ExxonMobil to merge business units as part of its cost-cutting plan in 2023, harnesses a vast cash flow in 23 years

Recently, ExxonMobil has highlighted that the established firm is merging some business units as a cost-cutting plan. The initiative could save annual costs by 9 billion USD from the 2019 levels in 2023.

The decision is part of the restructuring process followed by ExxonMobil this year. It implies that the fear of recession has not left the top business’s earnings untouched as it gears for a second layer of management.

The change would be associated with all the global trading platforms, from oil to freight and even the power sector.

After the report was published, the shares of the company increased substantially by 1.5 percent to record profits worth 56 billion USD.

ExxonMobil, the U.S.-based company, has previously mentioned that it would reorganize the company into three divisions: Upstream, Low Carbon Solutions, and Product Solutions. The divisions would deal with refining and chemical activities.

Exxon has clarified that it would merge smaller units to take decisions and effectively manage issues of supply, procurement, and acquisition of raw materials, among other factors.

The decision will provide more negotiation power to Exxon on deals with third parties. It may allow one unit to negotiate separate deals with the same dealer, thus helping to increase revenue.

Exxon has opened up to valid sources stating that the U.S based firm wants to involve simple processes and more advanced tools that will allow the company to work quickly and with fewer difficulties at a lower cost.

The company had previously undergone a laying-off procedure. But, they have confirmed that the recent decision is about something other than reducing the headcounts of the workforce. 

The company suffered a meteoric loss in its wealth in 2020 and has been changing for efficient functioning.

The crude oil sector has not been performing well in the market, which has raised doubts about the world’s largest market with a vast customer base.

U.S. crude prices were traded at 1.1 percent lower, accounting for 77.62 USD a barrel, while the Brent contract declined to 1 percent to account for 84.19 USD for a barrel.

The official data from the Energy Information Administration has disclosed that the U.S. oil inventories have grown for the seventh consecutive week, gaining the longest streak in history since 2020, while the rise in the gasoline and distillate stockpiles has remained considerably weak.

Recently, ExxonMobil Corporation has been in the news for achieving the highest cash flow in the last 23 years. Could the initiatives have any role in achieving success?

The fourth quarter of 2022 earnings report has sown that ExxonMobil has announced its quarterly earnings accounting for 12.8 billion USD, and the full-year earnings stood at 55.7 billion USD. The company has stated that it has paid a valuation of 1.3 billion USD in European taxes.

An official from the corporate headquarters has talked about the success. He has mentioned that the results benefitted from the favorable market, causing rising demand for crude. But, the company has tactfully taken advantage of the undersupplied market. The company began to invest counter-cyclically before the pandemic. They had gathered conventional wisdom and leaned in with the investments through the pandemic when the circumstances were difficult.

He has even acknowledged the improved portfolio of assets and organizational changes followed by a strong operation that helped to deliver stronger earnings, cash flows, and return the capital investments and shareholder funds.

The Senor ice President of ExxonMobil has reported the upstream earnings in the production sector accounted for 40 billion USD. This was a 23 billion USD increase from the valuation reported in 2021. The situation was driven by the volatile commodity price circumstances caused by the recovering demand and tight supply of crude.

The company has integrated advanced technology to undergo efficient resource recovery. The increased activity of the firm was funded by stronger measures of cost control amidst inflation.

Exxon’s array of vast physical assets and balance sheet provides the company advantages to come up as the strongest trading house that has reaped higher profits in the present fiscal. Exxon’s latest strategy has been gaining publicity. The company has made a series of external hirings in 2023. The company has further decided to centralize traders in London, which would help them to attract and retain talents in trading.

Exxon has the potential to become the top dealer in crude supplies, but it would not be an easy thing to achieve.

Edited by Prakriti Arora