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Market Trends Analysis of Indian Oil and Gas Industry

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OBJECTIVE OF THE STUDY

  1. This study provides an insight into the oil and gas industry.
  2. Analyze market trends for oil and gas industry in the global arena.
  3. To understand financial performance and financial position of oil and natural gas companies like ONGC, Petro china, Chevron and Exxon Mobil.
  4. To analyse the financial statements of 2009-2010, so as to understand about the key factors like Profitability and Solvency for decision making and ultimate business solvency.
  5. To find out the ratios of the company and carry out a comparative study.
  6. To understand the current position of these companies.
  7. To analyze the Indian oil market.
  8. To see the international scenario.
  9. To analyze the oil prices in India and other countries.

BROAD APPROACH AND METHODOLOGY

Type

The study carried out will be more like a Descriptive Research. For analyzing the financial statement, methodology to be used is financial ratio analysis and comparative study.

Purpose

The study mainly focuses on giving knowledge about the importance of annual reports.

Data collection

The data collection has been made in two ways:

  1. Primary source: Data has been collected with the help of constant interaction with my mentor Ms. Uma Rajamani - Manager (F&A).
  2. Secondary source: Data has been collected with the help of :
    1. Annual report of ONGC.
    2. ONGC reports.
    3. Internet.

This source helped me in collecting information about the company as a whole, financial performance.

Before making use of secondary data both the data and its source were evaluated. Particular attention was paid to definitions used, measurement error, source bias, reliability and the time span of the secondary data.

HIGHLIGHTS OF THE INDIAN OIL AND NATURAL GAS SECTOR

HIGHLIGHTS IN THE PETROLEUM & NATURAL GAS SECTOR DURING 2009-10

  • India has total reserves (proved & indicated) of 1201 million metric tonnes of crude oiland1437 billion cubic metres of natural gas as on 1.4.2010.
  • The total number of exploratory and development wells and metreage drilled in onshoreand offshore areas during 2009-10 was 428 and 1019 thousand metres respectively.
  • Crude oil production during 2009-10 at 33.69 million metric tonnes is 0.55% higher than33.51 million metric tonnes produced during 2008-09.
  • Gross Production of Natural Gas in the country at 47.51 billion cubic metres during 2009-10 is 44.63% higher than the production of 32.85 billion cubic metres during 2008-09.
  • The production of Natural Gas at 44.94% and 0.08% of the total were highest and lowestin JVC/Private and West Bengal respectively during 2009-10.
  • The flaring of Natural Gas in 2009-10 at 2.09% of gross production is lower than at 3.29% in 2008-09.
  • The refining capacity in the country increased to 184.386 million tonnes per annum(MTPA) as on 1.4.2010 from 177.968 MTPA as on 1.4.2009.
  • The total refinery crude throughput during 2009-10 at 160.03 million metric tonnes is0.46% lower than 160.77 million metric tonnes crude processed in 2008-09 and the prorate capacity utilisation in 2009-10 was 89.92% as compared to 107.43% in 2008-09.
  • The production of petroleum products during 2009-10 was 151.898 million metric tones (including 2.244 million metric tonnes of LPG production from natural gas) registering adecrease of 0.51% over last year's production at 152.678 million metric tonnes (including2.162 million metric tonnes of LPG production from natural gas).
  • The country exported 50.974 million metric tonnes of petroleum products against theimports of 23.49 million metric tonnes (including 8.828 million metric tonnes of LNG) during 2009-10.
  • The consumption of petroleum products during 2009-10 were 138.196 million metrictonnes (including sales through private imports) which is 3.60% higher than the sales of133.400 million metric tonnes during 2008-09.
  • The total number of retail outlets of Public Sector Oil Marketing Companies as on1.4.2010 has gone upto 36462 from 34948 on 1.4.2009.
  • The total number of LPG consumers of Public Sector Oil Marketing Companies as on1.4.2010 were 114.952 million against 105.632 million as on 1.4.2009.
  • The number of persons employed (including contract employees) in petroleum industryas on 1.04.2010 and 1.04.2009 are 129988 & 138973 respectively.

OIL INDUSTRY INTRODUCTION TO THE OIL INDUSTRY

Energy in all its forms is critical to economic growth, development, and social welfare. The world's need for reliable and affordable energy supplies is growing. Energy is a critical input for economic growth and its availability determines the quality of both, the national economy and the life of citizens. Sustainable economic progress hinges crucially around the supply of stable and competitively priced energy.

Oil is a fungible, international commodity whose ownership and ultimate destination is determined by market forces once it leaves the producing country. No country can effectively isolate itself from changes elsewhere in the market, nor is it likely that any nation can take actions that do not indirectly affect other nations.

Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture. OIL industry is considered to be the back bone of an economy because this is the main source of energy till date. Any economy around the world would fail to precede a single step in the absence of petroleum industry. Thus, before using this energy source, the crude petroleum is required to be refined in the petroleum refineries for extracting various fractions for energy generation namely, petrol, natural gas, kerosene, asphalt and many more.

The processes that are involved in the petroleum industry are:

  • Drilling at the site of petroleum for making well so that the crude oil could be extracted.
  • Refining of the crude oil
  • Storing of the extracted oil in a secured place.
  • Transportation of the stored crude oil is required to be done to the different refineries.
  • Processing of the crude oil needs to be done in the processing units of refineries for converting it into usable fuel form along with the other important derivative products.

Core activities of oil and natural gas sector

Exploration and Production

India is heavily import dependent for its oil and gas requirements. Our total imports of crude oiland petroleum products in the year 2008-09 amounted to 146.441 million metric tones (MMT), worth about Rs. 4,01,631 crore. The country also exported petroleum products amounting to 36.414 MMT, earning foreign exchange worth nearly Rs. 1,15,987 crore. The gap between demand and availability of crude oil from indigenous sources is likely to increase over the years. In case of gas, this gap is expected to decrease with production of gas from KG basin. The growing gap in demand and supply of oil and the shortfall in supply of gas requires greater emphasis to be placed on exploration and production.

Objectives of Exploration and Production activities

  1. To undertake a complete appraisal of the Indian Sedimentary basin area for tapping thehydrocarbon potential.
  2. To optimize production of crude oil and natural gas in the most efficient manner.
  3. To keep pace with the technological advancements and remain at the technological forefront in the global exploration and production industry.
  4. To achieve a near zero impact on environment.

Refining and Marketing

The development of refining and marketing activities is crucial for achieving self sufficiency inpetroleum products and in moving towards a competitive and consumer oriented market.

Objective of Refining and Marketing Activities

  1. Maintain self-sufficiency in all petroleum products by appropriate enhancement in refiningcapacities by National Oil Companies & private players including international oil companies.
  2. Develop export capability in petroleum products so that the refining industry becomes globally competitive and oil security is enhanced.
  3. To develop corresponding infrastructure including ports, pipelines and depots, etc. for anefficient oil industry.
  4. To make available quality fuels at affordable prices while continuing subsidies for sensitivepetroleum products.
  5. To improve consumer services through better retailing practices and competition.

Tariff and Pricing

A rational tariff and pricing policy is vital to ensure healthy growth of the hydrocarbonsector and to protect the consumers as well.

Objectives of Tariff and Pricing Policy

  1. To provide incentives for cleaner, greener and quality fuels so as to promote an environment friendly hydrocarbon sector.
  2. To balance the need to boost Government revenue with the need to align taxes and duties with Asia- Pacific countries and the prices to international levels.
  3. To promote new investments, by ensuring adequate protection to domestic producers

The industry is usually divided into three major components: upstream, midstream and downstream.

  • The upstream oil sector is known as exploration and production sector. It includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, and subsequently operating the wells that recover and bring the crude oil.
  • The midstream processes, stores, markets and transports the crude oil.
  • The downstream oil sector is used to refer to the refining of crude oil, selling and distribution.

Oil companies measure oil production in the unit of barrels (bbl).

Oil & Natural Gas Commission was established on 14th August, 1956 as a statutory body under Oil & Natural Gas Commission Act (The ONGC Act), for the development of petroleum resources and sale of petroleum products. ONGC was converted into a Public Limited Company under the Companies Act, 1956 and named as “Oil and Natural Gas Corporation Limited” with effect from 1st February, 1994. The Government disinvested around 10% of the equity shares of ONGC in March 2004 through a public offer in the domestic capital market at Rs. 750 per share. After the above disinvestment, the shareholding of the Government in ONGC came down to around 74.15%.

HIGHLIGHTS FOR THE YEAR 2009-10.

  • ONGC has made 15 oil & gas discoveries in the areas under its operative control.
  • State-of-the-art technologies inducted in hardware & software for seismic data acquisition, processing & interpretation, and in well logging.
  • Advanced drilling techniques for sidetracks, multilateral and extended reach wells absorbed and implemented on fast track. Engineering design audit introduced with significant cost savings.
  • ONGC registered its fifth Clean Development Mechanism (CDM) project with the United Nations Framework Convention on Climate Change (UNFCCC) on September 22, 2009. The project, ‘Energy Efficiency of Amine Circulation Pumps at Hazira' involves enhancing energy efficiency achieved in the Amine Circulation Pumps of Hazira Plant. The project will fetch an estimated Certified Emission Reduction (CER) of 4043 per year for a period of 10 years. With this, ONGC achieves a total annual CER of about 1.24 lakh.
  • National Safety Awards in Oil Mines Category: ONGC has bagged four National Safety Awards in Oil Mines Category for year 2007. This is fourth consecutive years that ONGC has bagged these awards, instituted by the Ministry of Labour & Employment, Government of India to motivate, appreciate and recognize the extraordinary performance in the area of mines safety. These awards were given by the Hon'ble Vice President of India in New Delhi on October 23, 2009. These awards are based on Longest Accident Free Period (LAFP) and Lowest Injury Frequency Rate (LIFR) and were judged by jury of Director General of Mines Safety, Management Representatives and Trade Union Representatives.
  • PCRA Award for Oil and Gas Conservation: ONGC bagged the Best Overall Performance PCRA Award amongst the Upstream Oil Companies for the Oil and Gas Conservation Programmes during the year 2009.

The National Stock Exchange of India Ltd, Mumbai The Company has the following

ASSETS /PLANTS/ BASINS/ REGIONS :

A. ASSETS/ PLANTS:

  1. Mumbai High Asset, Mumbai
  2. Neelam & Heera Asset, Mumbai
  3. Bassein & Satellite Asset, Mumbai
  4. Uran Plant, Uran
  5. Hazira Plant, Hazira
  6. Ahmedabad Asset, Ahmedabad
  7. Ankleshwar Asset, Mehsana
  8. Mehsana Asset, Mehsana
  9. Rajamundry Asset, Rajamundry
  10. Karaikal Asset, Karaikal
  11. Assam Asset, Nazira
  12. Tripura Asset, Agartala

B. BASINS:

  1. Western Offshore Basin, Mumbai
  2. Western Onshore Basin Vadodara
  3. KG Basin, Rajamundry
  4. Cauvery Basin , Chennai
  5. Assam & Assam-Arakan Basin , Jorhat
  6. CBM- BPM Basin , Kolkata
  7. Frontier Basin , Dehradun

C. REGIONS:

  1. Mumbai Region, Mumbai
  2. Western Region, Baroda
  3. Eastern Region, Nazira
  4. Southern Region, Chennai
  5. Central Region, Kolkata

PHYSICAL PERFORMANCE DURING 2008-09 & 2009-10

 

UNIT

2008-09

ACTUAL

2009-10

BE TARGET

2009-10

ACTUAL

APR-DEC 09

PROJECTIONS

JAN-MAR

2010

SEISMIC SURVEY

         

ON-LAND

2D (GLK/LK)

3D (SQ. KMS)

2275.51

5526.86

1502

5090

2004.58

2898.28

3045.42

1009.72

OFFSHORE

2D (GLK/LK)

3D (SQ. KMS)

74850.89

21258.14

26628

24276

16146.40

9066.29

9471.60

11862.71

DRILLING

         

EXPLORATORY

DEVELOPMENT

TOTAL (EXPL + DEV)

METERAGE (‘000M) WELLS (NOS.)

METERAGE (‘000M) WELLS (NOS.)

METERAGE (‘000M) WELLS (NOS.)

298.95

106

477.15

218

776.10

324

458.55

148

491.45

225

950.00

373

258.25

78

391.56

186

649.81

264

182.18

72

71.76

39

254.14

111

PRODUCTION

         

CRUDE OIL

MMT

25.367

26.950

18.639

7.125

NATURAL GAS

MMM3

22486.42

22248.23

17467.34

4826.66

VALUE ADDED PRODUCTS (VAP)

         

LPG

000'T

1026.32

1072.0

815.84

237.16

C2-C3

000'T

496.66

510.0

398.25

111.75

SKO

000'T

177.76

160.54

124.07

32.17

ARN/LAN

000'T

1553.01

1511.46

1196.07

297.39

OTHERS

000'T

59.7

55.0

45.59

8.15

TOTAL VAP

000'T

3313.45

3309.0

2579.82

686.62

FINANCIAL PERFORMANCE DURING 2008-09 & 2009-10

PARAMETERS

2008-09

ACTUAL

2009-10

BE

2009-10

ACTUAL

APR-DEC ‘09

PROJECTIONS

JAN - MAR ‘10

ESTIMATES

PLAN OUTLAY

21820.11

20867.58

14959.82

9760.39

TOTAL INCOME (INC. INTEREST INCOME)

60252.54

64731.06

47743.54

14917.04

NET PROFIT

16126.32

17556.23

12991.14

2550.48

PROGRESS OF PROJECTS : MAJOR PROJECTS COMPLETED DURING THE YEAR

SI. NO

PROJECT

DATE OF COMPLETION

APPROVED COST (RS)

1.

ADDITIONAL DEVELOPMENT OF BASSEIN FIELD & INSTALLATION OF 2ND STAGE BOOSTER COMPRESSOR

26.07.09

2937.01

2.

DEVELPOMENT OF VASAI EAST

30.09.09

1688.38

MAJOR PROJECTS APPROVED DURING THE YEAR

SI. NO

PROJECT

APPROVED COST (RS)

STATUS/ ANTICIPATED COMPLETION

1.

HEERA RE-CONSTRUCTION

706.70

APRIL 2010

2.

NEELAM RE-CONSTRUCTION

305.08

APRIL 2011

3.

ADDL. GAS PROCESSING FACILITY AT HAZIRA

370.11

APRIL 2011

4.

ADDL. PROCESSING UNITS AT URAN

1797.35

DEC 2011

5.

ASSAM RENEWAL PROJECT

(GROUP A: LAKWA-LAKHMANI & MORAN CTF)

2465.15

MARCH 2013

6.

MHN RE-DEVELOPMENT PH-II

6855.93

SEPT 2010

MAJOR INITIATIVES

  1. Strategic goals set for two decades 2001-2020
    1. Doubling Reserve Accretion to 12 Billion MTO+OEG
    2. Improving Recovery Factor to the order of 40%
    3. Production of 20 MMTPA O+OEG equity oil and gas from acquisitions abroad.
  2. Short-term Strategy
    1. Time scheduled exploration activities for prospect recognition and drilling.
    2. Prioritisation of exploration activities on fast track basis for enhancing reserves accretion.
    3. Pre-drill 3D seismic in deepwater and blanket 3D in key growth areas.
    4. Knowledge building in new sectors of producing as well as frontier basins.
  3. Medium-long-term Strategy
    1. Further intensification of exploration in the producing basins to realise the hydrocarbon resources to in-place volume conversion.
    2. Exploration spread in non-producing basins and yet to be explored basins to establish their potential and knowledge building.
    3. Major shift to deep offshore as the major thrust and contributing sector.
  4. Strategic Initiatives
    1. Major development projects including IOR/ EOR schemes with an approved cost of Rs. 30,000 crore are under various stages of implementation to enhance crude oil and natural gas production.
    2. A new and dedicated business unit viz. Eastern Offshore Asset has been constituted with an aim to put east coast discoveries on a fast track development through an integrated east coast hub.
    3. Substantive decentralization of administrative authorities together with delegation of financial authorities carried out to empower the field executives.
    4. Induction of new technologies in core areas of E&P activities like:
    5. Acquisition, processing and interpretation of seismic data
    6. Drilling and production technology
    7. IT and communication.
  5. Materials Management
    1. Inventory Management and codification procedure have been implemented and computerized to track and identify the materials efficiently.

NON-CONVENTIONAL SOURCES OF ENERGY

(i) Wind Power Project:

Wind Farm Project of 50 MW at Motisindoli in Kutch district of Gujarat is an initiative of ONGC towards its commitment for environment-friendly and pollution-free energy production. The power generated from this wind power project is being wheeled to 101 locations of ONGC's oil field installations/ offices/ residential quarters in the state of Gujarat. ONGC shall be saving about Rs. 30 crore per year on electricity charges in Gujarat, considering the present purchase price of electricity.

(ii) Installations of Solar thermal plants:

Solar thermal plants in ONGC guest house, hospital, academy hostel, officers' club, central workshop, Baroda and colony are already installed. Initiatives have been taken to install the solar water heating system at other locations of ONGC also. Solar panels were installed at well heads of (Bokaro) Jharkhand. 9600 lakhs per day (LPD) capacity of solar water heating system is added in this year and total capacity installed is 38100 LPD.

HEALTH, SAFETY AND ENVIRONMENT (HSE)

Environmental initiatives encompassed solid waste, liquid effluent, air emission monitoring mechanism for proactive planning to manage waste through environment-friendly technologies like bio-remediation, reduction and recycling options and environmental reporting based on global reporting initiative principles. Several initiatives of long-term and continuous nature like bio-remediation of oily sludge, effluent management, ISO certification of installations on international benchmark standards, Mangroove and Hingal plantations etc. are also being carried out in ONGC.

CONSERVATION OF ENERGY AND PETROLEUM PRODUCTS

ONGC is actively pursuing energy conservation measures. The conservation of petroleum products namely HSD, Lube oil and natural gas are important activities. These measures include:

  • Phasing out of old diesel engines more than 15 years old.
  • Awareness campaign on use of bio-diesel as alternate fuel.
  • Use of small DG sets during lean periods in rigs, proper capacity utilization, rationalization and efficiency improvement of equipments, use of energy efficient devices.
  • Substitution of diesel engines with gas engines at installations where gas is available.
  • Increase in lube oil change period resulting in substantial saving.
  • Natural gas flaring has been reduced and the same is being supplied to consumers.
  • Use of small DG sets and waste heat recovery equipment at offshore platforms, rigs, LPG plants at Hazira and Uran.
  • Use of energy efficient equipment and devices such as top drives, linear motion shale shakers, electronic diesel engines, soft start systems and energy efficient lamps etc.
  • Use of gas engines in place of diesel ones for power generation.
  • Thermal energy cost reduction achieved by maintenance of steam traps at processing plants.
  • Conducting energy audit on regular basis and Petroleum Products Conservation Opportunities (PPCOs) are identified.
  • Harnessing solar energy by using solar water heaters/ photo-voltaic panels at various locations.

ONGC VIDESH LIMITED (OVL)

ONGC Videsh Limited (OVL), a wholly-owned subsidiary of ONGC, was incorporated as Hydrocarbons India Private Limited on 5th March, 1965 with an initial authorised capital of Rs. 5 lakh, for the business of international exploration and production. Its name was changed to ONGC Videsh Limited on 15th June, 1989. The authorised and paid-up share capital of OVL as on 31st March, 2007 was Rs. 1,000 crore. The primary business of the company is to prospect for oil and gas acreages abroad. These include acquisition of oil and gas fields in foreign countries as well as exploration, production, transportation and sale of oil and gas.

OVL currently has participation in 39 projects in 15 countries namely, Vietnam (3 projects), Russia (2 projects), Sudan (3 projects), Iran (1 project), Iraq (1 project), Libya (3 projects), Myanmar (5 projects), Syria (2 projects), Egypt (2 projects), Cuba (2 projects), Nigeria Sao Tome Principe JDZ (1 project), Brazil (5 projects), Nigeria (2 projects), Colombia (6 projects), and Venezuela (1 project).

OVL's share of crude oil and natural gas production is currently from 9 projects in seven countries, viz., Russia, Sudan, Vietnam, Syria, Colombia, Venezuela and Brazil. OVL's share of crude oil and natural gas production in 2009-10 is expected to be 8.142 Million. Metric Tonne of oil equivalent (MMTOE) including of 2.017 BCM of natural gas. The other 30 projects being implemented by OVL are at various stages of exploration and appraisal. The gross revenue of Rs.13,444 crore is estimated by OVL during the financial year 2009-10 with net profit of Rs.412 crore. Further, OVL is pursuing acquisition of various oil and gas exploration and production opportunities in Russia, Central Asia, Latin America, Africa, and Middle East, which are at different stages.

  • Established as a joint stock company with limited liabilities on November 5,1999, as part of the restructuring of China National Petroleum Corporation (CNPC).
  • It was respectively listed on the NYSE (ADS code: PTR) and the HKSE (stock code: 00857) in April 2000 and on the Shanghai Stock Exchange (stock code:601857) in November 2007.
  • As at end of 2010, CNPC holds 86.292% shares of Petro China.
  • Ranked 7th by Platts in the “Top 250 Global Energy Companies” published by Platts Energy in 2010, which was the top ranking among enterprises in the Asia Pacific region for eight consecutive years.
  • Included as a constituent stock of the SSE Social Responsibility index and the Hang Seng Corporate Sustainability Index.
  • Adheres to the corporate policy of “Caring for Energy, Caring for You” and core business management principles of “Honesty, Innovation, Performance, Harmony and Safety”.
  • Perseveres in carrying out business in a more effective, safe and environmentally friendly manner; pursues the balance among the economy, environment and society; provides sustainable energy for economic and social development; and creates a better life for people.

CORE BUSINESSES

Engaged in a broad range of businesses related to oil and natural gas, which mainly include the exploration, development and production of crude oil and natural gas, the refining, transportation, storage and marketing of crude oil and refined products, the production and marketing of primary petrochemical products, their derivatives and other chemicals, and the transportation and marketing of natural gas.

YEAR

TOTAL ASSETS (RMB)

2010

16565

2009

14503

2008

11962

2007

10696

2006

8803

YEAR

TURNOVER (RMB)

2010

14654

2009

10193

2008

10726

2007

8375

2006

6914

YEAR

TAXES (RMB)

2010

2870

2009

2045

2008

2227

2007

1722

2006

1614

YEAR

NET PROFIT (RMB)

2010

1400

2009

1034

2008

1145

2007

1468

2006

1435

  • Chevron is an American multinationalenergycorporation. Headquartered inSan Ramon, California, and active in more than 180 countries.
  • It is engaged in every aspect of theoil,gas, andgeothermalenergy industries, includingexplorationandproduction, refining, marketing and transport; chemicals manufacturing and sales; andpower generation.
  • Chevron is one of the world's six "super major" oil companies. For the past five years, Chevron has been continuously ranked as one of America's 5 largest corporations byFortune 500.

Global Snapshot

  • Second-largest integrated energy company in the United States and among the largest corporations in the world, based on market capitalization.
  • Business activities around the world.
  • Diverse and highly skilled global workforce consists of approximately 58,000 employees and about 4,000 service station employees.
  • Capital and exploratory expenditures - Invested $21.8 billion in 2010; announced 2011 projected outlays of $26 billion, with continued focus on exploration and production

Financial Highlights - 2010

  • Sales and other operating revenues - $198 billion
  • Net income attributable to Chevron Corporation - $19 billion, or $9.48 per share - diluted
  • Return on capital employed - 17.4 percent
  • Return on average stockholders' equity - 19.3 percent
  • Cash dividends - $2.84 per share

Accomplishments - 2010

Upstream

  • Exploration - Achieved an exploration drilling success rate of 57 percent. Results included several natural gas discoveries offshore Western Australia. Additionally, acquired offshore exploration leases in China, Liberia, Turkey and the United States and captured shale gas acreage in Canada, Poland and Romania.
  • Production - Produced 2.763 million net oil-equivalent barrels per day, approximately a 2 percent increase over 2009, with about 75 percent of the volume outside the United States in more than 20 different countries.
  • Acquisition - Announced plans to acquire Atlas Energy, Inc., providing a shale gas acreage position in the Marcellus Shale, primarily in southwestern Pennsylvania. (Acquisition completed in February 2011.)

Major projects

  • Continued progress on the company's development projects to deliver future production growth.
  • Achieved first production at the deepwater Perdido Regional Development Project and the Athabasca Oil Sands Project Expansion and continued to increase production at the Tengizchevroil Sour Gas Injection/ Second Generation Plant project in Kazakhstan.
  • The company also reached final investment decision on a number of major capital projects, including Jack/St. Malo, Big Foot and Tahiti 2 in the Gulf of Mexico; Papa-Terra in Brazil; and expansion of the Caspian pipeline in Kazakhstan and Russia.

Natural gas projects

  • Delivered first gas from the Escravos Gas Project Phase 3A in Nigeria.
  • In Australia, continued construction on Barrow Island and awarded approximately $25 billion of contracts for materials and services for the Gorgon Project.
  • The company also executed additional binding and nonbinding agreements with Asian customers for the delivery of liquefied natural gas from the Gorgon and Wheatstone projects.

Downstream

  • Refinery upgrades - Completed project startups, including the Pascagoula, Mississippi, refinery continuous catalytic reformer and the Yeosu, South Korea, gas-oil hydrocracker. Construction also began on a processing unit designed to further improve the El Segundo, California, refinery's reliability, high-value product yield and flexibility to process a range of crude slates.
  • Chemical - Commenced operations on the ethylene cracker and polyethylene/normal alpha olefins plants in Qatar. Continued construction on a petrochemical project in Saudi Arabia with startup expected in late 2011.
  • Sales of nonstrategic assets - Sold a 23.4 percent ownership interest in Colonial Pipeline in the United States. Additionally, concluded the sales of businesses in Malawi, Réunion and Zambia and 21 product terminals.

Corporate Strategies

  • Financial-return objective - Create stockholder value and achieve sustained financial returns from operations that will enable Chevron to outperform competitors.
  • Enterprise strategies - Invest in people to strengthen organizational capability and develop a talented global workforce that gets results the right way. Execute with excellence through rigorous application of the company's operational excellence and capital stewardship systems and disciplined cost management. Grow profitably by using our competitive advantages to maximize value from existing assets and capture new opportunities.
  • Major business strategies - Upstream - grow profitably in core areas, build new legacy positions and commercialize the company's equity natural gas resource base while growing a high-impact global gas business. Downstream - improve returns and grow earnings across the value chain. The company also continues to utilize technology across all its businesses to differentiate performance and to invest in profitable renewable energy and energy efficiency solutions.
  • TheExxon Mobil Corporation, orExxonMobil, is anAmericanmultinationaloilandgascorporation.
  • It is a direct descendant ofRockefeller's StandardCompany,and was formed on November 30, 1999, by the merger ofExxonandMobil. Its headquarters are inIrving, Texas.
  • ExxonMobil is one of thelargest publicly traded companiesin the world, having been ranked either #1 or #2 for the past 5 years. However they are currently 6th according to Forbes Global 2000.
  • Exxon Mobil's reserves were 72 billion oil-equivalent barrels at the end of 2007 and, at then (2007) rates of production are expected to last over 14 years.
  • With 37oil refineriesin 21 countries constituting a combined daily refining capacity of 6.3 million barrels, Exxon Mobil is the largest refiner in the world,a title that was also associated with Standard Oil since its incorporation in1870.

2010 RESULTS AND HIGHLIGHTS

  • Record performance in workforce safety that continues to lead industry.
  • Strong earnings of $19.3 billion in a challenging business environment.
  • Total shareholder distributions of $26 billion.
  • Industry-leading return in average capital employed of 16 percent.
  • Start-up of eight major upstrwam projects.
  • Total net production of liquids and natural gas available for sale of 3.9 million oil-equivalent barrels per day.
  • Proved oil and gas reserve additions of 2.0 billion oil-equivalent barrels, replacing 134 percent of production excluding asset sales and determined on ExxonMobil's basis.
  • Start-up of a world-scale, fully integrated refining and petrochemical complex in Fujian Province, China.

Strategies

Upstream

  • Identify and selectively pursue the highest-quality exploration opportunities.
  • Invest in project that deliver superior returns.
  • Maximize profitability of existing oil and gas production.
  • Capitalize on growing natural gas and power markets.

Downstream

  • Maintain best-in-class operations, in all respects.
  • Provide quality, value products and services to our customers.
  • Lead industry in efficiency and effectiveness.
  • Capitalize on integration with other ExxonMobil businesses.
  • Selectively invest for resilient, advantaged returns.
  • Maximize value from leading-edge technologies.

Chemical

  • Focus on businesses that capitalize on core competencies.
  • Consistently deliver best-in-class performance.
  • Build proprietary technology positions.
  • Capture full benefits of integration across ExxonMobil operations.
  • Selectively invest in advantaged projects.

FINANCIAL STATEMENT

INTRODUCTION TO BALANCESHEET

A balance sheet is a list of assets and liabilities and claims of a business at some specific point of time and is prepared from an adjusted Trial Balance. It shows the financial position of a business by detailing the source of funds and utilization of these funds. A Balance Sheet shows the assets and liabilities grouped, properly classified and arranged in a specific manner.

USES OF BALANCE SHEET

  • It enables us to ascertain the proprietary interest of a person

Or business organization.

  • It enables us to calculate the actual capital employed in the business.
  • The lender can ascertain the financial position of the business.
  • It may serve as the basis for determining purchase consideration of the business.

LIMITATION OF BALANCE SHEET

  • The balance sheet can not reflect the value of certain factors

Such as skill and loyalty of staff.

  • A conventional balance sheet may mislead untrained readers

In inflationary situations.

INTRODUCTION TO PROFIT AND LOSS

ACCOUNT

The Profit & Loss account is also known as the income statement. It can be defined as a report that summaries the revenues and expenses of an accounting period to reflect the changes in various critical areas of firm's operation. It is of greatest interest and import and importance to end-users of accounting statements because it enables them to ascertain whether the business operations have been profitable or not during that particular period.

The important destination between the balance sheet and income statement is for a period of one year. The two broad categories of item shown in the income statement are revenue and expenses. Revenues derived from a company's operation say manufacturing and selling products. During transaction business has also incurred revenues other than main business operation. Expenses are occurred in day-to-day transactions.

Here, expenses regarding manufacturing activities, office and administrative expenses are considered. By deducting total expenses from total revenue we get profit and by deducting total revenue from total expenses we get total loss. Income tax amount is also decided by profit that incurred in business with help of this statement.

INTRODUCTION TO CASH FLOW STATEMENT

Cash is the nerve center around which business activity flow. The profit figure is shown in the profit & loss statement in the book profit. It does not represent cash profit. For knowing the cash profit we prepare cash flow statement in the business. This statement provides information about the cash flows of an enterprise. This statement is also useful in taking economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents. The cash flow statement deals with the provision of information about the historical changes in cash. Cash flow statement which classifies cash flows during the period among (i) Operating (ii) investing (iii) financing activities.

FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis will help business owners and other interested people to analyse the data in financial statements to provide them with better information about such key factors for decision making and ultimate business survival.

Purpose:

To use financial statements to evaluate an organisation's

- Financial performance

- Financial position.

To have a means of comparative analysis across time in terms of:

- Intracompany basis (within the company itself)

- Intercompany basis (between companies)

- Industry Averages (against that particular industry's averages)

To apply analytical tools and techniques to financial statements to obtain useful information to aid decision making.

Financial statement analysis involves analysing the information provided in the financial statements to:

- Provide information about the organisation's:

  • Past performance
  • Present condition
  • Future performance

- Assess the organisation's:

Earnings in terms of power, persistence, quality and growthSolvency

Effective Financial Statement Analysis

To perform an effective financial statement analysis, you need to be aware of the organisation's:

- business strategy

- objectives

- Annual report and other documents like articles about the organisation in newspapers and business reviews.

These are called individual organisational factors.

Requires that you:

  • Understand the nature of the industry in which the organisation works. This is an industry factor.
  • Understand that the overall state of the economy may also have an impact on the performance of the organisation.

→ Financial statement analysis is more than just “crunching numbers”; it involves obtaining a broader picture of the organisation in order to evaluate appropriately how that organisation is performing

Tools of financial statement analysis

The commonly used tools for financial statement analysis are:

  • Financial Ratio Analysis
  • Comparative financial statements analysis:

- Horizontal analysis/Trend analysis

- Vertical analysis/Common size analysis/ Component Percentages

FINANCIAL RATIO ANALYSIS

Financial ratio analysis involves calculating and analysing ratios that use data from one, two or more financial statements. Ratio analysis also expresses relationships between different financial statements.

Financial Ratios can be classified into 4 main categories:

a. Profitability Ratios

3 elements of the profitability analysis:

Analysing on sales and trading margin

- focus on gross profit

Analysing on the control of expenses

- focus on net profit

Assessing the return on assets and return on equity

Gross Profit % = Gross Profit * 100

Net Sales

Gross profit ratio indicates to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is.

Net Profit % = Net Profit after tax * 100

Net Sales

Net profit ratio is used to measure the overall profitability. This ratio indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc.

Operating profit % = net profit before tax *100

Net sales

Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit.

b. Liquidity or Short-Term Solvency ratios

Working capital management is important as it signals the firm's ability to meet short term debt obligations.

Working Capital = Current assets - Current Liabilities

Working capital is an amount of money borrowed from a bank or other lender and used by a new business for money to keep operations going and pay business bills during the startup period, when income is usually less than expenses. Some companies can generate cash so quickly they actually have a negative working capital like petro china and Exxon Mobil. A negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivable or in some cases it means that the company is facing bankruptcy.

Current Ratio = Current Assets

Current Liabilities

The objective of current ratio is to measure the margin of safety available for short term creditors. The higher the ratio, the more capable the company is of paying its obligations. The current ratio of ONGC gives a sense of the efficiency of its operating cycle. CHEVRON is also on the growing stage while PETROCHINA and EXXON MOBIL's current ratio suggests that the company is not in good financial health, not necessarily bankrupt, but it's not a good sign.

Quick Ratio = Current Assets - Inventory - Prepayments Current Liabilities - Bank Overdraft

The objective of computing this ratio is to measure the ability of the firm to meet its short term obligations as and when due without depending upon the realization of stock.

c. Asset Management or Activity Ratios

How well assets are used to generate revenues (income) will impact on the overall profitability of the business.

Asset Turnover = Net Sales

Average Total Assets

This ratio determines the amount of sales that is generated from each dollar of assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover.

Inventory Turnover = Cost of Goods Sold

Average Ending Inventory

A low turnover is a bad sign because products tend to deteriorate as they sit in the warehouse. Higher inventory means factor of higher demand.

Average Collection Period = Average accounts Receivable

Average daily net credit sales*

* Average daily net credit sales = net credit sales / 365

The approximate amount of time that it takes for a business to receive payments owed, in terms of receivables, from its customers and clients. Possessing a lower average collection period is seen as optimal, because this means that it does not take a company very long to turn its receivables into cash.

d. Financial Structure or Capitalisation Ratios

Measures the riskiness of business in terms of debt gearing.

Debt/Equity ratio = Debt / Equity

Debt Equity ratio indicates what proportion of equity and debt the company is using to finance its assets. A low ratio of 0.0005 means the company is exposing itself to a large amount of equity. This is certainly better than a high ratio since this would expose the company to risk such as interest rate increases and creditor nervousness.

Debt/Total Assets ratio = Debt *100

Total Assets

A metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. A higher percentage indicates more leverage and more risk. If the ratio is less than one, the company's assets are financed through equity.

Equity ratio = Equity *100

Total Assets

The equity ratio is a good indicator of the level of leverage used by a company. The equity ratio measures the proportion of the total assets that are financed by stockholders and not creditors.

 

ONGC

PETROCHINA

CHEVRON

EXXON MOBIL

LIQUIDITY

       

CURRENT

2.3778

0.6664

1.683

0.4683

WORKING CAPITAL

7711.056

-21915.8641

19829

-62696

QUICK

0.7121

0.211

0.5883

0.3265

PROFITABILITY

       

GROSS PROFIT

100.3643

12.8139

96.7159

97.0745

NET PROFIT

27.9523

10.29

9.3379

16.0651

OPERATING PROFIT

41.649

12.8191

15.642

11.1972

FINANCIAL STRUCTURE

       

DEBT EQUITY

0.00057

13.003

10.618

6.178

DEBT TOTAL ASSET

0.01242

45.8644

5.9706

3.0554

EQUITY

217.97

352.7085

57.266

49.4559

ASSET MANAGEMENT

       

ASSET TURNOVER

0.093356

3.897

0.577

0.658

INVENTORY TURNOVER

14.96287

18.921

0.032

14.962

AVERAGE COLLECTION PERIOD

9.3054

36.659

0.138

16.244

COMPARATIVE FINANCIAL STATEMENT ANALYSIS

  1. Horizontal analysis/Trend analysis
    • Trend percentage
    • Line-by-line item analysis
    • Items are expressed as a percentage of a base year
    • This is a time series analysis
  2. Vertical analysis/Common size analysis/ Component Percentages
    • All items are expressed as a percentage of a common base item within a financial statement
    • e.g. Financial Performance - sales is the base
    • e.g. Financial Position - total assets is the base
    • Important analysis for comparative purposes

- Over time and

- For different sized enterprises

HORIZONTAL/ TREND ANALYSIS OF ONGC

 

2010

2009

increase/decrease

% increase/decrease

         

fixed assets

5825.2176

4974.93675

850.28085

17.09128965

         

investments

1488.003525

3634.9434

-2146.939875

-59.06391486

         

working capital

       

current assets

12098.54768

12284.9901

-186.442425

-1.51764408

current liabilities

4387.492125

4748.64705

-361.154925

-7.605427845

 

7711.05555

7536.34305

174.7125

2.318266284

         

capital employed

19639.70483

17721.48375

1918.221075

10.82426902

         

less :debentures

1.119375

6.015375

-4.896

-81.39143445

         

shareholders fund

19638.58545

17715.46838

1923.117075

10.85558

         

equity share capital

481.249575

481.249575

0

0

         

plus : reserves

19157.33588

17234.2188

1923.117075

11.15871336

         
 

19638.58545

17715.46838

1923.117075

10.85558132

HORIZONTAL/ TREND ANALYSIS OF PETROCHINA

 

2010

2009

increase/decrease

% increase/decrease

         

fixed assets

195199.7084

169409.153

25790.55543

15.22382645

         

investments

40471.35901

33548.8056

6922.55342

20.63427683

         

working capital

       

current assets

43786.47288

45008.2169

-1221.74399

-2.714490986

current liabilities

65702.33704

59405.8682

6296.46887

10.59906885

 

-21915.86416

-14397.651

-7518.21286

52.21832855

         

capital employed

213755.2032

188560.307

25194.89599

13.36171772

         

less :debentures

20082.40728

13067.6612

7014.74609

53.68019562

         

shareholders fund

193672.7959

175492.646

18180.1499

10.35949

         

equity share capital

154438.6228

138778.406

15660.21692

11.28433262

         

plus : reserves

39234.17313

36714.2402

2519.93298

6.863639203

         
 

193672.7959

175492.646

18180.1499

10.35949386

         

HORIZONTAL/ TREND ANALYSIS OF CHEVRON

 

2010

2009

increase/decrease

% increase/decrease

         

fixed assets

104504

96468

8036

8.330223494

         

investments

7724

9587

-1863

-19.43256493

         

working capital

       

current assets

48841

37216

11625

31.23656492

current liabilities

29012

26211

2801

10.68635306

 

19829

11005

8824

80.18173557

         

capital employed

112793

99670

13123

13.16644928

         

less :debentures

286

301

-15

-4.9833

         

shareholders fund

112507

99369

13138

13.22142721

         

equity share capital

105811

92561

13250

14.31488424

         

plus : reserves

6696

6808

-112

-1.645123384

         
 

112507

99369

13138

13.22142721

HORIZONTAL/ TREND ANALYSIS OF EXXONMOBIL

 

2010

2009

increase/decrease

% increase/decrease

         

fixed assets

139116

121346

17770

14.6440756

         

investments

39085

42361

-3276

-7.7335285

         

working capital

       

current assets

55235

72266

-17031

-23.567099

current liabilities

52061

49100

2961

6.0305499

 

3174

23166

-19992

-86.298886

         

capital employed

140463

145277

-4814

-3.3136697

         

less :debentures

7129

7025

104

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