Friday, 7 February 2014

British Petroleum (BP) annual report 2013

British Petroleum, annual, report, 2013, BP

British Petroleum arrived with their annual report for 2013 this week and the report seems to have been accepted ok and can be found here. Nothing much happened with the share price and the reason for why the price has jumped up in the last couple of months (from around December) is probably mainly due to their share buy-back program.

in the table below you can see what they call RC Profit which includes the sale of TNK-BP and of course it makes it look as if it was a great year in comparison to 2012.

British Petroleum, RC profit, 2013

Since BP are kind people they themselves decided to publish also what it looked like if those kind of extra things were removed and then the situation is really a different story as can be seen below.

BP, annual report, 2013

What we then see is that 2013 had a large non operational profit that has now been removed and 2012 had a large non operational loss which means that in the end 2013 was a much worse year than 2012.

So what was then good with this annual report:
  • They have managed to decrease their net debt slightly
  • They decided to pay out 9.5 cents per share which makes the total to 36.5 cents for 2013 which is an increase with 11% since 2012 - let us hope they can keep it up
  • They have already bought back shares for 5.5 billion USD and will buy for an additional 2.5 billion USD.
  • The barrels from the Rosneft part is increasing for each quarter.
And the negative aspects:
  • Significant decrease of upstream
  • Litigations still not over concerning Deepwater Horizon
  • The decreased net debt is around as cash from the sale and will be used to buy back the 2.5 extra billion of shares meaning that decrease is soon gone but will be better per share.
  • Total revenue increase by only 2.1%
Conclusion: BP is on the good track but there is still a long way to go. As I have mentioned before I stepped in far to early in BP and there are many other oil companies of interest. I will keep my shares and collect my nice dividend and will never again accept shares as dividend... not due to BP but due to my stock broker and their outrageous price for doing so.


Anonymous said...

What is in general very worrying me about oil companies is that they do not have next good oil fields (targets) to be explored.
In past times when oil price was <30 USD/barrel companies were ignoring many of potential sources of the oil. Mainly because exploration/cost of the oil extraction from this fields would be higher than crude oil market price. After 2004, with increasing price of the oil, many of this field becomes theoretically profitable. Some of new projects were activated but not all of them.
And here we are: although oil companies claim that we (they) have plenty of the oil under the ground they are not using their money to initiate new exploration programs. Even with the oil price on >100 USD/barrel (stable from 4 years)! Instead, they are using available resources (money) to buy own stocks. This is not a logical behavior for companies willing to develop their business. Having so many (this is what they claim) opportunities (new fields) they should re-invest their cash and not to buy back their shares. There are two possible explanations for such behavior:
1) They do not believe that cost of oil will be high for next 5-10 years (and will drop)
2) The cost of exploration/oil extraction from the new fields is much higher 100 USD/barrel
I personally do not believe in the point no 1. With growing economy oil consumption is constantly (and rapidly) increasing. At the same time, production (extraction) of the oil (by volume) in last years is rather stable. It is than against basic market rules, to expect the drop of the market price for the goods that are in shortage. So, than the point no 2 becomes the real reason for lack of new exploration activities. And if this is the case, were are in trouble (and so will be BP and others)…

Fredrik von Oberhausen said...

Hmmm... Nice feedback thanks!

I think that you should add a third point which is that:

3. The P/E of the oil giants are so low that it makes more financial sense to buy back shares then to invest in new oil exploration and new oil fields.

If we just look at the P/E for BP which is 6.3 then that means whatever you invest you get back in 6.3 years. They simply can not beat that by investing in new oil exploration and in new oil fields because their investment is not returned in less than 6.3 years.

So I think for the shareholder all the oil companies that are buying back shares today are doing the correct thing.

A day will for sure come when they will no longer extract oil and they have had a pretty easy life as of yet without being forced to change or further develop their main product to be able to stay ahead of the competition etc.

The normal case is after all that in 8-10 years from now 25% of a companies revenue are coming from products that are being developed today and the oil giants have gotten away from doing that with their cash-cow product for years.

But that said... I am certain that when that times comes (no more oil) then they will adapt and maybe they buy up all the solar energy plants, or they start growing bacteria that produce oil from solar power or... nothing is constant which is why I have little fears concerning the future for the oil companies.

Thanks for your comment which leads to thoughts!