Oil & Gas Company Profile: BP #Energy

Pre Coronavirus 2020 I completed the Duke University Oil & Gas Industries: Operations and Market Program. Recently, I was asked to share a copy of my Peer Reviewed-graded Assignment (April 2020) Company Profile analysis by one of my program peers. Although the world and the Oil & Gas Industry is much different today, it will be interesting to understand which Oil & Gas Companies have been able to manage through the global pandemic with VUCA Leadership Strategies and Diversified portfolios vs. those with a limited response.

Disclaimer: All the information contain in this assignment is public information. The analysis is based on the program requirements.

Company Profile

#BP aka British Petroleum p.l.c. is a multinational oil and gas company with operations in Europe, North and South America, Australasia, Asia and Africa; headquartered in London, England (Founded 14 April 1909; 110 years ago). It is one of the world's six or seven largest publicly traded oil and gas companies, also known as “supermajors”. It was ranked 5th in 2019 as the world’s biggest oil and gas company by Oil & Gas Intelligence.

 BP Historical Revenue from 2016 to 2019

Revenue is the income from which all costs and expenses are subtracted to arrive at net income. BP had declining revenue from 2018 to 2019 average of about 6%, historical years 2016-2017 saw an average increase in revenue of 27.63%. 2020-Q1 information is unavailable at the time of this report. But the O&G industry is facing a downturn exacerbated by the COVID-19 coronavirus pandemic, and global oil prices continue to drop due to weaker demand market outlook and a surprise increase in US crude inventories. 

• Revenue ending 2019-Q4 was $72.170B, a 6.13% decline year-over-year.
• Revenue for the twelve months ending 2019-Q4 was $282.616B, a 6.95% decline year-over-year.
• Revenue for 2019 was $282.616B, a 6.95% decline from 2018.
• Revenue for 2018 was $303.738B, a 24.19% increase from 2017.
• Revenue for 2017 was $244.582B, a 31.07% increase from 2016.
• Revenue beginning 2016 was ($6.5 B) ending 2015-Q4, a 26.84% below analyst expectations.

BP Historical EBITDA from 2016 to 2019

EBITDA can be defined as earnings before interest, taxes, depreciation and amortization. BP had declining EBITDA from 2018 to 2019 average of about 17.86%, historical years 2016-2017 saw an average increase in EBITDA of 58.53%. 2020-Q1 information is unavailable at the time of this report. But the downturn exacerbated by the COVID-19 pandemic, may have declining pressure on EBITDA.

• BP EBITDA for 2019-Q4 was $5.110B, a 20.37% decline year-over-year.
• BP EBITDA for the twelve months ending 2019-Q4 was $29.486B, a 15.36% decline year-over-year.
• BP 2019 annual EBITDA was $29.486B, a 15.36% decline from 2018.
• BP 2018 annual EBITDA was $34.835B, a 39.02% increase from 2017.
• BP 2017 annual EBITDA was $25.058B, a 78.03% increase from 2016.

BP Success/Challenges

With over 200 O&G companies in the world. In recent years the traditional supermajors have seen stiff competition from a growing number of National Oil Companies – state-owned entities that have increasingly seizing sole rights to major oil reserves.

According to the US Energy Information Association, the U.S. alone consumed an average of 20.5 million barrels of petroleum a day in 2018. This amounts to around 7.5 billion barrels over the year and approximately 22% of total world petroleum consumption. BP is vertically integrated in all areas of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading. In 2020 BP ambition "Net Zero" by 2050 – highlights their focus on other types of energy (including renewables, biofuels, wind, solar, and smart grid technologies), climate policies, operations efficiency, and their commitment to a lower carbon future.

Changing Key Performance Indicators (KPI)

In 2018 BP introduced a target to achieve 3.5 million tons of sustainable Green House Gas emissions reductions of its operations worldwide by 2025. BP downstream refining availability will be closer align with its upstream plant reliability measures. Remuneration will help align its board and executive management to the interests of the shareholders. These will be some of the key building blocks moving forward. 

BP Future Outlook

The building blocks of BP’s success will be these five building blocks, Start-ups, Operations, Growth, Partnerships, and their Net Zero focus. Some analysts (26) have already taken notice with offering a 12-month price forecasts for BP at a median target of 29.00, with a high estimate of 40.92 and a low estimate of 17.26. The median estimate represents a +17.31% increase from the last price of 24.72. Consensus among investment analysts is a Buy. Coronavirus will have an impact on the global O&G industry, how much is still to be determined.

1. Successful Start-Ups: Began production on five Upstream major projects, with investment decisions taken for a future five
2. Reliable Operations: Delivered refining availability of 95% record refining through-put, and Upstream operated plant reliability of 94.4%
3. Retail Growth: Agreed to major fuel joint venture with Reliance Industries Limited in India. Expanded convenience partnership sites to around 1,600 globally
4. Powerful Partnerships: Joined forces with DiDi to create new electric vehicle charging networks in China
5. Low Carbon Expansion: Charging Stations, Solar, and Biofuels

References

1. “BP 2019 Annual Report.” BP. March 2020. Web. 1 April 2020.
2. “BP 2018 Annual Reporting Archive.” BP. March 2020. Web. 15 March 2020.
3. “BP 2017 Annual Reporting Archive.” BP. March 2020. Web. 15 March 2020.
4.  “BP 2016 Annual Reporting Archive.” BP. March 2020. Web. 14 March 2020.
5. “BP 2016 Annual Reporting Archive.” BP. March 2020. Web. 13 March 2020.
6.  “BP PLC.” Wikipedia. 30 March 2020. Web
7. “Big Oil.” Wikipedia. 30 March 2020. Web
8. “BP Revenue 2006-2019| BP.” Macrotrends. 3 April 2020. Web.
9. “BP EBITDA 2006-2019| BP.” Macrotrends. 3 April 2020. Web.
10. “Coronavirus COVID-19 Oil & Gas Impact.” Offshore Technology. 30 March 2020. Web
11. Muspratt, Adam. “The Top 10 Oil & Gas Companies in the World: 2019” Oil & Gas IQ. 1 May 2019. Web
12. McFarland, Allen. “In 2018, the United States consumed more energy than ever before.” U.S. Energy Information Administration, EIA. 16 April 2019. Web
13. “BP PLC Forcast.”CNN.com Money, Cable News Network, 6 April 2020. Web. 

Conclusion

What do you think about the #O&G market in 2021 as it relates to your products or services?

1. Neutral
2. Positive
3. Challenging

I'm grateful to my fellow program peers and the high remarks received and the opportunity to share this article. It will be very interesting to compare against Analyst Prediction for 2021 in the coming months. But I'm also reminded of a quote by Mohnish Pabrai, an Indian-American businessman, investor, and philanthropist.

It is the performance of the business that matters. It is hard enough to figure out the future of the business. Do not try to figure out the future of the country or the world; focus on the business.