A Financial Analysis of BP within the Oil Industry, Including Effects from the Recession on BP and the Industry

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Table of contents

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER01: INTRODUCTION1

Background of the Study1

Aims and Objectives of the Study2

Research Questions2

Introduction of British Petroleum2

CHAPTER 02: LITERATURE REVIEW4

Impact of Oil Price Changes on State Incomes5

Impact of Oil Price Shock on Economy6

Impact of Oil Price on Employment8

Oil prices increases and recession9

CHAPTER 03: METHODOLOGY15

Research Design16

CHAPTER 04: FINANCIAL ANALYSIS17

Financial Ratios Analysis of British Analysis17

Profitability Ratios Analysis17

Liquidity Ratios Analysis18

Debt Management Ratios Analysis19

Asset Management Ratios Analysis20

Comparison of Operating Profit Margin, and Gross profit Margin21

Comparison of Revenue, EBITDA and Net Income23

Stock Prices Analysis of BP24

CHAPTER 05: DISCUSSION25

Crisis in the Middle East and Oil Industry28

CHAPTER 06: CONCLUSION31

REFERENCES33

APPENDIX36

Income Statement36

Balance Sheet36

Cash Flow Statement37

Stock Price and Valuation38

Stock price History of BP39

CHAPTER01: INTRODUCTION

Background of the Study

The UK is a mature oil and gas producer, faced with an inevitable decline in output and exports. In 2010, it had approximately 3bn bbl of proven oil reserves located largely in the North Sea, where more than 250 oil and gas fields are in production or under development. There are more than 140 companies engaged in UK offshore operations. Oil production is falling steadily, having peaked at 2.9mn b/d in 1999. Daily output in 2011 is forecast to be 1.39mn bbl and BMI expects average output by 2015 of 1.07mn b/d. UK oil refining capacity at the end of 2010 was around 1.79mn b/d, slightly in excess of consumption, estimated to reach 1.63mn b/d in 2011.

The country's reserves of natural gas, mostly in the southern North Sea, in 2010 amounted to 256bcm (BP Statistical Review of World Energy, June 2011). The UK is also a producer of coal but output has tumbled since the 1980s because of high costs leading to the closure of many mines. Just a few years ago, the UK was probably the most energy self-sufficient country in the EU, having substantial domestic oil, gas, coal and nuclear energy resources that minimized import requirements. The rapid depletion of hydrocarbons and a gradual winding down of the coal industry and coal-fired power generation means that energy imports are on the rise. A policy decision to build new nuclear generating facilities, plus increased investment in renewable, should cap the rate of import growth. The 2010 change of government introduced a fresh element of uncertainty over nuclear plans, although there are few other large-scale energy options open to the country.

Aims and Objectives of the Study

Before starting on the course ...