Your Partner For Success FROM BRITISH PETROLEUM TO BEYOND PETROLEUM We deliver energy to the world. We care deeply about how we deliver energy to the world. We value safety, respect, excellence, courage and One Team. “ ” Group 1 Team B Professional Skills Cass Business School London INVESTEMENT APPRAISAL Anh Ho Dorothy Kiew Jenny Kuang Nina Xiao Yvonne Yang BP
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Your Partner For Success
FROM BRITISH PETROLEUM TO BEYOND PETROLEUM
We deliver energy to the world. We care deeply about how we deliver energy
to the world. We value safety, respect, excellence, courage and One Team.
“ ”
Group 1 Team B
Professional Skills
Cass Business School London
INVESTEMENT APPRAISAL
Anh Ho
Dorothy Kiew
Jenny Kuang
Nina Xiao
Yvonne Yang
BP
EXECUTIVE SUMMARY 2
INTRODUCTION TO BP 3
HIGHLIGHTS IN HISTORY 3
ETHICAL POSITION 3
FINANCIAL ANALYSIS 4 - 5
THE ENERGY INDUSTRY 6
BP’S MAIN COMPETITORS 6
SWOT ANALYSIS 7
CONCLUSION 7
APPENDIX 8
REFERENCES 9
CONTENTS
1
EXECUTIVE SUMMARY
This report aims to place BP on a pedestal while examining its merits for private investment. Among the facets meticu-
lously analysed are its ethics, sustainability, final accounts, and position in the energy market.
The multinational energy corporation whose two-letter world renown brand name has its history dating back to 1909 when
it was founded as Angolo Persian Oil; throughout its existence of over a century, BP has seen its name, logo and mission
statement, among other things, evolve. As scrutiny of the energy industry grew, BP instilled in the mindsets of its employ-
ees the grave importance of business ethics and amplified its investments into exploiting renewable energy and developing
environmentally friendly equipment.
Oil spills are not uncommon in this industry where deep-water drilling is involved, albeit its adverse effect on the environ-
ment. BP, regrettably, was involved in the largest oil spill in history in 2010 with 4.9 millions barrels of its oil floating on
the shores just off the Gulf of Mexico. Along with the taking of 11 men’s lives, monumental costs imposed by the US
Government were held to be BP’s responsibility. Financially and in terms of reputation, BP ‘took a hit’ and a lot was re-
quired to steer the company out of its dreadful situation. However, with competent senior management, recovery is under
way and since then, there has been substantial evidence to prove so.
BP’s earnings have increased considerably, goodwill has been regained and investors are taking greater interest in the
company. Financial ratios are improving and one or more have suggested that BP’s profitability is on the rise. Following
the “buy low, sell high” rule of thumb, its current share price proves to be a suitable share price for investment. In addi-
tion, with relatively high dividend yields due to constant net cash inflows, investors are able to experience an additional
revenue stream from this investment or if reinvestment for additional shares are made with the dividends, investors may be
able to indulge in capital gains in the future.
However, this therefore suggests that for short term (risky) investors, BP is not a suitable investment as its day-to-day var-
iations in share price is minimal and in comparison to its main competitors in the industry, BP does not hold a significant
superiority in the short term because as of now, BP is still in the midst of its recovery and such investors would need to
wait on the stock to gain great returns.
Upon leveraging BP’s strengths, weaknesses, opportunities and threats in a SWOT analysis, findings have inferred that its
strengths and opportunities outweigh its weaknesses and threats. Hence, our recommendation to the investor is that if you
are a long term and low risk investor, BP is a suitable company and this recommendation of ours is backed up by that of
other financial analysts from reputable organisations such as CNBC and Motley Fool.
2
INTRODUCTION TO BP
Formerly known as British Petroleum, BP is one of the world's leading international oil and gas companies, providing its
customers with fuel for transportation and petrochemicals products for everyday items. This multinational has 83,400 em-
ployees and 21,800 retail sites1, and is made up of subsidiaries BP, ARCO, ampm, ARAL, Castrol and Wild Bean Cafe.
Since 2000, BP has attempted to discover new resources including deeper water oil and gas, natural gas and wind while
focusing on substantial development. The aim of BP is to deliver energy to the world.
HIGHLIGHTS IN HISTORY2
1909 A British man established the company as Anglo Persian Oil company after having discovered the first
oil site in Persia.
1951 Iran nationalises oil industry under leadership of Mohammed.
1954 Name change to British Petroleum and market expansion into other regions took place.
1998-2000 Merges with Amoco, and acquires Arco and Burmah Castrol.
2010 Oil spill in the Gulf of Mexico killed 11 people and resulted in 4.9 million barrels of oil being discharged,
threatening marine life and hundreds of miles of coastline.3
ETHICAL POSITION
In 2010, while the environmental damages and wildlife threats due to the deep-water horizon explosion off the Gulf of Mex-
ico were near immeasurable, BP’s reputation was tarnished and their estimated pay-out costs and fines were rapidly increas-
ing. The public failed to find a strong enough justification for the worst oil spill in history and this led to BP suffering a col-
lapse in its public relations and reputation. However, with persistence on BP’s part, it has been able to reshape its image in
the public eye. Offering assistance to the US Government to minimise the impact of the issue and compensate people affect,
discovering alternative energy sources and becoming a sponsor of the London 2012 Olympic Games are among the few
initiatives carried out by BP that attributed to the restoration of its pronounced image and upright ethical position.
During the 2012 Games, BP helped to promote 'a Green London' to the world, and provided advanced fuels and engine oils
for over 5,000 official vehicles, fuel for generators and the liquefied petroleum gas (LPG) for the Games’ catering needs;
this demonstrated BP's care for both the society and environment. In addition, this served as an advertisement which aided
the recovery of BP’s public relations. BP has contributed to finding new forms of low-carbon energy while reducing its own
contributions to carbon in the atmosphere since the early years of the twenty first century. An example would be that its
greenhouse gas emissions were down to 61.8 Mte4 in 2011 due to a reduction in activity. Along with technological advance-
ment, the use of sustainable energy resources would enable the firm to be highly productive.5
The initial clean-up project for the Gulf of Mexico accident aimed to restore the natural resources and priority was given to
projects that benefitted the ‘affected wildlife, habitats and recreational uses’ most eminently. BP carried out over ‘12,500
bird observational survey sessions’ over a 4-month period from May 2010 to roughly measure the impact on their habitats
before implementing any project.6
1 http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9021229&contentId=7039276 2 http://www.mcclatchydc.com/2010/05/08/93779/bp-has-a-long-record-of-legal.html 3 http://www.bbc.co.uk/news/science-environment-13123036 4 Mte - Million tonnes of CO2 equivalent. Source from: www.bp.com 5 http://www.bp.com/sectiongenericarticle.do?categoryId=9014445&contentId=7027526 6 http://www.bplondon2012.com 3