Edited from “chairman's letter” and “group chief executive's review” - annual report 2008 and company website
BP states that 2008 was a year to “remember”. “There are few precedents in history for such a rapid and dramatic change in the business environment. In the space of a few months we went from a record oil price of more than $140/barrel, and BP reporting two consecutive quarters of record profits for the company, to a recession in most of our major markets”, says chairman, Peter Sutherland.
Exploration and Production
BP employs a focused exploration strategy in areas with the potential for large oil and natural gas fields as new profit centres. Within its portfolio of assets, it will continue to develop its profit centres in which it has a distinctive position: Asia Pacific gas, Azerbaijan, Algeria, Angola, Trinidad, deepwater Gulf of Mexico and Russia. It will also manage the decline of its existing profit centres in Alaska, Egypt, Latin America, Middle East, North American gas and the North Sea.
It will build production with improving returns by focusing on finding the largest fields, concentrate its involvement in a limited number of the world’s most prolific hydrocarbon basins and build leadership positions in these areas; and manage the decline of existing producing assets and divest assets when they no longer compete in its portfolio.
In 2009, oil and gas prices are expected to be significantly lower than 2008. In response BP will aim to use the operational momentum generated in 2008 to continue to increase the efficiency of its cost base and to build capability for the future.
The company says that it intends to retain its rigour around capital investment, in particular pacing its development to take advantage of any cost reductions in a deflationary environment, and supporting its strategy of growing the upstream business. It believes that its portfolio of assets is strong and is well positioned to compete and grow in a range of external conditions.
Refining and Marketing
BP aims to improve the quality and capability of its manufacturing portfolio. It says its retail strategy provides differentiated fuel and convenience to some of what it states as being “the most attractive global markets”.
Its lubricants brands offer its customers benefits through technology and relationships, and it will focus on increasing brand and product loyalty. BP will continue to build deep customer relationships and strategic partnerships in the business-to-business (B2B) sector.
In addition, the company has also started to address overhead costs by reducing senior level headcount and by simplifying the marketing footprint. It says it will work on gaining “greater consistency and efficiency through the business to capitalise on the leadership positions that it enjoys in the most valuable markets”.
Alternative Energy
BP states that with energy demand and carbon emissions rising, “the world needs sustainable, affordable energy source available”. BP will invest a significant amount in alternative energy technology compared with its “peers”.
BP says that the key question is which technologies will make the greatest contribution to meeting energy demand while providing BP with strong growth businesses. In 2008 it prioritised areas with long-term growth potential, such as wind, solar, biofuels and carbon capture and storage (CCS) and directed the majority of its $1.4bn investment in the year to these areas.
BP’s overall key strategy
BP is taking action to close the competitive gap through a focused effort on its three priorities of safety, people and performance. It says it is determined to operate safely and reliably, to develop the capability of its people and to drive performance through restoring operational momentum.
In Exploration and Production its resource base underpins the potential to sustain production of at least 4m barrels/day out to 2020. BP states that it will do better than this as it continues to pursue new access and deliver further exploration success.
In Refining and Marketing it intends to close the performance gap progressively over the next few years by restoring performance in its key refining facilities and by re-organising to operate more efficiently and optimise margin capture.
In Alternative Energy it will manage the business to grow equity value for BP, by investing in long-term strategic growth options in low carbon technologies.
“BP’s strategy for the future is robust. We have great positions in many of the major hydrocarbon basins of the world. We also have great market positions in the key economies and are preparing for the future by building a new low-carbon energy business. Executing our strategy is where we must improve. In safety, we are significantly lowering the risk profile of our operations. On the front lines of our business, we are moving this agenda forward”, concludes Sutherland.
Please also see BP to launch UK biobutanol production by 2013 on ICIS news.
ICIS Chemical Business magazine has unveiled the ICIS Top 100 Chemical Companies, with rankings based on 2008 sales.
A PDF of the ICIS Top 100 Chemical Companies is available for download on ICIS connect.
See the article and analysis of the ICIS Top 100 on ICIS news.
Financial highlights: BP, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales ($ m) |
361,143 |
284,365 |
265,906 |
239,792 |
192,024 |
|
Operating Profit ($ m) |
21,157 |
20,845 |
22,000 |
22,341 |
17,075 |
|
R&D ($ m) |
595 |
566 |
395 |
300 |
234 |
|
Total Assets ($ m) |
228,238 |
236,076 |
217,601 |
206,914 |
194,630 |
|
Diluted earnings per share ($) |
111.56 |
107.84 |
109.00 |
104.52 |
76.87 |
|
Number of Employees |
92,000 |
98,100 |
97,000 |
96,200 |
102,900 |
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BP
Company Structure
BP’s main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals. BP was founded in 1909 as the Anglo-Persian Oil Co to develop oil fields in Persia (Iran). At that time, 97% of the shares were owned by Burmah Oil but in 1914 the UK government injected 2m of new capital into the company in return to a majority shareholding. Much later, the government's shareholding was reduced and ended in 1987 apart from a tiny residual holding. Meanwhile, in 1935, the company was renamed Anglo-Iranian Oil Co.
More about BP Structure
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