British Petroleum Research paper (Research Paper Sample)
SWOT analysis may not be all accurate as more factors from external or internal can affect BP. But SWOT gave us an overview of each advantage or disadvantage BP might face. Overall, BP's performance is solid and strong for its years-long businesses. But BP must change their game for future economic and environmental to both matches with global needs while keeping their stand in the energy sector as one of the seven supermajor oil and gas companies.source..
British Petroleum (BP) IFRS
Petroleum and petrochemical hydrocarbon compounds are found naturally as crude oil in liquid form from the ground. For the successful treatment of these pollutants, a more sophisticated ecological technique has been suggested to avoid affecting the environment, soil, plants, and other microbial activities. These compounds also contain more chemicals such as sulfur, oxygen, carbon dioxide, nitrogen, and trace elements, which are identified by their chemical and physical properties. This study uses a table research method to support the British Petroleum Company's history and recent reports. Despite a huge loss of more than 28 billion U.S. dollars in 2010, they provided and delivered heating, lighting, and mobility of their product services to people around the world. The commitment boosted its market growth by about 4 billion U.S. dollars in 2015 and is expected to grow by more than 25% by 2025. Prehistoric, petroleum, and petrochemical hydrocarbons have been broken down by fractional distillation during refining into various products. British petroleum products are usually light in weight with low sulfur content and therefore maintain a strong position in the market despite common difficulties, criticism, or lost revenue.
British Petroleum (BP's) Description, Geographic Presence and, Products
British Petroleum company, also referred to as BP is a British multinational oil and gas company established in 1909 with its headquartered in London, United Kingdom (Sönnichsen, 2020). BP provides "12 million tons of petrochemical products annually through contracts or via 18,900 retail sites." (Dun & Bradstreet, 2019), and is present geographically in more than 70 countries worldwide. (British Petroleum, n.d). Some of these countries include the United States, Singapore, Austria, Belgium, Germany, Hungary, China, Canada, Angola, Egypt, and Kuwait. (British Petroleum, n.d).
Moreover, according to the Dun & Bradstreet Website, BP has approximately 72,500 employees, made 278,397 million dollars in revenue in 2019, a gross profit of 27,583 million dollars, and a net income of 4,026 dollars. (Dun & Bradstreet, 2019). BP is also amongst one of the world's seven oil and gas major companies. It has divided its businesses into three segments, Upstream, Downstream, and Other Businesses (Sönnichsen, 2020). However, according to Statista.com, "the Downstream sector is by far the largest segment, [as it generates] over 90 percent of BP's total revenues." (Sönnichsen, 2020). This sector is also their primary sector and "includes the processing and final distribution of fuels, lubricants, and petrochemicals [with] North America and Africa as their most important regions for BP's oil production." (Sönnichsen, 2020).
Nevertheless, it is important to note that the company has had multiple environmental, health, and safety violations throughout the years, as conveyed in Statista.com. Their most recent and most known incident was "the Deepwater Horizon oil spill in the Gulf of Mexico in April of 2010." (Sönnichsen, 2020). It is known to be one of the "largest marine oil spills in history" and had an estimated oil spilled quantity of 4.9 barrels. (Sönnichsen, 2020). Moreover, according to Statista.com, the incident has "cost the company some 28 billion U.S. dollars." (Sönnichsen, 2020). However, despite this setback in 2010, the company has always been devoted to offer and deliver heat, light, and mobility products and services to people globally.
To add on, BP offers oil and gas petrol stations, motor oil lubricants bio and low carbon products, wind power, and biofuels. (British Petroleum, n.d). While staying committed to being environmentally responsible. As BP wants to help the world "reach [a] net-zero and improve people's lives." (British Petroleum, n.d). One of their goals as a company is "to dramatically reduce carbon in [their] operations and production [while] growing new low carbon businesses, products, and services." (British Petroleum, n.d) Subsequently, rebranding themselves as a company, that is innovative and environmentally conscious in the way it provides energy for people globally.
British Petroleum (BP's) Major Competitors
Some of British Petroleum's (BP) major competitors are Chevron Corporation, Exxon Mobil Corporation, and Royal Dutch Shell. (Dun & Bradstreet, 2019). As indicated by dnb.com, Chevron has "approximately11.4 billion barrels of proved reserves, produces about 3.1 million barrels of oil per day, and has refining capacity for nearly 1.7million barrels per day". (Dun & Bradstreet, 2019). Moreover, the company "sells refined products branded under the Chevron, Texaco, and Caltex names through approximately 7,900 gas stations in the US and around 5,100 outside the US." (Dun & Bradstreet, 2019).
Another renowned competitor of BP is Exxon Mobil Corporation. Exxon Mobil Corporation is known as "the world's #1 publicly traded oil company" (Dun & Bradstreet, 2019). The company "holds more than 22 billion barrels of oil equivalent of proved reserves, spread across some 15 countries on six continents." (Dun & Bradstreet, 2019). It also has a daily average output of about "1.7 million barrels of crude oil, 269,000 barrels of NGLs, and 9.4 billion cubic feet of natural gas." (Dun & Bradstreet, 2019).
Lastly, Royal Dutch Shell is another competitor of BP (Dun & Bradstreet, 2019). It is known as "the second-largest oil company and the third-largest of any type globally [with] worldwide proved reserves of 11.6 billion barrels of oil equivalent." (Dun & Bradstreet, 2019).
British Petroleum (BP) IFRS
The oil and gas industry's market size grew to about four billion US dollars in 2015 and is estimated to attain a 20% growth by 2024 since 2016. The table below illustrates the trends in the industry's world market.
(Retrieved from Global Markets Insights, Inc., 2016)
Crude oil is one of the products in great demand in the current world. The product is useful as fuel and the manufacturing of petrochemicals like adhesives, solvents, and plastics. The leading companies in the production of oil are Sinopec in China, PetroChina in China, and Royal Dutch Shell in the UK, followed by BP in the UK. BP's market share is equivalent to 271.76 billion US dollars (Sonnichsen, 2020). The table below shows a representation of the top companies across the globe, together with their market shares in the oil and gas industry.
The oil and gas industry is not IFRS dominant. Instead, it makes use of Generally Accepted Accounting Principles (GAAPs). Under GAAPs, two methodologies are used in accounting for costs in the oil industry. These approaches include the full cost and successful cost method. The US GAAPs have significantly influenced the development of accounting practices in the oil industry. The US GAAPs has affected the accounting practices in other nations. Even those countries that do not have specific accounting rules comply with the US GAAPs. Most of the companies in the oil and gas industry have adopted the "successful effort" approach. In this approach, the cost undergone when developing and acquiring reserves is capitalized on a field-by-field basis. Furthermore, the estimation of revenues and expenses in the industry's reserves is not done by accountants. Instead, it is done by petroleum reservoir engineers or geologists. The adoption of international financial reporting standards (IFRS) will provide significant accounting changes to companies in the industry (PwC, 2017). Numerous companies in the industry have the responsibility to check on their accounting standards and implement initiatives that comply with the IFRS's regulatory framework. However, most of the companies are using the US GAAPs, making it possible for a US company to achieve significant comparability of its financial statements. For instance, both the GAAPs and IFRS use a statement of cash flows, balance sheet, and income statement. On the same note, the methods are identical when dealing with cash and cash equivalents. Therefore, I expect significant comparability of statements when shifting from GAAPs to IFRS.
Starting January 1st, 2005, BP officially adopted International Financial Reporting Standards (IFRS). They also chose not to adopt International Accounting Standard No. 39 'Financial Instruments: Recognition and Measurement' (IAS 39) until 1 January 2005. This means that while they will redo their financial information for 2004 to reflect IFRS; they will keep financial assets and liabilities, including derivatives to match with the UK generally accepted accounting practice (UK GAAP).
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. The current ratio tells investors and analysts how a company can maximize current assets on its balance sheet to satisfy its current debt and other payables by dividing the current assets by current liabilities. The current ratio for BP 2020 third quarter is 1.22.
Quick (Acid-Test) Ratio
Quick Ratio or Acid Test indicates a company's capacity to pay its current liabilities without needing to sell its inventory or get additional financing. We can get the result by subtracting inventory from current assets and divided by current liabilities. The quick ratio for BP 2020 third quarter is 0.98. The higher the result, the better a company's liquidity and financial health; the lower the ratio, the more likely a company will struggle to pay back thei...
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