1. 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 worlds 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 Caf.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.BPs 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

2. 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. Exxonmobils 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 theworlds 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. 3. 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. 4. Top World Oil Consumers, 2011(Thousand Barrels per Day)2,2932,400United States 2,230 China2,72518,949 Japan 2,793 India 2,986 Saudi Arabia3,426 Brasil 4,464 Russia8,924 Germany Canada Korea, SouthFigure 1.1 Top World Oil Consumers, 2011Source: U.S. Energy Information Administration, Countries OverviewTop World Natural Gas Consumers, 2011(Billion Cubic Meters)683.3 700 600 500414.1 400 300 137.5 129 100.399.5 94.2883.94 20082.48 77.8 100 0Figure 1.2 Top World Natural Gas Consumers, 2011Source: CIA World Factbook 5. 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 worlds largest producer andrapid growth in Qatars, Russias and Turkmenistans output. Meanwhile the production inLibya, the UK and the EU declined.Top World Oil Producers, 2011 (Thousand Barrels per Day)2,687 Saudi Arabia 2,9592,682 11,153Russia3,088United States3,600China10,229 Iran4,234 Canada4,289 United Arab Emirates10,128 Mexico Brazil KuwaitFigure 1.3 Top World Oil Producers, 2011Source: U.S. Energy Information Administration, Countries Overview 6. 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). 7. Top World Oil Net Exporters, 2011 (Thousand Barrels per Day) Saudi Arabia1,7521,490 Russia1,8171,752 8,167 United Arab Emirates 2,206 Kuwait 2,343 7,504 Nigeria2,601 Iran 2,242 Iraq Norway Angola VenezuelaFigure 1.5 Top World Oil Net Exporters, 2011Source: U.S. Energy Information Administration, Countries OverviewTop World Oil Net Importers, 2011 (Thousand Barrels per Day)1,2921,346United States1,697948 China 8,822 Japan2,170 India 2,235 Germany 2,489 4,635 Korea, South France4,329 Spain Italy NetherlandsFigure 1.6 Top World Oil Net Importers, 2011Source: U.S. Energy Information Administration, Countries Overview 8. Top World Natural Gas Exporters, 2011(Billion Cubic Meters) 199.920015099.75 94.81 92.410057.75 55.28 42.33 32.230.79 50 24.70Figure 1.7 Top World Natural Gas Exporters, 2011Source: CIA World Factbook Top World Natural Gas Importers, 2011 (Billion Cubic Meters)120105.899.63 98.0110070.2 80 53.63 60 46.2 42.3838.238.0436.71 40 200Figure 1.8 Top World Natural Gas Importers, 2011Source: CIA World FactbookIt is often speculated about lack of global oil and gas reserves. Due to OPECs World OilOutlook the world has more than enough oil resources to satisfy consumer demand for many 9. 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 hasnt 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 sectors 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 todays 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 ofArab 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 couldnt but affect other fuels. 2010 oil spill in the Gulf of Mexico resulted in 10. 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 Worlds Biggest Public Companies in Oil and Gas Operation Industry(values calculated April 2012)RankCompanyCountry SalesProfitsAssetsMarket (billion (billion (billionValue USD) USD) USD)(billion USD)1 Exxon Mobile United433.541.1 331.1 407.4 States4 Royal Dutch ShellNetherlands 470.230.9 340.5 227.67 PetroChina China 301.120.6 304.7 294.710Petrobras - Brazil 145.920.1 319.4 180Petroleo Brasil11BP United375.525.7 292.5 147.4 Kingdom12ShevronUnited236.326.9 209.5 218 States15GazpromRussia117.631.7 302.6 159.818TotalFrance216.215.9 213 132.424Sinopec China391.411.6 179.8 104.2China Petroleum27ConocoPhillips United230.912.4 153.2 98.8 StatesSource: Forbes, The Worlds Biggest Public Companies 11. 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 companys activity.Vertical analysis is one of the best methods to show the trend in companys 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 thecompanys 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, companiesCompany Analysiswill be unable to obtain the greatestbenefit. Assets structure refers to liquid Vertical andHorizontalassets and fixed assets, intangible assets AnalysisRatio AnalysisCAPMand 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. 12. 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 theBP500000XOM4000003000002000001000000 EBITDA EBITDA EBITDA EBITDA EBITDASales and other operating revenues Production and manufacturing expensesSales and other operating revenues Production and manufacturing expensesSales and other operating revenues Production and manufacturing expensesSales and other operating revenues Production and manufacturing expensesSales and other operating revenues Production and manufacturing expensesEBITEBITEBITEBITEBIT -100000 20072008200920102011 13. 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 XOMs 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 assetsBP Plc assets structureCurrent assets Non-current assets Non-current assets26% 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 ratios calculations).In spite of the accident,BP Plcdemonstrates 40%more stable and more 35%cashefficient position 30% 25%(SeeChart####).ThisBP 20% XOMstability is a result of 15% 10%5%0% 2007 200820092010 2011 14. effective managing of companys 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 Corporations 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 15. Current ratioQuick ratioSuper quick ratio YearsBP XOMIndustry BPXOMIndustryBP XOMIndustry 2011 1.16 0.94 1.19 0.690.67 0.770.17 0.17 0.27 2010 1.12 0.94 1.20 0.680.65 0.770.24 0.13 0.29 2009 1.14 1.06 1.17 0.640.74 0.720.14 0.21 0.24 2008 0.95 1.47 1.14 0.541.14 0.700.12 0.64 0.25 2007 1.04 1.47 1.21 0.541.21 0.780.05 0.58 0.23 Average 1.081.18 1.18 0.620.88 0.750.14 0.35 0.26 Ideal210.75According 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, thats 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 inventorymethods 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 havent 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. 16. 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 analysisCompanys 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 companys 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 Ratio20.00%12.00%10.00%15.00%8.00%10.00% BP BP6.00% XOMXOM 5.00% Oil and gaz industry 4.00%Oil and gaz industry2.00% 0.00% 2007 20082009 2010 20110.00% 2007 2008 2009 2010 2011-5.00%-2.00% ROEROA 45%25.00% 40% 35%20.00% 30%15.00% 25% BPBP 20% XOM10.00% XOM 15% Oil and gaz industryOil and gaz industry 10% 5.00%5%0% 0.00% -5% 2007 20082009 2010 2011 2007 200820092010 2011 -10% -5.00%Limitations 17. 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 companysperformance 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.Lets 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. 18. 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 19. 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 todays 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. 20. 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. 21. CHAPTER III : STRATEGY ANALYSIS IN BOTH COMPANIES3.1 Sustainability Balance Scorecard in Energy SectorIn present days, its 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 companysmanagerial decisions which is based on Kaplan & Nortons 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].[1]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) 22. ExxonMobil and BP have many things in common. Both of them are among the worlds 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. [2]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 [3]. 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 [4]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] 23. Revenue Growth Unique mix of Productivity products & service attributes Customer relations Corporate imageFinancial Customer Perspective PerspectiveInternal Learning & ProcessStaff Perspective Development Building franchise via Staff training innew products andmarketing & refiningservices developmentbusiness Nurture leadershipskills 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. Mobils per gallon cost comparison with the rests in the market Actual cash flow compared to the rest of the business planCustomer Perspective 24. 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 satisfactionComplete customerstrategy Motivating Revenue growth forindependent dealers Companysto deliver a greatFinancial strategy buying experience Customers buyAttract moreproducts & servicesCustomers 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 25. 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 worldsgrowing 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 BPs 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. [5]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 performanceTransparency of values 26. 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 flowportfolio by 2014 versus 2011 at $100management per barrel Visibility and New upstream projectstransparency to onstream with unit value operating cash marginsFinancial Customer Standartized service double the 2011 averagePerspective Perspective Cash flow distriburion: half for re-investment and half for other business purposes InternalLearning &Process StaffPerspectiveDevelopment Serious approach toknowledge management Playing to our strengths To become a great Relentless focus onemployer safety & managing risks To maintain the trust ofpeople inside andoutside 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. 27. 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:[1] 19th World Energy Congress, Sydney, Australia (2004) Social responsibility in EnergyCompanies. Available athttp://www.worldenergy.org/documents/congresspapers/metallog0904.pdf [Accessed 5 Dec.2012][2] 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][3] 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][4]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][5] BP (2012) 2012 Annual General Meeting: CEOs Speech, Bob DudleyAvailable at: http://www.bp.com/genericarticle.do?categoryId=98&contentId=7074117[Accessed 7 Dec. 2012] 28. ReferencesBaker H.K. and Powell G. (2009). Understanding Financial Management: A Practical Guide.Bull R. (2007). 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The Analysis and Use of Financial Statements.(3rd edn). Wiley. p.111. 29. Wiehle U., Diegelmann M., Deter H., Schmig 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://129.10.70.18/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. 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Available athttp://129.10.70.18/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] 30. U.S. Energy Information Administration. (2012). Annual Energy Outlook 2012. Available athttp://www.eia.gov/forecasts/aeo/ [Accessed 29 Nov. 2012]Babson College Faculty. (2012). How to Calculate a Beta. Available athttp://faculty.babson.edu/academic/Beta/CalculateBeta.htm [Accessed ]BP. (2012). Available at http://www.bp.com [Accessed 1 Dec. 2012]Central Intelligence Agency . (2012). CIA World Factbook. Available athttps://www.cia.gov/library/publications/the-world-factbook/ [Accessed 8 Dec. 2012]ExxonMobile. (2012). Available at http://www.exxonmobil.com/Corporate/ [Accessed 1 Dec.2012]Forbes. (2012). The World Biggest Public Companies. 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APPENDIXESLong term operating analysis of BPRatios and2011 2010 200920082007Net Fixed AssetTurnoverBP2.05 1.83 1.51 2.38 2.03Oil and gas industry1.80 1.58 1.42 2.40 2.08Total Asset TurnoverBP1.28 1.09 1.01 1.58 1.20Oil and gas industry1.00 0.87 0.82 1.31 1.09Equity TurnoverBP3.37 3.13 2.35 3.96 3.04Oil and gas industry2.08 1.80 1.72 2.77 2.27Long term operating analysisRatios and 20112010 2009 2008 2007Net Fixed AssetTurnoverXOM2.18 1.852.17 3.79 3.23 Oil and gas industry1.80 1.581.42 2.40 2.08Total Asset TurnoverXOM1.41 1.221.29 2.02 1.61 Oil and gas industry1.00 0.870.82 1.31 1.09Equity TurnoverXOM3.02 2.522.73 4.07 3.21 Oil and gas industry2.08 1.801.72 2.77 2.27 33. Profitability Analysis of BPRatios and 20112010 200920082007Operating Profit MarginBP 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 MarginBP 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 EquityBP23.06%-3.92%16.31% 23.17% 22.25%Oil and gas industry 17.9% 13.7%11.7% 20.3% 23.9%Return on AssetsBP 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 MarginXOM0.16 0.14 0.12 0.18 0.18 Oil and gas industry0.15 0.13 0.12 0.14 0.18Net Profit MarginXOM0.09 0.08 0.06 0.10 0.10 Oil and gas industry0.09 0.08 0.07 0.07 0.11 34. Return on EquityXOM 0.27 0.210.17 0.400.33 Oil and gas industry 0.18 0.140.12 0.200.24Return on AssetsXOM 0.12 0.100.08 0.200.17 Oil and gas industry 0.09 0.070.06 0.100.11 Long term debt and solvency ratiosRatios and20112010 2009 2008 2007Debt-to -EquityBP 39.7%47.7%34.1%36.4% 33.1% Oil and gas industry31.0%31.0%33.0%28.0% 24.0%Debt-to-CapitalBP 28.4%32.3%25.4%26.7% 24.9% Oil and gas industry24.0%24.0%25.0%22.0% 20.0%Interest CoverageBP3216.69%-312.39%2363.42% 2316.10% 2369.27% Oil and gas industry4431.0% 3401.0% 2679.0%4446.0% 3735.0%Long term debt and solvency ratiosRatios and 20112010 2009 20082007Debt-to -EquityXOM 0.110.100.09 0.080.08 Oil and gas industry 0.310.310.33 0.280.24 35. Debt-to-CapitalXOM0.100.09 0.080.080.07 Oil and gas industry0.240.24 0.250.220.20Interest CoverageXOM297.59205.4764.46 124.92 179.70 Oil and gas industry 44.31 34.0126.7944.4637.35Liquidity AnalysisRatios and20112010 200920082007Current ratioBP115.7%112.3% 114.0%95.1% 103.8%Oil and gas industry119.0%120.0% 117.0%114.0%121.0%Quick ratioBP68.9% 67.8%64.3% 53.9% 54.1%Oil and gas industry77.0% 77.0%72.0% 70.0% 78.0%Super quick ratioBP17.02%23.95% 14.06%11.74%4.61%Oil and gas industry27.0% 29.0%24.0% 25.0% 23.0%Liquidity Analysis 36. Ratios and 2011 2010200920082007Current ratio XOM 0.94 0.941.061.471.47Oil and gas industry 1.19 1.201.171.141.21Quick ratio XOM 0.67 0.650.741.141.21Oil and gas industry 0.77 0.770.720.700.78Super quick ratio XOM 0.17 0.130.210.640.58Oil and gas industry 0.27 0.290.240.250.23 Short term operating analysisRatios and2011 2010200920082007Inventory Turnover RatioBP1463.4% 1133.2%1058.5% 2147.0% 0.0% Oil and gas industry 1658.0% 1487.0%1319.0% 2354.0% 1596.0%Receivables Turnover RatioBP1344.5% 1224.9%1058.5% 1579.2% 861.4% Oil and gas industry 1130.0% 1036.0%978.0%1487.0% 930.0%Payables Turnover RatioBP1258.9% 1080.0%1045.5% 1794.1% 925.2% 37. 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 and20112010 2009 2008 2007Inventory Turnover Ratio XOM 31.0928.5226.1039.46 0.00Oil and gas industry 16.5814.8713.1923.5415.96Receivables Turnover Ratio XOM 15.5414.5513.5924.5712.68Oil and gas industry 11.3010.36 9.7814.87 9.30Payables Turnover Ratio XOM 13.7512.0212.4421.6913.35Oil and gas industry 11.6110.6910.3916.4510.54 38. Working Capital Turnover RatioXOM 42.0848.48 31.73 50.16 30.92 Oil and gas industry 15.9514.24 12.22 20.43 13.28Average inventory processing periodXOM 11.7412.80 13.999.27 Oil and gas industry 22.0025.00 28.00 16.00Average receivable collection periodXOM 23.4825.09 26.86 14.90 28.78 Oil and gas industry 32.0035.00 37.00 25.00 39.00Operating CycleXOM 35.2237.88 40.84 24.170.00 Oil and gas industry 54.0060.00 65.00 40.000.00 Five-component disaggregation of ROE TaxInterestEBITAsset Year ROE = LeverageBurdenBurden MarginTurnover 2011 23.06%0.66 0.9810.60%1.282.63 20100.00%0.77 -1.25%1.092.87 2009 16.31%0.66 0.9511.04%1.012.32 2008 23.17%0.62 0.97 9.76%1.582.50 2007 22.25%0.66 0.9811.38%1.202.52Five-component disaggregation of ROE TaxInterestEBITAssetYearROE = LeverageBurdenBurden MarginTurnover 201126.59%0.561.00 15.74%1.41 2.14 20100.00% 0.580.00 14.38%1.22 2.06 200917.44%0.550.98 11.72%1.29 2.11 200840.03%0.540.99 18.29%2.02 2.02 39. 200733.35% 0.570.99 18.42%1.611.99 BP PLC, Common-Size Consolidated Statement of Financial Position, AssetsDec 31,Dec 31,Dec 31, Dec 31, Dec 31,Property, plant and2011 20102009 20082007 equipment40.68% 40.46%45.89% 45.22%41.51%Goodwill 4.13%3.16% 3.65%4.33% 4.66%Intangible assets7.20%5.25% 4.89%4.50% 2.82%Group share of net assetsof jointly controlled9.16%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 and9.83%9.41% 11.98%12.19% 9.61%associatesOther investments0.72%0.44% 0.66%0.37% 0.78%Loans0.30%0.33% 0.44%0.44% 0.42%Other receivables1.48%2.31% 0.73%0.31% 0.41%Derivative financial 1.72%1.55% 1.68%2.21% 1.58%instrumentsPrepayments0.43%0.53% 0.60%0.59% 0.46%Deferred tax assets0.21%0.19% 0.22%Defined benefit pension 0.01%0.80% 0.59%0.76% 3.78%plan surplusesNon-current assets66.70% 64.43% 71.33%70.91%66.03%Loans0.08%0.09% 0.11%0.07% 0.07%Inventories8.76%9.63% 9.58%7.37%11.25%Trade receivables9.53%8.91% 9.58% 10.02%13.98%Other receivables5.32%4.52% 2.94%2.80% 2.12%Trade and other 14.85% 13.42% 12.51%12.82%16.10% 40. 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 receivable0.08%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 assets33.30% 35.57% 28.67% 29.09%33.97% Total assets100.00% 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 2010200920082007Property, 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 assets7.20%5.25% 4.89% 4.50% 2.82%Group share of net assets ofjointly controlled entities and9.16%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 andJan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900 Jan 0, 1900associatesOther investments0.72%0.44% 0.66% 0.37% 0.78%Loans0.30%0.33% 0.44% 0.44% 0.42%Other receivables1.48%2.31% 0.73% 0.31% 0.41%Derivative financial instruments 1.72%1.55% 1.68% 2.21% 1.58%Prepayments0.43%0.53% 0.60% 0.59% 0.46% 41. Deferred tax assets0.21%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, 1900Loans0.08%0.09% 0.11% 0.07% 0.07%Inventories8.76%9.63% 9.58% 7.37%11.25%Trade receivables9.53%8.91% 9.58%10.02%13.98%Other receivables5.32%4.52% 2.94% 2.80% 2.12%Trade and other receivablesJan 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%Prepayments0.44%0.58% 0.74% 1.34% 1.52%Current tax receivable 0.08%0.25% 0.09% 0.17% 0.30%Other investments0.10%0.56% Cash and cash equivalents4.80%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, 1900Group balance sheet$ million 2011 2010* 200920082007Non-current assetsProperty, plant and 119,214 110,163108,275 103,200 97,989equipmentGoodwill12,100 8,5988,620 9,878 11,006Intangible assets 21,10214,298 11,54810,2606,652Investments in jointly15,51814,927 15,29623,826 18,113controlled entitiesInvestments in13,29113,335 12,963 4,0004,579associates 42. Other investments 2,117 1,191 1,5678551,830Fixed assets183,342 162,512 158,269 152,019 140,169Loans884 8941,039995 999Trade and other4,337 6,298 1,729710 968receivablesDerivative financial5,038 4,210 3,965 5,054 3,741instrumentsPrepayments 1,255 1,432 1,407 1,338 1,083Deferred tax assets611 528 516 Defined benefit172,176 1,390 1,738 8,914pension plan surpluses195,484 178,050 168,315 161,854 155,874Current assetsLoans244 247 249 168 165Inventories25,66126,21822,60516,82126,554Trade and other 43,52636,54929,53129,26138,020receivablesDerivative financial3,857 4,356 4,967 8,510 6,321instrumentsPrepayments 1,286 1,574 1,753 3,050 3,589Current tax receivable 235 693 209 377 705Other investments2881,532Cash and cash 14,06718,556 8,339 8,197 3,562equivalents 89,16489,72567,65366,38478,916Assets classified as held8,420 4,487 1,286for sale 97,58494,21267,65366,38480,202Total assets293,068 272,262 235,968 228,238 236,076Current liabilitiesTrade and other 52,40546,32935,20433,64443,152payablesDerivative financial3,220 3,856 4,681 8,977 6,405instruments 43. Accruals 5,932 5,6126,202 6,7436,640Finance debt 9,044 14,626 9,10915,740 15,394Current tax payable1,941 2,9202,464 3,1443,282Provisions11,238 9,4891,660 1,5452,19583,780 82,83259,32069,793 77,068Liabilities directlyassociated with assets 538 1,047 163classified as held forsale84,318 83,87959,32069,793 77,231Non-current liabilitiesOther payables 3,437 14,285 3,198 3,0801,251Derivative financial 3,773 3,6773,474 6,2715,002instrumentsAccruals 389637703784959Finance debt35,169 30,71025,51817,464 15,651Deferred tax liabilities15,078 10,90818,66216,198 19,215Provisions26,404 22,41812,97012,108 12,900Defined benefitpension plan and other12,018 9,857 10,01010,4319,215post-retirement benefitplan deficits96,268 92,49274,53566,336 64,193Total liabilities180,586176,371 133,855136,129 141,424Net assets 112,482 95,891 102,11392,109 94,652EquityBP shareholders 111,465 94,987 101,61391,303 93,690equityMinority interest1,017904500806962Total equity 112,482 95,891 102,11392,109 94,652 *Adjusted following the termination of the Pan American Energy LLC sale agreement, as described in Note 4. 44. Group balance sheet $ million2011 20102009 20082007Cash and cash equivalents12,6647,82510,693 31,43733,981Cash and cash equivalents, 404628 00 0restrictedTrade notes and accountsreceivable, less estimated 3004425439 2218618707 30775doubtful amountsOther notes and accountsreceivable, less estimated8598 68455459 5995 5675doubtful amountsTrade notes and accounts 38,642 32,28427,645 24,70236,450receivableInventories15,024 12,97611,553 11,64611,089Other current assets6,2295,271 5,3444,481 4,443Current assets 7296358984 5523572266 85963Companies carried at equity 26,708 26,71524,411 22,03022,053in underlying assetsCompanies carried at cost orless and stock investments1,5441,557 1,5771,636 1,647carried at fair valueLong-term receivables andmiscellaneous investments at6,0817,066 5,6774,890 4,494cost or less, net of reservesInvestments, advances and 34,333 35,33831,665 28,55628,194long-term receivablesProperty, plant andequipment, at cost, less214,664199,548 139,116121,346120,869accumulated depreciation anddepletion 45. Other assets, including9,0928,6407,3075,8847,056intangibles, netLong-term assets258,089243,526178,088155,786156,119Total assets331,052302,510233,323228,052242,082Total assets 331052 302510 233323 228052 242082Notes and loans payable 7,7112,7872,4762,4002,383Trade payables 33,969 30,780 24,236 21,190 29,239Payables to equity companies5,5535,4504,9793,5523,556Accrued taxes other than7,1236,7785,9215,8666,485income taxesOther10,4227,0266,1396,0355,995Accounts payable and 57,067 50,034 41,275 36,643 45,275accrued liabilitiesIncome taxes payable 12,7279,8128,310 10,057 10,654Current liabilities77,505 62,633 52,061 49,100 58,312Long-term debt9,322 12,2277,1297,0257,183Postretirement benefits 24,994 19,367 17,942 20,729 13,278reservesDeferred income tax liabilities36,618 35,150 23,148 19,726 22,899Other long-term obligations21,869 20,454 17,651 13,949 14,366Long-term liabilities92,803 87,198 65,870 61,429 57,726Total liabilities170308 149831 117931 110529 116038Common stock without par9,5129,3715,5035,3144,933valueEarnings reinvested 330,939298,899276,937265,680228,518Accumulated other-9,123 -4,823 -5,461 -9,931 1,989comprehensive income (loss)Common stock held in-176,932 -156,608 -166,410 -148,098 -113,678treasuryExxonMobil share of equity154,396146,839110,569112,965121,762Noncontrolling interests6,3485,8404,8234,5584,282Total equity160,744152,679115,392117,523126,044Total liabilities and equity 331052 302510 233323 228052 242082 46. Group cash flow statement $ millionFor the year ended 31 December 2011 2010 200920082007Operating activities Profit (loss) before taxation(4,825)38,834 25,12434,28331,611 Adjustments to reconcile profit(loss) before taxation to net cashprovided by operating activities Exploration expenditurewritten off1,024 375593 385 347 Depreciation, depletion andamortization11,135 11,16412,10610,98510,579 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 5,3813,277 3,003 3,728 2,473associates Interest receivable (198)(277) (258) (407) (489) Interest received216205203 385 500 Finance costs 1,2461,170 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) 47. 197450459420 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 19,217650 (Increase) decrease in (3,988)(3,895)(5,363) (7,255)inventories9,010 (Increase) decrease in other (9,913) (15,620)current and non-current assets7,5952,4395,210 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 activitiesCapital expenditure (17,845) (18,421) (20,650) (22,658) (17,830)Acquisitions, net of cash(10,909)(2,468)(395) (1,225)acquired1Investment in jointly controlled(857)(461)(578) (1,009) (428)entitiesInvestment in associates(55) (65) (164)(81) (187)Proceeds from disposals of fixedassets3,5007,4921,7159181,749Proceeds from disposals of(768)businesses, net of cash disposed a 9,462966 112,518Proceeds from loan repayments301501530647192Other(200) 47 374Net cash used in investing(26,633)(3,960) (18,133) (22,767) (14,837)activities 48. Financing activities Net issue of shares (2,567)(7,113)74 169207 Proceeds from long-term financing 11,600 11,934 11,5677,9618,109 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 2,2271,494 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 activities482 840 Currency translation differences relating to cash and cash (492)(279)(184)110135 equivalents Increase (decrease) in cash and (4,489) cash equivalents 10,2171424,635 972 Cash and cash equivalents at beginning of year 18,5568,3398,1973,5622,590 Cash and cash equivalents at end of year 14,067 18,5568,3398,1973,562 *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 millions20112010 20092008 2007Net income including non-controlling 42,20631,39819,658 46,86741,615interests 49. Depreciation and depletion 15,583 14,76011,91712,37912,250Deferred income tax charges (credits) 142 -1,135 1,399124Postretirement benefits expense in5441,700-1,72257-1,314excess of (less than) paymentsOther long-term obligation provisions in -151 160 731-63 1,065excess of (less than) paymentsDividends received greater than (lessthan) equity in current earnings of equity -273 -596-483921 -714companiesAdjustments for noncash transactions1584514889 10443 14693 11411(Increase) reduction - Notes and-7,906-5,863-3,170 8,641-5,441accounts receivable(Increase) reduction - Inventories-2,208-1,148459 -1,28572(Increase) reduction - Other current222 913 132 -509280assetsIncrease (reduction) - Accounts and8,8809,943 1,420-5,415 6,228other payablesChanges in operational working-10123845-1159 14321139capital, excluding cash and debtNet (gain) on asset sales -2,842-1,401-488-3,757-2,217All other items, net1,148 -318 -16490 54Net cash provided by operating5534548413 28438 59725 52002activitiesAdditions to property, plant and -30,975 -26,871 -22,491 -19,318 -15,387equipmentProceeds associated with sales ofsubsidiaries, property, plant and 11,1333,261 1,545 5,985 4,204equipment, and sales and returns ofinvestments(Increase) decrease in restricted cash and224 -628 4,604cash equivalentsAdditional investments and advances -3,586-1,239-2,752-2,495-3,038Collection of advances1,1191,133724 574 391Additions to marketable securities-1,754 -15 -16-2,113-646 50. Sales of marketable securities 1,674 155 571 1,868144Net cash used in investing activities-22165-24204 -22419 -15499 -9728Additions to long-term debt7021,143225 79 592Reductions in long-term debt-266 -6,224-68-192-209Additions to short-term debt 1,063 5981,3361,067 1,211Reductions in short-term debt-1,103-2,436 -1,575-1,624-809Additions (reductions) in debt with three 1,561 709 -71 143-187months or less maturityCash dividends to ExxonMobil -9,020-8,498 -8,023-8,058-7,621shareholdersCash dividends to non-controlling-306 -281-280 -375-289interestsChanges in noncontrolling interests-16-7 -113 -419-659Tax benefits related to stock-based 260 122 237 333369awardsCommon stock acquired-22,055-13,093-19,703 -35,734-31,822Common stock sold9241,043752 753 1,079Net cash used in financing activities-28256-26924 -27283 -44027 -38345Effects of exchange rate changes on cash -85 -153520-2,743 1,808Increase (decrease) in cash and cash4839-2868 -20744 -2544 5737equivalentsCash and cash equivalents at beginning 7,82510,693 31,437 33,981 28,244of yearCash and cash equivalents at end of 126647825106933143733981yearGroup income statement For the year ended 31 December $ million20112010 20092008 2007 Sales and other operating revenues 467,029370,125 301,500 459,579390,328 51. Earnings from jointlycontrolled entities after 15,28910,677 7,14311,081 8,901interest and taxEarnings from associates after interest and taxInterest and other income4,111 2,419 1,943 6,699 5,323Gains on sale of businesses andfixed assetsTotal revenues and otherincome486,429 383,221 310,586 477,359 404,552Purchases266,534 197,959 152,806 249,454 199,498Production and manufacturingexpensesa40,26835,79233,02737,90531,885Production and similar taxes 73,47664,66560,75576,22772,681Depreciation, depletion andamortization 15,58314,76011,91712,37912,250Impairment and losses on saleof businesses and fixed assetsExploration expense2,081 2,144 2,021 1,451 1,469Distribution and administrationexpenses 14,98314,68314,73515,87314,890Fair value (gain) loss onembedded derivativesProfit (loss) before interest andtaxation 73,50453,21835,32584,07071,879Finance costsa 247 259 548 673 400Net finance expense (income)relating to pensions and otherpost-retirement benefits 52. Profit (loss) before taxation73,257 52,959 34,777 83,397 71,479Taxationa31,051 21,561 15,119 36,530 29,864Profit (loss) for the year42,206 31,398 19,658 46,867 41,615Attributable toBP shareholders41,060 30,460 19,280 45,220 40,610Minority interest41,060 30,460 19,280 45,220 40,610Earnings per share centsProfit (loss) for the yearattributable to BP shareholdersBasic8.43 6.24 3.99 8.70Diluted8.42 6.22 3.98 8.66