Ok it’s time for the $BP thread. I will demonstrate that BP is a terrible company to interact with in any way, whether you work there, doing business with BP, or (heaven forbid) are a shareholder. I’ll try to organize this in a logical faction.

From an employee perspective, your first concern should be safety. Between 2007-2010, BP refineries in TX and OH accounted for 97% of “egregious, willful” violations issued by OSHA. This is while BP operated only ~8% of total US capacity. In other words, BP facilities were

371x more likely to earn OSHA violations than refineries operated by all other companies in the US. Just a brief timeline of BP worker accidents:

-1965 Sea Gem: North Sea is opened up, and BP rushes the job. Capsized the rig and killed 11.

-2005 Texas City Refinery: killed 15, injured 180

-2006 Prudhoe Bay Pipeline spill: They hadn’t pigged the line in 8 years and cost cutting measures resulted in monitoring gaps. It took them 3 days to find the leak. Spilled 5mbo.

-2008 Caspian Sea Gas Leak: nobody killed but guess what caused the gas leak? Bad cement job! They’ll come to see that old habits die hard.

-2010 Deepwater Horizon: Movie does a decent job, but $RIG guys weren’t perfect either. They rush the cement job, blowout. Killed 11

Injured 16, leaked 5mmbo into the ocean. Total cost to BP, $65B. What could $65B buy back then? Combined market cap of $RIG $HAL $NBR $HP

What is important to understand is that in order to have a catastrophic incident, it can’t just be 1 thing goes bad. Or 2, or 3. It’s 10.

For Texas City, between 1991 and the incident, there were 16 different documented events that signaled the possibility of the exact process that caused the explosion, all ignored.

For the Macondo well, they had issues with rushing a cement job 2 years before.

They rushed the cement, cited pseudo-science as to why they didn’t get mud flowback, were too slow closing annular preventers and shear ram, miswired BOTH backup batteries on the BOP, but one of them was also run backwards, so it ended up working.

Even if you didn’t care about the value of human life (which their safety record shows they do not) BP’s safety history embodies “Penny-wise, pound-foolish.”

Now let’s turn to BP’s operational performance both relative to peers ( $XOM, $CVX, $RDS, $TOT) and in absolute terms.

Looking at all 12-month periods beginning 1/1/2000. Green is best in category, orange is worst. BP takes the cake in each. Total holding period return for the past 21 yrs:
BP: 6%
XOM: 123%
CVX: 369%
RDS: 79%
TOT: 272%

So we’ve determined that there is something wrong with BP. What has driven it? Well let’s see how they paid for their legal settlements from the two largest accidents (Texas City and Deepwater Horizon)

https://www.google.com/amp/s/www.cnbc.com/amp/id/100145780

“From 2010-2012, BP agreed to sell $30B in assets”

Ask any farmer, once you have to start selling land, you’re toast. You slash your earning power and set in place an irreversible decline. BP branded it as a “re-focus.” A refocus on what? Well let’s look at their notable assets sales since 2010.

2010: $18.45B in Upstream assets

2012: $4.8B (Carson Refinery and Texas City Refinery)

$5.6B GOM assets to Plains Exploration

TNK-BP sale to Rosneft for ~$28B

2014: Alaska Assets to Hilcorp $1.25B

2019: Rest of BP Alaska to Hilcorp for $4B cash ($1.6B doubtful earnout)

2020: Last of petrochemicals business for $5B.

The justification for each sale was to “re-focus” BP and strengthen its balance sheet. Let’s take a look at that balance sheet.

BP’s total debt/EBITDA doubled from 2010-2019 (prior to covid downturn, doubled again in 2020)

So BP shot itself in the foot from a PR perspective, killed 2 dozen of its workers, and gutted the company. So naturally, who is leading the energy transition? The operator with the worst track record in traditional energy production. Undoing much of the reinvestment into GOM

that was done by his predecessor, Bernard Looney has chosen to bet the company on renewables, amid the best traditional asset buying opportunity in the last decade. How’s that going so far? Well they cut their exploration team down to 100, from 700 before Looney took the reins.

So it looks like they’re committed. Commitment doesn’t necessarily equal skill, talent, or expertise. Most recently, they shot the moon on bidding for offshore wind leases that the auction holder had to confirm the bid wasn’t a typo.

They then doubled down saying “we’re confident in 8-10% returns” from the project, seemingly ignoring that they could’ve won the bid and, by their math, earned 14-16% by understanding the business prior to throwing money around.

“BP is working to make the world a better place.” Let’s ask any of the 10,000 employees getting the ax in the COVID fallout. Don’t worry, Bob Dudley got a $3MM bonus in 2019 as he teed that up. Maybe ask the 7,000 that got laid off in the 2016 downturn.

For a “pivot,” “transition,” or “re-focus,” there’s seems to just be a whole lot of shrinking. Imagine working in upstream as Looney is bragging about projecting a production decline of 40% by 2030. Or refinery throughput decline of 30%. Obviously midstream will follow suit.

The story of BP is sad at first, but repeated errors and double-downs take away all pity. They bowed down to euro activists who would dissolve the company immediately if they could. They will always be too much of an oil company for those people.

However, their pivot away from their core competency has made them uninvestable for everyone else. A company caught in limbo where they’ve pissed off everyone. Throw in an awful safety record and an apathetic (at best) work force, and you have a recipe for implosion.

In 1909 the company was founded and made the first major oil discovery in the Middle East. The Anglo Persian Oil Company opened up the Middle East to western investment and fueled industry all over the globe. Fast forward 110 years & they’re ashamed of their history and identity.

There are too many instances of what I call “BPisms” to list here, but feel free to comment with your favorites. Some of mine are: projecting oil demand scenario of 45mmbopd, pushing TXRRC to kill flaring, then applying for 121 permits, and its ad-agency buzzword presentations.

Thanks for reading, and wherever you work, don’t let it become BP.

@bp_America @bp_plc in case you wanted to see the broad energy industry’s view of your track record and culture (the performance speaks for itself)