Amid growing concerns about the world's supply of oil having reached an inflection point where it will no longer meet demand, the offspring of ExxonMobil's (NYSE:XOM) founder have taken it upon themselves to try to set the company's direction.
That founder was, of course, the famous -- at one point, infamous -- John D. Rockefeller. In the late 1800s, Rockefeller began putting together a cartel that became the Standard Oil Trust. Later, as we all learned in our middle school history classes, trust-busters split the company into what has evolved into 34 entities. In addition to Exxon, the offspring of Standard Oil includes the nation's second- and third-largest oil companies, Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP).
Uninvited help
Now, when ExxonMobil holds its annual meeting in Dallas on Wednesday, the company's shareholders will vote on four Rockefeller-sponsored resolutions that would affect the company's strategy. As The Wall Street Journal noted this weekend, while three of the measures "address concerns about global warming and renewable energy," the fourth -- and apparently most important to the family -- would result in the appointment of an independent chairman, to whom the company's CEO would report.
According to the Rockefellers -- who officially own 0.006% of Exxon's shares -- the splitting of the two positions would permit the chairman to be more involved in the company's direction, hopefully with an eye to increasing its involvement in renewable energy. They also believe that the independent chairman "might be more responsive to shareholder concerns."
Exxon's chairman and CEO, Rex Tillerson, responded that Exxon is a petroleum and petrochemical company. Beyond that, he says he thinks "we're the best one in the world, and our performance would tend to support that."
Who's best?
Obviously, Exxon is the world's biggest publicly owned oil company, topping its two abovementioned former siblings, along with such big European-based companies as Royal Dutch Shell (NYSE:RDS-A) (NYSE:RDS-B), BP (NYSE:BP), and Total (NYSE:TOT). Exxon’s revenue during the past 12 months topped $389 billion, and it managed to slide more than $42 billion of that amount to the bottom line.
But is Exxon the best? In the search for the somewhat elusive answer to that question, I looked at how the company stacks up relative to its U.S.-based peers on some key financial measures. As you can see, Exxon commands a premium valuation relative to its Standard Oil brethren, but with its superior profitability and a rock-solid balance sheet that merits a top-notch AAA credit rating, that premium is very well deserved.
|
ExxonMobil |
Chevron |
ConocoPhillips | |
|---|---|---|---|
|
Market Cap |
$474 billion |
$205 billion |
$140 billion |
|
Forward P/E |
10.1 |
9.0 times |
7.7 times |
|
Operating Margin |
16.5% |
14.4% |
12.7% |
|
Total Debt/Equity |
0.08 |
0.09 |
0.24 |
|
Return on Equity |
35.6% |
25.4% |
14.3% |
Source: CapitalIQ, a division of Standard & Poor's.
What else matters?
As many Fools know, I spend a great deal of my time thinking about the world's energy situation. For that very reason, I'm high on the notion that we simply must replace oil and natural gas over time with effective alternative fuels. But more immediately, we have to find as much oil as possible in our quest to keep up with skyrocketing global demand. That's something Exxon does quite well.
As to the Rockefellers’ concerns over Exxon’s responsiveness to shareholders, I think the above chart makes an excellent case for its performance in that area. To my way of thinking, it'd be shameful to take management's eyes off the oil-finding ball in favor of involving the company in something that's not its stock in trade.
So I'm here to recommend that ExxonMobil shareholders appreciate the quality company with which they've become involved. And Fools who haven't built positions in the company might consider doing so, especially in light of the increasing demands of the world's search for oil and gas.
And as to the Rockefellers, we're all grateful for John D.'s contribution to today's energy scene, but current family members would be well-advised to stick to their knitting.
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