Wednesday November 11, 11:31 am Eastern Time
Company Press Release
Mobil President Eugene A. Renna
Highlights Strategies to Maximize
Returns
Announces New Initiatives Totaling $500 Million
FAIRFAX, Va.--(BUSINESS WIRE)--Nov. 11, 1998--At a presentation to the investment
community today, Mobil's President and Chief Operating Officer Eugene A. Renna
discussed Mobil strategies to maximize returns in a difficult industry environment.
He also reiterated Mobil's commitment to deliver shareholder returns that are in the top
quartile of the major oils. The strategies continue to be aggressive management of the
asset base, including $500 million of new initiatives to be implemented across all
businesses, and disciplined investment in long term growth.
In addressing Mobil's strategies, Renna indicated, ''We know we must be responsive
to the impacts of the Asian economic crisis, as well as lower crude oil prices and
margins. Frankly, it's prudent to take out some insurance against the possibility that
depressed oil and chemical market conditions will continue for some time.''
Renna continued, ''On the other hand, we have not come to the conclusion that the
worst case scenario is upon us. Over the last several years we have pursued some very
sound strategies for achieving our long term goals. So, we do not intend to knee-jerk.
With our debt-to-capitalization ratio in the targeted 30 percent range, we have
substantial flexibility to weather the downturn.''
Renna indicated that Mobil did not count on improved industry conditions to help it
achieve its targets of $5 billion earnings in 2001 and a 14 percent average return on
capital. Thus, the $2 billion increase in earnings from a 1996 base would be driven by
self-help, i.e. profitable growth, expense control and improved performance.
However, Mobil did not expect a substantial hit from industry conditions. Since 1996,
industry factors have depressed earnings by nearly $1 billion. ''That's a pretty deep
hole versus where we thought we would be,'' said Renna. ''If these conditions persist, it
will be very challenging to achieve our goals without substantial additional self-help.''
Mobil already has initiatives in place which will generate benefits of about $1 billion
before tax versus a 1996 base, including joint ventures and aggressive programs in the
Asia Pacific region. Mobil realized about $300 million in 1997, expects another $300
million in 1998, and most of the balance in 1999.
To supplement these programs, our businesses have identified and committed to
additional local initiatives which would reduce costs by about $500 million before tax
over the next few years.
Renna said, ''While there is bound to be some impact on headcount, we're not talking
about a major organizational restructuring. We're also not assuming any large alliances,
although we would not preclude a deal that contributes substantially to increased
earnings, returns and shareholder value.''
Renna continued, ''What we are talking about are across the board opportunities to
improve the efficiency of all segments of our business. These initiatives once again
demonstrate that cost reduction is never over -- it's part of Mobil's culture of continuous
improvement.''
As examples, Renna cited several local initiatives in the Asia Pacific downstream and
Latin America. In addition, Renna indicated Mobil will benefit from reduced spending
and improved efficiency in the systems area as efforts wind down for Year 2000
compliance and as several new systems are implemented.
On the investment spending side, Mobil subscribes to disciplined spending in the $5-6
billion range, excluding any major acquisition or opportunity. However, in the current
environment, the pace of overall investment and exploration spending will be slowing
down.
For example, certain discretionary projects are being deferred in the Asia Pacific
downstream and in the upstream, especially where the economics of short lived
exploitation projects look marginal at current prices.
Spending in 1998 will likely come close to the original plan of $5.9 billion, as program
cuts have been partly offset by the addition of projects which support long term growth,
such as the Terra Nova oil development. Plans for 1999 have not yet been finalized, but
directionally, spending will be down from 1998.
Renna indicated, however, that, ''Major legacy projects which will contribute to
long-term growth in oil and gas production, earnings and cash flow will be funded. In
addition, Mobil will be alert to attractive assets that may become available.''
Key E&P growth areas include the East Coast of Canada, the Caspian region,
West Africa, South America, Norway and worldwide liquefied natural gas. Key to
long term growth in the U.S. will be success in Mobil's substantial deepwater
acreage position.
In M&R, Mobil is very well positioned in the U.S., Europe and Asia, and its
refineries require little capital. Most downstream spending will support marketing
growth.
In Chemical, Mobil plans growth through large scale, competitively advantaged
petrochemical projects.
Renna concluded by expressing confidence in Mobil's strategies and future based on
its, ''talented organization, top flight assets, a commitment to aggressively pursue
initiatives to keep costs at or below competitive levels, and a superb suite of
opportunities for profitable growth.
''In addition, long-term prospects for Asia are excellent, and Mobil's leverage there is
expected to give us a clear competitive advantage when that region turns the corner.''
Cautionary statement under Private Securities Litigation Reform Act of 1995: This
release contains forward-looking statements about earnings, return on capital
employed, capital expenditures, and implementation of initiatives, joint ventures and
projects. These statements are based on current information, plans and expectations.
Actual results could differ materially due to factors including trends in economic growth,
conditions in petroleum and chemical markets, success in implementing plans and
programs, and effects of political events, regulations and taxation.
For more news and information about Mobil, please see us on the World Wide Web at
www.mobil.com/news. |
