BP reports 38.4% EBITDA growth in 2018 and 1.0 pp EBITDA Margin growth from 9.1% to 10.1%

05 Feb 2019 • About BP ($BP.A) • By InTwits

BP reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is expanding: 10.1% in 2018 vs. 9.1% in 2017 vs. 4.9% in 2014
EBITDA Margin is quite volatile: 10.1% in 2018, 9.1% in 2017, 6.3% in 2016, 3.0% in 2015, 4.9% in 2014
BP has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.3%. At the same time it's in pair with industry average of 9.1%
CAPEX is quite volatile: ₹8,550m in FY2018, ₹7,737m in FY2017, ₹14,944m in FY2016, ₹5,386m in FY2015, ₹6,078m in FY2014
The company has business model with low profitability: ROIC is 8.7%
It operates with medium-size leverage: Net Debt/EBITDA is 1.4x while industry average is 1.8x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 24.4%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.0 pp from 9.1% to 10.1% in 2018. EBITDA Margin grew at 1.7 pp per annum in the last 5 years.

Gross Margin showed almost no change in 2018. During the last 5 years Gross Margin bottomed in 2015 at 9.5% and was growing since that time.

Net Income margin increased slightly on 1.7 pp from 1.4% to 3.1% in 2018. During 2014-2018 Net Income margin bottomed in 2015 at -2.9% and was growing since that time. The efficient tax rate was 43.2% in 2018.

Investments (CAPEX, working capital and M&A)

In 2018 BP had CAPEX/Revenue of 5.6%. CAPEX/Revenue decreased on 2.8 pp from 8.4% in 2015 to 5.6% in 2018. It's average level of CAPEX/Revenue for the last three years was 7.2%. To deliver its fast growth BP invested a large share of EBITDA (55.1%) to CAPEX. During the last 5 years CAPEX as a % of Revenue topped in 2016 at 9.1% and was declining since that time.

BP has spent $1,395m on M&A in 2018 which accounts for 0.47% of revenue.

Return on investment

The company operates at low ROIC (8.7%) and ROE (9.5%). ROIC increased on 4.8 pp from 3.9% to 8.7% in 2018. ROE increased on 6.0 pp from 3.5% to 9.5% in 2018. During 2014-2018 ROIC bottomed in 2015 at -6.1% and was growing since that time. During 2014-2018 ROE bottomed in 2015 at -6.2% and was growing since that time.

Leverage (Debt)

Debt level is 1.4x Net Debt / EBITDA and 2.2x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 1.7x to 1.4x in 2018. Debt increased on 4.1% while cash dropped on 12.2%. During the last 5 years Net Debt/EBITDA topped in 2015 at 4.0x and was declining since that time.

BP has good short term financial stability: Interest coverage ratio (ICR) is 6.8x. BP has no short term refinancing risk: cash is higher than short term debt (239.7%).

Average interest expence paid by the company was 3.3% in 2018.

Valuation and dividends

The company's trades at EV/EBITDA 5.1x and P/E 11.8x.

The company paid 71.4% of Net Income as dividends in 2018.

Management team

CEO total compensation was $14,666,000 in 2018 which included $1,854,000 salary and $1,690,000 annual bonus. BP's CFO is Brian Gilvary. Brian Gilvary has 8 years tenure at the company.

Insider ownership is 0.0050%.

At the end of financial year the company had 73,000 employees. Average revenue per employee in 2018 was $4,092,548.

Financial and operational results

FY ended 31 Dec 2018

BP ($BP.A) key annual financial indicators

mln. $	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	353,568	222,894	183,008	240,208	298,756	24.4%
Gross Profit	44,286	21,064	21,712	36,263	45,873	26.5%
SG&A	12,696	11,553
EBITDA	17,360	6,708	11,609	21,894	30,309	38.4%
EBIT					14,852
Interest expence					2,198
Tax					7,145
Net Income	3,780	-6,482	115	3,389	9,383	176.9%
Stock Based Compensation					690
Balance Sheet
Cash	29,763	26,389	23,484	25,586	22,468	-12.2%
Inventory					17,988
Short Term Debt	6,877	6,944	6,634	7,739	9,373	21.1%
Long Term Debt	45,977	46,224	51,666	55,491	56,426	1.7%
Cash flow
Capex	22,546	18,648	16,701	16,562	16,707	0.9%
Dividends					6,699
Acquisitions					1,395
Ratios
Revenue growth	-6.7%	-37.0%	-17.9%	31.3%	24.4%
EBITDA growth	-58.0%	-61.4%	73.1%	88.6%	38.4%

Gross Margin	12.5%	9.5%	11.9%	15.1%	15.4%	0.3%
EBITDA Margin	4.9%	3.0%	6.3%	9.1%	10.1%	1.0%
EBIT Margin					5.0%
SG&A, % of revenue	3.6%	5.2%
SBC, % of revenue					0.2%
Net Income Margin	1.1%	-2.9%	0.1%	1.4%	3.1%	1.7%
CAPEX, % of revenue	6.4%	8.4%	9.1%	6.9%	5.6%	-1.3%

ROIC	1.2%	-6.1%	-1.8%	3.9%	8.7%	4.8%
ROE	3.1%	-6.2%	0.1%	3.5%	9.5%	6.0%
Net Debt/EBITDA	1.3x	4.0x	3.0x	1.7x	1.4x	-0.3x
Interest coverage ratio (ICR)					6.8x
Interest expence / Average debt					3.3%
People
Insider ownership					0.0%
Employees					73,000
Revenue/Employee, th. $					4,093

Peers in Oil & Gas Producers

Below we provide BP benchmarking against other companies in Oil & Gas Producers industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Eland Oil & Gas ($ELA)		54.8%	-86.9%	2,804.1%
President Energy ($PPC)	-6.1%	-19.8%	-1.9%	81.3%
Amerisur Resources ($AMER)	17.9%	-69.3%	-22.9%	79.6%
Turkiye Petrol Rafinerileri A.S. ($TPRD)	-3.3%	-7.1%	-5.5%	54.8%
Urals Energy Public Co ($UEN)	-11.5%	-38.8%	6.8%	52.1%
Median (32 companies)	-0.8%	-19.5%	-8.9%	18.5%	41.0%
BP ($BP.A)		-37.0%	-17.9%	31.3%	24.4%

Top companies by Gross margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Societatea Natl De Gaze N Romgaz Sa ($SNGR)		99.0%	98.5%	98.7%
Serica Energy ($SQZ)		67.0%	30.7%	60.4%
Oil & Gas Development Co ($OGDC)	68.5%	62.7%	54.0%	55.3%	59.2%
Tethys Petroleum Limited ($TPL)	46.2%	-76.0%	-30.0%	42.8%
Zoltav Resources Inc ($ZOL)	32.5%	30.7%	41.9%	36.0%
Median (21 companies)	19.6%	12.6%	13.7%	18.2%	37.6%
BP ($BP.A)	12.5%	9.5%	11.9%	15.1%	15.4%

Top companies by EBITDA margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Trinity Exploration & Production ($TRIN)	25.1%	30.9%	13.0%	77.1%
Societatea Natl De Gaze N Romgaz Sa ($SNGR)		62.5%	49.7%	59.3%
Oil & Gas Development Co ($OGDC)	69.3%	62.4%	53.9%	55.8%	59.3%
Zoltav Resources Inc ($ZOL)	-16.1%	25.6%	42.6%	49.8%
Serica Energy ($SQZ)		61.3%	24.6%	47.9%
Median (32 companies)	15.9%	18.8%	13.3%	17.9%	7.9%
BP ($BP.A)	4.9%	3.0%	6.3%	9.1%	10.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
President Energy ($PPC)	10.4%	142.7%	147.0%	69.1%
Tethys Petroleum Limited ($TPL)	95.2%	37.5%	12.0%	66.0%
Ithaca Energy Inc ($IAE)	103.5%	42.8%	41.6%	33.9%
Volga Gas ($VGAS)	14.0%	45.5%	12.8%	33.9%
Amerisur Resources ($AMER)	21.2%	72.4%	65.8%	33.8%
Median (32 companies)	15.7%	16.0%	13.1%	11.7%	3.9%
BP ($BP.A)	6.4%	8.4%	9.1%	6.9%	5.6%

Top companies by ROIC, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Trinity Exploration & Production ($TRIN)	8.0%	11.0%	-18.7%	80.5%
Turkiye Petrol Rafinerileri A.S. ($TPRD)	5.3%	25.4%	16.8%	25.6%
Societatea Natl De Gaze N Romgaz Sa ($SNGR)			10.9%	20.3%
Novatek OAO ($NVTK)	21.2%	19.4%	26.6%	17.7%
Serica Energy ($SQZ)	-5.5%	19.4%	5.5%	16.9%
Median (36 companies)	5.3%	1.3%	4.7%	5.5%	-7.1%
BP ($BP.A)	1.2%	-6.1%	-1.8%	3.9%	8.7%

Top companies by Net Debt / EBITDA


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Ruspetro ($RPO)	27.9x	116.8x		22.9x
Ithaca Energy Inc ($IAE)			4.5x	7.5x
Jkx Oil & Gas ($JKX)				3.5x
Rosneft OJSC ($ROSN)	2.8x	2.3x	2.3x	3.1x
Hellenic Petroleum Sa ($HLPD)		2.5x	2.1x	2.1x
Median (26 companies)	1.3x	1.4x	0.9x	0.8x	-0.0x
BP ($BP.A)	1.3x	4.0x	3.0x	1.7x	1.4x

BP stock price chart

BP financials

mln.	FY2010	FY2011	FY2012

Revenue	297,107	375,517	375,765
EBITDA	2,024	44,136	26,844
Net income	-3,719.000	25,700	11,017
CAPEX	18,421	17,845	23,222
Debt	45,336	44,213	48,800
Cash	18,556	14,067	19,635

About BP

BP p.l.c. operates as an integrated oil and gas company worldwide. It operates in three segments: Upstream, Downstream, and Rosneft. The Upstream segment engages in the oil and natural gas exploration, field development, and production; midstream transportation, and storage and processing; and marketing and trade of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGL). It also owns and manages crude oil and natural gas pipelines; processing facilities and export terminals; and LNG processing facilities and transportation, as well as NGL extraction business. The Downstream segment refines, manufactures, markets, transports, supplies, and trades in crude oil, petroleum, and petrochemicals products and related services to wholesale and retail customers. It offers lubricants and related products under the Castrol, BP, and Aral brands to the automotive, industrial, marine, and energy markets; and petrochemicals products, such as purified terephthalic acid, paraxylene, acetic acid, olefins and derivatives, and specialty petrochemicals products. This segment also sells gasoline, diesel, and aviation fuel. The Rosneft segment engages in the exploration and production of hydrocarbons in the United States, Canada, Vietnam, Venezuela, Brazil, Algeria, the United Arab Emirates, Turkmenistan, and Norway; and offers jet fuel, bunkering, bitumen, and lubricants. This segment also owns and operates 10 refineries in Russia; and has an interest in 4 refineries in Germany. As of December 31, 2014, this segment owned and operated approximately 2,500 retail service stations in Russia. The company also produces bioethanol, sugar, and biobutanol; exports power to the local grid; transports hydrocarbon products through shipping and chartering services; and holds interests in 16 operating wind farms with a generation capacity of 2,585 megawatts. BP p.l.c. was founded in 1889 and is headquartered in London, the United Kingdom.