BP is one of the largest energy companies in the world, providing its customers with energy for light and heat, fuel for transports, retail services and petroleum based chemical products for everyday items. BP plc is a global energy (oil, gas and chemical) company headquartered in London, United Kingdom. BP is the third largest energy company and the fourth largest company in the world. The name "BP" derives from the initials of one of the company's former legal names, British Petroleum. BP is the UK largest corporation, with its head office in St James's, City of Westminster, London. The company is among the largest private sector energy corporations in the world and its vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies. The company is listed in the London Stock Exchange and is a constituent of the FTSE 100 Index.
Calculation of key ratios
The overall evaluation of the company using both financial and non-financial factors including SWOT analysis :
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The downwards of BP's ratings reflects Fitch's opinion that risks to the both BP's financial profile and business and continue to increase following the Deepwater Horizon accident in the US Gulf of Mexico. The company has so far continuously failed to stop the resultant oil leak. Fitch notes that the drilling of relief wells also poses risks and extra time may be required for them to be fully effective. An additional factor supporting the downwards is the 1 June 2010 announcement by US Attorney General, Eric Holder that both a criminal and civil investigation has opened with the respect to the oil spill that could have potential negative implications for BP's financial profile.
The group has established a total financial framework to ensure that it is able to maintain an proper level of liquidity and financial capacity and to keep on constrain the level of assessed capital at risk for the purposes of positions taken in financial instruments. The failure to operate within our financial framework could lead to the group becoming financially difficulty leading to a loss of shareholder value. The commercial credit risk is measured and controlled to determine the group's total credit risk. The inability to determine adequately our credit exposure could top to financial loss. A credit crisis affecting the banks and other sectors of the economy could impact the ability of counterparties to meet their financial difficulties to the group. It could also affect to our ability to increase capital to reserve growth.
The Crude oil prices are generally set by US dollars, while sales of refined products and petrochemicals may be in a variety of currencies. Fluctuate in exchange rates can give rise to foreign exchange exposures, with a consequent impact on underlying revenues and costs.
There are some disadvantages to that approach. Some might get it surprising that oil and chemical companies have the highest average rating of all the industry groups in the world. But the average ratings shouldn't be read as an index of how much good the company does or of how loud its critics should be. They are meant as a measure of how seriously the company's future decisions will consider in nonfinancial factors. And by that indication, the future of Big Oil might be much brighter than their past.
The opinion of BP spokesman David Bicker ton, whose company came out on top of the ratings for the second year in a row. "Responsibility is about how embedded ethical issues are in decision-making within the organization," he says. "We believe that's what you really need to explain." While BP's chief executive John Browne is known as a believer in green energy and corporate citizenship, it's the company's in-depth, candid reporting that wins points in the Accountability Rating.
To get to the point where sustainability reports like BP's are taken seriously requires a lot of infrastructure. For the FORTUNE Global 100, saying that nonfinancial goals are a top business priority comes relatively easily: Nearly two-thirds of them identify some nonfinancial goal as part of their long-term business mission. But only half the companies use an external set of standards to evaluate their nonfinancial performance, and a quarter employ an outside auditor.
Always on Time
Marked to Standard
"SWOT is an acronym for the internal strengths and weaknesses of a firm and the environmental opportunities and threats facing that firm. SWOT analysis is a widely used technique through which manager create a quick overview of a company's strategic situation. The technique is based on the assumption that an effective strategy derives from a sound "fit" between a firm's internal resources (strength and weaknesses) and its external situation (opportunities and threats). A good fit maximizes a firm's strength and opportunities and minimizes its weaknesses and threats. Accurately applied this simple assumption has powerful implications for the design of a successful strategy."
Location of Factor
Dominant market position
Vertically integrated operations
Wide geographical presence
Decline in crude oil and natural gas production.
Controversies and criticism.
Increasing demand for gas in north America
Rising demand for refined product and petrochemicals in china
Oil and gas exploration project
Investments in the alternative energy business
Saturation of resources in the north sea
Instability in some oil produce region
BP is the ranked at the world's 3rd largest energy company and is positioned as a multinational oil company headquartered in London that:
Operates petrochemical businesses worldwide through the network of its subsidiaries and retail brands(Amoco; ARCO; BP Express, BP Connect; BP Travel Centre; ampm; Burmah Castrol etc)
Participates in London Stock Exchange, IPO in New York Stock Exchange. and is listed in the FTSE 100 Index;
BP Amoco strong brand loyalty for oil;
Strong brand management driven by the 'Beyond Petroleum' slogan. Â
Increase in petrol prices in the UK;
Explosion of BP refinery in Texas that caused 100 injuries and 15 deaths in 2005;
Criminal charges due to the spread of 270.000 gallons of crude oil in the Alaska tundra in 2006;
Closing of Alaskan oil wells.
8 b. USD investment in the research of alternative fuel methods, including hydrogen, natural gas, wind and solar over the forthcoming decade;
Expansion of frontier areas suitable for BP's future reserves (post-Soviet Union territories);
Extension of strategic oil and gas acquisitions in North Sea area;
Launch of more flexible price policy to compete main rivals;
Environmentally unsound policies due to oil and toxic spills;
Occasional refinery explosions;
Corrosion in pipelines;
Competition from Shell and Chevron
Ceasing operations in a number of potential locationsÂ with their further re-branding (Conoco);
Sale of corporate-owned stations;
More than 5.000 shortages within coming months;
$66,71 per barrel creates considerable tensions for running oil business;
Further lawsuits considering the company's ecological activities;
Recommendations to the board of directors as how they can improve each of the key ratios mentioned above
Gross profit ratio:
BP PLC's gross profit ratio deteriorated from 2007 to 2008 but then slightly improved from 2008 to 2009.
Return on capital employed:
BP PLC's return on equity improved from 2007 to 2008 but then deteriorated significantly from 2008 to 2009 at the same time BP PLC's return on assets improved from 2007 to 2008 but then deteriorated significantly from 2008 to 2009.
BP PLC's debt-to-equity ratio deteriorated from 2007 to 2008 but then improved from 2008 to 2009 and not reaching 2007 level therefore BP PLC's debt-to-capital ratio deteriorated from 2007 to 2008 but then improved from 2008 to 2009 not reaching 2007 level.
BP PLC's current ratio deteriorated from 2007 to 2008 but then quite improved from 2008 to 2009 and exceeding 2007 level and same time BP PLC's quick ratio deteriorated from 2007 to 2008 but then improved from 2008 to 2009 exceeding 2007 level and also BP PLC's cash ratio improved from 2007 to 2008 and from 2008 to 2009.
Price earning ratio:
If company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued as well Otherwise, if company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.
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BP's new chief executive has promised to shake up the company's culture to improve safety and reliability following the Mexico. Bob Dudley, who will take over on October 1, also said that the company's planned $30bn disposal programmed could position it for higher growth in the future. He was speaking as BP announced that it lost $17bn after tax in the second quarter, one of the largest losses in British corporate history, after a $32.2bn pre-tax provision for the costs of cleaning up the spill and compensating the victims. The net cost to BP is offset by a $10bn reduction in its payments of tax, mostly in the US. Mr. Dudley will take over from Tony Hayward, who is leaving by mutual agreement with BP's board, after his position became untenable following savage criticism in the US of his handling of the crisis. Mr. Hayward said on Tuesday that he had been "demonized and vilified"."The fact is BP cannot move on as a company in the US with me as its leader," he said. "It's a practical matter, not a matter of whether life is fair or not. He said: "The Gulf of Mexico explosion was a terrible tragedy for which, as the man in charge of BP when it happened, I will always feel a deep responsibility, regardless of where blame is ultimately found to lie."He added: "I believe the decision I have reached with the board to step down is consistent with the responsibility BP has shown throughout these terrible events. BP will be a changed company as a result of Macon do [its damaged oil well in the Gulf of Mexico] and it is right that it should embark on its next phase under new leadership." Carl-Henric Svanberg, BP's chairman, who has been strongly criticized by some of its British shareholders, said he had not considered resigning. "The board has repeatedly and explicitly asked me to stay on as chairman and I am honored to do so," he said. He said in a statement: "The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired."