About BP Solar International Inc.
BP is one of the largest oil and gas companies in the world. With proven reserves of approximately 20 million barrels of oil and oil equivalents, BP explores, produces and sells oil and gas, fuels, lubricants, wind power, and biofuels. With presence in some 80 countries, it sells 12 million tons of petrochemical products annually through contracts or via 18,700 retail sites. BP's main brands include the eponymous BP brand, which appears on rigs, offices, and gas stations, gas station-specific brands Amoco (US) and Aral (Germany), lubricant brand Castrol, and gas station convenience store brands ampm and Wild Bean Café.
BP has two major operating segments: Upstream and Downstream. A third segment Rosneft is also reported.
The downstream segment is BP's primary earner, bringing in some 90% of total sales. BP manages the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum, petrochemicals products, lubricants, and related services to wholesale and retail customers.
Upstream activities (some 10% of revenue) include oil and natural gas exploration, field development and production, transportation, storage and processing. BP also markets and trades LNG and natural gas liquids.
BP has a 20% equity interest Rosneft, the biggest oil producer in Russia, and although reported as a separate operating segment it does not contribute to sales.
BP has other biofuels and wind businesses, shipping and corporate activities worldwide, making up only a tiny fraction of total sales.
BP is headquartered in London. Its upstream business is active in the North Sea and the Norwegian Sea, Gulf of Mexico, Canada, Mexico, Brazil, Trinidad & Tobago, Abu Dhabi, Azerbaijan, Australia and East Indonesia. In the US, BP has upstream activities in Alaska, Arkansas, Colorado, New Mexico, Oklahoma, Texas and Wyoming.
Downstream, BP has major refineries in the US North West (Cherry Point), Rockies (Whiting and Toledo), as well as refineries in Germany, Netherlands, Spain, South Africa, New Zealand and Australia.
BP is not particularly dependent on any one market, a third of its revenue coming from the US and the rest being spread across the world.
Sales and Marketing
BP primarily sells oil and gas through pipelines and by ship, truck and rail, serving more than 12,000 customers across 140 countries annually. It has more than 60,000 suppliers, helping it sell 12 million tons of petrochemical products annually through contracts or via 18,700 retail sites.
Major company brands include eponymous BP, as well as AMOCO, ampm, Aral, and Castrol. With some 2,400 service stations, Aral is one of the most recognized brands in Germany, while BP and Castrol are leading brands of motor oil and lubricants. US retail brand ampm has more than 950 locations throughout the US west coast.
BP's revenue is closely tied to the price of crude oil. The 2015-16 oil and commodity price downturn slashed BP's revenue from a $380 billion peak in 2013 to a decade-low of $183 billion in 2016. Net earnings plummeted similarly, from a sizable $23 billion in 2013 to a $6 billion loss just two years later. In the years since the downturn, revenue has been growing and profits are back in the black.
In fiscal 2019 (ended 29 March) BP's sales grew 24% to $303.7 billion thanks to higher realized average prices across the year, peaking at $85/b in October and bottoming out after a sharp fall at $50/b at the end of the year. The company also saw a strong increase in volume sales amid higher oil demand.
Net income has grown exponentially since BP just about broke even in 2016. In 2018 its net income grew 176% to $9.6 billion due to the general improvement in industry conditions, although the figure is less than half of arch-rival Royal Dutch Shell.
BP's cash position weakened slightly during fiscal 2019, ending the year $3.1 billion lower at $22.5 billion. The company's operations generated $22.9 billion, while investing activities used $21.6 billion and financing used $4.1 billion. The company's main cash uses in 2018 were capex, acquisitions, and dividends.
BP, like its closest peers, was hit hard by the oil price downturn of 2015-16. Revenue reduced from a peak of $380 billion in 2013 to $180 billion in 2016, before recovering in the years since. With oil prices recovering and oil & gas activity ramping up once more, the company is following a strategy of diversification—in both the resources it produces, as well as the markets it sells to.
On the production side, BP has launched 13 major projects in the last two years in diverse regions like Trinidad, India and the Gulf of Mexico. It is also exploring possible acquisitions in the Santos Basin of Brazil. The company is in line with its goal to produce 900,000 barrels of new production per day by 2021. It posted one of the most successful exploration years in 2017, with a decade-high reserve replacement ratio.
A bigger, bolder news came in July 2018, when BP announced plans to acquire oil and gas field assets from BHP Billiton in a $10.5 billion deal. This bold acquisition is seen as a second chance for BP to enter the lucrative American shale business. Its 2010 Deepwater Horizon disaster—with a concomitant $60 billion damage bill—unraveled its first attempt.
To free up its balance sheet, BP announced in 2019 it was withdrawing from Alaska, which had for decades been a key region for the company. The $5.6 billion sale includes Prudhoe Bay, North America's biggest ever oil field, which BP has been operating since 1977. Ultimately BP hopes to divest assets worth $10 billion in total.
While BP is not exactly racing to become a renewable pioneer any time soon, the company is also steadily diversifying its portfolio to include green technology, though its scope remains limited. Should an unexpected external factor accelerate the renewables transition it could undermine BP's business model. It acquired the UK's largest electric vehicle charging network (renamed BP Chargemaster) and, along with another three-dozen partnership investments in clean energy, tied up with the company Lightsource to invest in large-scale solar projects. Lightsource grew its presence to 10 countries in 2018, up from five.
Downstream, BP has equally ambitious plans to expand its marketing businesses. The company has steadily increased its retail fuel offerings in growth markets like India, Indonesia, and Mexico, which had 440 BP gas stations as the end of 2018. In China, BP even entered a joint venture with DongMing Petrochemical for further market penetration.
Mergers and Acquisitions
In July 2018, BP spent $10.5 billion on acquiring BHP Billiton oil and gas field assets spanning 470,000 acres with a reported capacity of 190,000 barrels per day. The majority of the acerage lies in the Eagle Ford, followed by Haynesville, and some in the Permian. Two months later, BP also announced acquisition of 61% participating interest in the onshore Gobustan PSA (product sharing agreement) in Azerbaijan, and plans to drill one exploration well to appraise prospects in mid-2019.
Also in 2018, BP acquired Chargemaster, the UK's largest operator of electric vehicle charging stations with more than 6,500 points across the country. Chargemaster designs, builds, and maintains a variet of charging types, including those for home use.
BP's history dates back to efforts of British companies to capitalize on discoveries of rich oil deposits in Middle East in the late 19th and early 20th Centuries. These included the Anglo-Persian Oil Company (later the Anglo-Iranian Oil Company), in which the British Government took a majority share in 1914. It became British Petroleum in 1954, and, following a number of other acquisitions, became BP in 2000. BP's modern history is marked by the 2010 Deepwater Horizon disaster, a massive spill in the Gulf of Mexico that resulted in the highest fines and penalties in the history of the US.
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