Exxon Mobil Corporation (NYSE: XOM), a leading integrated oil and gas company, was once the world's largest publicly traded company by market capitalization. It has since surrendered the top ranking to Apple Inc. (NASDAQ: AAPL) and was also surpassed by Alphabet Inc. (NASDAQ: GOOG), Microsoft Corporation (NASDAQ: MSFT) and Berkshire Hathaway Inc. (NYSE: BRK-A) at different times. As of April 22, 2016, Exxon Mobil was fourth on the market capitalization list behind Apple, Alphabet and Microsoft. With energy markets eventually powering Exxon Mobil out of the current down cycle, it may well restore its earnings and further build up equity to return to its most prominent position in market and equity capitalization.

Many energy companies have been weighed down by their heavy debt load in the energy downturn. Thus, having less debt capitalization makes it easier for a company to crawl out of the market trough. Compared to its peers and the industry as a whole, Exxon Mobil has a lower debt-to-equity ratio, putting less financial stress on its earnings and liquidity. However, with little to no asset expansion since the end of 2012, as Exxon Mobil reined in its capital expenditures to weather the storm of falling oil prices, enterprise value has at last also shrunk. Absent favorable changes in energy markets, Exxon Mobil may not quickly see upward movements in its equity capitalization, debt capitalization and enterprise value metrics.

Equity Capitalization

In the three years since the end of 2012, Exxon Mobil's total book equity, as shown in the balance sheet, appeared to be holding the base better than its equity capitalization as valued by the market. The book equity value carried an upward momentum since at least 2011, all the way to the end of 2014, with retained earnings never ceasing to accumulate and continuing to add to the equity's book value. Equity capitalization, on the other hand, stalled on its way up after 2013, when the stock started trading down, along with oil prices turning south. The diversion between equity book value and equity capitalization suggests that investors have been bracing for continued negative business fundamentals in the general energy markets. Even though Exxon Mobil is generating earnings and expanding its equity on the books, absent year-over-year earnings increases, its equity capitalization will likely remain depressed.

Debt Capitalization

While companies may issue new shares to obtain additional equity capital to fund business expansions, it is more common for them to rely on earnings and borrowing for capital expenditure funding. Because of continued earnings declines at Exxon Mobil after 2012, the company had been resorting to debt use to structure any new capital. However, despite increases of its total debt since 2012, the company's total debt-to-equity ratio remains below those of its peers and the industry average. With $38.7 billion in total debt and $170.8 billion of total book equity as of the end of 2015, the company's total debt-to-equity ratio was a mere 0.2. When compared to the amount of equity capitalization, its debt capitalization is only about 10% of the market worth of its equity capital. Its relatively low level of debt use helps ensure the financial strength Exxon Mobil needs during a time of weak earnings performance.

Enterprise Value

Enterprise value is a useful valuation metric. Unlike equity or debt capitalization, which each give only partial valuation of a company's equity or debt capital, enterprise value provides a fuller picture of the value of the total assets in use, funded by both equity and debt. In other words, enterprise value measures the total economic value of a company, which is an insight for investors as to how the company may be performing financially as a whole, given the way it sources its capital. Exxon Mobil's Enterprise value has been on the decline after 2013. The company's prudent debt management certainly is not putting any strain on its operations, but with dismal earnings and equity capitalization, the market is not likely to assign higher marks on Exxon Mobil's enterprise value in the immediate term.

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