NEW YORK, Dec. 15 /PRNewswire/ -- Exxon Mobil Corporation (NYSE: XOM)
Chairman Lee Raymond today briefed investors and the media on the new
ExxonMobil organization, and the updated outlook for merger benefits.
"We have moved from a year of planning to combine Exxon and Mobil, to
actually operating as a merged company, ExxonMobil," Raymond said.
"When we announced plans for the merger -- about a year ago -- both
companies recognized this was a once in a lifetime opportunity. Since that
time, we have further refined the opportunities and benefits available to the
merged company. While we were excited about the prospects for ExxonMobil in
1998, we are even more positive today," Raymond said. "This enthusiasm is
shared by the many Exxon and Mobil people who have worked so hard to make this
merger a reality."
Raymond commented that "the synergy benefits of the merger are expected to
be greater than previously forecasted and are likely to be realized sooner.
Our enthusiasm, however, goes beyond numbers. What we see is a company
positioned exceptionally well for the future. . .in terms of its talented
workforce, its existing portfolio of high quality assets, and its
technological leadership. These characteristics coupled with strong financial
resources place ExxonMobil in a unique position to capture many of the
excellent opportunities likely to be available to our industry over the coming
years."
Transition Efforts
"Lou Noto said it best last December. The merger of Exxon and Mobil was
born of opportunity, not necessity," Raymond noted. "Our clear objective has
been to maximize the value of that opportunity for our shareholders by
creating the premier company in the industry," he added. "We are moving from
a multifunctional, geographically based regional structure to 11 global
functional businesses, each responsible for guiding their operations and
stewarding results on a worldwide basis."
Raymond said that the task of combining two companies the size of Exxon
and Mobil "was simplified by the inherent compatibility and shared values of
the two organizations. This compatibility was abundantly evident on the
transition teams, which functioned extremely well, building strong confidence
in how well the organizations will blend together."
As a result of the merger and other identified organizational efficiency
steps, Raymond said staffing requirements are expected to decline by almost
16,000 people between year-end 1998 and year-end 2002. About 2,000 of that
reduction already occurred in 1999, prior to completion of the merger.
Executive positions will decrease by more than 1,000 or about one-third of the
two companies' pre-merger totals. These staffing numbers do not reflect
required divestments or any additional productivity improvements in the base
business beyond those already identified.
"This is clearly the most difficult aspect of implementing a merger as
large as this one," noted Raymond. "We certainly appreciate the contributions
all employees have made to Exxon and Mobil over the years, and we have plans
in place to help cushion the impact on those who must separate."
Merger Benefits Update
Since the merger was announced in December 1998, Exxon and Mobil have been
designing the merged company and developing plans for capturing near-term
synergy benefits. "We now have a much better understanding of what we can
achieve and how to achieve it," Raymond said.
A year ago, the companies expected pre-tax synergy benefits to be
significant at about $2.8 billion per year by year three of the merger.
"Our current view is that near-term merger synergies will be considerably
higher than we originally estimated," Raymond said. "We expect the synergies
directly attributable to the merger itself to amount to $3.8 billion annually,
on a pre-tax basis. This figure does not include any cost or margin
improvements from our traditional ongoing efficiency programs -- that would
occur with or without the merger. For instance, in 1999 the two companies'
base business efficiency efforts will yield a $1.2 billion reduction in cash
operating costs compared to 1998. These savings are not included in the
$3.8 billion -- nor are the expected results of similar efforts in 2000 and
beyond. In addition, the $3.8 billion does not include any cost savings
associated with divestments."
Raymond noted that a key objective of the merger planning effort was to
achieve readiness to begin operating on a combined basis -- and start
capturing synergy benefits -- rapidly following completion of the merger. "We
have only just started to review forward plans together," Raymond said. "But
I am confident that we can achieve at least the $3.8 billion, and we can do it
faster than we thought at this time last year."
Raymond noted that the merger is forecast to improve net income by about
$1 billion in 2000, with the positive impact rising to around $2.5 billion by
2003. These figures include the impact of one-time restructuring costs and
asset divestments.
ExxonMobil expects to capture the full market value of the assets
identified by the regulators for divestment. Sales proceeds from these assets
are estimated to be in the range of $4-$5 billion. Raymond said that the
earnings impact from divestitures was more difficult to estimate, "but current
figures indicate a net gain of around $1 billion after tax."
He noted that the asset sales alone would likely add about $3 billion to
ExxonMobil's cash flow. "On a one-time basis, the merger should generate more
like $3.5 billion in positive cash flow -- when you include the impact of
reduced working capital requirements and restructuring costs."
Raymond also stated that, "By year three, the merger is expected to
provide recurring positive cash flow of about $4 billion per year, reflecting
the after-tax impact of synergy benefits and optimization of the merged
company's capital investment program."
World Class Businesses
In addition to the discussion of merger planning and the expected
financial benefits, Raymond provided an overview of ExxonMobil's worldwide
operating organizations. His comments highlighted the strategic fit -- both
functionally and geographically -- between the assets of the two companies.
He noted ExxonMobil's excellent competitive position in the global upstream,
downstream, and petrochemicals businesses -- and placed special emphasis on
the company's continued commitment to technological leadership.
In closing, Raymond noted that "While the merger will necessarily result
in many changes, it is important to remember that many things will remain the
same -- the most important of which are our fundamental strategies for
generating superior long-term performance."
CAUTIONARY STATEMENT: Projections, estimates, and business plans
described in this news release are forward-looking statements. Actual
future results, including cash flow and earnings effects, synergy benefits,
staffing impacts, and changes in capital productivity resulting from the
merger, could differ materially due to a number of factors. These factors
include changes in market conditions affecting the oil and gas industry,
changes in law or government regulation, the outcome of commercial
negotiations, our ability to integrate the businesses of Exxon and Mobil as
planned and other factors discussed under the heading "Cautionary Statement
Concerning Forward-Looking Statements" in our Joint Proxy Statement/Prospectus
dated April 5, 1999.
SOURCE Exxon Mobil Corporation
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Related links:
http://www.exxon.mobil.com
CONTACT:
Tom Cirigliano of Exxon Mobil Corporation,
972-444-1109
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