An Analysis of the Financial Situation of Bp P.L.C

Topics: Financial ratio, Peak oil, Petroleum Pages: 20 (5359 words) Published: July 14, 2010
Research and Analysis Report

An Analysis of the Financial Situation of BP P.L.C.

Prepared by Yuehua Song

Actual words: 4,952words
Date: September 2007



1.1 Topic Chosen2
1.2 Reasons for Choosing the Topic2
1.3 Aims and Objectives3
1.3.1 Aims3
1.3.2 Objectives3
1.4 Sources of Information6
1.4.1 Annual Reports and Accounts of BP 2002-20066
1.4.2 Annual Reports of Shell 2002-20067
1.4.3 Analysts’ Reports7
1.4.4 Newspaper Commentaries7
1.4.5 The Information Released by In-house Brokers and Financial Advisors of BP7 1.4.6 General Background Reading8
1.4.7 Professional Magazines and Journals8
1.5 Methods Used for Information Collecting8
1.5.1 Library Reading8
1.5.2 Website Visiting9


2.1 The Business11
2.2 SWOT Analysis11
2.3 Strategic Analysis and Major Features Review (SLEPT)15 Strategic Analysis15
Major Features Review (SLEPT)15
2.4 Financial performance18
2.4.1 Growth20
2.4.2 Ratios22
2.4.3 Investment27


1.Strong strategic position with reputation challenge on safety issue28 2.General financial healthy, challenge the market leader28 3.Middle to long-term investment29


1.1 Topic Chosen
For this research and analysis project, Topic 8 “An Analysis of the Financial Situation of BP P.L.C. (BP)” has been chosen as the topic. To assist the study, the Royal Dutch Shell P.L.C. (Shell) is been chosen for a comparison.

1.2 Reasons for Choosing the Topic
One of my friends, an employee of BP, was given a chance to enter the company’s share option saving scheme. He asked me should he take this option or not. After a roughly study I found that BP is the second-largest global oil group of Europe. During the last decade, the company has performed well and turned from a local company to a global company. But over the past two years, BP has suffered a series of safety and operational problems, led to increasing public scrutiny and had an effect on BP’s reputation. With this background, the company’s investment value is worth to be reviewed. Most investors have shown the interest in whether the outstanding performance will be kept up after a new CEO take over in May 2007, and how soon can the critical difficult situation of the company will be turned around. This report would bring an answer for above questions by a financial study. The Royal Dutch Shell (Shell) operates in the same industry sector with similar comparable size and will be mentioned as the comparative company for assisting the research。 1.3 Aims and Objectives

1.3.1 Aims
This report will attempt to presents an analysis of the current financial position and the future prospects of BP from a view of shareholder perspective.

1.3.2 Objectives
The position analysis is combined with financial statements review and analysis, are the tow main clues for this research project. The data from financial statements will cover the years through 2002 and 2006. Position Analysis
The persition analysis is a review on the operating environment, both inernal and external, of the business. Two analysis models, SWOT alongside SLEPT can be used as a basis for the analysis of business and environmental factors. (Armstrong, 2006)

SWOT Analysis
Under this model, the company’s strengths (S) weaknesses (W), opportunities (O) and threats (T) will be reviewed. The work involved draws on the data obtained about operating objectives, current position, extrapolated position, gaps and environmental forecast, and corporate appraisal. The SWOT analysis is a critical assessment of the internal appraisal of BP’s strengths and weaknesses, and an external appraisal of the opportunities and threats open to the competitive oil and gas industry. (ibid)...

Bibliography: Armstrong. M. (2006). A handbook of Human Resource Management Practice. 10th Edition, London, Kogan Page
Castro, N
Catanand, T. and Harvey, F. (2005) BP Earmarks $8bn for Green Investment. The Financial Times, November 29
Crooks, E
Crooks, E. (2007) BP Seeks More Joint Ventures in Russia. The Financial Times, July 23
Crooks, E
Cygnus Business Consulting & Research (2004) ‘Global Oil and Gas’, November, pp.5
Fabozzi, F. J. and Peterson, P. P. 2003. Financial Management & Analysis. 2nd Edition. New Jersey: John Wiley & Sons, Inc.
Foster, G. 1986. Financial Statement Analysis. 2nd Edition. New Jersey: Prentice-Hall
Hillman, A
Holmes, G., Sugden, A. and Gee, P. 2005. Interpreting Company Reports and Accounts. 9th Edition. Essex: Person Education Limited
Mautz, R
Zittel, W. and Schindler, J. (2003) Future World Oil Supply.
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