ExxonMobil Continues to See Benefits from Merger
ExxonMobil Corp. said it expects to see an extra $1 billion in annual benefits from the 1999 merger of Exxon and Mobil, which would bring revenue gains and savings from the merger to over $8 billion in 2003.
First estimates of merger benefits were thought to be around $2.8 billion per year when they announced the planned merger in late 1998, that estimate was raised to $3.8 billion when they completed the deal in late 1999.
Chairman and Chief Executive Officer Lee Raymond told a meeting of analysts and investors on Tuesday that the company had realized annual merger benefits of $5.8 billion by the end of 2001 and that the number would rise to over $7 billion in 2002. ExxonMobil expects to capture an extra $1 billion in merger benefits in 2003, he said, but in later years it will no longer disclose figures for cost savings and revenue enhancements from the merger because Exxon and Mobil have become too entwined. At the time of the merger, Exxon said cost cutting efforts would include the loss of 16,000 jobs or 13 percent of the combined company's work force, a number the company later raised to 19,000.
Raymond told the audience that the Irving, Texas company has no plans to make major changes in its strategy, despite recent weakness in oil and gas prices. Hurt by lower energy prices, the company's fourth-quarter income fell by nearly 50 percent. "We don't need to reinvent ourselves," said Raymond, who added that the company is sticking to its target of raising oil and gas production by an average of 3 percent a year until 2007.
ExxonMobil's production increased by just one percent in 2001, excluding the suspension some natural gas production in Indonesia due to security concerns. Raymond reiterated plans to boost capital spending by 10 percent from the $12.3 billion the company spent last year and said capital spending will rise by another 10 percent in 2003.