COVID-19 – we cannot ignore it IV – British Petroleum (BP)

Of course I realised that an oil-major would be a terrible match when combined with the previous two companies, Qantas and Wyndham. Yet I took BP, because I expected it to be hit as hard as the other two. The huge BP-buildings in the 3D-graph make the others almost invisible, but to be honest I expected the pattern to be the same: lower revenue, negative cash flow, equity going down and liabilities going up.

Photo by Jack B on Unsplash

I was wrong! Although the revenue dropped and the equity went down, the cash flow did not become negative and the liabilities even went down instead of up (see input-file)! Yet a major loss was announced, so what happened?

An important difference between profit (loss) and cash flow from operations are all kinds of depreciation, amortisation and write-offs. The Q2 report says (p 22, note 3):

“Impairment charges for the second quarter mainly relate to producing assets and principally arose as a result of changes to the group’s oil and gas price assumptions.”

This is a huge part of the loss and it’s hardly related to Corona (consumption of fossil fuels went down because of Corona, but it’s not the major cause of the low oil price).

The note 4 at the same page says: “Exploration expense in the second quarter and half year was $9,674 million and $9,876 million and includes exploration expenditure write-offs of $9,618 million”

As a matter of fact it seems like significant parts of both the loss and drop in equity for 2020 H1 are caused by a changing strategy! This would mean that BP is not a good example of a company suffering from the pandemic, although it’s not helping them either.

Then we still have the liabilities. Looking at the group balance sheet (still same Q2 report, now page 17), we see the impact is mainly coming from the current liabilities, where “Trade and other payables” dropped. This would mean that debts were paid sooner – probably to help their suppliers to survive. This might be in indirect Corona-effect after all, but be aware, it’s just me speculating!

As a result of all those changes, the BP-building in the graph is lower and narrower for 2020 H2, but the depth is even less and the roof is green (positive cash flow)!

Double-clicking the screenshot will open the 3D-graph in your browser. Clicking the right mouse-button and moving the mouse up and down at the same time, will zoom the graph in and out. For maniputalion of this 3D-graph: Clicking left while moving the mouse will tilt the graph in different directions. Double clicking in the graph translates it and readjusts the centre at the same time. Just try it – If you don’t know how to get the normal position back, refresh the page in your browser.

The next time we won’t show BP in the graph. Not because it’s a bad example, but because it would dwarf out all other buildings in the graph, like it does now.

Don’t forget to download your free copy of AnRep3D at our website. Short tutorials, explaining different parts of AnRep3D are available at our Youtube-channel Follow @AnRep3D on Twitter, to be informed about new posts.

About AnRep3D

AnRep3D is the new company, founded after the handover of Scientassist (together with VRBI) to one of my sons. From now I will focus on three-dimensional graphs for the financial markets, showing the main figures from annual reports in comparison. As per 2021 a second product is available: EnRep3D. It is meant to visualise energy. Although the engine is the same, the texts, manual, website and examples (including blogposts) are focused at energy.
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