BP Debt jumped on 17.7% and Net Debt / EBITDA jumped on 0.7x from 1.4x to 2.1x

04 Feb 2020 • About BP ($BP.A) • By InTwits

BP reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:

BP is a company in decline: FY2019 revenue growth was -6.8%, 5 years revenue CAGR was -4.7%
EBITDA Margin is quite volatile: 9.4% in FY2019, 10.1% in FY2018, 9.1% in FY2017, 6.3% in FY2016, 3.0% in FY2015
BP has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.1%. At the same time it's a lot of higher than industry average of 2.3%.
CAPEX is quite volatile: £39m in FY2019, £28m in FY2018, £22m in FY2017, £28m in FY2016, £8m in FY2015
The company has potentially unprofitable business model: ROIC is 4.3%
It operates with medium-size leverage: Net Debt/EBITDA is 2.1x while industry average is 2.0x

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 decreased on 6.8%. During FY2015-FY2019 Revenue growth topped in FY2017 at 31.3% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 0.77 pp from 10.1% to 9.4% in FY2019. EBITDA Margin stuck to a growing trend at 1.7 pp per annum in the last 5 years.

Gross Margin increased slightly on 1.5 pp from 15.4% to 16.9% in FY2019. Gross Margin followed a growing trend at 1.8 pp per annum in the last 5 years.

Net Income margin decreased slightly on 1.7 pp from 3.1% to 1.4% in FY2019. During FY2015-FY2019 Net Income margin topped in FY2018 at 3.1%.

Investments (CAPEX, working capital and M&A)

BP's CAPEX/Revenue was 5.5% in FY2019. BP's CAPEX/Revenue decreased on 3.6 pp from 9.1% in FY2016 to 5.5% in FY2019. For the last three years the average CAPEX/Revenue was 6.0%. The company invested a big chunk of EBITDA (59.1%) to CAPEX which didn't stop revenue from falling. CAPEX as a % of Revenue followed a declining trend at -0.92 pp per annum in FY2015-FY2019.

Return on investment

The company operates at low ROIC (4.3%) and ROE (4.1%). ROIC decreased on 4.4 pp from 8.7% to 4.3% in FY2019. ROE decreased on 5.4 pp from 9.5% to 4.1% in FY2019. During FY2015-FY2019 ROIC topped in FY2018 at 8.7%. During the last 5 years ROE topped in FY2018 at 9.5%.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 3.0x. Net Debt / EBITDA jumped on 0.7x from 1.4x to 2.1x in FY2019. Debt surged on 17.7% while cash showed almost no change in FY2019. During FY2015-FY2019 Net Debt/EBITDA bottomed in FY2018 at 1.4x.

BP has no short term refinancing risk: cash is higher than short term debt (179.0%).

Valuation and dividends

BP's trades at EV/EBITDA 5.8x and P/E 23.6x.

Management team

The company's CFO is Brian Gilvary. Brian Gilvary has 8 years tenure at the company.

Financial and operational results

FY ended 30 Nov -0001

BP ($BP.A) key annual financial indicators

mln. $	2015	2016	2017	2018	2019	2019/2018
P&L
Revenue	222,894	183,008	240,208	298,756	278,397	-6.8%
Gross Profit	21,064	21,712	36,263	45,873	46,910	2.3%
SG&A	11,553
EBITDA	6,708	11,609	21,894	30,309	26,091	-13.9%
EBIT				14,852
Interest expence				2,198
Tax				7,145
Net Income	-6,482	115	3,389	9,383	4,026	-57.1%
Stock Based Compensation				690
Balance Sheet
Cash	26,389	23,484	25,586	22,468	22,472	0.0%
Inventory				17,988
Short Term Debt	6,944	6,634	7,739	9,373	12,554	33.9%
Long Term Debt	46,224	51,666	55,491	56,426	64,892	15.0%
Cash flow
Capex	18,648	16,701	16,562	16,707	15,418	-7.7%
Dividends				6,699
Acquisitions				1,395
Ratios
Revenue growth	-37.0%	-17.9%	31.3%	24.4%	-6.8%
EBITDA growth	-61.4%	73.1%	88.6%	38.4%	-13.9%

Gross Margin	9.5%	11.9%	15.1%	15.4%	16.9%	1.5%
EBITDA Margin	3.0%	6.3%	9.1%	10.1%	9.4%	-0.8%
EBIT Margin				5.0%
SG&A, % of revenue	5.2%
SBC, % of revenue				0.2%
Net Income Margin	-2.9%	0.1%	1.4%	3.1%	1.4%	-1.7%
CAPEX, % of revenue	8.4%	9.1%	6.9%	5.6%	5.5%	-0.1%

ROIC	-6.1%	-1.8%	3.9%	8.7%	4.3%	-4.4%
ROE	-6.2%	0.1%	3.5%	9.5%	4.1%	-5.4%
Net Debt/EBITDA	4.0x	3.0x	1.7x	1.4x	2.1x	0.7x
Interest coverage ratio (ICR)				6.8x
Interest expence / Average debt				3.4%
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	FY2015	FY2016	FY2017	FY2018	FY2019
Parkmead Group(The) ($PMG)	-24.4%	-44.0%	-60.4%	69.7%
Turkiye Petrol Rafinerileri A.S. ($TPRD)	-7.1%	-5.5%	54.8%	64.1%
Range Resources ($RRL)	-37.9%	-46.3%	19.4%	54.8%
Amerisur Resources ($AMER)		-22.9%	79.6%	27.8%
Royal Dutch Shell ($RDSB)		-11.8%	30.6%	27.3%	-11.2%
Median (7 companies)	-19.2%	-8.9%	18.5%	27.8%	-11.2%
BP ($BP.A)		-17.9%	31.3%	24.4%	-6.8%

Top companies by Gross margin, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Oil & Gas Development Co ($OGDC)	62.7%	54.0%	55.3%	59.2%
Parkmead Group(The) ($PMG)	-111.5%	-44.2%	28.5%	57.8%
Amerisur Resources ($AMER)	-20.2%	-1.1%	21.3%	28.4%
Royal Dutch Shell ($RDSB)	15.9%	18.2%	18.0%	17.3%	19.0%
Turkiye Petrol Rafinerileri A.S. ($TPRD)	11.3%	10.5%	11.5%	10.4%
Median (6 companies)	12.6%	13.7%	18.2%	22.8%	19.0%
BP ($BP.A)	9.5%	11.9%	15.1%	15.4%	16.9%

Top companies by EBITDA margin, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Oil & Gas Development Co ($OGDC)	62.4%	53.9%	55.8%	59.3%
Amerisur Resources ($AMER)	0.1%	-35.0%	20.0%	28.8%
Total Sa ($TTA)	11.5%	13.6%	15.1%	16.8%
Royal Dutch Shell ($RDSB)	8.9%	11.7%	13.7%	13.7%	15.0%
Turkiye Petrol Rafinerileri A.S. ($TPRD)	10.4%	9.3%	10.4%	9.8%
Median (7 companies)	18.8%	13.3%	17.9%	13.7%	15.0%
BP ($BP.A)	3.0%	6.3%	9.1%	10.1%	9.4%

Top companies by CAPEX/Revenue, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Amerisur Resources ($AMER)	72.4%	65.8%	33.8%	11.7%
Total Sa ($TTA)	17.5%	14.2%	9.2%	9.3%
Oil & Gas Development Co ($OGDC)	31.5%	26.0%	23.2%	8.5%
Royal Dutch Shell ($RDSB)	9.9%	9.5%	6.8%	5.9%	6.7%
Range Resources ($RRL)	43.4%	5.7%	0.1%	1.9%
Median (7 companies)	16.0%	13.1%	11.7%	5.9%	6.7%
BP ($BP.A)	8.4%	9.1%	6.9%	5.6%	5.5%

Top companies by ROIC, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Turkiye Petrol Rafinerileri A.S. ($TPRD)	25.4%	16.8%	25.6%	31.2%
Oil & Gas Development Co ($OGDC)	24.3%	13.7%	14.2%	17.3%
Royal Dutch Shell ($RDSB)	-1.5%	0.9%	5.5%	10.9%	7.8%
Total Sa ($TTA)	2.5%	3.2%	5.8%	9.2%
Amerisur Resources ($AMER)	-11.4%	-13.3%	0.1%	5.0%
Median (18 companies)	1.3%	4.7%	5.5%	5.0%	-6.6%
BP ($BP.A)	-6.1%	-1.8%	3.9%	8.7%	4.3%

Top companies by Net Debt / EBITDA


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Turkiye Petrol Rafinerileri A.S. ($TPRD)	1.8x	1.9x	1.1x	1.4x
Royal Dutch Shell ($RDSB)	1.1x	2.7x	1.6x	0.9x	1.5x
Total Sa ($TTA)	1.9x	1.7x	0.8x	0.8x
Oil & Gas Development Co ($OGDC)	-0.1x	-0.1x	-0.0x	-0.0x
Amerisur Resources ($AMER)	-622.4x		-1.8x	-1.1x
Median (6 companies)	1.4x	0.9x	0.8x	0.4x	1.5x
BP ($BP.A)	4.0x	3.0x	1.7x	1.4x	2.1x

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.