Why BP’s Prospects Are Looking Better In 2020

by Trefis Team
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BP (NYSE:BP) is an oil major headquartered out of London, which employs over 73,000 people globally. BP competes with a range of other oil majors, including Exxon Mobil, Chevron, and Royal Dutch Shell. Trefis captures trends in BP’s Revenues over the years, along with our forecast for 2020 in an interactive dashboard, parts of which we highlight below. We believe that BP’s prospects are looking better in 2020 due to key acquisitions and improved commodities environment, with the company likely to report $327.5 billion in revenues for the year.

An Overview of BP’s Revenues

Our forecast of $327.5 billion in revenues for BP in 2020 includes our revenue forecast for each of its three operating segments:

  • Upstream: The Upstream division consists of exploring and producing crude and natural gas. This division contributes 12% of the total revenue ($38.5 billion expected in 2020)
  • Downstream: The Downstream division consists of the following: retail and marketing of refined products, refined crude products, and chemical products.  The division contributes 82% of the total revenue. ($268 billion expected in 2020)
  • Other: The Other division primarily deals in alternative forms of energy, including hydro, nuclear, wind, and solar energy. ($21 billion expected in 2020)

Understanding Recent Trends 

  • BP is slowing down the rate of output of its commodities divisions and cutting back on its Downstream division as the company looks to consolidate its operations.
  • Crude oil output is expected to be slightly below trend from 2017 and 2018, and reduce to a far more moderate level in FY19 as BP looks to cut back on output with a softer macro environment weighing on prices.
  • The output for natural gas and NGL is also expected to fall due to the glut in the natural gas market, and low natural gas prices weighing down on the division.
  • Data around trends in BP’s crude oil, natural gas, and NGL output over the years is available in our interactive dashboard
  • Downstream revenues are expected to rise slightly year over year, with demand from Europe and Asia continuing to provide support for the division.
  • BP recently acquired a stake in India’s Reliance Petroleum will benefit the division, as the growing demand for petroleum in India will provide an improved prospectus for growth.
  • The Other division continues to see low growth, but with BP’s increasing foray into renewable energy, this sector will pick up the pace into 2020.

Our Outlook For BP Going Into 2020:

  • Crude oil and NGL sales may recover as prices recover, with BP’s increasing presence in Asia, vis a vis, Reliance in India and various other operations, we expect that crude output and NGL will face fewer headwinds.
  • BP recently signed deals with a range of European data centers and Amazon to provide clean energy. This model is expected to become increasingly profitable for BP, as it looks to sign further deals in 2020, and onward.
  • BP is expected to grow revenue at a moderate pace in 2020 with a tougher macro climate weighing down on the company’s outlook. The situation may change, though, if the oil prices sustain their recovery, at which point the company may increase its output by 9-10%.

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