IntroductionBP is one of the well established companies in the oil and exploration industry. BP has grown from a humble beginning as Anglo-Persian Oil Company, when it first discovered oil on the 26th of May 1908 in Persia (modern Iran) to a multinational corporation. The company was founded by William Knox D'Arcy. From that first, uncertain search for oil in Persia, BP has grown to become a global energy company. BP not only provides large quantities of oil but is also making strides along a promising path towards oil’s alternatives. The company’s headquarters is located in London, U.K.
It has subsidiaries all over the globe with main concentration in the U. S.A, Russia, Azerbaijan, Angola, the U. K, North Africa, Canada, the Middle East and Asia. It is involved in the exploration, production, refining and distribution of natural gas, petroleum and other related products (BP 2012). This report outlines the BP’s Financial Analysis, Global Economy Outlook, Major Ventures, and Business Diversification: Alternative Energy, Competition plus Future of Oil Industry. These topics are crucial for any party interested in having a deeper insight of the company’s operations and their impacts in addition to the manner in which the company is able to respond to disasters that may occur in the oil and exploration industry.
Needless to say, there are other areas that are of great significance to a company that also need to be addressed. However, this report may not capture all the details. Therefore, issues such as corporate governance and structure, remuneration, regulatory requirements, controls and procedures as well as use of technology have not been captured. This information is available in the company’s reports as well as from electronic sources. Financial AnalysisTable 1: Key Performance IndicatorsKey Fundamentals31-Dec-1231-Dec-11Percentage ChangeRevenue (£ m) 231055.06241629.88-4.38%Pre-Tax Profit (£ m) 11571.2124988.10-53.69%Earnings per Share (EPS) 37.44p87.47p-57.20%Price-Earnings 11.355.26115.78%Dividend Cover 1.805.03-64.21%Dividend Yield 5.00%4.00%25.00%Operating Margin 3.81%8.52%-55.28%ROCE 10.52%21.90%-51.96%Net Gearing 24.70%27.05%-8.69%Source: London Stock Exchange: Prices and Markets, BP PLC; FundamentalsBP revenue for the year ending 31 December 2012 went down by 4.38 percent from the previous year to 231055.06 million Euros.
The pre-tax profit followed the same path shedding off 53.69 percent to settle at 11571.21 million Euros in 2012. Earnings per Share also lost a massive 57.2 percent and settled at 37.44p in 2012 down from 87.47p in 2011.
However, against all odds, the price-earnings ratio gained 115.78 percent to settle at 11.35 in 2012 up from 5.26 in 2011. Dividend cover was slashed by 64.21 percent to settle at 1.8 in 2012. On the other hand, the dividend yield surged up by 25 percent up to 5 percent. The operating margin, a measure of profitability, shed off 55.28 percent from 2011 to settle at 3.81 percent in 2012. Further, Return on Capital Employed (ROCE), declined by 51.96 percent from the previous year to 10.52 percent in 2012.
Net gearing ratio shed off 8.69 percent to 24.7 percent in 2012.2012 BP results were severely affected by the legal settlement fee settled on with the US administration following the Gulf of Mexico oil spill, and by inferior results in the company’s operating divisions (BP, 2012). Operating cash flow is disposable cash flow provided by operating activities, as of the group’s cash flow statement. Operating activities are the main income-generating activities of the group in addition to other activities that are not investing or financing activities. Inferior operating cash flow in 2012 replicated the cash flow effect of lower profits, which was partially mitigated by a lower cash outflow linking to the Gulf of Mexico oil spill.
Gearing permits investors to notice how significant net debt is in relation to equity from shareholders. The year ended with gearing within our desired 10-20% range and we will continue to target this range while uncertainties remain (Edmonds et al, 2006; BP, 2012).