Analysis of Woodside Petroleum, British Petroleum, and ExxonMobil in the Oil and Gas Industry

This paper presents an analysis of three global organizations operating in Oil and gas industries. It also summarizes 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.

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ECON6007 HYDROCARBON ECONOMICS AND PROJECT
MANAGEMENT

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Executive summary
Information regarding the decisions and the financial performances of an organization is
important for investors to evaluate the effectiveness of the investment. The past performances
and the histories of decision making also provide a hint regarding the future of the company.
Apart from that, the study of any specific industry also provides knowledge so that
information regarding the returns from that industry can be found out.
This paper aims at analyzing the performances, past strategies and the financial stabilities of
three global companies operating in oil and gas industry. These three companies include
Woodside Petroleum Limited, British Petroleum, and Exxon Mobil. The report sheds light on
the financial performances, liquidity and the stability of the organizations. In addition to that,
a presentation of the overall performances of the oil and the natural gas industry is also done
in the report. Furthermore, the study also includes a forecasting study of the industry in order
to find out the expected behavior of the oil and the natural gas industry in the future.
Woodside Petroleum Company is the largest oil and natural gas company in Australia. This is
a public company which has the largest share of the market. Apart from the oil and the
natural gas, the company also invested in other projects within Australia in order to diversify
its operation. The company has their petrol stations in other countries such as Myanmar,
United States, Senegal and Republic of Korea as well. There is a number of oil-developing
offshore sites under the banner of the company.
British Petroleum is one of the biggest oil and Gas Company of Britain based in London.
Following its impressive performance in the year 2012, this company has made it to the seven
supermajor companies of the world. This organization is vertically oriented and operation of
the company encompasses different sectors of the oil and natural gas industry. As of the data
of 2016, the operation of the company is spread across 72 countries making 3.6 million
barrels of production per day.
ExxonMobil is the tenth largest player in the market for oil and natural gas. The daily
production of the company has reached 3.9 million barrels since the year 2015. This company
is also the 9th largest publicly traded company in the world. The company has around 37 oil
refinery and offshore projects in more than 24 countries of the world.
All the three companies are a potential destination for lump sum investment and have their
own advantages and disadvantages. However, over the years these companies have been an
attractive place for the investors to invest their fund.

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Table of contents
Introduction................................................................................................................................4
The portfolios of the selected companies...................................................................................4
Woodside Petroleum Limited.................................................................................................4
British Petroleum....................................................................................................................5
ExxonMobil............................................................................................................................7
Future of the energy market.......................................................................................................8
Estimation of prices and demand in oil and gas industry...........................................................9
The forecast of the gas market in the future.............................................................................11
Conclusion................................................................................................................................11
Reference..................................................................................................................................13

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Introduction
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.
The portfolios of the selected companies
Woodside Petroleum Limited
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 26th 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.
Analysis of the assets
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.
Financial performances

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Income
statement
Total revenue
(millions)
Net Income
(Millions)
Shareholder profit
(Millions)
Earnings per share
(Cents)
2016 $4075 $868 $640 26
2015 $5030 $26 $1730 3.2
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).
Strategic decisions of the company
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.
Operational Facts
 The company has experienced an increase in the current assets as demand increased
by 23% from the foreign market (Comyns, Breeda, and Frank 2015).

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 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
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.
Analysis of the assets
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.
Financial performances of the company
Income
statement
Total revenue
(millions)
Net Income
(Millions)
Shareholder profit
(Millions)
Earnings per share
(Cents)
2016 $186606 $172 $115 0.61

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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.
Strategic decisions of the company
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.
Operational facts
 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.

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ExxonMobil
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.
Analysis of the assets
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.
Financial performances of the company
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

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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).
Strategic decisions of the company
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.
Future of the energy market
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.

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Figure 1: The projection of future demand in the energy market
(Source: Badiru, Adedeji and Samuel 2016)
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.
Estimation of prices and demand in oil and gas industry
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.
Figure 2: The projection of the price of crude oil by IMF
(Source: Sharma et al. 2017)

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Figure 3: The demand for energy in the future
(Source: Tiu, Brylee David and Rigoberto 2015)
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.
The forecast of the gas market 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.

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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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