The first quarter of oil majors indicate an unexciting day ahead in the rates of oil prices. The crude oil prices are expected to rise to $100 a barrel before the end of 2019. BP’s first-quarter results clearly indicate the same. The dents in profits are lower but with days to come the oil disaster could prevail once again.
- Threats
- Bills diminishing: The dent in BPs profits of about $2.4 bn was largely due to lower refining income which obviously is a major threat. The forecasts were actually predicting a bigger dent and in times to come. The future of crude oil is a threat and reminds of the deepwater horizon disaster that took place nearly a decade ago but still hasn’t washed out from the system and minds of businesses. The bills are already down sharply from last year.
- Environmental activists: The annual meeting this year will certainly observe a new threat from the activists. It is already clear that the environmental activists will support a resolution by climate action 100+ and seek a better response for greenhouse gas emissions. This certainly is a threat to the increased use of crude oil.
- Political issue: BP will face a further increase in oil prices due to decisions being taken by the president in recent times. The strengthened embargo in Iran has intensified the whole situation with Iran as well as Saudi Arabia. There has been no increased production in these countries.
These above threats are bound to exert upward pressure on the energy prices and obviously causing distress among the involved. The support provided to Occidental Petroleum may be helpful for the investors for short-term profits and dividends. In fact, higher energy prices will destabilize global output.
- Conglomerate model
The Whitbread’s are reaping the benefits of the conglomerate model by selling Costa to coca-cola and with the cash paid off the pension deficit of the group, cut debt and proceeds back to the shareholders. The model has the advantage that when one underperforms, the other can fill the gap. The confidence of the consumers has also increased with time and Whitbread is sensibly going ahead with the investments further. The company is more focused on shaping the increased capital expenditure in the right direction and cash flow reduction.
- Fast growing Markets
The exposure has given rise to fast-growing markets namely of Asian, Middle East and African markets and this has been a mere disappointment as Standard Chartered has also quoted the same. The money laundering breaches have been difficult to tackle and the recovery of the funds has become almost impossible. The JP Morgan former banker has shown steadiness with a 10 per cent rise in the profits and millions of share buyback has been promised. Instead of buybacks, the better recommendation would be have spent the money on strengthening reserves, IT-related training and compliance training. The company needs to pay attention to this aspect of growth.
