Financial Comparison – Oil CompaniesEssay Preview: Financial Comparison – Oil CompaniesReport this essayFinancial Analysis ProjectBA430Company ProfileBritish Petroleum (BP), formerly BP Amoco, is the worlds #2 integrated oil company, behind Exxon Mobil. The company, which was formed in 1998 from the merger of British Petroleum and Amoco, has grown further by buying Atlantic Richfield Company (ARCO). The company is based in London and operates in more than 100 countries in Europe, the United States, Canada, Russia, South America, Australia, Asia, and Africa. It has exploration and production interest in 26 countries. Almost 40% of its fixed assets are located in the US. It is the largest US oil and gas producer. BPs US operations are headed by Bob Moore, President BP America. A top refiner (3.4 million barrels of oil per day capacity), petrochemicals, and specialty chemicals manufacturer, it has expanded by buying motor-oil maker Burmah Castrol. BP operates 29,000 gas stations worldwide.
SummaryThe company overall seems to be financially healthy despite natural and man-made disasters. BP lost $2 billion post-tax because of Hurricane Katrina and an explosion at their Texas City refinery. Additionally, it was required to partially shut down the Prudhoe Bay oil field in Alaska in early July because of corrosion in the pipelines that led to several oil spills. Because of these incidents, the company has come under more scrutiny. BP American President Bob Malone will be appearing before a Congressional committee in Washington D.C. on September 7 to answer allegations by lawmakers that BP has been involved in tampering with the oil futures market. The Alaska Oil and Gas Conservation Commission has tentatively scheduled a Sept. 26 hearing to evaluate BPs proposal to install new piping connections to reroute production in Prudhoe
The BP A-bomb and the aftermath: (1) The cost of oil drilling in Alaska and BP’s failure to follow through on its pre-tax promises is high. (2) As if oil did not matter, BP has to turn around and pay off its first $100 billion debt. The company’s failure to make its debt on time is more evidence of how low its operating costs are — especially when oil prices are in the early stages of decline. (3) While BP lost a staggering $2 billion in oil production and lost another $100 billion by accident — a disaster of epic proportions — it is at the top of the corporate hierarchy in the North Sea. With its massive oil wealth, BP has far more leverage than many of the big oil-producing states of the Pacific. The company’s $50 billion valuation of offshore reserves in the North Sea, which it bought during the Obama administration after the Second Gulf War, and the $40 billion it invested into a massive $100 billion new development complex at a major energy project in Abu Dhabi in 2009, are a strong indicator of how much oil has moved forward. (4) For the fourth consecutive year, the government, acting under a special power-sharing agreement with BP that began in 2012, has failed yet another oil deal under which it agreed to fully repurchase oil on behalf of both companies. (5) BP’s “unfair and unwarranted” settlement with Alaska and its $7 billion purchase of oil leases on the Gulf coasts is proof of the state’s commitment to not overinvest or underinvest in the state’s oil and natural gas. (6) At the same time, the company’s decision to merge with Deepwater Horizon is a sign of how much oil and gas offshore Alaska has to offer for the rest of our oil and gas infrastructure. (7) The company’s continued financial woes will likely prove particularly damaging for its long-term prospects. If BP continues to have a long stretch and no good ideas for its investments, it must have a more rational plan of investing in its ability to survive in the oil and gas fields. Instead, it appears it simply bought up oil leases and sold them to an offshore oil company. (8) These types of problems are unlikely to change. Instead, the oil and gas industry and its opponents are working to convince their shareholders that the company will invest it’s best capital wisely. (9) An oil company that tries to make as much money as it can through selling its well and the profits they make is essentially trying to sell a single, poorly executed investment to a shareholder on a daily basis. (10)
Why an emergency: BP’s future looks bright again as it begins to figure out exactly how many extra barrels of oil it needs to sell before the end of 2007. (1) As global oil reserves decline, BP may need to build to the end of 2016 an even larger number of pipelines that will deliver more oil and natural gas to customers in the Gulf. The company has just spent $4.2 billion on the pipeline extension project in Alabama over the last year. (2) Since BP recently announced the $60 billion financing that it promised BP back in April, it has taken the company on a four-way walk. (3) The company already has two offshore drilling operations in both Georgia and Texas in its portfolio. As of the fourth quarter of this fiscal year, it intends