Aim of my research is to measure the concern and fiscal public presentation of British Petroleum during 31 December 2006 and 31 December 2008. In this respects, analysis of cardinal public presentation indexs, ratio analysis and SWOT analysis have been performed.
In cardinal public presentation indexs, tendencies of gross and other incomes, net income before revenue enhancement and after revenue enhancement, plus and stockholders ‘ fund have been analysed. For ratio analysis different liquidness ratios, purchase ratios, profitableness ratios and efficiency ratios have been tested and strengths, failings, chances and menaces have besides been evaluated.
The undertaking concludes on the consequences that BP has some critical issues with its operating cost which are major cause of shriveling borders and besides have weak safety controls. But overall BP performed good in aforementioned three old ages and direction of BP has focused critical issues and strengthened their geographic expedition and production activities.
Table of Contentss
Why this subject? 1
Why British Petroleum? 2
What does BP make? 2
Core Trade names of BP 3
Direct Rivals of BP 3
Research Aims: 4
Beginnings of Information: 5
Restrictions of Information assemblage: 6
Ethical Issues in information assemblage: 6
Accounting and Business Techniques used for analysis 6
Ratio Analysis: 6
Why Ratio Analyses are more helpful? 7
Restrictions of Ratio Analysis: 7
SWOT Analysis 8
Advantages of SWOT analysis: 9
Restrictions of SWOT analysis: 9
Analysis of Cardinal Performance Indexs 10
Gross and Other Income: 11
Net income ( before revenue enhancement and after revenue enhancement ) : 12
Stockholders ‘ Fundss 13
Ratio Analysis 14
British Petroleum p.l.c. , Key Ratio Charts 15
Liquidity Ratios 16
Leverage Ratios 17
Profitability Ratios 18
Efficiency Ratios 19
SWOT Analysis of British Petroleum 20
Alternative Energy 23
Adoption of Environment Friendly Policies 23
Extension of hunt of oil in deep Waterss 23
Volatile Oil Monetary values 23
Strong Rivals 24
Change in Torahs in different states 24
High Punishments due to miss of wellness and safety steps 24
Environment Protection Policies 24
Pressure from Governments 24
Table of Figures
Figure 1: SWOT Analysis Framework 9
Figure 2: Sale and Other Operating Grosss Year 2006 11
Figure 3: Sale and Other Operating Grosss Year 2007 11
Figure 4: Sale and Other Operating Grosss 2008 11
Figure 5: Net income before Taxation from Continuing Operationss 12
Figure 6: Entire Assetss 13
Figure 7: Debt to Equity Ratio 15
Figure 8: Current Ratio 15
Figure 9: Tax return on Total Assets 16
Figure 10: Tax return on Shareholder ‘s Fundss 16
Figure 11: Net incomes per Share ( EPS ) 16
Figure 12: Net Net income Margin 16
Table of Illustrations
Table 1: Ratio Analysis 14
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Why this subject?
In order to protect the involvement of stockholders describing demands for fiscal information have increased in the past few old ages particularly after the prostration of Enron, World Call and Maxwell. With the addition in describing demands and to fulfill the demands of all stakeholders ( internal and external ) of concern, now this has become more of import for concerns, particularly for “ PLC Companies ” , to unwrap non merely fiscal information but some other of import information related to concern scheme, runing activities, societal duty and investing in people etc. in their one-year study to stockholders.
This subject has been chosen to analyze the fiscal strength of British Petroleum and their concern scheme. This will assist to understand how the public presentation of a company can be analysed by following different accounting and concern techniques and theoretical accounts.
This subject will be more helpful to understand:
How to analyze the public presentation of a company by analyzing and construing the fiscal information provided in the one-year study.
How ratio analysis can simplify complex fiscal information to understand and can be helpful to analysis the public presentation of a company by different stakeholder particularly investors.
Importance of concern theoretical accounts e.g. SWOT and how SWOT analysis can be helpful to analyze the internal and external environment of a company.
How transnational companies manage transverse boundary line operations while following with different statute laws in different districts.
How concerns compete by following different concern schemes.
Why British Petroleum?
British Petroleum ( BP ) is the UK based third largest “ energy company ” in the universe and 5th largest company in the universe with its 333 subordinates and its central offices in St James ‘s, City of Westminster, London. BP is in the concern of oil geographic expedition, oil refinement, natural gas and crude oil merchandise selling.
BP was founded as the Anglo Persian Oil Company by William Knox D ‘ Arcy in 1909 and celebrated its hundredth birthday on 14th April, 2009. BP started with oil found in a rugged portion of Persia and since so, different little and big finds have fuelled their advancement. At present BP has geographic expedition and production involvement in about 25 states and is runing in more than 100 states with work force strength of more than 96,000 employees. It has activities chiefly in UK, US, South America, Canada, Norway, Africa, Asia and Middle East.
What does BP make?
BP P.L.C is parent company of BP Group of companies and affect in the undermentioned concern activities:
Oil and gas geographic expedition
Extracting oil and gas
Traveling oil and gas
Making fuels and merchandises
Selling fuels and merchandises
Generating low C energy
Due to increase in demand of oil and to carry through the demand of energy, BP has taken major stairss frontward by following new engineering required to transport out geographic expedition activities in more distant countries and in deep Waterss.
BP is one of those companies who, to provide the turning energy demand, has invested important sum in alternate energy engineering ( $ 1.4 billion approx. harmonizing to 2008 one-year study ) . Their prioritized countries are air current, solar, bio fuels and CCS, where a important long term growing potency has been anticipated.
Core Trade names of BP
BP – most of the concern is done under this chief trade name
ARCO – ARCO brings low cost fuel to US west seashore
ampm – ampm, in pattern, are like snack-food subject park and carry more than 2000 merchandises.
ARAL – ARAL does n’t supply merely fuel but besides a 3rd largest fast nutrient retail merchant in Germany after McDonald ‘s and Burger King.
Castrol – Castrol is the 1 of the taking trade names in universe for motor oils
Wild Bean Cafe – This is renowned for fresh baked nutrient and quality java
Direct Rivals of BP
Royal Dutch Shell
Main grounds to take British Petroleum are:
Size of the Company, as it is one of the largest energy companies.
Application of different across boundary line statute laws, as BP is a transnational company and operating in more than 100 states.
Widely dispersed operations of company.
BP is one of those companies utilizing latest engineering for geographic expedition and production of oil in deep Waterss and to develop and use alternate beginnings of energy.
As an energy company, BP has more duty to protect environment and society.
Purpose of this research is to analyze the fiscal and concern public presentation of British Petroleum during 31 December, 2006 and 31 December 2008. As fiscal twelvemonth of BP ends at 31st December, so last available one-year study for the twelvemonth ended 2008 has been used and public presentation of BP has been compared for aforesaid three periods. Performance has been compared by comparing periods non with rivals.
Main focal point of this research would be on the BP ‘s external environment, concern scheme of BP to run into the challenges and their impact on the fiscal public presentation of BP. In order to analyze fiscal public presentation ratio analysis have been used and to analyze the overall concern SWOT analysis have been performed.
Research has been conducted to run into the following aims:
Analysis of fiscal public presentation of British Petroleum with the aid of ratio analysis.
Analysis of BP ‘s public presentation with the aid of accounting and concern techniques and by using “ SWOT analysis ” .
Analysis of cardinal public presentation indexs of British Petroleum.
Designation of strengths, failings, chances and menaces.
Business scheme of company for energy options with long term growing prospective to run into the turning energy demands with low cost of production and addition in grosss.
Analyse the steps taken by BP for sustainable development, to protect the environment and their part towards the development of society.
In order to run into these research aim, fiscal statements of aforementioned periods have been analysed by utilizing ratio analysis and SWOT analysis has been made to understand the concern public presentation of BP and their concern scheme to cut down the competitory spread with their equals in the industry. Research has besides been made on the attempts of BP to research alternate energy beginnings, usage of new engineering and their scheme towards sustainable development and environment protection.
Beginnings of Information:
As to execute fiscal analysis I needed fiscal statements of British Petroleum ( BP ) , so, fiscal information has been obtained from one-year studies of BP for three periods ( old ages ) from 31 December 2006 to 31 December 2008. These fiscal studies are available on the web site of British Petroleum.
For the intent of SWOT analysis, different other beginnings have been used for updated intelligence about the BPs net income and their concern activities.
Fiscal Times ( FT )
International Energy Agency ( IEA )
Guardian intelligence paper
Different Diaries and Articles
British Petroleum ‘s official web site
Leister University ‘s library
Association of Chartered Certified Accountant ( ACCA ) ( web site )
In order to carry on research work information has been collected from secondary beginnings as aggregation of primary informations could hold been more clip consuming and can non do any important difference in the quality of research work and results/ decisions.
Data has been collected from really dependable beginnings, i.e. BP ‘s official web site, concern diaries, concern intelligence documents and beginnings available in library, whose genuineness and credibleness is unquestionable, so it is believed that fiscal information and other information related to concern activities of BP are accurate.
Restrictions of Information assemblage:
Size of British Petroleum plc is really large with broad scope of operational activities which have been spread in most of the states in the universe, so aggregation of informations through primary beginnings is non lone clip devouring but besides requires more resources. For this ground trust has been made on secondary beginnings. For this intent, different intelligence documents, articles in diaries and web sites have been consulted and analyses have been made on the footing of available data/ information through these secondary beginnings.
Ethical Issues in information assemblage:
Keeping in position the ethical issues, in this research, attention has been made non to entree or include any confidential information about the BP ‘s concern activities or any other information related to its fiscal consequences ( inside information ) which may impact the determinations of investors or creditors.
Due attention has besides been made that research work of others should non be included in this research, nevertheless, those have been used for mention intents and to garner information in relation to my ain research work. In this respects proper mentions have been made for information collected from different beginnings.
Accounting and Business Techniques used for analysis
There are different techniques available to directors, investors and other interested parties to analyze the public presentation of a concern on the footing of historical informations. Hereby I have used ratio analysis and SWOT analysis. Inspite of holding restrictions, these two techniques are really popular among assorted groups of people who have their involvements vested in the company and ever maintain an oculus on company ‘s public presentation.
Fiscal information provided in the one-year study of a company although is in more item and supply a complete overview of the company ‘s public presentation but largely, it becomes hard for people to construe the consequence and to compare them with old old ages or with the public presentation of equals.
Accounting ratios are used to depict the important relationship between figures presented in fiscal statements i.e. Statement of Financial Positions, Income Statement. Ratios along with their reading are ever helpful for those, interested in the fiscal public presentation of a company, to understand the critical Numberss driving the concern.
Accounting ratios can be categorised in to following:
Why Ratio Analyses are more helpful?
Ratios ever simplify the complex fiscal information provided in one-year study, and on comparing, provide clear indicant of any alteration from old twelvemonth.
Ratios help to put marks and besides helpful in be aftering and prediction.
Ratio analysis made it easy to compare the public presentation of different sections of a concern and they are besides helpful when public presentation of concern is compared with equals in the same industry or company ‘s public presentation in old old ages.
Ratios are really helpful for investors in doing investing determination and for loaners to analyze the fiscal strength of concern.
With the aid of assorted turnover ratios, operational public presentation of a concern can be improved and forecast can be made.
Restrictions of Ratio Analysis:
Ratios at their ain can non bespeak the public presentation of a company. For this intent it is necessary that ratios should be interpreted carefully and truth of fiscal information should besides be ensured.
Ratios are calculated on the footing of historical informations, hence, they can non state us about the public presentation of a concern in future, so critical determinations can non be made on the footing of ratios entirely.
In order to demo public presentation to stakeholders, fiscal information can be manipulated through originative accounting and window dressing. Ratios calculated on the footing of such information may misdirect the user.
For comparing intents, it is indispensable that both companies adopt same accounting policy or it should be same ( in instance of same company ) in both periods for which comparing has been made, otherwise comparing would be distorted.
Ratio analysis do non account for the alteration in monetary values ( rising prices ) , alteration in engineering, alteration in accounting policy or alteration in accounting criterions. ( Christopher J Pyke, 1999 ) .
Every company has different hazard profile, different capital construction and size and faces different political issue and influence from authoritiess. Ratio analyses do non account for all these things.
A SWOT analysis is the survey of any concern ‘s strengths, failings, available chances and possible menaces. As compared to ratio analysis, SWOT analyses are more subjective ; nevertheless, these analyses provide a really good overview of company ‘s ability to accomplish its aims and are really helpful for stakeholders to take determinations.
Strengths and failings are usually a survey of company ‘s internal environment whereas chances and menaces are ever found in external environment. SWOT analysis normally enables direction of a company to place their strengths to work identified chances and to construct a strategic program to accomplish their aims.
Internal Environment External Environment
Strengths Weaknesses Opportunities ThreatsSWOT Analysis model
Figure 1: SWOT Analysis Framework
There is no fixed manner to make SWOT analysis, it varies from organisation to organisation and it depends on the aims to be achieved.
Advantages of SWOT analysis:
SWOT analysis is a survey of a concern ‘s internal and external environment wherein chances and menaces are identified for the concern while strengths and failings are evaluated. This helps direction to measure their nucleus capablenesss.
SWOT analysis helps direction to develop concern scheme and set aims to give the concern a new strategic way.
This may assist to bring forth new thought to utilize company ‘s strength in order to work an identified chance.
Brands the company ‘s direction cognizant about menaces and failings and enable them to build effectual hazard direction policy and to take extenuation steps good in clip before.
Format of SWOT analysis is rather flexible to suit the nucleus public presentation countries of a company irrespective of sort of concern they are transporting out.
Restrictions of SWOT analysis:
SWOT analysis has four of import elements i.e. strengths, failings, chances and menaces, it is necessary to place them accurately as they differ from organisation to organisation. Sometimes direction may neglect to place these elements and may stop up at incorrect determination. For illustration what if a strength is in existent non a strength?
SWOT analysis does non supply counsel to direction how to place the four elements. Accuracy of designation of these elements depends on the strong opinion and experience of direction.
Opportunities can be overlooked or can be identified after long clip they can be exploited ( For illustration Vodafone missed the chance to subscribe a contract with apple for “ iPhone ” and Vodafone ‘s direction realized this after losing 159000 clients within three months ( Rupert Neate. 24 July 2009 ) .
SWOT analysis is normally a list of Do ‘s and Don’ts, a company may non concentrate how to accomplish its targets/ aims.
SWOT analysis are usually drawn-out and may be a company in footings of clip
Significance of information wholly depends on the quality of inquiries asked and replies given against them.
Analysis of Cardinal Performance Indexs
In order to analyze the public presentation of British Petroleum plc. , tendencies of some cardinal indexs have been observed and analysed e.g. Gross, Profits, Total Assets, Shareholders ‘ equity.
Gross and Other Income:
Figure 2: Entire Grosss and Other IncomeTrend of gross and other income shows that in twelvemonth 2008 growing rate was 25.95 % from old twelvemonth i.e. 2007, which was merely 6.24 % in 2007 from old twelvemonth, whereas, in 2006 growing rate of grosss was 11.74 % . However, from 2006 to 2008 grosss have grown by 33.81 % which is a important addition demoing the successful concern scheme of direction, but we can non disregard the impact of surprising addition in the monetary values of rough oil in twelvemonth 2008. Because production of rough oil and natural gas was n’t alteration much which is as follow ( British Petroleum. ( 2008 ) . Annual F & A ; OI ) :
Production ( BP portion, cyberspace of royalties )
Crude oil ( thousand barrels per twenty-four hours )
Natural gas ( million three-dimensional pess per twenty-four hours )
Entire hydrocarbons ( thousand barrels of oil tantamount per twenty-four hours ( mboe/d ) ) a
Major portion of gross revenues and operating gross consist of “ Refining and Marketing ” .
Figure 3: Sale and Other Operating Grosss Year 2007
Figure 2: Sale and Other Operating Grosss Year 2006
Pie charts show that in 2006, 83.28 % of grosss were from refinement and selling maps and 2nd largest map was Exploration and production with 12.88 % of entire grosss.
Figure 4: Sale and Other Operating Grosss 2008In 2007 refinement and selling portion in gross was increased to 85.20 % and geographic expedition and production ‘s portion reduced by 1.33 % from 2006 and stood at 11.55 % .
In 2008, same tendency has been followed and portion of Refining and Marketing farther increased to 86.67 % and portion of Exploration and Production reduced to 10.96 % .
As BP is a elephantine in oil sector actively involved in upstream and downstream activities, this tendency of grosss indicates that BP ‘s direction privation to emphasis on their “ Refining and Marketing ” side by puting more in refinery and crude oil selling companies.
Figure 5: Net income before Taxation from Continuing OperationsProfit ( before revenue enhancement and after revenue enhancement ) :
There is no uncertainty that 2007 was non a good twelvemonth for British Petroleum in footings of concern and net income. Although there was addition in grosss with diminishing rate but “ net income before revenue enhancement ” from go oning operations was reduced by important Numberss. Main ground of this lessening in “ net income before revenue enhancement ” was addition in purchases by 7.26 % from old twelvemonth and high fiscal cost i.e. $ 407 million higher than 2006.
Net income before revenue enhancement climbed up in twelvemonth 2008 due to increase in monetary values of oil but it was still less than 2006 ( chiefly because of higher disbursals on purchases and increased fiscal cost ) .
Figure 7: Net income ( After Tax ) for the YearOn the other side if you look at the net income for the twelvemonth ( after revenue enhancement ) attributable to stockholders, there is non much difference in twelvemonth 2007 and twelvemonth 2008. One of the grounds is doubtless higher sum of revenue enhancement but in 2008, fiscal cost was besides significantly higher in last five old ages. Stockholders and other stakeholders may hold concerns on this increased fiscal cost and increase in pitching ratio from 33 % in 2007 to 36 % in 2008.
Figure 6: Entire AssetsTotal assets represent the size of a company and include current assets, fixed assets such as land, edifice works and equipment, and intangible assets such as licences and good will.
Figure 9: Net Assetss
Figure 10: Fixed AssetsWith the aid of this graphical presentation, in twelvemonth 2007, addition in the plus base of British Petroleum plc can be observed which is higher by about 8.5 % from twelvemonth 2006. Whereas entire assets decreased by 3.32 % in twelvemonth 2008 from old twelvemonth. However, a net addition in entire plus in three old ages from 2006 to 2008 is $ 10,637 m ( 4.89 % approx. ) which is a good mark for stockholders and other stakeholders of BP. As this shows that company is widening its operations and puting more to heighten its operations which may finally ensue addition in net incomes and maximization of stockholders wealth.
This position is besides supported by addition of investing in fixed assets which seems really much consistent in three old ages from 2006 to 2008 where as net assets ( Entire assets – entire liabilities ) of the company, which are the equity of stockholders ( BP ‘s stockholders equity i.e. “ portion capital + militias ” + minority involvement ) , are following the same tendency as of entire assets. Net assets of the company, in twelvemonth 2008, have increased by 7.77 % from twelvemonth 2006 which is more than per centum addition in entire assets of the company.
Stockholders ‘ Fundss
Figure 11: Stockholders ‘ FundUltimate aim of every concern is ever “ addition in net income ” and “ maximization of stockholders wealth ” . In order to accomplish this aim, direction of every company makes different short term and long term concern schemes.
Attempts of British Petroleum ‘s direction in this respect reflect in the figures of stockholders ‘ financess which shows a little diminution in the equity in twelvemonth 2008 by 2.69 % whereas if you look at the last five twelvemonth public presentation there is a consistent addition in stockholder ‘s equity up to twelvemonth 2007. Stockholders ‘ equity has increased by 7.77 % from 2006 to 2008. This means company is increasing its militias by retaining net incomes in order to finance future moneymaking undertakings.
Table 1: Ratio AnalysisIn order to measure the public presentation of British Petroleum plc, a ratio analysis has been made on the footing of fiscal information provided in the one-year amalgamate fiscal statements ( Provided in Annexure I ) .
Stockholders Liquidity Ratio
Solvency Ratio ( % )
Debt to Equity Ratio
Net Net income Margin ( % )
EBIT Margin ( % )
Tax return on Stockholders ‘ Fundss ( % )
Tax return on Capital Employed ( % )
Return on Operating Capital Employed ( % )
Tax return on Entire Assets ( % )
Employee turnover per Employee ( $ m )
Net income per Employee ( $ m )
Net incomes per portion ( cents )
Creditors Payment ( yearss )
Net Assetss Turnover
Fixed Assets Turnover
Entire Asset Employee turnover
Stockholders ‘ Fundss per Employees. ( Unit )
Working Capital per Employee ( Unit )
Entire Assets per Employee ( Unit )
British Petroleum p.l.c. , Key Ratio Charts
Current Ratio Debt to Equity Ratio
Figure 8: Debt to Equity Ratio
Figure 7: Current Ratio
Tax return on Entire Assets Return on Shareholder ‘s Fundss
Figure 10: Tax return on Shareholder ‘s Fundss
Figure 9: Tax return on Total Assetss
Net Net income Margin Earnings per portion ( EPS )
Figure 12: Net incomes per Share ( EPS )
Figure 11: Net Net income Margin
Liquidity ratios are used to find the ability of any company/ concern to pay off its short term liabilities. Higher the ratio, better the company ‘s fiscal place is to cover its short term duties through short term assets ( current assets ) .
Common liquidness ratios are current ratio, speedy ratio and hard currency ratio. All these ratios show the ability of company to change over its current assets in to hard currency and pay off its short term liabilities. Investors and analyst ever use these ratios to look into the possibility of bankruptcy of any company and to look into the ability of company as a traveling concern.
For this purpose liquidness ratios have been calculated for British Petroleum to measure the ability of company to pay off its short term duties. In twelvemonth 2006, BP had about same current plus as of current liability as the current ratio is 1 where as in 2007, current ratio was 1.04 which shows that company had more assets so its duties to be paid off. But in twelvemonth 2008 this ratio dropped down to 0.95, which is less than 1. This shows that company has non plenty liquid assets to cover its short term liabilities ( i.e. 95 cents of assets to cover 100 cents of liabilities ) , which may be dismaying for stakeholders of the company. This may besides do the efficiency of working capital direction questionable, deficiency of which may do short term liquidness jobs and may take company towards proficient insolvency.
Quick ratio uses more liquid assets as it does non take in to account the stock lists of company to look into the ability of a company to cover its short term liability through more liquid plus. In twelvemonth 2007, speedy ratio of British Petroleum was declined as compared to twelvemonth 2006 where as in 2008 ; betterment can be seen in ability of company to run into its short term duties through more liquid assets ( i.e. current assets excepting stock lists ) . This ratios shows that in twelvemonth 2008, BP has 71 cents of assets ( current assets excepting stock lists ) to cover 100 cents of liabilities.
Although stockholders ‘ liquidness ratio besides shows a worsening tendency but hard currency ratio has improved in twelvemonth 2008 after demoing a diminution in twelvemonth 2007.
But looking at the liquidness ratios it seems imperative that direction of British Petroleum should emphasis on the betterment of working capital direction as liquidness ratios are demoing a worsening tendency. So, in instance of more than expected bad debt, British Petroleum may hold liquidness issues in short term.
Leverage ratios enable us to measure the long term fiscal stableness of a company. These ratios have been calculated to look into and measure the British Petroleum ‘s beginnings of finance and ratio of “ debt and equity ” and company ‘s ability to cover its fiscal cost through its net income.
It has been observed that debt ratio over the past three old ages has increased which finally increased the pitching degree of company from 28 % in twelvemonth 2006 to 36 % in twelvemonth 2008. This is besides a ground of addition in fiscal cost and diminution in ability of company to cover its involvement disbursal from its net income as a consequence involvement coverage ratio has decreased from 35.66 times in twelvemonth 2006 to 22.78 times in twelvemonth 2008. However, still company has a good debt equity ratio and still hold a capacity to raise more debt.
On the other side company ‘s plus screen ratios has improved over the last three old ages, this shows that company has adequate assets to cover its debt duties. As a regulation of pollex this ratio should be 1.5 and British Petroleum has this ratio more than this in all three old ages.
Although solvency ratio of British Petroleum declined in twelvemonth 2007, but recovered to same degree, as of twelvemonth 2006, in twelvemonth 2008. As a regulation of pollex a solvency ratio of more than 20 % shows a company financially healthy, so, solvency ratio of BP with 24 % brings the company in to same class.
Overall purchase ratios show that BP is basking a sound fiscal place and still hold a capacity to raise more debt which may finally diminish the leaden mean cost of capital ( Seth Armitage. ( 2005 ) Modigliani and Miller theorum ) .
“ Profitableness is a step of company ‘s ability to bring forth gross revenues and to command its disbursals ” ( Karen Berman, Joe Knight, John Case ( November 17, 2005 ) ) . These ratios are really of import to analyze the profitableness of any concern. If a concern is extremely liquid and efficient so it should be profitable every bit good. These ratios show the success of any concern and direction ‘s short term and long term concern schemes in footings of concern ‘s ability to bring forth net incomes and give expected return on the investing of stockholders.
By looking at the profitableness ratios, it has been observed that there is a diminishing tendency in the net incomes before involvement and revenue enhancement and same tendency is being followed by Net Net income Margin. This indicates that direction of British Petroleum should emphasis to cut down its operating disbursals particularly disbursals of purchases which are 68.24 % of entire gross in 2006, 68.89 % in 2007 and 72.74 % in 2008 ( Refer to Appendix I ) . In order to cut down these disbursals there is a demand to negociate footings of contracts with services and material suppliers efficaciously and expeditiously. It has besides been observed that BP ‘s net net income border is really low as compared to industry ‘s 5 old ages mean i.e. 11.75 % ( Reuters. ( 2009 ) . Ratios ) . ( Refer to Appendix IV )
However, it has been observed, although return on entire assets declined in twelvemonth 2007 ( 9.33 % from 10.50 % in 2006 ) and so stabled in twelvemonth 2008 ( Industry ‘s 5 twelvemonth norm is 11.72 % ) , return on capital employed has improved in twelvemonth 2008 ( 22.24 % ) after a diminution in twelvemonth 2007 ( 20.37 % ) . This may be seen as a good mark by stakeholder of British Petroleum and other possible investors.
Net incomes per portion ( EPS ) of BP, which is ever regarded as cardinal step to measure the public presentation of a company, has besides increased from 108.76 cents ( 2007 ) to 112.59 cents ( 2008 ) . This shows that how much net income BP has made per portion after revenue enhancement, attributable to ordinary stockholders. Addition in EPS ever has positive impact on investors who expect good return on their investing. This is besides supported by BP ‘s dividend payout ratio which was 48.90 % in twelvemonth 2008 as compared to 38.89 % in twelvemonth 2007 and 34.96 % in twelvemonth 2006.
Activity ratios help direction and investors to analyze the efficiency and effectivity of direction of company ‘s assets and operations. These ratios besides show a company ‘s ability to change over its assets in to hard currency.
By analyzing the activity ratios of British Petroleum it has been observed that efficient direction of working capital is being emphasised as plus turnover ratios have improved in three old ages and aggregation period from debitors has been reduced. This means the company ‘s ability to rapidly change over its assets e.g. receivables in to hard currency, has improved.
Net plus turnover ratio has improved in twelvemonth 2008 ( 3.98 ) as compared to 2007 ( 3.08 ) . Same betterment tendency has been followed by the fixed plus and entire plus turnovers. There is besides an betterment in the stockholder ‘s fund per employee and entire assets per employee. This shows the efficiency of company and its employees in utilizing its plus to bring forth more gross for its stockholders.
SWOT Analysis of British Petroleum
British Petroleum ( BP ) is the 3rd largest vertically incorporate oil and gas company in the universe. The company ‘s operations include the geographic expedition and production of gas and rough oil, building and excavation, fabrication, and fuel transit. It besides has a web of subordinates engaged in the chemicals, power, and renewable energy sectors. This SWOT analysis has been conducted to analyze the internal and external environment of BP and to place its strengths, failings, chances and menaces. These analyses have been conducted on the footing of current available information about British Petroleum.
Undoubtedly one of the BPs strength is its assets base and high net incomes and its presence in Europe as largest oil company. However, in order to analyze the strengths of BP, its success in geographic expedition and production, usage of latest engineering and its presence in US, Gulf and Europe has been assessed.
BP and CNPC to develop Iraq ‘s super giant Rumaila Field ( BP Press Release. 03 November 2009 )
The pool has agreed to increase the end product from Rumaila field to about 3 million barrels per twenty-four hours ( about three-base hit ) . After this Rumaila field would go universe ‘s 2nd largest oil bring forthing field.
Share of each spouse:
British Petroleum 38 %
CNPC 37 %
State Oil Marketing Organisation ( SOMO ) 25 %
BP and CNPC have a program to put $ 15 billion approx in hard currency in following 20 old ages ( life of contract ) . As per BP imperativeness release cost will get down to be recovered after rise in merchandise by 10 % from its current degree i.e. one million barrel per twenty-four hours. Besides this, fee of $ 2 per barrel would be earned on incremental oil production ( after 10 % addition ) .
Elephantine Discovery by BP at its Tiber Prospect in the deepwater US Gulf of Mexico ( BP Press Release. 02 September 2009 )
In the US Gulf of Mexico, British Petroleum is the largest manufacturer of oil and gas and its cyberspace production is over 400,000 barrels of oil tantamount per twenty-four hours. On September 02 2009, BP announced a elephantine find of oil reservoirs at its Tiber Prospect in the deepwater US Gulf of Mexico.
Strong planetary trade name “ BP ” is being enjoyed by British Petroleum which reflects the set of values that they follow in their concern determinations and appears on refineries, air current farms, solar merchandises, production platforms and corporate offices. Other strong trade names of British Petroleum are “ ARCO ” , “ ampm ” , “ Castrol ” , “ ARAL ” , “ Wild Bean Cafe ” .
Use of latest engineering to research oil in deep Waterss and to happen alternate beginnings of energy e.g. Solar engineering, air current engineering, seismal engineering, is one of the BP ‘s strength. In order to salvage cost, BP has besides awarded an outsourcing IT contract of more than ?1.5 billion to TCS, Infosys and Wipro along with IBM and Accenture ( Indian Companies ) . ( Pankaj Mishra, 28 August 2009 ) .
Demand of natural gas is increasing twenty-four hours by twenty-four hours particularly in Europe. It has been announced officially that BP has started the natural gas production from Savonette field, offshore Trinidad with mean expected production of 600 million standard three-dimensional pess per twenty-four hours of gas. In this field BP has 100 % involvement. Gas from Savonette will provide Atlantic LNG ‘s liquefaction works for export as LNG to international markets, every bit good as the domestic market. ( BP Press Release. 28 October 2009 )
Weak Safety Controls have ever been an issue for British Petroleum, safety misdemeanors at BP ‘s Texas City, Texas refinery got monolithic detonation in March 2005 and as a consequence 15 workers died and 100s were injured. ( Sheila McNulty. 22 October 2009 ) . During probe by OSHA 439 willful misdemeanors were found and even after four old ages of this incident BP could non guarantee the remotion of all safety issues.
Lapp in 2006, BP shutdown the oilfield due to damaged grapevine in Alaska which affected 8 % of U.S. Oil Production. ( Chirs Isidore, 08 August 2006 )
High operating cost ( as reflects in the one-year studies of BP ) is besides an issue which affects the profitableness of BP. Main ground of this high operating cost could be deficiency of efficient planning. For this instance of “ Thunder Horse ” undertaking may be quoted, which was suppose to get down production in January 2005, came in to life in June 2008 after a hold of three old ages which finally caused addition in cost.
Lack of any competitory advantage over its direct rivals is another identified failing of BP. All of BP ‘s rivals are in same concern and utilizing more or less same engineering. However, BP ‘s rivals may hold border due to their more rigorous wellness and safety policies.
Due to depletion in oil reservoirs and increase in demand of energy globally, find of alternate beginnings of energy have become imperative. With its net incomes, BP has figure of chances to put more in alternate energy. At present, BP is in procedure of organizing partnerships with academe and joint ventures with other concerns to develop superior engineerings to heighten the usage of biofuels.
BP is besides utilizing progress engineering to detect and bring forth oil in deep Waterss, and utilizing other beginnings of energies, e.g. solar, air current.
Adoption of Environment Friendly Policies
Peoples and authoritiess are more rigorous on environment safety and sustainable developments. Governments and people in society ever prefer those merchandises, particularly in fuel, which are more environment friendly. By puting more in doing fuel more environments friendly, working responsibly and following more rigorous wellness and safety policies, BP can make strong bonds with society.
Extension of hunt of oil in deep Waterss
At present BP is one of those limited oil companies which are capable to research and bring forth oil from deep Waterss. BP may get the rights by subscribing contracts with authoritiess of different states to seek oil in deep Waterss. Recently BP has made a deep H2O find in Gulf of Mexico ( Steve Gelsi, Market Watch. 02 September 2009 )
Volatile Oil Monetary values
Year 2008 was more ambitious for oil companies due to volatility of oil monetary values. In July 2008 oil monetary values reached to $ 147 per barrel ( highest since oil crises in 1970 ) and dropped down to $ 30 at the terminal of twelvemonth ( BBC News. 5 June 2009 ) . This could be a large menace to net incomes of BP as direction may happen it hard to maintain their grosss up and cut down the operating costs.
BP has really large names on its rivals list i.e. Exxon Mobil, Chevron, Royal Dutch Shell. All of these are involved in same sort of concern and researching in about same sort of alternate beginnings of energy. With full of resources and good concern schemes these rivals can be a large menace for British Petroleum.
Change in Torahs in different states
Different states in the universe have different oil policies. BP is a transnational company and faces political issues, issues of conformity with local Torahs, issues of royalties etc. At present Brazilian authorities is in procedure of argument on four measures on oil Torahs by which authorities may hold a greater interest in late discovered off shore oil reservoirs ( COSTA DO SAUIPE, Reuters, 13 August 2009 )
High Punishments due to miss of wellness and safety steps
The U.S. Department of Labor ‘s Occupational Safety and Health Administration ( OSHA ) has issued $ 87,430,000 in proposed punishments to BP Products North America Inc. for the company ‘s failure to rectify possible jeopardies faced by employees working in BP ‘s refinery in Texas. ( US Department of Labors OSHA. 2009 )
This mulct is the largest in OSHA ‘s history. Second largest entire punishment was $ 21 million was besides against BP in 2005.
Environment Protection Policies
Explosion in BP ‘s refinery in Texas, ecstasy of oil grapevine in Alaska, all these event have given a bad image of BP. Now authoritiess and society may believe that BP does non care much about protecting environment and construct of sustainable development is non being followed.
Pressure from Governments
British Petroleum may confront force per unit area from authoritiess due to its deficiency of wellness and safety steps as due to rapture of grapevine in Alaska BP had to close down its oilfields which reduced the supply of oil in America by 8 % ( Chirs Isidore, 08 August 2006 ) and became a cause of addition in oil monetary values. Because of this, punishments and other limitations may be implied by authoritiess on BP.
In order to run into the research aims, ratio analysis and SWOT analysis of British Petroleum, has been conducted.
With the aid of ratio analysis it has been observed that BP has a strong plus base of $ 228,238m, although it was decreased from the old twelvemonth i.e. 2007 but entire assets have been increased by $ 10,637m ( 4.89 % ) from twelvemonth 2006. However geartrain of the company has increased from 28 % to 36 % which did non hold a noticeable impact on the profitableness of the company, nevertheless, caused a lessening in the involvement coverage ability of the company.
Inspite of the volatile oil monetary values which were $ 30 ( at their lowest ) per barrel at the terminal of twelvemonth 2008, BP managed to do good net incomes of $ 21,666 m in twelvemonth 2008 as compared to $ 21,169 m. Dividend payout was besides more i.e. 48.90 % in 2008 as compared to 38.89 % in 2007. By this direction of BP gained the trust of its stockholders and made them to believe in the concern schemes adopt by BP ‘s direction.
On the other side BP has besides shown betterment in the on the job capital direction by cut downing the debitors collection period and by bettering the plus turnovers.
In twelvemonth 2009 monetary values of oil are once more increasing and there are outlooks that they may make to $ 100 per barrel, as most of the universe ‘s economic systems have managed to come out of recession and have more energy demands. In order to take advantage of this chance British Petroleum working sharply with other joint venture spouses to get and develop oilfields in the different states which resulted sign language of contract with Iraqi authorities to heighten the oil production from Rumaila oilfield. In order to provide the high demand of energy, BP has besides made investing in alternate energy beginnings e.g. solar energy, biofules and air current.
BP is besides sharply working on the geographic expedition and production of oil in deep Waterss by utilizing latest engineering. Recently BP has made a find of its 19th oil find in extremist deep Waterss block 31 Angola.
However BP is losing its image as a responsible company after the major incidents of detonation in their refinery at Texas and ecstasy of oil grapevine in Alaska. BP has besides been fined for more than $ 87m for deficiency for wellness and safety steps in Texas. This has become imperative for BP to alter this image by following more environment friendly policies. BP will besides hold to do long term concern schemes to cut down its operating cost in order to increase net income borders and to get by with alteration in Torahs in different states where they have operations.