BP Amoco Essay, Research Paper
British Petrochemical Corporation registered
on April 14, 1909, as the Anglo-Persian Oil Company, Ltd. It was named
the Anglo-Iranian Oil Company, Ltd., in 1935 and changed its name to the
British Petroleum Company Limited in 1954. The current name was adopted
in 1982. The company?s headquarters are in London. The Anglo-Persian Oil
Company was formed in 1909 to take over and finance an oil-field concession
granted in 1901 by the Iranian government to an English investor, William
Knox D?Arcy. (Britannica)
In 1914 the British government became
the company?s principal stockholder and over the years was usually the
largest single stockholder. Effective January 1, 1955, British Petroleum
became a holding company. In the beginning of the 1977 the British government
reduced its ownership of BP by selling shares to the public, and in the
late 1980s the government turned over BP entirely to private ownership
by selling its remaining shares of the company. In 1987 BP acquired the
remainder of the Standard Oil Company for almost $8 billion reinforcing
its position as one of the largest oil companies in the world.
Amoco Corporation formerly Standard
Oil Company, American petroleum corporation, was founded in 1889 by the
Standard Oil trust to direct the refining and marketing of oil in the Midwestern
states. The company?s first refinery, outside Whiting, Ind., produced fuel
oil, kerosene, and other petroleum products. Around 1910 Standard Oil developed
the cracking process, which became the most important method fro producing
gasoline from petroleum. In 1911 the U.S. Supreme Court dissolved the nationwide
Oil trust, and Standard Oil (Indiana)
became independent. Its headquarters are in Chicago. (Britannica)
In the 1920 Standard Oil acquired
partial interest in companies that owned Midwestern oil fields and pipeline
networks in order to add production to its refining and marketing operations.
In the 1950s Standard Oil became active in oil exploration and production
ventures in South America and the Middle East. In 1961 most of the company?s
U.S. operating activities were unified in the American oil company, for
which Standard Oil (Indiana) served as a holding company. The byname Amoco
was increasingly used as a brand and corporate name. In 1985 the Standard
Oil Company (Indiana) became officially the Amoco Corporation.
On December 30,1998, BP and Amoco
confirmed that the US Federal Trade Commission (FTC) has granted regulatory
approval for the merger of the two companies and that completion of the
deal will take place at year-end. Both companies agreed to intend to close
the transaction shortly after 2100 hours London time on December 31, 1998,
when Amoco?s stock will leave the Standard & Poor 500 and the shares
of the merged group, BP Amoco p.l.c., will be listed on the London Stock
Exchange. With a market capitalization of more than $140 billion, BP Amoco
p.l.c. is the Britain?s biggest company and one of the world?s top three
?We aim to play a leading role in meeting
the world?s needs for oil, gas, solar power and petrochemicals without
damaging the environment.?
BP AMOCO?S WORLD
The BP Amoco group stands out as
a complete provider of energy and petrochemicals. Every day they serve
millions of customers with products to the quality of their lives ? fuel
for transport, energy for heat and light, solar power, and petrochemicals
for plastics, fibres and fabrics. Explorers from Amoco and BP have led
the way in finding the world?s giant oil and gas fields and getting energy
to the world?s marketplace. According to Larry Fuller and Peter Sutherland,
co-chairmen, the meeting the demand of energy calls for a blend of outstanding
human and technical skills, sophisticated global organization and two-way
relationships with local communities, customers, contractors, partners,
government and employees. BP Amoco?s aim is to be successful in everything
they do by delivering outstanding performance.
Their business is about discovery
? about finding, producing and marketing the natural energy resources on
which the modern world depends. Their sales revenues, market value, and
oil and gas reserves make BP Amoco one of the three largest integrated
energy companies in the world. They operate in one hundred countries on
six continents. Each day they generate almost three million barrels of
oil equivalent production, of which sixty-five percent is oil and thirty-five
percent natural gas. They have well-established operations in Europe, North
and South America, Australia and much of Africa.
BP Amoco is distinguished by the
financial resources to operate on a global scale, the technical capacity
to seize opportunities, and a flexible management structure. The core of
their business is a world-class set of assets. In Britain they are the
largest producer of oil and gas from the North Sea and West of Shetland.
In the United States they are one of the largest producers of oil and gas,
based on major assets in the Gulf of Mexico, Texas and Alaska. In South
America they are the largest international oil and gas investors in Argentina,
Colombia, Trinidad and Tobago, and Venezuela.
BP Amoco?s transport network criss-crosses
the globe. They operate 23,000 miles of pipeline, most of it in the United
States. They also control an international tanker fleet of more than thirty-five
vessels, either fully owned or on long-term charter. Natural gas can be
used as a fuel with minimal processing, but crude oil needs to be refined
before it becomes a fuel that can power vehicles, ships and places or be
turned into heating oil for industry and commerce. The cost of running
refineries means that each of the eighteen facilities they wholly or partly
own must be highly competitive and efficient. Once refining is completed,
the different products are moved to storage terminals by ship, barge, pipeline
or rail. From there they are usually delivered to customers by road tankers.
Every day they sell or trade 4.4 million barrels of refined products.
On land, on the sea and in the air,
BP Amoco products help to keep the world moving. Each day they serve tem
million customers worldwide. Products are marketed under the red, white
and blue Amoco Brand in the United States and under the green and yellow
BP brand in the rest of the world. In the United States, BP Amoco has about
fifteen thousand service stations. They are a leading supplier of premium
gasoline in America. Outside North America they have a worldwide network
of 11,500 service stations. They operate in about one hundred countries.
BP Amoco is also one of the world?s largest marketers of aviation fuel
and a major supplier of fuels and lubricants to the global shipping industry.
Customers can call for their fueling services at more than eight hundred
ports and six hundred airports.
BP Amoco is the world?s third largest
petrochemicals company, based on a diverse, highly integrated product portfolio
and strong marketing positions in North America, Europe and the Far East.
BP Amoco operates large-scale chemicals manufacturing plants in the United
States, Britain, Belgium, France, Germany and Brazil. Thirteen joint-venture
projects in seven countries give BP Amoco a powerful platform for expansion
in Asia, including China, Singapore, South Korea, and Malaysia. BP Amoco
holds leading position is seven core products ? acetic acid, acrylonitrile,
aromatics, purified terephthalic acid (PTA), alpha-olefins, purified isophthalic
acid (PIA) and polypropylene.
BP Amoco is the world?s largest
producer of PTA, which is used to manufacture polyester, and polybutene
from which engine oil and lubricants are made. They also produce raw materials
for plastics such as polystyrene and polyethylene ? the versatile polymer
use in products from food packing to gas pipes. Another of their products,
polypropylene, is the source of a variety of everyday products. Other BP
Amoco chemical products are used for applications as diverse as pharmaceuticals,
cosmetics, detergents, packaging, coatings, adhesives, fuel additives,
cable insulation, microfilm, cassette tapes, and synthetic rubber.
WHAT THEY STAND FOR
The merger of BP and Amoco combines
the resources, skills and experience of two great companies, companies
that already share similar values and policies. According to Sir John Browne,
the chief executive officer, the formation of BP Amoco will provide an
opportunity to improve our performance by building on the track record
and the highest achievements of each company. BP Amoco will aspire to deliver
excellent performance in every part of our business and to be in touch
with the reality of the world in which they are operating. They want to
build relationships on the basis of mutual advantage ? the needs of those
who do business with them, and the needs of each community in which they
They aim to conduct their operations without
accidents, no harm to people and no damage to the environment. They apply
their skills, technology, and know-how to the search for creative and constructive
Their business policies are universal.
Their commitment is to use these policies to raise their own standards.
BP Amoco?s goal is to play a leading role in meeting these needs from oil,
gas, solar power and petrochemicals without damaging the environment. Innovation
will be the hallmark of the way they work with people, technology, assets,
and relationships. BP Amoco believe that their activities should generate
economic benefits and opportunities and their conduct should be a source
of positive influence. Their business policies focus on five areas ? ethical
conduct; employees; relationships; health, safety and environment; control
and finance. They are committed to respect the rule of law, develop
employment practices, create mutual advantage in all relationships, demonstrate
respect for the natural environment, and manage their financial performance.
They expect that everybody who works for BP Amoco to take responsibility
for living up to these commitments. Their measures of success are the extend
to which they meet those commitments, the long-term value they create for
their shareholders, the pride of their employees in their accomplishments,
the satisfaction of their customers and all those with whom BP Amoco do
business, and the way communities judge their activities.
BP AMOCO CHEMICALS
BP Amoco?s main activities are exploration
and production of crude oil and natural gas; refining, marketing, supply
and transportation; solar power and manufacturing and marketing of petrochemicals.
BP Amoco Chemicals manufactures and markets wide ranges of petrochemicals,
intermediates, plastics, and specialities. Each year they sell more than
25 million of petrochemicals, specialities and fabricated products worldwide,
creating an annual turnover of $9,691 million in 1998. They operate large-scale
manufacturing plants in the United States, the United Kingdom, Belgium,
France, Germany, Malaysia, and Brazil. Thirteen joint-venture businesses
in seven countries give a powerful platform for growth in Asia, including
China, Singapore, South Korea and Malaysia.
BP Amoco Chemicals holds leading
positions in seven core products ? acetic acid, acrylonitrile, aromatics,
purified terephthalic acid (PTA), alpha-olefins, purified isophthalic acid
(PIA) and polypropylene. Some of their products are used internally as
the raw materials for other downstream chemicals, others are sold to customers
for use in application as diverse as pharmaceuticals, cosmetics, detergents,
packaging, wire and cable insulation, lubricants, textiles, agriculture
and agrochemicals, electrical and electronic components, automotive parts,
aerospace and aviation and in the building and construction industry.
One of the main factors in their
success has been in developing and applying advanced technology to their
manufacturing processes and BP Amoco Chemicals owns a number of proprietary
technologies. Among these is Innovene, a gas phase manufacturing process
for polyethylene. They also have leading-edge technology for the manufacture
of polypropylene. Other includes Cativa, an iridium-based catalyst for
acetic acid, naphthalene dicarboxylate (NDC), a chemical that makes polyesters
stronger and more heat-resistant, and their acrylonitrile process, which
is used in 95 percent of the world?s acrylonitrile manufacturing capacity.
On February 17, 2000, BP Amoco Chemicals
announced that they are studying options to debottleneck production at
their purified terephthalic acid (PTA) plant at Cooper River, South Carolina.
BP Amoco is studying options for a new world-scale, 700,000 metric tonne
PTA unit that could be brought on-stream by the end of 2003. (Northern
Everybody who works for BP Amoco
Chemicals is responsible for getting health, safety, and the environment
right. Good health, safety, and the environment performance and the health,
safety and security of everyone who works for BP Amoco are critical to
the success of their business. They are committed to respecting the rule
of law, conducting their business with integrity, and showing respect for
human dignity and the rights of the individual wherever they do business.
They are also committed to respect the natural environment and work towards
their goals without no accidents, no harm to people and no damage to the
January – June 1999 1998
Replacement cost profit before exceptional
items ($m) 1,903 2,358
Replacement cost profit after exceptional
items ($m) 880 2,420
Historical cost profit after exceptional
items ($m) 1,459 1,632
Earnings per ordinary share on replacement
cost profit before exceptional items (cents) 20 25
Dividends per ordinary share (cents) ?
first quarter? second quarter 10.010.0 9.510.0
Dividends per ordinary share (pence) ?
first quarter? second quarter 6.16.2 5.86.0
Dividends per ADS (cents) ? first quarter?
second quarter 60.060.0 57.060.0
Capital expenditure ($m) 3,263 5,065
In the 1998 Annual Report co-chairmen of
BP Amoco described the merger of BP and Amoco as a ?groundbreaking deal
for the oil industry.? A strong second-quarter of 1999 result as merger
cost savings began to come through produced replacement cost profits for
the half of $2,128 million, before exceptional items and after adjusting
for special charges of $225 million. These profits were about 12 percent
down on a year ago. Net debt increased to $15,1 billion. The ratio of net
debt to net debit plus equity was 26%.
The exploration and production business
generated $2,435 million of replacement cost operating profit for the half
year after adjusting for special charges. This represented an improvement
of 10% on the first half of 1998, despite lower oil prices, and reflected
several factors ? higher oil and gas production, lower costs stemming from
savings and the benefits resulting from post-merger rationalization.
Replacement cost operating profit for
the half year was $956 after adjusting for special charges ? down 31% on
the same period in 1998. At $474 million, replacement cost operating profit
after adjusting for special charges was 29% lower than same period in 1998.
Chemicals production was 8% up on the first half of 1998 as sales improved.
LOOKING TO THE FUTURE
On July 15, 1999, BP Amoco announced
new targets. They will lop $4 billion of its annual costs, sell assets
of $10 billion and boost capital spending to a total of $26 billion over
the three years to the end of 2001. According to Sir John, BP Amoco will
continue to improve efficiency and intend to high-grade the portfolio with
$10 billion of disposals. They plan to invest for growth and to maintain
their gearing within a band of around 25% to 30% and to maintain our dividend
policy of paying out 50% of underlying mid-cycle earnings. BP Amoco will
continue to plan on the basis of a low oil price, driving down supply cost
to ensure the group?s robustness at $11 a barrel. Capital spending this
year should be around $7 billion and disposals $2 billion. Some $2.2 billion
of the cost-reduction targets is expected to come from the upstream business,
$1.4 billion from refining and marketing and $400 million from petrochemicals.