FORTUNE MAGAZINE No company is benefiting more from this gusher of good OIL news than Exxon Mobil. In 2000 it returned to the top of the Fortune 500 for the first time since Exxon basked there alone in 1984. With adjusted revenues of $210 billion--$17 billion more than No. 2 Wal-Mart--it blew past the competition the way Tiger Woods does on a golf course. Between 1999 and 2000 it grew by nearly $47 billion (more than the size of No. 22, American International Group).
Nor does Exxon Mobil scrape by on the tissue-thin margins of a retailer. Last year it made $17.7 billion, nearly three times as much as Wal-Mart, and more money than any company ever. Best of all, it has paid off for shareholders. Over three decades, the average annual return for Exxon Mobil and its predecessor, Exxon, has exceeded the return of the S&P 500.
For sure, higher oil prices have pumped up both revenues and profits. The average price of a barrel of West Texas Intermediate crude climbed to $30.31 last year, vs. $19.25 in 1999 (when Exxon Mobil's profits were less than half as large). But there is more to this success story than OPEC's squeeze. So far, Exxon Mobil looks like a merger made in heaven. The companies that combined at the end of 1999 have become a highly focused, smooth-running machine remarkably efficient at discovering, refining, and marketing oil and gas.
One number makes the point. Although people have been extracting oil from the earth since 1859, Exxon Mobil spent less per barrel to find it last year than at almost any time in history: 65 cents. That's about half as much as the 1999 cost of $1.20 a barrel, and well below the $4 per barrel the company spent in the 1980s. In other words, it has almost never been cheaper for Exxon Mobil to find a resource that has for a century become increasingly scarce--and one that some alarmists say is in danger of total depletion.
Exxon Mobil is a world apart from the rest of the oil business, figuratively and literally. Local taxi drivers have a hard time finding its headquarters, on a secluded, guarded site in the Dallas suburb of Irving; nearby Cowboys Stadium is a much more popular destination. The headquarters building, an overscaled three-story structure with several tiers of peaked gray-green roofs, looks considerably more Asian than Texan. Inside, a vast space decorated with flowers and fine art seems to swallow up the 400 employees who work there. The overall impression is of a well-endowed museum with very few visitors.
Scattered throughout the building are representations of the Exxon tiger, most dramatically in a large painting hanging behind the desk of Lee R. Raymond, Exxon Mobil's chairman and CEO since 1993. Raymond, 62, has come to personify the company he runs: proud, independent, demanding, blunt. A South Dakota native who has spent his entire working life at the company, Raymond says he could care less that Exxon Mobil is the largest corporation in America. "We don't get too excited about revenues around here," he told Fortune. "We look at this company on a 20-year basis."
What Raymond does care about is where in the world Exxon Mobil can profitably invest its capital to find oil. "We have opportunities the magnitude of which we haven't seen since the 1970s, and we have the technology to take advantage of them," he says. "It's a pretty exciting time." Exxon Mobil is preparing to spend $45 billion over the next decade to increase its energy production by three million barrels a day. "The opportunity to go places is greater than it's ever been," says Ron Gold, vice president of the Petroleum Industry Research Foundation in New York.
Every day Exxon Mobil pumps 4.3 million barrels from nearly 27,000 wells. Last year it replaced 112% of its production, the seventh year in a row that it added more energy than it produced. With 21.5 billion barrels of proven reserves, the company could, in theory, pump oil and gas at current rates for 13 years without locating another drop. But, of course, it will locate plenty, with a lot less drama than in the days--not so long ago--when wildcat wells were successful just 10% of the time. Exxon Mobil can now strike oil with about 50% of its wildcat wells, even though the oil is much harder to find; if the company is drilling where it has operated before, the finding rate goes to 60%. At the Hoover and Diana fields, 160 miles from land in the Gulf of Mexico, Exxon Mobil located 400 million barrels under one mile of water and more than a mile underground (see A $9 Billion Bonanza in the Gulf of Mexico). |
