British Petroleumx

7/29/2019 British Petroleumx

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British PetroleumAnant AseshJillam Parida

S. Subbarao


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Industry Overview

Big Oil (Seven Sisters)

BP plc.

Chevron Corporation

ExxonMobil Corporation

Royal Dutch Shell plc. Total SA

Before the oil crisis of 1973 the members of the Seven Sisterscontrolled around 85% of the world's oil reserves

The super majors began to emerge in the late-1990s, in

response to a severe fall in oil prices Large petroleum companies began to merge, often in an effort

to improve economies of scale, hedge against oil pricevolatility, and reduce large cash reserves through reinvestment


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Major Mergers

BP's acquisitions of Amoco in 1998 and of ARCO in 2000

Exxon's merger with Mobil in 1999, forming ExxonMobil

Total's merger with Petrofina in 1999 and with Elf Aquitaine in

2000, with the resulting company subsequently renamed Total

S.A. Chevron's acquisition of Texaco in 2001

Merger of Conoco Inc. and Phillips Petroleum Company in

2002 led to ConocoPhillips

This process of consolidation created some of the largestglobal corporations as defined by the Forbes Global 2000

ranking, and as of 2007 all were within the top 25

Between 2004 and 2007, the profits of the six super majors

totaled US$494.8 billion


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Market Capitalization

Company Market Capitalization

Exxon Mobil Corporation 403.73 B

Chevron Corporation 230.83 B

Royal Dutch Shell plc. 209.56 B

BP plc. 129.14 B

Total SA 123.44 B

ConocoPhillips 80.51 B


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NOC

Publicly traded giants like Royal Dutch Shell, Chevron, ConocoPhillips

and Total may be Big Oil, but they are not Biggest Oil

That moniker goes to the state-owned national oil companies, NOCs

For short, that sit on 77% of the worlds oilaccumulations

Even Exxons 12 billion barrels of proven oil reserves look meager Among NOCs there are haves and have-nots

Cnooc, backed by Chinas horde of dollars, can afford whatever is

politically feasible to buy

Mexicos Pemex, on the other hand, would be an ideal buyer of

some deep-water stakes

Pemex revenues support the Mexican government, leaving scant

cash for new investment in Mexicos own deep-water prospects


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BPs Oil Spill

In the wake of BPs oil spill, its worth thinking about the

differences between Big Oil and Biggest Oil

In as much as the spill hurts the publicly traded international

oil companies with deep water prospects in the gulf, it helps

many of the NOCs Drillers have already been scared out of the Gulf of Mexico, by

the post-spill moratorium and the realization that drilling

there will be more costly and complicated

Once these big deep-water rigs have left, it will be yearsbefore they return

Wounded BP looking around for billions in assets it can sell to

cover its spill bills


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Financial Issues

In the aftermath of the Horizon disaster in the US Gulf of Mexico,

BP's 2010 earnings reflect both the extent of the disaster on BP's

financial strength as well as the implementation of a new global

strategy

BP reported a loss before interest and taxation of $3.7 billion,

compared to a profit of $26.4 billion in 2009

Earnings in every segment rose compared to 2009 performance, BP

recorded a loss of $40.8 billion before interest and taxation in

response to the US Gulf oil spill

Profit from exploration and production rose to $30.89 billion from$24.80 billion in 2009 partially due to higher crude oil prices

In 2011, the company registered a PBT of $39.82 billion

Economic slowdown has had its impact on the financial standing of

the company as well


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FCFF


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Financial Indicators


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U.S.

All of this talk of national oil companies leads to the question:Should the U.S. have one? And if it did, how big would it berelative to those OPEC giants?

In the weeks after the Deep-water Horizon exploded somepolitical observers, like former Clinton administrationSecretary of Labor Robert Reich, suggested that PresidentObama should move to nationalize BPs U.S. operations ascollateral for the debt it owes America

That would have, in effect, created Americas own national oilcompany

BPs subsequent $20 billion escrow fund kowtow removed anypressure for nationalization

U.S. produces more than 8 million bpd, trailing only SaudiArabia and Russia in output


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Top 10


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Personal management and CSR

Over the last decades, the business agenda has expanded bythe inclusion of environmental issues, most notably the threatof global climate change, and more recently, growing concernsover the social impact of international commerce

Attention to social problems such as human rights violations ,corruption and transparency

In brief, BP has received moderate negative attention on CSRissues, at least compared to other transnational's like Shell orElf

For instance, several NGOs have publicly acknowledged BP forbeing among the first oil transnationals to endorse a humanrights policy, for its early position on the climate change issue,its exit from the Global Climate Coalition, and for setting newstandard such as transparency


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Columbia Human Rights issue

In 1995, BP and partners signed formal contracts with the

Colombian Defense Ministry and National Police to assign

army brigades and police to defend their operations

According to Human Rights Watch (HRW), the Colombian

military has a reputation for serious human rights abuses, andis described as "one of the few in the hemisphere still engaged

in a pattern of gross violations of human rig

The BP-led consortiums private security firm, Defense

Systems Colombia (DSC), was also accused of giving lethal

training to a Colombian army brigade, importing arms and

setting up intelligence networks to monitor individuals

opposed to the company


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In the aftermath of negative international attention to these

issues, BP and partners renegotiated the previous

agreements, in terms that payments were made to the state

owned Eco Petrol rather than directly to the security forces

BP has also organized a number of ethical workshops inColumbia in order to raise awareness and understanding

and to ensure that staff are able to recognize dilemmas and

know what course of action to take to resolve them

BP has also spent some $30 million on social investment

Programmes


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Relentless focus on safety and managing risk

More visibility and transparency to value

Ensured that any security arrangements protect human rights

and are consistent with international standards for law and

enforcement


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Expansion and Future Directions BPs strategy for the future is not based on profitability but on

creating safety, trust, and value growth for all its stake holders. BP has recently ventured into a share swap and joint venture

deal with Rosneft.

BP announced in March 2010 a $7 billion dollar deal with

Devon Canada Corporation. The two companies agreed to

work together on the Kirby oil sands lease south of Fort

McMurray, Alta.

BPs has exploration and production operations are located in

29 countries. Major development projects are located in the

Gulf of Mexico, Azerbaijan, Algeria, Angola, and parts of PacificAsia.

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