performance of two abovementionedcompanies as well as to compare theirs financial performance with industry averages.Besides of these, it was used Capital Asset Pricing Model (CAPM) to determine a theoreticallyappropriate required rate of return of an asset, if that asset was to be added to an already well-diversified portfolio, given that assets non-diversifiable risk.All graphs, charts and tables represent the calculations based on the Annual reports and Officialreports of BP and XOM, except noted otherwise.2.2. Horizontal and vertical analysisDue to the involving BP Plc in Deepwater Horizon oil spill in 2010 and a huge amount ofexpenses related to the accident, the financial position of BP Plc became worse and led to the BP 500000 XOM 400000 300000 200000 100000 0 EBITDA EBITDA EBITDA EBITDA EBITDA Sales and other operating revenues Production and manufacturing expenses Sales and other operating revenues Production and manufacturing expenses Sales and other operating revenues Production and manufacturing expenses Sales and other operating revenues Production and manufacturing expenses Sales and other operating revenues Production and manufacturing expenses EBIT EBIT EBIT EBIT EBIT -100000 2007 2008 2009 2010 2011
deficit. The results of the accident found the reflection in the financial statements of the companyby the significant increase in production and manufacturing expenses. To balance the situationBP announced a divestment program to sell about $38 billion worth of non-core assets by 2013to compensate its liabilities related to the accident. In July 2010, it sold its natural gas activities,stake and forecourts and supply businesses. In comparison with BP, XOM demonstrates strongincrease in sales, however, generally, the financial position of BP is more stable (See Chart ###).The level of earnings of BP had not been significantly changed during 5 years period (excluding2010 because of the force-majeure) while XOM‟s earnings have cyclic nature.If to take into account the balance sheets of the companies and to use current assets amountwithout any details, the assets structure 5 years average proportion of two companies has a slightdifference (6%).XOM assets structure Current assets BP Plc assets structure Current assets Non-current assets Non-current assets 26% 32% 68% 82%However, as it was mentioned earlier, due to the Deepwater Horizon oil spill accident, BP Plcbegan divestment policy, which affected to the current assets structure, particularly, beginningfrom the 2010, current assets include assets classified as held for sale. It is obviously, thatwithout accident, the company will allocate this assets to the other components, however, we cannote that some of these assets will classified as long-term assets.So, to indicate the differences in proportion and to follow the trend of their changes, we excludethe assets for sale from the current assets (it is not applicable for the ratio‟s calculations).In spite of the accident,BP Plc demonstrates 40%more stable and more 35%cash efficient position 30% 25%(See Chart####). This BP 20% XOMstability is a result of 15% 10% 5% 0% 2007 2008 2009 2010 2011
effective managing of company‟s liquidity risk. BP is using the access to a wide range of fundingat competitive rates through capital markets and banks and to sufficient funding through its owncurrent cash holdings and future cash generation including disposal proceeds, the commercialpaper markets, and by using undrawn committed borrowing facilities, to meet foreseeableliquidity requirements. To save the current assets in the appropriate level, XOM carefullymanages through counterparty quality and investment guidelines to ensure it is secure andreadily available to meet the Corporation‟s cash requirements and to optimize returns.Generally BP Plc and as XOM have well-balanced structure of assets, which is provided byeffective management accounting.It is important for XOM to pay more attention to the stability of the current assets, which isrequired for adequate forecasting and planning.2.3. Financial ratio analysisFinancial Ratios are ratios computed by the mangers to evaluate the performance, progress andachievements of the company with other companies in the same industry. Financial ratios alsohelp the investors, creditors, lenders, analyst and managers in critically analysing an investmentopportunity and credit decisions. The ratios compare the risk and return of a firm with that ofother firms, thus ratio analysis support inter firm comparison. (Gerald I. White et al 2003).2.3.1. LiquidityLiquidity ratios are the ratios that measure the ability of a company to meet its short term debtobligations. These ratios show the number of times the short term debt obligations are coveredby the cash and liquid assets.Taking into account that the oil and gas industry has proven time and again that it is among themost dangerous industries for people and environment, it would be correct to consider only thecash and cash equivalents as relevant assets because they are most likely to be used to meet shortterm liabilities in an emergency.Table ### Liquidity ratios
Current ratio Quick ratio Super quick ratio Years BP XOM Industry BP XOM Industry BP XOM Industry 2011 1.16 0.94 1.19 0.69 0.67 0.77 0.17 0.17 0.27 2010 1.12 0.94 1.20 0.68 0.65 0.77 0.24 0.13 0.29 2009 1.14 1.06 1.17 0.64 0.74 0.72 0.14 0.21 0.24 2008 0.95 1.47 1.14 0.54 1.14 0.70 0.12 0.64 0.25 2007 1.04 1.47 1.21 0.54 1.21 0.78 0.05 0.58 0.23 Average 1.08 1.18 1.18 0.62 0.88 0.75 0.14 0.35 0.26 Ideal 2 1 0.75According to the Table ###, Current ratio of BP has been very steady, it stayed at a rate of 1.1for the past three years and will probably keep the record for this year. This ratio is higher than0.94 of XOM.However, current ratio is affected by the inventory method used, that‟s why it is not possible tomake adequate comparative analysis of the current ratios for XOM and BP, because XOM usesLIFO (last in, first out) while BP accounts its inventories with FIFO (first in, first out)methodology.To take a deeper look at the short-term liquidity of the company and exclude the inventorymethod‟s influence, we shall examine its acid-test ratio (quick ratio). As it is shown in the table,all average ratios are less than 1.0 meaning that the companies haven‟t enough cash or cashequivalent to pay off its current liabilities. However XOM showed excellent results at 2008 and2007 with a quick ratio of more than 1.0 while BP is struggling at 0.5 and Industry average waslower than 1.0.Taking into account that the oil and gas industry has proven time and again that it is among themost dangerous industries for people and environment, it was considered to calculate super-quick ratio using only the cash and cash equivalents as relevant assets because they are mostlikely to be used to meet short term liabilities in an emergency.Super-quick ratio analysis demonstrates the significant deterioration of the ratios in 2010 and2011 (more than 1.6 times) for XOM while there were not so noticeable decreases in the otherliquidity ratios. It had been resulted by the increase of the amount of trade notes and accountsreceivable.
In spite of the low liquidity ratios (less than ideal), which are usually indicate weakness, becausethe company might not be able to borrow additional funds or sell assets to raise enough cash tomeet its current liabilities, XOM and BP, being one of the strongest companies in the oil and gasindustry, has always had the capacity to borrow on a short-term basis to pay off its currentobligations.2.3.2. Profitability analysisCompany‟s profitability is one of the important segments of the financial analysis. Profitabilityinformation is extremely significant for investors because these earnings are either retained orpaid out in dividends to shareholders, both of which affect the company‟s stock price. Manydifferent measures of profitability indicate how much the company is earning relative to the basethat is used, such as sales, assets, and shareholders‟ equity. The different profitability ratios arerelative measures of the success of the company.Due to the visual aids, we demonstrated the results of each ratio calculations graphically. Operating Profit Margin Ratio Net profit Margin Ratio 20.00% 12.00% 10.00% 15.00% 8.00% 10.00% BP BP 6.00% XOM XOM 5.00% Oil and gaz industry 4.00% Oil and gaz industry 2.00% 0.00% 2007 2008 2009 2010 2011 0.00% 2007 2008 2009 2010 2011 -5.00% -2.00% ROE ROA 45% 25.00% 40% 35% 20.00% 30% 15.00% 25% BP BP 20% XOM 10.00% XOM 15% Oil and gaz industry Oil and gaz industry 10% 5.00% 5% 0% 0.00% -5% 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 -10% -5.00%Limitations
the best method of evaluation performance of companies due to the inherent limitations of ratioanalysis.Drawbacks in using ratio analysisWhen one uses the accounting and financial ratios as a method of assessing company‟sperformance face the following problems:In case of a loss generating company, the ratios seem meaningless.The financial ratio are not uniform i.e. there is no standard of ratios, there is no single definitionof a correct ratio.The ratio can be manipulated easily according to the requirements of the presenter.Ratio are just figure, without any supported explanation, calculation and definition.Ratio take into account only financial perspective, other factors affecting the performance of thecompany are not taken into consideration.The ratios losses their importance over a period of years due to factors such as inflation.Let‟s discuss each of the above problems separately1 Loss making CompaniesEven if a small limited company is incurring losses, it does not mean necessarily that thecompany is worthless, the owners of small business run the company for many other reasonsother than just profit earning, for example “life style choice” (Jennings and Beaver 1997; Jarviset al. 2000; Green bank 2001). Such small companies do not intend to grow into largercompanies as they are working just to maintain their particular life style.In the case of a public listed company, a loss may leave an adverse impact on its long termgrowth and investor, every company in order to survive in the long run need to be profitable(Reid and Smith 2000). Financial ratio analysis is ineffective in the above case especially if oneis trying to evaluate profitability because the ratio will be in negative due to loss.
2 No standard definition:Financial ratios are calculated differently by using different formulas and definitions (Gibsonand Cassar 2005). For example if one wants to evaluate the profitability of any company he canuse any of the following ratios:Gross Profit marginNet profit marginReturn on equityReturn on assetsNet Profit before tax and interestNet Profit after tax and interestThe entire above ratios will give a different result; similar problem is experience while definingshareholders equity, debt, and long term loans etc. similarly some books lays down as thestandard current ratio to be 1 but such conclusion are sometimes dangerous and misleading,some companies are able to perform well with a current ratio of less than 1, for examplesupermarkets.Thus it can be concluded that ratio does not give comparable results and are not reliable, forexample if while performing longitudinal ratio, the analyst changes from one definition toanother and does not disclose the change in definition, then the new ratios cannot be comparedwith the earlier ones.3 ManipulationAs seen above, when there is no standard definition of ratio, everybody can use differentdefinitions according to their convenience; consequently the manipulation of ratios is easy. The
management can choose any ratio, include or exclude any item and present such results whichlook better and remove any kind of distortion.4 No supporting calculations and explanationsThe annual reports of many companies does not show the calculations and definitions used incalculating ratios, this suppress the value of information they provide, as no supportingcalculations are provided with the help of which clarity and genuineness can be established. Inthe case of small businesses also, where data are collected through self report mail surveys(Brush and Vanderwerf 1992; Chandler and Hanks 1993; Murphy et al. 1996) such figures arenot consistent across business and hence incomparable.5 Other unconsidered factorsAnother disadvantage in using Ratio analysis as a performance assessment tool is that it does nottake into account the things which cannot be measured in terms of ratio but otherwise have animpact on the value of the company by increasing sales indirectly, for example, the goodwill ofthe company in the market, change in management etc.6 Time value of moneyRatio analysis fails to take into account factors such as rise in prices and inflation which affectthe value of a dollar. For example, 10 years before a profit of $10 million might be a bigachievement but today the value of 1$ is not the same as it was ten years ago. This limitationmakes it difficult to compare historical figure with today‟s figure, thus giving a distorted pictureof the financial statements.ConclusionInspite of these inherent flaws in ratio analysis it is still widely used by the marketing andoperations management to evaluate the performance of the companies. As ratio analysis is notstandardized, no supporting calculations and explanations are provided and no consideration ispaid to the time value of money, there is a need for such a performance evaluation too, whichtakes into account not only the financial but also the non financial factors before judging theperformance irrespective of the year under consideration.
Inspite of these big problems, organizations use ROCE and ROI and other ratios to judge theimprovement in the performance of the organization (Meyer, 2005). Thus it is suggested thatsuch work should be viewed carefully and cautiously when analysing the success andperformance of a small medium enterprise.
CHAPTER III : STRATEGY ANALYSIS IN BOTH COMPANIES3.1 Sustainability Balance Scorecard in Energy SectorIn present days, it‟s more believed that social-environmental aspects of companies indicate thefactors concerning its survival & ability to compete. Sustainability Balance Scorecard (SBSC)[Epstein, Wisner, 2001] is considered to be one of the efficient models of managementaccounting which helps to integrate development & social responsibility of the company‟smanagerial decisions which is based on Kaplan & Norton‟s Balance Scorecard. SBSC is used asa management technique to hold a good control of relevant decisions life-cycle from strategicplan to operation feedback [figure adapted from Bieker, 2003].Companies doing business in energy sector were not much concerned with life qualityimprovement, as far as their main competitive factor is related to productivity in terms ofquantifiable benefits. Whereas practicing comprehending the importance of the social-environmental aspect of its activity which serves as competitive factor in the modern market.Possible sustainability Balanced Scorecard scheme (from Bieker, 2003)
ExxonMobil and BP have many things in common. Both of them are among the world‟s largestoil companies, both rakes in billions of dollars in profit operating refineries, offshore platforms.ExxonMobil started investment in alternative energy much later than BP, but has lowestpercentage of the violations for refineries. Below we can compare organizational strategies,implementation plans in terms of Balanced Scorecard analysis for both companies. 3.2 Balanced Scorecard strategy in ExxonBy industry standards, ExxonMobil is recognized as a behemoth among all oil companies withmarket share valued in $386.96 billion states ValueWalk Magazine by 2012 . The strategicvision of the company was defined as the following: “To be the best integrated refiner-marketer in the United States by efficiently deliveringunprecedented value to customers” In 1992 new head of Mobil Bob McCool facilitated to change performance style by adoptingBalanced Scorecard. And ExxonMobil made the crucial decision to implement “differentiatedvalue proportion” to focus on financial goal about increasing its return on capital employed forover 6% within 3 years.And new strategy was developed – “to reconstruct the organization from a centrallycontrolled manufacturer of commodity products to a decentralized, customer-drivenorganization”.All four perspectives to facilitate new target achievement were modeled together with measuringmetrics for every operation. [See Figure 1]
• Revenue Growth • Unique mix of • Productivity products & service attributes • Customer relations • Corporate image Financial Customer Perspective Perspective Internal Learning & Process Staff Perspective Development • Building franchise via • Staff training in new products and marketing & refining services development business • Nurture leadership skills of managersFigure 1. BSC in EXXON MOBILThe Financial Perspective comprised two main levers: Revenue Growth & Productivity.The revenue growth strategy was to expand sales outside of gasoline by suggesting productssuch as: oil, antifreeze, wiper fluid, tires & wiper blades together with supplementary automotiveservices as: car washes, oil changes and minor repairs. Moreover, ExxonMobil decided to sellmore premium brands to customers to increase profitability.Measurement tools for implementation were adopted accordingly. They were: Revenue of non-gasoline products Profit Margin Compared Sales Volume Ratio of Premium products sold to Regular onesAs for Productivity lever, ExxonMobil intended to slash operating expenses per gallon sold tothe lowest level in the industry sector, as well as extracting more from existing assets by the wayof reducing the downtime of oil refineries and increasing their yields.Corresponding measurement tools were implemented. Mobil‟s per gallon cost comparison with the rests in the market Actual cash flow compared to the rest of the business planCustomer Perspective
One of the main business strategies of the ExxonMobil was customer value proposition byoffering unique mix of products of service attributes, excelling customer relations & corporateimage, which helped to attract and improve relationships with targeted customers by givingpremium quality customer service. [See Figure 2]Metrics to measure were set as: Share of targeted customer segments Mystery shopper rating Dealer profitability Dealer satisfaction Complete customer strategy Motivating Revenue growth for independent dealers Companys to deliver a great Financial strategy buying experience Customers buy Attract more products & services Customers at premium pricesFigure 2 Customer Strategy Cycle.Internal Process Perspective objectives comprised building franchise via new products &services development which was achieved by learning customer segments better to build best-in-class franchise teams, by improving hardware performance and inventory management, by on-time delivery & being industry cost leader, as well as implementing Corporate-Citizen policy inorder to eliminate environmental accidents.Metrics for measuring effectiveness in the operation were: New product acceptance rate Return on investment rate of new product Target market share Dealer quality rating
Refinery yield gap Unplanned downtime Inventory levels Stock out rate ABC versus the competition Reduction of environmental incidents & safety accidents in numbersFor Learning & Development perspective ExxonMobil defined to excel personnelunderstanding of the marketing and refining business. Besides, company focused to nurtureleadership skills to company managers to articulate the vision of the company, as well aspersonnel development. The productivity of activities was measured by: Ration of strategic skills to job coverage On-time deployment of systems Personnel BSC Employee feedbackAbove given strategy map for four major perspectives were deployed in all business units &service departments with the purpose of developing & launching their own detailed mapsrespectively. Implementation of the Balanced Scorecard at lower levels of the organizationhelped ExxonMobil to detect and fill major gaps and pitfalls in the strategies.3.3 Balanced Scorecard strategy in BPBusiness strategy of BP is “to grow value of shareholders by helping to meet the world’sgrowing energy needs safely and responsibly” and it utilizes about 10 points of measurementto evaluate performance of the company. The plan starts with focusing on importance of safetyand centres on focusing BP‟s strengths: gas value chains, exploration, giant fields, deepwater,world class downstream, technology & relationships. CEO of the company Bob Dudley definedplan details at the beginning of 2012. Expectation plan is as follows: Inexorable focus on safety & risks management Course on strengths BP performance much Stronger and more Focused Simpler and more Standardized performance Transparency of values
Measurement metrics on target achievement: Portfolio Management Double the 2011 average of unit operating cash margins for new upstream projects Generate around 50% of annual operating cash flow in comparison to 2011 by 2014 at$110 per barrel Half of incremental operating cash to use for re-investment and half for distribution, otherbusiness purposes Focusing on balance sheet and frequency of gearing • Strong balance sheet with gearing in the lower half of the 10-20% range over time • Generate around 50% more • Continue active annually in operating cash flow portfolio by 2014 versus 2011 at $100 management per barrel • Visibility and • New upstream projects transparency to onstream with unit value operating cash margins Financial Customer • Standartized service double the 2011 average Perspective Perspective • Cash flow distriburion: • half for re-investment and half for other business purposes Internal Learning & Process Staff Perspective Development • Serious approach to knowledge management • Playing to our strengths • To become a great • Relentless focus on employer safety & managing risks • To maintain the trust of people inside and outside of the companyBP mainly focuses a simpler business organization which support economic development andhelp to improve quality of life for millions of people. Moreover, BP „s activities also generatesjobs, investment, infrastructure and revenues for governments and local communities dependingon the needs of society where it operates. BP cares deeply about how it delivers energy to theworld.
V. CONCLUSION(Recommend-ns from Kseniya)As a summary to investment options, it is important to emphasize that the assumptions to Oil &Gas industry development are continuous and changing as far as this sector is one of the coreindustry sectors that touches political, economical, environmental & social aspects in the countryor region.References: 19th World Energy Congress, Sydney, Australia (2004) Social responsibility in EnergyCompanies. Available athttp://www.worldenergy.org/documents/congresspapers/metallog0904.pdf [Accessed 5 Dec.2012] NPR/News/Business (2012) by Wendy Kaufman: Exxon after Valdez: Lessons for BP?Available at http://www.npr.org/templates/story/story.php?storyId=128691405&ft=1&f=1006[Accessed 3 Dec. 2012] ValueWalk Magazine (2012) by ValueWalk Staff: ExxonMobil Offers More Value Than BP,RDSA or CVX Available at: http://www.valuewalk.com/2012/07/exxon-mobil-offers-more-value-than-bp-rdsa-or-cvx/ [Accessed 30 Nov. 2012]Balanced Scorecard and Strategy Map at Mobil North America Marketing and Refining (NAM&R) Available at: http://www.executivemanagementskills.com/pdf/mobil.pdf[Accessed 5 Dec. 2012] BP (2012) 2012 Annual General Meeting: CEO’s Speech, Bob DudleyAvailable at: http://www.bp.com/genericarticle.do?categoryId=98&contentId=7074117[Accessed 7 Dec. 2012]
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Wiehle U., Diegelmann M., Deter H., Schömig P.N. and Rolf M. (2006). 100 IFRS FinancialRatios.Agarwala S., Pruitt D., Sanders K. and Wang L. (). Comparative Operational and FinancialAnalysis. Available athttp://www.bauer.uh.edu/centers/uhgemi/documents/Group%202%20Financial%20Analysis%20Presentation.pdf [Accessed ]BP. (2012). BP Statistical Review of World Energy June 2012. Available athttp://22.214.171.124/videoplayer/statistical_review_of_world_energy_full_report_2012.pdf?ich_u_r_i=df839a8673d71ac6fe3ffd00b83c2e00&ich_s_t_a_r_t=0&ich_e_n_d=0&ich_k_e_y=1245118930750563512472&ich_t_y_p_e=1&ich_d_i_s_k_i_d=10&ich_u_n_i_t=1 [Accessed 30 Nov.2012]DBRS. (2011). Rating oil and gas companies. Available athttp://www.dbrs.com/research/228875 [Accessed 29 Nov. 2012]Economist Intelligence Unit. (2012). Big spenders. The outlook for the oil and gas industry2012. Available at http://www.slideshare.net/Management-Thinking/big-spenders-the-outlook-for-the-oil-and-gas-industry-in-2012 [Accessed 29 Nov. 2012]Frecknall- Hughes J., Simpson M. and Padmore J. (2007). Inherent Limitations in UsingFinancial Ratio Analysis to Assess Small and Medium Sized Company Performance. Available athttp://www.shef.ac.uk/content/1/c6/06/89/64/2007-01.pdf [Accessed ]Kont K-R. Jantson S. (2011). Activity-Based Costing (ABC) and Time-Driven Activity-BasedCosting (TDABC): Applicable Methods for University Libraries?. Available athttps://ejournals.library.ualberta.ca/index.php/EBLIP/article/view/10156/9380 [Accessed ]Lin Y.B. (2005). Research Assignment Financial Analysis: Apple Computer Inc. Available athttp://people.bu.edu/beelin/TermPaper-AppleCom.pdf [Accessed ]OPEC. (2012). World Oil Outlook 2012. Available athttp://126.96.36.199/videoplayer/WOO2012.pdf?ich_u_r_i=22b9570da4a0a7d5a3e7235840a507b2&ich_s_t_a_r_t=0&ich_e_n_d=0&ich_k_e_y=1245118930750763192424&ich_t_y_p_e=1&ich_d_i_s_k_i_d=3&ich_u_n_i_t=1 [Accessed 29 Nov. 2012]
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APPENDIXES Long term operating analysis of BPRatios and 2011 2010 2009 2008 2007Net Fixed AssetTurnover BP 2.05 1.83 1.51 2.38 2.03 Oil and gas industry 1.80 1.58 1.42 2.40 2.08Total Asset Turnover BP 1.28 1.09 1.01 1.58 1.20 Oil and gas industry 1.00 0.87 0.82 1.31 1.09Equity Turnover BP 3.37 3.13 2.35 3.96 3.04 Oil and gas industry 2.08 1.80 1.72 2.77 2.27 Long term operating analysisRatios and 2011 2010 2009 2008 2007Net Fixed AssetTurnover XOM 2.18 1.85 2.17 3.79 3.23 Oil and gas industry 1.80 1.58 1.42 2.40 2.08Total Asset Turnover XOM 1.41 1.22 1.29 2.02 1.61 Oil and gas industry 1.00 0.87 0.82 1.31 1.09Equity Turnover XOM 3.02 2.52 2.73 4.07 3.21 Oil and gas industry 2.08 1.80 1.72 2.77 2.27
Profitability Analysis of BPRatios and 2011 2010 2009 2008 2007Operating Profit Margin BP 10.6% -1.2% 11.0% 9.8% 11.4% Oil and gas industry 15.0% 13.1% 12.3% 14.5% 18.0%Net Profit Margin BP 6.8% -1.3% 6.9% 5.9% 7.3% Oil and gas industry 8.6% 7.6% 6.8% 7.4% 10.5%Return on Equity BP 23.06% -3.92% 16.31% 23.17% 22.25% Oil and gas industry 17.9% 13.7% 11.7% 20.3% 23.9%Return on Assets BP 8.8% -1.4% 7.0% 9.3% 8.8% Oil and gas industry 8.6% 6.7% 5.6% 9.7% 11.4% Profitability AnalysisRatios and 2011 2010 2009 2008 2007Operating Profit Margin XOM 0.16 0.14 0.12 0.18 0.18 Oil and gas industry 0.15 0.13 0.12 0.14 0.18Net Profit Margin XOM 0.09 0.08 0.06 0.10 0.10 Oil and gas industry 0.09 0.08 0.07 0.07 0.11
Return on Equity XOM 0.27 0.21 0.17 0.40 0.33 Oil and gas industry 0.18 0.14 0.12 0.20 0.24Return on Assets XOM 0.12 0.10 0.08 0.20 0.17 Oil and gas industry 0.09 0.07 0.06 0.10 0.11 Long term debt and solvency ratiosRatios and 2011 2010 2009 2008 2007Debt-to -Equity BP 39.7% 47.7% 34.1% 36.4% 33.1% Oil and gas industry 31.0% 31.0% 33.0% 28.0% 24.0%Debt-to-Capital BP 28.4% 32.3% 25.4% 26.7% 24.9% Oil and gas industry 24.0% 24.0% 25.0% 22.0% 20.0%Interest Coverage BP 3216.69% -312.39% 2363.42% 2316.10% 2369.27% Oil and gas industry 4431.0% 3401.0% 2679.0% 4446.0% 3735.0% Long term debt and solvency ratiosRatios and 2011 2010 2009 2008 2007Debt-to -Equity XOM 0.11 0.10 0.09 0.08 0.08 Oil and gas industry 0.31 0.31 0.33 0.28 0.24
Debt-to-Capital XOM 0.10 0.09 0.08 0.08 0.07 Oil and gas industry 0.24 0.24 0.25 0.22 0.20Interest Coverage XOM 297.59 205.47 64.46 124.92 179.70 Oil and gas industry 44.31 34.01 26.79 44.46 37.35 Liquidity AnalysisRatios and 2011 2010 2009 2008 2007Current ratio BP 115.7% 112.3% 114.0% 95.1% 103.8% Oil and gas industry 119.0% 120.0% 117.0% 114.0% 121.0%Quick ratio BP 68.9% 67.8% 64.3% 53.9% 54.1% Oil and gas industry 77.0% 77.0% 72.0% 70.0% 78.0%Super quick ratio BP 17.02% 23.95% 14.06% 11.74% 4.61% Oil and gas industry 27.0% 29.0% 24.0% 25.0% 23.0% Liquidity Analysis
Ratios and 2011 2010 2009 2008 2007Current ratio XOM 0.94 0.94 1.06 1.47 1.47 Oil and gas industry 1.19 1.20 1.17 1.14 1.21Quick ratio XOM 0.67 0.65 0.74 1.14 1.21 Oil and gas industry 0.77 0.77 0.72 0.70 0.78Super quick ratio XOM 0.17 0.13 0.21 0.64 0.58 Oil and gas industry 0.27 0.29 0.24 0.25 0.23 Short term operating analysisRatios and 2011 2010 2009 2008 2007Inventory Turnover Ratio BP 1463.4% 1133.2% 1058.5% 2147.0% 0.0% Oil and gas industry 1658.0% 1487.0% 1319.0% 2354.0% 1596.0%Receivables Turnover Ratio BP 1344.5% 1224.9% 1058.5% 1579.2% 861.4% Oil and gas industry 1130.0% 1036.0% 978.0% 1487.0% 930.0%Payables Turnover Ratio BP 1258.9% 1080.0% 1045.5% 1794.1% 925.2%
Oil and gas industry 1161.0% 1069.0% 1039.0% 1645.0% 1054.0%Working Capital Turnover Ratio BP 1580.5% 1293.9% 1071.9% 1846.2% 986.3% Oil and gas industry 1595.0% 1424.0% 1222.0% 2043.0% 1328.0%Average inventory processing period BP 2494.2% 3220.9% 3448.3% 1704.7% Oil and gas industry 2200.0% 2500.0% 2800.0% 1600.0%Average receivable collection period BP 2714.7% 2979.8% 3448.2% 2317.7% 4237.3% Oil and gas industry 3200.0% 3500.0% 3700.0% 2500.0% 3900.0%Operating Cycle BP 5208.9% 6200.7% 6896.5% 4022.4% 0.0% Oil and gas industry 5400.0% 6000.0% 6500.0% 4000.0% 0.0% Short term operating analysisRatios and 2011 2010 2009 2008 2007Inventory Turnover Ratio XOM 31.09 28.52 26.10 39.46 0.00Oil and gas industry 16.58 14.87 13.19 23.54 15.96Receivables Turnover Ratio XOM 15.54 14.55 13.59 24.57 12.68Oil and gas industry 11.30 10.36 9.78 14.87 9.30Payables Turnover Ratio XOM 13.75 12.02 12.44 21.69 13.35Oil and gas industry 11.61 10.69 10.39 16.45 10.54
Working Capital Turnover Ratio XOM 42.08 48.48 31.73 50.16 30.92 Oil and gas industry 15.95 14.24 12.22 20.43 13.28 Average inventory processing period XOM 11.74 12.80 13.99 9.27 Oil and gas industry 22.00 25.00 28.00 16.00 Average receivable collection period XOM 23.48 25.09 26.86 14.90 28.78 Oil and gas industry 32.00 35.00 37.00 25.00 39.00 Operating Cycle XOM 35.22 37.88 40.84 24.17 0.00 Oil and gas industry 54.00 60.00 65.00 40.00 0.00 Five-component disaggregation of ROE Tax Interest EBIT Asset Year ROE = × × × × Leverage Burden Burden Margin Turnover 2011 23.06% 0.66 0.98 10.60% 1.28 2.63 2010 0.00% 0.77 -1.25% 1.09 2.87 2009 16.31% 0.66 0.95 11.04% 1.01 2.32 2008 23.17% 0.62 0.97 9.76% 1.58 2.50 2007 22.25% 0.66 0.98 11.38% 1.20 2.52 Five-component disaggregation of ROE Tax Interest EBIT AssetYear ROE = × × × × Leverage Burden Burden Margin Turnover 2011 26.59% 0.56 1.00 15.74% 1.41 2.14 2010 0.00% 0.58 0.00 14.38% 1.22 2.06 2009 17.44% 0.55 0.98 11.72% 1.29 2.11 2008 40.03% 0.54 0.99 18.29% 2.02 2.02
2007 33.35% 0.57 0.99 18.42% 1.61 1.99 BP PLC, Common-Size Consolidated Statement of Financial Position, Assets Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Property, plant and 2011 2010 2009 2008 2007 equipment 40.68% 40.46% 45.89% 45.22% 41.51%Goodwill 4.13% 3.16% 3.65% 4.33% 4.66%Intangible assets 7.20% 5.25% 4.89% 4.50% 2.82%Group share of net assetsof jointly controlled 9.16% 8.65% 10.86% 10.92% 8.14%entities and associatesLoans made by groupcompanies to jointly 0.67% 0.76% 1.12% 1.27% 1.47%controlled entities andassociatesInvestments in jointlycontrolled entities and 9.83% 9.41% 11.98% 12.19% 9.61%associatesOther investments 0.72% 0.44% 0.66% 0.37% 0.78%Loans 0.30% 0.33% 0.44% 0.44% 0.42%Other receivables 1.48% 2.31% 0.73% 0.31% 0.41%Derivative financial 1.72% 1.55% 1.68% 2.21% 1.58%instrumentsPrepayments 0.43% 0.53% 0.60% 0.59% 0.46%Deferred tax assets 0.21% 0.19% 0.22% – –Defined benefit pension 0.01% 0.80% 0.59% 0.76% 3.78%plan surplusesNon-current assets 66.70% 64.43% 71.33% 70.91% 66.03%Loans 0.08% 0.09% 0.11% 0.07% 0.07%Inventories 8.76% 9.63% 9.58% 7.37% 11.25%Trade receivables 9.53% 8.91% 9.58% 10.02% 13.98%Other receivables 5.32% 4.52% 2.94% 2.80% 2.12%Trade and other 14.85% 13.42% 12.51% 12.82% 16.10%
receivables Derivative financial 1.32% 1.60% 2.10% 3.73% 2.68% instruments Prepayments 0.44% 0.58% 0.74% 1.34% 1.52% Current tax receivable 0.08% 0.25% 0.09% 0.17% 0.30% Other investments 0.10% 0.56% – – – Cash and cash equivalents 4.80% 6.82% 3.53% 3.59% 1.51% Assets classified as held 2.87% 2.62% – – 0.54% for sale Current assets 33.30% 35.57% 28.67% 29.09% 33.97% Total assets 100.00% 100.00% 100.00% 100.00% 100.00% BP PLC, Common-Size Consolidated Statement of Financial Position, Assets % Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 2011 2010 2009 2008 2007Property, plant and equipment 40.68% 40.46% 45.89% 45.22% 41.51%Goodwill 4.13% 3.16% 3.65% 4.33% 4.66%Intangible assets 7.20% 5.25% 4.89% 4.50% 2.82%Group share of net assets ofjointly controlled entities and 9.16% 8.65% 10.86% 10.92% 8.14%associatesLoans made by group companiesto jointly controlled entities and 0.67% 0.76% 1.12% 1.27% 1.47%associatesInvestments in jointlycontrolled entities and Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900associatesOther investments 0.72% 0.44% 0.66% 0.37% 0.78%Loans 0.30% 0.33% 0.44% 0.44% 0.42%Other receivables 1.48% 2.31% 0.73% 0.31% 0.41%Derivative financial instruments 1.72% 1.55% 1.68% 2.21% 1.58%Prepayments 0.43% 0.53% 0.60% 0.59% 0.46%
Deferred tax assets 0.21% 0.19% 0.22% – –Defined benefit pension plan 0.01% 0.80% 0.59% 0.76% 3.78%surplusesNon-current assets Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900Loans 0.08% 0.09% 0.11% 0.07% 0.07%Inventories 8.76% 9.63% 9.58% 7.37% 11.25%Trade receivables 9.53% 8.91% 9.58% 10.02% 13.98%Other receivables 5.32% 4.52% 2.94% 2.80% 2.12%Trade and other receivables Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900Derivative financial instruments 1.32% 1.60% 2.10% 3.73% 2.68%Prepayments 0.44% 0.58% 0.74% 1.34% 1.52%Current tax receivable 0.08% 0.25% 0.09% 0.17% 0.30%Other investments 0.10% 0.56% – – –Cash and cash equivalents 4.80% 6.82% 3.53% 3.59% 1.51%Assets classified as held for sale 2.87% 2.62% – – 0.54%Current assets Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900Total assets Jan 1, 1900 Jan 1, 1900 Jan 1, 1900 Jan 1, 1900 Jan 1, 1900 Group balance sheet $ million 2011 2010* 2009 2008 2007 Non-current assets Property, plant and 119,214 110,163 108,275 103,200 97,989 equipment Goodwill 12,100 8,598 8,620 9,878 11,006 Intangible assets 21,102 14,298 11,548 10,260 6,652 Investments in jointly 15,518 14,927 15,296 23,826 18,113 controlled entities Investments in 13,291 13,335 12,963 4,000 4,579 associates
Group cash flow statement $ millionFor the year ended 31 December 2011 2010 2009 2008 2007Operating activities Profit (loss) before taxation (4,825) 38,834 25,124 34,283 31,611 Adjustments to reconcile profit(loss) before taxation to net cashprovided by operating activities Exploration expenditurewritten off 1,024 375 593 385 347 Depreciation, depletion andamortization 11,135 11,164 12,106 10,985 10,579 Impairment and (gain) losson sale of businesses and fixed (2,072) (4,694) (808) 160 380assets Earnings from jointly (6,220) (4,757) (3,901) (3,821) (3,832)controlled entities and associates Dividends received fromjointly controlled entities and 5,381 3,277 3,003 3,728 2,473associates Interest receivable (198) (277) (258) (407) (489) Interest received 216 205 203 385 500 Finance costs 1,246 1,170 1,110 1,547 1,393 Interest paid (1,110) (912) (909) (1,291) (1,363) Net finance expense (income)relating to pensions and other (263) (47) (591) (652) 192post-retirement benefits Share-based payments (88)
197 450 459 420 Net operating charge forpensions and other post-retirementbenefits, less contributions and benefit payments for (1,004) (959) (887) (173) (404)unfunded plans Net charge for provisions, (298) (92)less payments 2,976 19,217 650 (Increase) decrease in (3,988) (3,895) (5,363) (7,255)inventories 9,010 (Increase) decrease in other (9,913) (15,620)current and non-current assets 7,595 2,439 5,210 Increase (decrease) in other (5,767) (5,828) (6,101) (3,857)current and non-current liabilities 20,607 Income taxes paid (8,035) (6,610) (6,324) (12,824) (9,072)Net cash provided by operatingactivities 22,154 13,616 27,716 38,095 24,709Investing activities Capital expenditure (17,845) (18,421) (20,650) (22,658) (17,830) Acquisitions, net of cash (10,909) (2,468) (395) (1,225)acquired 1 Investment in jointly controlled (857) (461) (578) (1,009) (428)entities Investment in associates (55) (65) (164) (81) (187) Proceeds from disposals of fixedassets 3,500 7,492 1,715 918 1,749 Proceeds from disposals of (768)businesses, net of cash disposed a 9,462 966 11 2,518 Proceeds from loan repayments 301 501 530 647 192 Other (200) – – 47 374Net cash used in investing (26,633) (3,960) (18,133) (22,767) (14,837)activities
Financing activities Net issue of shares (2,567) (7,113) 74 169 207 Proceeds from long-term financing 11,600 11,934 11,567 7,961 8,109 Repayments of long-term (9,102) (4,702) (6,021) (3,821) (3,192) financing Net increase (decrease) in short- (3,619) (4,405) (1,315) term debt 2,227 1,494 Dividends paid BP shareholders (4,072) (2,627) (10,483) (10,342) (8,106) Minority interest (245) (315) (416) (425) (227) Net cash provided by (used in) (9,551) (10,509) (9,035) financing activities 482 840 Currency translation differences relating to cash and cash (492) (279) (184) 110 135 equivalents Increase (decrease) in cash and (4,489) cash equivalents 10,217 142 4,635 972 Cash and cash equivalents at beginning of year 18,556 8,339 8,197 3,562 2,590 Cash and cash equivalents at end of year 14,067 18,556 8,339 8,197 3,562 *2010 included a deposit received in advance of $3,530 million in respect of the expected sale of our interest in Pan American Energy LLC; 2011 includes the repayment of the same amount following the termination of the sale agreement as described in Note 4. Exxon Mobil Corp., Consolidated Statement of Cash Flows USD $ in millions 2011 2010 2009 2008 2007Net income including non-controlling 42,206 31,398 19,658 46,867 41,615interests