BP Plc Accounting - Case Study Example

Accounting case study on "BP plc" BP plc. started out as British Petroleum a that is synonymous with many peopleand is a multinational company whose headquarters are in London dealing with oil and gas as the two broad classes of products (Bp.com, 2014). The company’s market capitalization is ranked sixth globally, and fifth largest company globally in terms of revenue. Its production of gas and oil in the year 2012 was the sixth largest in the world and is amongst what are referred as the “supermajors” in the production of gas and oil. It is a vertically integrated company operating in any gas and oil industry sector and this diversification includes production and exploration, distributing and marketing, trading, power generation, refining, and petrochemicals (Bp.com, 2014). The company is further engaged in production of renewable sources of energy that include wind power and biofuels. The company boasts of intense operations in slightly more than eighty countries across the globe with a production of more than three million barrels daily with estimated reserves of approximately seventeen billion barrels. The company has approximately twenty thousand seven hundred service stations globally with its largest front in America. The company’s success in financial terms is broad with notable investments in Rosneft, its listing in the “London Stock Exchange (LSE),” and it is a member of the “FTSE 10 index” (Bp.com, 2014). The company has a high market capitalization in the London Stock Exchange, which is approximately worth eighty five billion pounds with secondary listings in the New York Stock Exchange (NYSE) and Frankfurt Stock Exchange (FSE) (Bp.com, 2014). The company began its production efforts under the tag British Petroleum in the Middle East from early 1954 (Franck & Huyghebaert, 2004). It is regarded as the first oil company to find exploits in North Sea. The company has undergone different transformations and challenges along the years in terms of changes in ownership to oil related disasters that have contributed to its success and loss of revenue. BP operates under different product lines with unlimited opportunities for growth. These products include Air BP, BP Target Neutral, BP Franchising, Fuelling cards, Asphalt and Bitumen, BP Biofuels, Motor lubricants and oil, Petrol/gas station locator, Gas/Petrol stations, Industrial lubricants, Liquefied Natural Gas, Gas and power energy, BP Crudes, NGL, MSDS, BP shipping, Petrochemicals, Marine Fuels, and Lubricants (Bp.com, 2014). Air BP deals with a variety of products with the first one being aviation fuels. Aviation fuels account for an annual sale of approximately seven billion gallons of oil supplied across the globe in its more than six hundred locations. The fuels supplied by BP Air include Jet Kerosene and Aviation Gasoline. The two fuel products are sold in conformity to regulations in the host country, which establishes its own standards. Air BPs products are sold at its different markets and has experienced phenomenal growth over the past two years a tendency that likely to improve along an established plan. The products sold under BP Air can be classified as Stars under the BCG Matrix as explained by the rapid growth experienced over the last two years and significant market share (Mcdonald & Keegan, 2002). The products have the potential of becoming market leaders an avenue that is being pursued by the company. The second product under the BP umbrella is referred as BP Franchising. BP franchises have been established in different markets along the globe. Franchising is one of the strong points of the company with accumulated experience in operations of over twenty-five years. The franchising segment is tasked with overseeing the growth of the retail segment of the company through franchising some of its service stations as well as brands (Bp.com, 2014). People seeking to franchise with the multinational buy this category of product. The range of packages in the franchising section includes BP connect that features the Wild Bean Café, Aral Store, Petit Bistro, ampm, BP Express, and BP brands with global recognition. The product offered under this category can be described as a source of income. The franchising efforts are sustainable on their own owing to the period in the market. BP is strong brand and this eases the demand for franchises while on the overall raking in considerable amounts of revenue for the company. The franchise section costs the company little in terms of maintenance, as it is the prerogative of a franchisee to meet established standards. The use of franchising has been utilized for market expansion and penetration. The income generated from the franchises is used in propelling the sale and production of other star products. The company owns several gas/petrol station s directly across the globe (Bp.com, 2014). These stores are managed by the company’s employees and are responsible for generating great amounts of revenue for the country. The products sold include diesel, petrol, and kerosene. The slogan used for the company’s petrol stations indicates the offered of everything needed by people when they are on the road. Apart from petroleum products being sold in the stations, the stations provide travel essentials as well as food. Items found in the stores do not generate high income nor translate to a high percentage grip of the market and can thus be referred as the problem child under the BCG Matrix. Fast food and retail stores experience high growth across the world with the industry being one of the most expansive (Bp.com, 2014). However, retailing under BP is done on a lower scale unlike big multinationals such as Wal-Mart. Remarkably, it is of great significance to note that the gas and petrol stations owned by the company directly or through franchising act as offloading points for some of the company’s products sold. The gas/petrol stations can be described as Star products for the company because of the high sales recorded through refined petroleum products. The company produces liquefied natural gas, which is one among the processes in the value chain. The company has constructed several liquefaction plants across the globe dealing with the supply and development of liquefied natural gas. Under the same program, the company owns modern tankers enabling the company access to premium markets. Different suppliers who then engage in the sale of the final product buy the products under this service (Bp.com, 2014). The product can be classified as a source of fast income because the sector is one of the fastest growing across the gas industry. The growth of the sector is associated with the increased global demands for energy and hence yields immense financial capital for the company. BP is involved in the production and sale of crude products in different markets with established plants as well as through shipping. The company has segmented its market into different regions that include Central Asia, Far East, Europe, Middle East, South America/ Caribbean, and West Africa. The sale of crudes generates some of the highest incomes for the company with four new types of crudes being explored by the company including Saturno, Plutonio, and Pazflor in Angola, and Skarv in Norway. The company has been engaged in continued exploration efforts across the globe to increase its market share and oil reserves (Bp.com, 2014). Crudes can be referred as star products due to their high income and high market share enjoyed by the company. Remarkably, BP is the third largest distributor of crudes across the globe with its management increasing investments in terms of the level of technology necessary for production (Bp.com, 2014). The company’s other products are under the marine fuels and lubricants group that includes products under BP Marine, Castrol Marine, and Castrol offshore. The three product lines are amongst the top revenue earners for the company. BP marine is involved in the supply of quality, services, and high technology lubricants to world leading companies with bulk shipping, tankers, and large containers. The companies act as intermediaries for BP plc in the distribution of products bought from the company to be sold across different locations globally. Castrol Marine products deal with supply of quality lubricants across the world (Bp.com, 2014). The lubricants are world leaders amongst providers of lubricants and this can be attributed to the high quality observed as is with other products under the company’s production line. The final branch under the marine products is labeled Castrol Offshore that provides specific lubrication for drilling, subsea applications, and surface production. These three brands have been pivotal in the company cementing its position on the global front and diversification of its product line. The products can be referred as sources of income for the company with immense potential of developing to star products. The company produces petrochemicals that are used as intermediary products in the production of bottles, clothes, lipstick, and painkillers (Bp.com, 2014). The intermediary products sold by the company include PX, which is one of the raw materials used in the manufacture of purified terephthalic acid. Other products explored under the segment include acetyls, derivatives, and olefins. However, the company’s engagement in the production of petrochemicals is not as pronounced as other products explored under the company. Different manufacturers buy the products. BP has a significant market share with established shares in slightly higher than a dozen manufacturing plants across the world selling its products in more than seventy countries. The company is in continued efforts of expanding its refining processes alongside marketing activities. Oil refining is a process of improving the quality of extracted oil. The latest product line amongst BP’s products includes low and alternative carbon energy a venture it started in 2005 (Bp.com, 2014). The business is a costly affair with an approximate investment of eight billion US dollars spread over ten years. The renewable form of energy includes biofuels, wind, and solar energy. The company sells the three products to different markets across the world with increased awareness on the need for renewable, environmentally friendly, and sustainable energy. The product line further includes production of non-renewable sources of energy including hydrogen power, and with an investment totaling to seven billion US Dollars. The business segment for non-renewable energy sources is concentrated in the United States of America with four billion out of the seven billion being invested in the country (Bp.com, 2014). The company employees over five thousand people to work under this unit and does not reveal financial details from the program. It produces over two thousand six hundred megawatts from sixteen wind farms located in the United States. The company does not rake in sufficient resources from this program and has been in talks with different stakeholders to sell the wind energy unit. This line of product can be referred as the problem child. The company’s revenue in 2012 stood at US$ 388.285 billion with a net income of US $11.816 billion (BP plc, 2013). References BP plc. 2013. BP p.l.c. Group results Fourth quarter and full year 2012. [report] London: BP press, pp. 1-50. BP plc. 2013. Financial and Operating Information 2008-2012. [report] London: BP press, pp. 1-90. Bp.com. 2014. Air BP - Products. [online] Available at: http://www.bp.com/subsection.do?categoryId=4503690&contentId=7018443 [Accessed: 15 Feb 2014]. Bp.com. 2014. Franchising | Products and Services | BP Global. [online] Available at: http://www.bp.com/en/global/corporate/products-and-services/franchising.html [Accessed: 15 Feb 2014]. Bp.com. 2014. Liquified Natural Gas | Products and Services | BP Global. [online] Available at: http://www.bp.com/en/global/corporate/products-and-services/liquified-natural-gas.html [Accessed: 15 Feb 2014]. Bp.com. 2014. BP Crudes. [online] Available at: http://www.bp.com/modularhome.do?categoryId=6725&contentId=7020583 [Accessed: 15 Feb 2014]. Bp.com. 2014. Marine fuels and lubricants | Products and Services | BP Global. [online] Available at: http://www.bp.com/en/global/corporate/products-and-services/marine-fuels-and-lubricants.html [Accessed: 15 Feb 2014]. Bp.com. 2014. Petrochemicals. [online] Available at: http://www.bp.com/modularhome.do?categoryId=6110&contentId=7016372 [Accessed: 15 Feb 2014]. Franck, T. and Huyghebaert, N. 2004. On the interactions between capital structure and product markets: A survey of the literature. Tijdschrift voor Economie en Management, 49 (4), pp. 727--87. Mcdonald, M. and Keegan, W. J. 2002. Marketing plans that work. Boston: Butterworth-Heinemann. Read More