"I have to laugh," says Exxon Corp. Chairman Clifford Garvia. "Exxon is 7.4 percent of the petroleum market, and yet people want to break us up. It just doesn't make any sense."
By Garvin's measure, Exxon is not all that large. But by any other measure it's enormous.
Revenues last year from production, refining, shipping, marketing and other sources totaled $58.5 billion, making Exxon the largest industrial corporation in the world. Profits totaled $2.4 billion. Assets at year-end stood at $38,000 billion. While $4.6 billion was spent for exploration and other capital projects, the company generated $5.6 billion in cash flow. And the company keeps $5 billion in cash and marketbale securities on hand.
For Exxon - which until a few years ago was called the Standard Oil Co. of New Jersey and which began life as the cornerstone of the old Rockefeller Standard Oil trust - size is both a source of strength and a limitation on what it can do as a company, as Garvin observed.
She has allowed Exxon to take to stake in virtually every major production reservoir worldwide. The company has been the most aggressive bidder in the offshore lease sale conducted by the U.S. government. It is a major operator in the North Sea and in Alaska!
But size also prevents the company from making the kinds of aggressive acquisitions that would allow it to significantly diversify from its energy base or to expand through purchases.
While no one confirms it officially, there is widely believed to be an "Exxon rule" in Washington that precludes the company from making major outside acquisition.
When Kennecott Copper was selling Peabody Coal, at the mandate of the Federal Trade Commission, it submitted a list of possible purchasers for approval. Only one name was crossed off the list by the FTC, according to sources, and that name was Exxon.
Attempts to develop new ventures internally, like Qyx, the computer-programmed electric typewriter, could produce a billion-dollar business in a few years. Yet that would be insignificant in the context of what will by then probably by a $100 billion company.
Exxon, according to company watchers, faces two related tasks as it enters the 1980's: Replacing its depleting existing production of oil and gas with new discoveries, and finding productive ways to spend the enormous cash flow that will continue pouring into the company's coffers over the near-term.
There are predictions that by the 1990s Exxon may have to start slowly liquidating corporate assets if its earnings from declining oil and gas production can't be reinvested in other areas fast enough.
With its enourmous cash investments in both the North Sea and the North Slope beginning to pay off in a big way, Exxon's profit growth over the next few years is expected to average more than 10 percent annually, outpacing the other international oil grants.
"Their problem is finding places to put their money," said Goldman Sachs petroleum analyst Charles Cahn. He observed, however that this will "really be a problem for the 1990s and not the 1980s."
"Part of their problem is the size of their lower-48 states' production base," said George Baker, an economist with Petroleum Analysts Ltd. "It is large and profitable, but it is also very matured in its rate of depletion. It is so significant that it will be difficult to replace it. That is why they have to go out and become an aggressive bidder on any new oil projects that come up."
Under the circumstances, Exxon has done rather well. Higher prices have doubled overall revenues since the 1973 embargo year. Profits last year dopped back to below their 1972 level after hitting a peak of $3 billion in 1974. But for the first six months of 1978 they are up by 13 percent.
"Sure it's in our enlightened self-interest to continue to search," said Exxon Chairman Garvin. "We're not interested as professional managers in liquidating this enterprise. We could have taken the $5 billion we spent last year and given it back to the shareholders, saying we'll go out of business in the future. But that's not what we consider our mission to be."
Exxon's own production of petroleum declined 51 percent between 1973 and 1977 to 2.3 million barrels a day. This was supplemented by oil from the Organization of Petroleum Exporing Countries like Saudi Arabia, where Exxon operates. But total production of 4.9 million barrels a day last year was down 18 percent from 1973. U.S. production was down 16 percent. And natural gas production also declined 9 percent since 1973 to 8.4 million cubic feet daily last year.