Assessing a Company's Future Financial Health: Analysis of ExxonMobil

Analysis of ExxonMobil
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Analysis of ExxonMobil
This is a continuation of the assessment of ExxonMobil. This part of the analysis will assess the final three steps of the nine-step assessment process thus; 1. Viability of the 3–5-year plan, 2. Stress test under scenarios of adversity, and 3. Current financing plan.
1 Viability of the 3–5-Year Plan
In the year 2021, the company unveiled a 5-year plan to increase shareholder value and meet the goals of climate change as per the Paris Agreement (Yahoo Finance, 2021). The plan included the adaptation to the energy business environment by use of technology and having its earnings grow. The plan that runs between 2021 and 2025 involves an expenditure of $16-$19 billion on cash-accretive, high-return projects to ensure the funding of future projects, dividend sustainability and growth, and a reduction in its debt. The goal is to work towards attaining leadership in low carbon emissions through low-carbon hydrogen and the use of carbon capture technology.
This plan was necessitated by the drop in the company’s revenues and earnings per share of 30.72% and 92.68%, respectively, for the fourth quarter of 2020. The plan is to reduce carbon emissions by 15-20%, methane intensity by 40-50%, and flaring intensity by 35-45% by 2025. This plan is viable since the company plans to make advancements in fuel cell technology that captures CO2 from the air through the partnership between FuelCell Energy, Inc. and its newly created subsidiary, ExxonMobil Low Carbon Solutions.
2 Stress Test under Scenarios of Adversity
In 2017, Exxon Mobil investors took a vote to compel the company to address the issues of climate change transparently. Amid the adversity in climate change, companies in the oil sector have put their weight behind the Paris Climate Agreement. The investors wanted the scenario of adversity brought about by climate change to be used to “stress test” the company. Exxon shareholders are among the numerous company investors who have put pressure on their companies to take initiatives to address the worsening climate situation brought about by increased carbon emissions. The shareholders are concerned about their shareholder value in the companies and how the companies will remain competitive. Vanguard and BlackRock are among some of Exxon’s biggest shareholders that pushed the company to make disclosures on the global plans in the increased regulations in climate change.
The investors’ concerns were brought about by the reality of a world that is trying to move away from fossil fuels. The shareholders of Exxon were concerned about the companies positioning for a low-carbon economy (Market Place, 2017). The investors opined that the uncertainties and existing trends call on Exxon to rethink its future strategy in this regard. From the concerns of the inv...