Analysis Of Three Global Oil And Gas Companies And Their Financial Performance

Overview of the Oil and Gas Industry

Discuss about the Hydrocarbon Economics and Project Management.

The financial performances of organizations and the decision makings are not only important from the perspective of the management of the company, it also important from the perspective of investors as well. The accurate decision making of the organizations, apart from bringing success to the companies also attract the investors. The aim of this paper is to present an analysis of three global organizations operating in Oil and gas industries. It also summarises the production and the financial decisions of the company. In addition to that, the study also showcases the overview of the oil and gas industry as a whole thereby discussing the effects of the changes in the industry.

This is one of the biggest oil and natural gas Company based in Australia. As per the figure of 2016, the company has a market share of 27% (Shukla, Amit, and Hamad 2016). The company has started investing in different offshoring projects in order to expand the economic activity of the company. The company was incorporated in 26^th July 1954 and initially the name of the company was after the small town Woodside, Victoria, Australia. The early operation of the company was limited in Victoria and in the year 1960 it moved in the north east part of Australia in collaboration with Shell and Bumrah oil. Immediately after this, BHP replaced Bumrah oil in the consortium and bought 34% of the shares of Woodside Petroleum Company. In the year 1990, both the company sold out their share of the company’s stock and Woodside became an independent oil and natural gas company.

The assets of the company include both the domestic and the international assets. According to the data of Beyer et al. (2015) the company operates in other major countries such as South Korea, United States and many more. Thus, apart from asset development within the country, the asset of the county is also spread across in many parts of the globe. In addition to that, the assets of the company in the international market are rapidly increasing. In countries like South Korea and united state, it has started projects for exploration and extraction. The Pluto NG project of the company contributes to the most part of the asset and the development of the company. Again the North West shelf project has also huge share in the overall assets of the company.

Income statement Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Total revenue (millions)	Net Income (Millions)	Shareholder profit (Millions)	Earnings per share (Cents)
2016	$4075	$868	$640	26
2015	$5030	$26	$1730	3.2

Woodside Petroleum Company

Table 1: the financial statements of the company

(Source: Developed by the learner)

The production of the company increased since the year 2012 and in the year 2016, it recorded the highest production of 2.3 million barrels per day. Kassotis et al. (2016) stated that enhancement in the production of the new project Pluto NG had allowed the company to increase the production to compete for the other global players in the market. This increase in the volume of production of the company also resulted in the reduction of per unit cost of production. Thus, in the following year, the company managed to reach the breakeven point with 23% of the decrease in the cost of sales of the products of the company. It is also notable that the projects of the company are generally low in the capital investment that is required therefore the resulting cash flow had increased since the year 2016 (Abdulrahman et al 2016).

The capital expenditure of any organization is the most important strategic decisions taken by the management. As per the data of the company, 40% of the capital has been spent for the operation of Wheatstone LNG project of the company which is expected to increase the overall annual production of the company (Kassotis et al. 2016). In addition to that this large chunk of the capital investment has also been done in order to commercialize the projects in Senegal and Myanmar. Furthermore, 40% of the overall capital expenditure of the company has also been done in the internal projects which are based in Australia (Sharma et al. 2017). Ablo and Austin (2016) stated that these strategies of the management of the company focused on the project of cars borough and greater Enfield. Apart from that, 20% of the capital expenditure of the company has also been targeted to improve the health and the safety of the operation of the company.

• The company has experienced an increase in the current assets as demand increased by 23% from the foreign market (Comyns, Breeda, and Frank 2015).
• Management of the company structured the Capex so that accurate decision can be made by the company.
• As per the forecasting, the production of the company is expected to reduce in the near future.
• The overall debt of the company has increased since the year 2012.

British Petroleum is the largest oil and natural gas company of Britain in terms of revenue generated. The operation of the company is spread across 72 countries of the world. Apart from that, the company has the largest share of hydrocarbon reserves which ensures the future security of the company (Shukla, Amit, and Hamad 2016). Compared to the other large players of the world, the production is huge amounting to 3.3 million barrels per day. The company has around 18000 petrol stations throughout the world. In terms of operation and performance, the BP America is the largest subsection of the company. The company’s representative in the Russian market which is known as BP Russia also owns 19.5% stake in another rival oil company of Russia known as Rosneft. However, the company, in the past, attracted lots of criticism due to the mishap of Texas City refinery explosion. Apart from this, the company was associated with a number of oil spills in the past that harmed workers and the environment.

British Petroleum

The company has operated both in the upstream and the downstream projects. As per the data of the company, it has started 24 new upstream projects in the last 5 years of operation of the company. Many studies have also suggested that the future production of the company will also increase in the future due to the increase in the productivity of the projects of the company (Hebblewhite and Mark 2017). Apart from the upstream projects the company also has an investment in the downstream projects as well. It is important to note that the overall improvement in the performance of the company over the last five years is mainly due to the improvements in the downstream projects.

Income statement	Total revenue (millions)	Net Income (Millions)	Shareholder profit (Millions)	Earnings per share (Cents)
2016	$186606	$172	$115	0.61
2015	$225982	$-6400	$-6482	-35.39
2014	$358678	$4003	$3870	20.55

Table 2: the financial statements of the company

(Source: Kassotis et al. 2016)

After the financial loss that it had incurred in due to the mismanagement in the deepwater project of the company, there was no stable in the financial performance of the company. However, over time the operation has strengthened position and stability leading to a growing productivity. Since the year 2014, the cost reduced by 7 billion USD which reflected in the increased margin of the company. Apart from that, the shareholder’s value which reduced following the crisis is now recovering as well.

Most of the focus of the company has been to develop the future assets of the company. Due to the increase in the demand for natural gas, the company has increased investment in the projects of natural gas production. The company has plans to expand the operation of the company and under this, the company has the strategies to open new start-up projects of the company in the near future. The company has made 3 billion USD as revenue in the last two years combating the environmental volatiles (Purdy et al. 2016). The future projects of the company include the enhancement of the production of hydrocarbon. Apart from that, the company also has the plans to increase the global presence so that existing opportunities can be extracted from the global market.

• The company conceded a loss of $6.5 million in the year 2015 (Boczkowski et al. 2015).
• There are a number of new projects which are going get introduced in the 5 years.
• The Deepwater project loss impacted the stability of the company.
• Post the crisis the performance of the company has shown positive signs of recovery leading to better performances in the following years.
• As per the figure of 2016, the total profit for the shareholders of the company was around 115 million USD.
• The company has the plans to reduce the emissions in the environment.

ExxonMobil is the public oil and gas company based in Irving, United States of America. Despite being a public company, the financial performances especially the improvement in the revenue has placed it in one of the 7 largest companies in the global oil and gas industry. The daily production of the company stands at 3.9 million barrel per day. The company, apart from the oil exploration also have investment in off shoring projects as well. It is important to note that this company also has been associated with mishaps in the past. The company is often criticised by the experts of oil and natural gas industry for its ineffective cleanup efforts. Alaska oil spills, which is considered as the worst oil spills in the world has also been due to the mismanagement from the side of this company. 

ExxonMobil

As per the data of the company, the overall assets of the company have increased over the year since 2001. The main focus of the company has been on the upstream operation; therefore this section explains the most of the increase in the assets of the company. According to Raynal et al. (2016), there are around 24 deepwater and LNG projects of the company in the US. The company’s presence in the foreign market is not much significant and hence most of the assets of the company are within the boundary of the US. The company has several projects on drilling, reservoir simulation, and exploration as well. 

Income statement	Total revenue (millions)	Net Income (Millions)	Shareholder profit (Millions)	Earnings per share (Cents)
2016	$106576	$140	$72	0.45
2015	$125465	$133	$80	0.66
2014	$136568	$144	$93	0.67

Table 3: financial performances of the company

(Source: Hebblewhite and Mark 2017)

The financial performances of the company have been mostly stable over the years. This is due to the lack of risk-taking attitude of the management of the company. Comyns, Breeda, and Frank (2015) stated that the company mostly undertakes decisions which are generally risk-averse. However, the growth of income and the revenue of the company have been negative. This is due to the fact that, this company has mostly focused on the upstream extraction of the oil reserves. The increases in the demand for the natural gas thus, have not been able to impact the financial performances of the company (Micheli et al. 2016).

Most of the capital expenditure of the company has been on the projects of oil exploration. Around 60% of the overall capex of the company is focused on the upstream operation related to oil exploration. In addition to that, the company has also spent a sizable amount on the drilling and in the simulation of the reservoirs as well. The future plans of the organizations also mostly focus on the operation in the oil sector. Dmitriev et al. (2015) stated that the lack of strategies of the company regarding the natural gas exploration has limited the financial performances of the company.

The GDP of almost all the countries in the world is increasing and along with that the population of the world is also increasing. This is going to impacts on the demand of the energy markets in the future. The emerging economies of the world demands 56.1% of the overall production of the energies (Osakwe 2017). Therefore, the rise in the population and the GDP of these countries is expected to increase the demand for energy.

According to the projections, the increase in the demand for the natural gas is the most. This is attributed to the fact that natural gas produces a lot less pollution in the environment. Although the demand for the biofuels will also increase due to the increase in the population of the world, this will not be due to the changes in the preferences of the new customers of the market.

The future oil prices depend on the demand and the supply schedule of the market in the future. Therefore, it is important to study the future behavior and the pattern of the buyers and the sellers of the market in order to understand the future prices in the market.  Ledezma et al. (2015) highlighted that the exact changes in the future prices can not found out, therefore studying the consumer and the seller behavior in the market is important.  As per the study of IMF, the price of the crude oil is expected to increase to $55 per barrel in the year 2018 from the $43 per barrel in the year 2014 (Obeng-Odoom 2015). This increase in the price of crude oil can also be due to the expected reduction in the production of oil by OPEC.

Zangana et al. (2017) stated that a part of the increase in the prices of the crude oil and the other energies will also be due to the increase in the demand of the energies in the future. The most part of the increase in the demand for oil will be from the emerging economies of the world. Aldhaheri, Obaid, and Mohamed (2016) stated that, while the developed economies like the US will shift the demand to the natural and renewable energies the proportionately greater increase in the population in the emerging market will increase the demand for the oil in the future.

There are a number of factors which will influence the market for gas in the future. Berkowitz et al. (2017) stated that not only the demand and the supply of the market, the prices and the production of the oil market are also expected to influence the market of gas in the future. Apart from that, regulations of the government storage technology, production technology is also expected to influence the gas market of the world in the future. As per the prediction of IMF, the prices of the gas in the future will increase. This is due to the fact the demand for the gas will increase proportionately more than that of the effect of rising price of oil will have on the market of gas in the future. Endresen et al. (2017) highlighted that price of the gas market will increase 15 % since the year 2017 due to the increasing amount of export as well. However, the rising price of oil market will have an insignificant effect on the market as the increase in the population will outplay in this case.

The effects of these changes in the markets of oil and natural gas in the future will bring about many changes in the economy and the technology (Perrons, Robert and Jesse 2015). First of all the changing characteristics of the market will compel the organizations to change their strategic decisions in the future. The organizations which are currently focusing on the oil exploration may change their focus to the production of the natural gas.  In addition to that, the changes in the market may intrigue the automobile sector, which uses a sizable amount of the energy production to innovate and bring changes in the technology (Cherepovitsyn, Alexey, and Alina 2016). This can also be seen in the future plans of the organizations as well. For example, Woodside management has the plan to increase expenditure for projects related to natural gas. Apart from that, British petroleum has also planned to increase the investment by 24% in the natural gas production as well.

Conclusion

Therefore, all the three organizations discussed in the paper can have a different type of performance in the future. While the Woodside petroleum company has the largest expansion in the future as per the projection, it also has the risk as the share prices of the company can reduce in the future. Again the ExxonMobil does not have an impressive performance compared to the other supermajors in the market, its financial performance is stable and hence the decision to invest in these organizations complete depend on the risk-taking the pattern of the investors. The paper also shows that in the future the prices of both oil and the natural gas are expected to increase. This is not only because of the increasing GDP and the increasing demand; this is also due to the fact that the world population is expected to rise in the future. This changing market characteristic is also expected to bring about changes in the behaviors of the government and the sellers of the market as well. Innovation from the side of the producers is also expected following the changes in the demand and the supply of the oil and natural gas market.

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