BP In The World Market - Essay Example

Share Portfolio Investment Assignment Introduction In the current volatile financial market environment, it is vitally important to make informed decisions regarding the financial investment that one wishes to make. Besides studying and understanding the trends in the stock market, the choice of the company that one wishes to invest in is requisite. Understanding all the relative dynamics enables one to make informed decisions regarding the amount of finances to invest, at what time to make the investment and at what time to pull out of the company. Timely decisions in this regard would go a long way in ensuring the safety and security of the respective investment. Most importantly, informed decisions in this regard would enable the investor to attain the primary goal of profiting from the respective business. It is against this background that this paper provides a share portfolio review. The company of choice pertains to the BP gas and oil company that has been stable in the financial share market over time. To enhance a coherent consideration, it begins by justifying the choice of the company. It then proceeds to an analysis of the performance of the invested shares and provides an informed judgment as to whether the performance was good. Finally, it presents the reasons that informed the investor with respect to keeping the shares in the company. BP in the World Market BP is one of the key players in the global gas and oil industry. With respect to returns and production capacity, BP is the leading gas industry in the world. Research indicates that the company explores both natural gas and oil in a significant 30 countries. Furthermore, it possesses up to 18.1 billion barrels of oil in reserves. This information ascertains that the company is stable and its operations are sustainable. Although the company is not immune to the negative implications of the shortages stemming from the dynamic oil industry, it is unlikely that its reserve could be depleted without it seeking for other alternatives. Arguably, it has sufficient capital and its sustenance is assured. The company has a broad consumer base comprising of various clients drawn from diverse economic backgrounds. These customers are scattered across the globe in 90 different countries. Its business segments include production, exploration, marketing and refining (BP, 2011). Through the respective segments, it has succeeded in providing fuel as well as fuel products employed for transportation, providing energy, heating and lighting. The relative retail brands have equally been important as a part of the company’s diversification plan. Financial Performance The annual financial reports for BP PLC ADS indicate that BP has encountered financial losses in the past. Year 2006 2007 2008 2009 2010 Sales/Revenue $B 144.45 142.1 196.99 153.32 192.51 Sales Growth $B -1.63 38.63 -22.17 25.51 Source: BP Financial Statements The above table indicates that 2007 and 2009 were not the best financial years for the company. Its performance was very low and arguably, these were not the best years for the investors to make investments. However, the trends reversed in the succeeding years and in 2010, the performance had assumed an upward trend. These trends also ascertain that the company faces the normal financial problems like other companies but it is able to overcome the challenges. This is a positive implication and it demonstrates that the company is stable. The trend of sales/Revenue and Sales Growth from 2006 to 2010, Source: Extracts from BP Financial Statements, 2006, 2007, 2008, 2009 and 2010 On a positive note, the chart shows that progress was registered in 2010 with increasing trend in revenue and sales growth. This is a positive implication as it suggests that the company’s growth is sustainable. Increment in revenue and sales stabilizes the company and enables it to diversify its operations. All relative activities are instrumental in enhancing and maintaining its financial stability. This is reflected in the financial markets where its shares continue to trade on the stock market. Analysis of Gross income Growth Source: Extracts from BP Financial Statements, 2006, 2007, 2008, 2009 and 2010 The preceding graph indicates that the income growth of the company is upward. Likewise, this implies that its financial growth and ultimate sustainability is assured. Certainly, the company is likely to use the respective income to boost its performance and ensure that it gets sufficient returns from its operations. To a great extent, this cushions it against the negative implications of the changing financial markets. This is because with the income, it can easily address the various challenges in a timely manner. Tabula for of pretax income yr 06 yr 07 yr 08 yr 09 yr 10 Pretax income -16.62 19.7 -18.15 -145.6 Source: Extracts from BP Financial Statements, 2006, 2007, 2008, 2009 and 2010 Analysis of the working capital yr 06 yr 07 yr 08 yr 09 yr 10 Current Assets 38.49 40.29 46.17 41.89 57.31 Current Liabilities 38.5 38.8 48.54 36.73 52.9 Working Capital -0.01 1.49 -2.37 5.16 4.41 Source: Extracts from BP Financial Statements, 2006, 2007, 2008, 2009 and 2010 From the preceding table, the working capital of the company is also stable and promising. Although not at its peak, the current status is positive and company operations are within its revenue. This is a clear sign of financial stability. A significant percentage of the challenges that the company is currently grappling with can be attributed to the accident that it incurred. This preposition is echoed by the Chief Executive Officer who reports that the resultant corporate crisis had adverse implications on the performance and general wellbeing of the company. In detail, the April, 20th 2010 oil spill greatly affected the environment, business operations, job availability communities and the general industry. Nonetheless, important lessons have been learnt from the incident and measures have been undertaken to prevent future occurrences. One of the intervention measures that have been undertaken includes the sell of company assets to address the financial problems that were related to the incident. In addition, the company has disposed of various assets totaling to a significant 22 billion dollars. The finances that are derived from the respective disposals have been instrumental in boosting the performance of the company on the stock Market. Current trends show that its performance is stable and it still maintains its top position in the oil and gas industry (BP, 2011). Furthermore, company reports ascertain that it has greatly reduced its expenses and instead secured different additional credit lines. This sound performance is an implication that the company has sufficient assets that boost its performance and make it viable for investors. Current financial reports ascertain that the energy markets have recovered and continue to stabilize in 2011. Being at the top of this industry, it cannot be disputed that the company’s financial performance is at the forefront. Also worth appreciating are the emergent energy shortages that are being faced by countries across the globe. In this respect, the energy demands are increasing on a daily basis. This implies that BP has the challenge of meeting the abovementioned trends. To a great extent, this implies that the future of the company is bright. Coupled with its efforts to address aspects pertaining to innovation, technology and investment, BP is geared towards improving its overall performance. Of great importance however is its performance in the financial markets. Statistical evidence ascertains that the company assumes up to 13.3 percent share in FTSE 100 (BP, 2011). Indeed, it is one of the major players in the industry with its main focus being renewable energy resources and gas. The role that it plays in environmental protection has given it a plus in the industry. Unlike most of its competitors that oppose environmental protection strategies affecting the oil industry, BP has been on the forefront to advocate for clean production processes. It has initiated intensive lobbying to advocate for environmental protection. This implies that the company is conversant with the relative implications and willing to take practical measures to address the same. As such, it has gained support from various global countries. Its image has also been improved through time. Seemingly, these factors have also contributed significantly to its upward performance in the financial markets. Seemingly, the company has also invested a great deal in selling other types of products. The products in this regard include gasoline, aviation fuels, and fuel oil and middle distillates amongst others. The proceeds from the above products are reinvested in the company. To a great extent, this has contributed to its stability over time. Financial reports of the company cite that the company has received minimum resources from external investors. Nonetheless, it has put in place measures to attract more external investment. With regard to the company’s share prices, these have had a relatively volatile movement. Between November 2010 and September 2011, these moved from 424p to 386p. Nonetheless, there has been a major improvement in the recent past and currently, the prices are up at 424p (BP, 2011, p. 1). Likewise, this implies that the performance of the company is still stable and therefore the shares invested in the same are safe. Conclusion As it has come out from the preceding analysis, BP Oil and Gas Company is financially stable. Its performance in the stock market has been positive, implying a state of stability and sustainability. Although it has faced various challenges, it has been able to curb the respective challenges in a timely manner. A review of its income tax, working capital, sales and revenue income and other financial aspects show that the company’s growth is upward. This state of affairs has also been contributed to by the investments that it has made over time. Its diversification plan has also boosted its financial status. For this reason, investing shares in the company is a sound idea. List of Reference BP, 2011, BP Financial Statements, 2006, 2007, 2008, 2009 and 2010, Retrieved 31st May, 2012 from http://www.corporatewatch.org/?lid=287 Read More