British Petroleum is one of the five major energy companies in the universe engaged in the concern of oil and natural gas geographic expedition and selling every bit good as development of renewable energy devices across 80 states of the universe. The company with around 80300 staff members on its paysheet in 2009 made an one-year bend of US $ 239 Billion that made the BP the 4th largest planetary production house ( BP, 2010, pp. 46-49 ) . The company besides has a big market portion in shop and sale of petrochemicals. British Petroleum has four major operations in energy concern, viz. ; ( a ) geographic expedition ; ( B ) refinement, production and selling ; ( degree Celsius ) Petrochemicals and ( vitamin D ) Power, Gas and Renewable ( Article 13, 2004 ) .
British Petroleum that started its operation as a joint venture called Anglo Persian Oil Company ( APOC ) in 1909 made a singular journey from a modest start in oil geographic expedition to go one of the largest participants in the energy sector presently engaged in concern of ( a ) Crude Petroleum & A ; Natural Gas ; ( B ) Natural Gas Liquids ; ( degree Celsius ) Petroleum Refining ; ( vitamin D ) Lubricating Oils & A ; Greases ; ( vitamin E ) Natural Gas Transmission ; ( degree Fahrenheit ) Crude Petroleum Pipelines ; ( g ) Refined Petroleum Pipelines ; ( H ) Petroleum Bulk Stations & A ; Terminals ; ( .i ) Chemicals & A ; Allied Products, and ( J ) Offices of Keeping Companies and so on ( Anonymous ) . After its denationalization in several tranches in the 1980s ( Poole, 2008 ) , it has finally become the largest private corporation in the United Kingdom as per the Forbes list for the twelvemonth 2000 ( Times, 2009 ) . In its effort to portray its image as a responsible and sustainable concern endeavor in the energy sector, the company besides ventured into solar energy and other signifiers of non conventional energy beginnings that brought it a celebrity termed in many circles as ‘Beyond Petroleum ‘ although such claims of being responsible has been under menace due to some accidents that occurred in recent times that brought the company under heavy unfavorable judgment ( Hayes, 2010 ] . However, our present intent here is non to acquire into these inside informations but to acquire into an analysis of company finance after showing a brief overview of the company, its profile and its function in the sector. The physical and fiscal public presentation of the British Petroleum is provided in Table-1 and Table-2. The information in the tabular array is reproduced in Chart-3 and Chart-4 in the signifier of indexes taking twelvemonth 2005 as the base.
Chart-1
Beginning: hypertext transfer protocol: //www.wikinvest.com/stock/BP_ % 28BP % 29/Data/Market_Capitalization
Chart-2
Beginning: hypertext transfer protocol: //www.wikinvest.com/stock/BP_ % 28BP % 29/Data/Market_Capitalization
As can be seen from Chart-1 and Chart-2, both in footings of Market Capitalization by its ain every bit good as in comparing with other participants in the sector, the BP has shown failings in the recent old ages in comparing to its earlier public presentation. This can mostly be contributed to the recent oil spill incident highlighted in the media caused by the carelessness of BP in guaranting equal safety steps in its operations.
Table-1
Performance in Physical Output of British Petroleum
Year & gt ; & gt ; & gt ;
2005
2006
2007
2008
2009
Crude Oil Production for Subsidiaries ( ‘000 barrels per twenty-four hours )
1423
1351
1304
1263
1400
Crude Oil Production for Equity Accounted Entities ( ‘000 barrels per twenty-four hours )
1139
1124
1110
1138
1135
Natural Gas Production for Subsidiaries ( Million Cubic Feet per twenty-four hours )
7512
7412
7222
7277
7450
Natural gas production for Equity Accounted Entities ( Million Cubic Feet per twenty-four hours )
912
1005
921
1057
1035
Beginning: BP, 2010, 13
Table-2
Fiscal Performance of British Petroleum over Recent Old ages
Year & gt ; & gt ; & gt ;
2005
2006
2007
2008
2009
Gross saless and other runing grosss from go oning operations*
239792
265906
284365
361143
239272
Net income before involvement and revenue enhancement from go oning operations*
32182
35658
32352
35239
26426
Net income from go oning operations*
22133
22626
21169
21666
16759
Net income for the twelvemonth
22317
22601
21169
21666
16759
Net income for the twelvemonth attributable to BP stockholders
22026
22315
20845
21157
16579
Capital outgo and acquisitions #
14149
17231
20641
30700
20309
Beginning: BP, 2010, 12
As can be seen from Table-1 and Table-2, although the end product degree of BP has non undergone important alterations except for some fringy diminution in the most recent old ages, in most of its fiscal indexs, it has shown important diminution between 2008 and 2009. In footings of net income, it is has performed miserably even compared to its 2005 degrees as can be clearly noticed from the index lines presented in Chart-4
Chart-3
Beginning: Drawn on the footing of information in Table-1
Chart-4
Beginning: Drawn on the footing of information in Table-2
With this wide overview, allow us now focus on the fiscal construction of the BP Plc.
Financing Structure of British Petroleum: A Comparative Position
As we are cognizant, fiscal construction is a model of assorted types of funding employed by a house to organize resources required for its operations. Normally, it consists of equity capital, loan capital, over bill of exchange and some short term liabilities. Table-3 provides the major fiscal tendencies for the British crude oil in the last five old ages. As can be seen from the table-3, the debt to equity ratio for the British Petroleum has gone up from 24 per centum to 34 per centum between 2005 and 2009. The debt equity ratio is calculated to mensurate the company ‘s fiscal purchase or hazard. Although it is a debatable step of purchase, it is one of the most used fiscal ratio to cipher the hazard of concern. An addition in the debt equity ratio holds that the hazards associated with the fiscal facets of British Petroleum have increased over last few old ages.
Table-3
Major Financial Trends in British Petroleum
2005
2006
2007
2008
2009
Entire Assetss
206914
217601
236076
228238
235968
Net Assetss
80450
85465
94652
92109
102113
Share Capital
5185
5385
5237
5176
5179
BP Shareholder ‘s Equity
79661
84624
93690
91303
101613
Finance Debt Due after more than one twelvemonth
10230
11086
15651
17464
25518
Net debt
16,373
21,122
26,817
25,041
26,161
Equity
80,765
85,465
94,652
92,109
1,02,113
Choice Financial Ratios
Debt to debt-plus-equity ratio
19 %
22 %
24 %
27 %
25 %
Debt to equity ratio
24 %
28 %
32 %
36 %
34 %
Net debt to net debt-plus-equity ratio
17 %
20 %
22 %
21 %
20 %
Net debt to equity ratio
20 %
25 %
28 %
27 %
26 %
Beginning: BP 2010 -a, 27
It is really hard to pull decisions on the footing of fiscal information for a individual company unless we compare it with others in the same industry. This is peculiarly so because, the degree of hazards that can be comfortably undertaken, the sum of net income that can be considered as equal etc can be misdirecting as they are really specific to the industry under reappraisal. Therefore, in order to analyze the fiscal state of affairs of the BP Plc, we have undertaken a comparing of it with the Exxon Mobil, another major in the sector that is besides a universe leader and even larger in footings of its coverage and concern compared to the BP Plc. Table-4 provides a comparing between BP plc and Exxon Mobil on the footing of several choice indexs over last five old ages. However, before we make such a comparing, it might be utile to take into history the constructs used in these comparings.
Tax return on equity is the ratio of the amount of net income from the entire operations of the last five old ages ( 2005-2009 ) and the amount of common equity over the last five old ages. The ratio exhibits the degree of concern strength a company commands in footings of its income or gross. Return on assets is the ratio of the amount of income for last five old ages to the amount of entire assets. This indicates the productiveness of the assets held by the company. Return on invested capital is the ratio income and invested capital, which shows the productiveness of the capital. Gross net income border is the ratio of gross net income ( income subtraction cost ) to the entire income over the last five old ages. The different between pre -tax and station revenue enhancement net income border indicate the comfort a company enjoys in footings of its consistence with the acceptable degree of regulations and ordinances in the country it operates. SG & A ; A indicate the ratio of summing up of merchandising, general and administrative disbursals to overall gross of the company. Entire debt equity ratio takes into history both short term and long term debts in ciphering debt equity ratio.
Table-4
A Comparison Between Selected Financial five twelvemonth norms of BP Plc and Exxon Mobil.
BP Plc
Exxon Mobil
Tax return on Equity
22.8 %
31.7 %
Tax return on Assetss
9.2 %
16.0 %
Tax return on Invested Capital
19.4 %
29.9 %
Gross Profit Margin
20.0 %
34.7 %
Pre-Tax Net income Margin
11.3 %
17.9 %
Post-Tax Net income Margin
7.4 %
10.2 %
Net Net income Margin ( Entire Operationss )
7.4 %
10.2 %
SG & A ; A as a % of Gross saless
5.2 %
4.2 %
Debt/Equity Ratio
0.18
0.06
Entire Debt/Equity Ratio
0.32
0.08
Beginning: For BP Plc, hypertext transfer protocol: //finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp? tkr=bp
For Exxon Mobil, hypertext transfer protocol: //finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp? tkr=XOM
As can be noticed from the comparing between Exxon and BP Plc, in most of the instances bespeaking the strength factors, Exxon has performed much better than the British crude oil. On the other manus, a lower SG & A ; A for Exxon indicates that BP Plc spends a batch of money in publicizing its trade name and other non productive disbursals compared to the entire gross of the company, This besides indicate that on history of returns from advertisement and other non-output related disbursals, BP lags behind the Exxon. Finally, on history of hazard factors associated, the figures for BP are alarmingly higher than the Exxon Mobil. While the mean debt equity ratio bespeaking the purchase or hazard of the company is about 18 per centum for BP, it is merely 6 per centum for the Exxon Mobil. If one takes into history the short term debts besides, the proportion of debt equity ratio about doubles the longer term debt equity ratio to make around 32 per centum for BP plc compared to merely 8 per centum in footings of Exxon. From the analysis, it is clear that the fiscal construction is non appropriate in instance of BP Plc when compared to other market participants in the industry. The lower differences in the station revenue enhancement and pre revenue enhancement net income border for British crude oil might bespeak that the company enjoys revenue enhancement benefits every bit good as other privileges compared to others. A deeper analysis is required for the same. Chart -4 gives a ocular comparing of the information provided in Table-4.
Chart-5
Beginning: As per information in Table-4
Cost of Capital in British Petroleum
For any production Centre, cost of capital is a important factor for consideration, as it measures to be a company incurs towards its financess. As we are cognizant, financess of a company consists of both debt and equity and the cost of such support would necessitate a consideration of both the cost of debt every bit good as the cost of the equity or the needed rate of return to guarantee investing in a company. Cost of debt includes the hazard free rate of bonds, recognition hazard rates and revenue enhancement rate. On the other manus, the cost of equity is a map of dividend outputs and the growing rate of dividends. In other words, the needed return on any equity, as per the Capital Asset Price Modelling, is the hazard free rate plus beta times expected market hazard premium ( Megginson, 336 ) .
Or E ( RS ) = Rf + I?s ( Rm -Rf )
Where, E ( RS ) is the expected return, Rf is the expected hazard free return in the market or the authorities bond output rate, I?s is the sensitiveness to market hazard for the security, and Rm is the historical return of the stock market. On the other manus the leaden mean cost of capital is represented by the expression ;
WACC = { D/ ( D+E ) } rd + { E/ ( D+E ) } rhenium,
Where, D and E are the market value of the house ‘s debt and equity,
.rd and rhenium are the rates of return expected by investors on debt and equity ( Megginson, 343 ) .
In the Table -5 We have provided a WACC computation for both BP Plc and Exxon Mobil. As the information shows, the value of WACC for BP Plc is at 9 per centum compared to a lesser value of 7 per centum for Exxon. This indicates that the capital hazard degree of British crude oil is higher compared to its rival.
Table-5
Weighted Average Cost of Capital for BP Plc and Exxon Mobil
Indexs
BP Plc
Exxon Mobil
Monetary value of the Stock ( $ )
27
59
Beta Levered
0.72
0.42
Debt ( Million $ )
35127
14428
Shares ( Million $ )
3131
4698
Equity ( Million $ )
85719
279108
Capital ( Million $ )
120846
293536
Debt equity ( % )
40.98
5.17
Debt Capital ( % )
29.07
4.92
Tax ( % )
31.9
43.4
WACC Calculation
9.00 %
7.00 %
Cost of Debt
7.00 %
7.00 %
Cost of Equity
10.00 %
9.00 %
Risk Free Rate
4.40 %
4.40 %
Beginnings: For BP Plc. hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” show=tb % 2Cfb % 2Crh % 2Cch % 2Cmb % 2Csl % 2CHYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” bookid=3616934HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” version=2HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” frame_style=border % 3A9px % 20solid % 20 % 23666 % 3Bheight % 3A380px % 3Bwidth % 3A100 % 25HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-BP? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616934 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” edit=1
For Exxon Mobil: hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” show=tb % 2Cfb % 2Crh % 2Cch % 2Cmb % 2Csl % 2CHYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” bookid=3616948HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” version=2HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” frame_style=border % 3A9px % 20solid % 20 % 23666 % 3Bheight % 3A380px % 3Bwidth % 3A100 % 25HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” & amp ; HYPERLINK “ hypertext transfer protocol: //www.editgrid.com//publish/calc/user/wikiwealth/Stock-Research-Summary-XOM? savebar=0 & A ; show=tb, fb, Rh factor, ch, megabit, Shining Path, & A ; bookid=3616948 & A ; version=2 & A ; frame_style=border:9px solid # 666 ; height:380px ; width:100 % & A ; edit=1 ” edit=1
PART-II
A Preliminary Report on the new Venture of the British Petroleum site in Cambodia
Background: In last 50 old ages, there has been several attempts in vain for economic geographic expedition and production of crude oil merchandises in Cambodia. The Gallic tried it ab initio in late 1969 and stopped their attempts in 1975 after the autumn of the Khmer Republic ( Library of Congress, 2009 ) . However, by 1998, three out of nine geographic expedition Wellss drilled by UK, Gallic Australian and Nipponese companies bore successful consequences. The enterprise by UK ‘s Enterprise Oil at two trial sites in Angkor -1 good and Khao Tang-1 good have capacity to bring forth 6 million three-dimensional pess of gas and 1500 barrels of oil per twenty-four hours. While it is possible to do these attempts economically profitable through dialogues with the present authorities there which has a unfastened attitude for international trade and FDI, the strategic and locational advantages of originating a concern venture in Cambodia are many. However, in this study, there has been an effort to concentrate on the economic facets of the attempt merely. It might besides be utile to advert some other participants interested in the offshore oil ventures in the gulf of Thailand under the legal power of Cambodia. They are Chevron Overseas Petroleum ( Cambodia ) Ltd, Moeco Cambodia Company ( a subordinate of Mitsui Oil Exploration Company Ltd. ) , Singapore Petroleum Company Ltd, PTTEP International Ltd, Resourceful Petroleum Ltd and Cooper Energy Ltd. ( Janes 2009 ) . Given the overall status at that place, a new LPG production works can be established by BP in Cambodia.
Table-A
World Natural Gas Reserves, Production and Consumption
Proved Militias As on January 2008
Production in ( 2007 )
Consumption ( 2007 )
( Tcm )
portion ( % )
( Bcm )
portion ( % )
( Bcm )
portion ( % )
North America
8
4.5
767.3
26.3
791.5
27.1
Latin America
7.4
4.1
147
5
128.7
4.4
Europe
6.2
3.5
288.8
9.9
544.4
18.6
Former Soviet Union
53.8
30.1
790.7
27.1
629.7
21.6
Africa
14.6
8.1
191.5
6.6
85.3
2.9
Middle East
73.9
41.3
353.9
12.1
298.3
10.2
Asia and Oceania
15.1
8.4
381.2
13.1
442.3
15.1
Entire
178.9
100
2920.4
100
2920.4
100
Beginning: Kobayashi, ( 2010 )
As can be seen from Table-A, the ingestion in the Asia Pacific part is much higher than the production degree and this can organize the footing of the principle behind holding a to the full owned subordinate in the part. On the other manus, the rise in the international monetary value of natural gas in the signifier of liquefied crude oil gas ( LPG ) has increased from $ 194 per metric metric ton in 2002 to around $ 802 in October 2008. This indicates that the concern will hold equal potency for net income in the part ( See Chart-A ) .
Chart-A
Tendencies in International Price of LPG ( $ /MT )
Beginning: GOI ( 2008 )
Table-B provides a concern program for a little graduated table LPG production unit in Cambodia. As we can see from the Table,
Table-B
Plant Features
Estimated Plant cost ( $ Million )
25
Annual Gas Input ( Quantity in Billion SCF )
20
Annual Gas Input Cost ( $ per SCF )
0.25
Annual Gas Input Total Cost ( $ Million )
5
Merchandises
LPG ( 12.17 % )
Dry Gas ( 85.10 % )
Condensate ( 1.61 % )
Measure
142930
17 million
300400
Unit of measurement
metric tons
000 SCF
barrel
Product Unit Cost ( $ )
150 per metric ton
0.5
20
Merchandise Value ( $ Million )
21.44
8.5
6.01
Plant Depreciation @ 10 % ( $ Million )
2.5
Expected excess over production stuff cost ( Excluding labor and other costs ) ( in $ Million )
13.94
8.5
6.01
Based on the Calculations provided by TATA MESSIRI
Chart-B
Sweeping Price Index of LPG in the Region
Note: In the absence of information on Cambodian information, Indian figures have been take as declarative figures:
Beginning: GOI 2010
As can be seen from the Table, the unsmooth computations would bespeak a immense return from operations in the vicinity. Given that the the state can supply inexpensive labor, the concluding costs would non be much higher. The works building and production would non take more than two old ages given its little size and by that clip, while the end product cost will increase significantly, rewards being gluey, the input cost would non increase that much. So from this preliminary analysis, this can be considered as an economically feasible undertaking. What follows is a brief projections about the operation of the works.
In order to show the NPV, we need to cipher the free hard currency flow statement and the cost of capital. The cost of capital for BP is assumed to be at 9 per centum. Table-C gives the computations for NPV for the new undertaking.
As per the expression, NPV=I?0t FCF T / ( 1+WACC ) T – FCF0
Where,
Expected Measure in MT =14293
WACC for BP assumed to be fixed at 9 % =0.09
Table-C
NPV Calculation for the New Project
Price per MT
Expected Gross
Unit of measurement Cost of production
Entire Cost of production
FCF
T
( 1+r ) T
FCFt/ ( 1+r ) T
National trust
2008
851
Nothing
2009
1030
Nothing
2010
1246
0
700
10005100
-10005100
0
1.0
-10005100
-20010200
2011
1508
0
847
12107018
-12107018
1
1.1
-11107356
-21112456
2012
1824
26073206
1025
14648467
11424739
2
1.2
9615974
-389126
2013
2207
31550786
1240
17725885
13824901
3
1.3
10675360
670260
2014
2671
38179122
1501
21449821
16729301
4
1.4
11851459
1846359
2015
3232
46199970
1816
25956100
20243870
5
1.5
13157127
3152027
2016
3910
55905874
2197
31409077
24496796
6
1.7
14606639
4601539
2017
4731
67650839
2658
38007642
29643197
7
1.8
16215844
6210744
2018
5725
81863240
3216
45992463
35870777
8
2.0
18002333
7997233
2019
6927
99061448
3892
55654772
43406676
9
2.2
19985639
9980539
2020
8382
119872734
4709
67346984
52525750
10
2.4
22187445
12182345
NPV
5129264
Notes:
Price per MT ( extrapolated as per one-year mean growing rate in WPI of LPG at 21 % as given in Chart A )
Cost of production @ 700 per MT as per local Calculations available from Secondary beginnings as in 2010 and with a growing rate similar to the monetary value of LPG
FCF = Free Cash Flow Statement ( =Net Revenue-Net Cost )
T is the clip period in old ages
As can be seen from the tabular array, the NPV calculated shows the viability of the undertaking.
Appendix ( Charts )
Chart 1
Market Capitalization… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 4
Chart 2
Market Capitalisation of BP and its rivals… … … … … … … … … … … … … … … … … … … … … … … … … … … .4
Chart 3
Tendency of end product public presentation of BP… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 6
Chart 4
Fiscal Report of BP in recent old ages… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .6
Chart 5
Comparison between BP and Exxon… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .9
Chart A
Tendencies in International Price of LPG… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … ..13
Chart B
Sweeping Price Index of LPG in the Region… … … … … … … … … … … … … … … … … … … … … … … … … … … … 14
Appendix ( Tables )
Table-1
Performance in Physical Output of British Petroleum… … … … … … … … … … … … … … … … … … … … … … … … .5
Table-2
Fiscal Performance of British Petroleum over Recent Old ages… … … … … … … … … … … … … … … … … … … .5
Table-3
Major Financial Trends in British Petroleum… … … … … … … … … … … … … … … … … … … … … … … … … … … … … 7
Table-4
A Comparison Between Selected Financial five twelvemonth norms of BP Plc and Exxon Mobil… … … … ..8
Table-5
Weighted Average Cost of Capital for BP Plc and Exxon Mobil… … … … … … … … … … … … … … … … … … .11
Table-A
World Natural Gas Reserves, Production and Consumption… … … … … … … … … … … … … … … … … … ..12-13
Table-B
Plant Features… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .14
Table-C
NPV Calculation for the New Project… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .15