BP Amoco Essay, Research Paper

British Petrochemical Corporation registered

on April 14, 1909, as the Anglo-Persian Oil Company, Ltd. It was named

the Anglo-Iranian Oil Company, Ltd., in 1935 and changed its name to the

British Petroleum Company Limited in 1954. The current name was adopted

in 1982. The company?s headquarters are in London. The Anglo-Persian Oil

Company was formed in 1909 to take over and finance an oil-field concession

granted in 1901 by the Iranian government to an English investor, William

Knox D?Arcy. (Britannica)

In 1914 the British government became

the company?s principal stockholder and over the years was usually the

largest single stockholder. Effective January 1, 1955, British Petroleum

became a holding company. In the beginning of the 1977 the British government

reduced its ownership of BP by selling shares to the public, and in the

late 1980s the government turned over BP entirely to private ownership

by selling its remaining shares of the company. In 1987 BP acquired the

remainder of the Standard Oil Company for almost $8 billion reinforcing

its position as one of the largest oil companies in the world.

Amoco Corporation formerly Standard

Oil Company, American petroleum corporation, was founded in 1889 by the

Standard Oil trust to direct the refining and marketing of oil in the Midwestern

states. The company?s first refinery, outside Whiting, Ind., produced fuel

oil, kerosene, and other petroleum products. Around 1910 Standard Oil developed

the cracking process, which became the most important method fro producing

gasoline from petroleum. In 1911 the U.S. Supreme Court dissolved the nationwide

Standard

Oil trust, and Standard Oil (Indiana)

became independent. Its headquarters are in Chicago. (Britannica)

In the 1920 Standard Oil acquired

partial interest in companies that owned Midwestern oil fields and pipeline

networks in order to add production to its refining and marketing operations.

In the 1950s Standard Oil became active in oil exploration and production

ventures in South America and the Middle East. In 1961 most of the company?s

U.S. operating activities were unified in the American oil company, for

which Standard Oil (Indiana) served as a holding company. The byname Amoco

was increasingly used as a brand and corporate name. In 1985 the Standard

Oil Company (Indiana) became officially the Amoco Corporation.

On December 30,1998, BP and Amoco

confirmed that the US Federal Trade Commission (FTC) has granted regulatory

approval for the merger of the two companies and that completion of the

deal will take place at year-end. Both companies agreed to intend to close

the transaction shortly after 2100 hours London time on December 31, 1998,

when Amoco?s stock will leave the Standard & Poor 500 and the shares

of the merged group, BP Amoco p.l.c., will be listed on the London Stock

Exchange. With a market capitalization of more than $140 billion, BP Amoco

p.l.c. is the Britain?s biggest company and one of the world?s top three

oil majors.

?We aim to play a leading role in meeting

the world?s needs for oil, gas, solar power and petrochemicals without

damaging the environment.?

BP AMOCO?S WORLD

The BP Amoco group stands out as

a complete provider of energy and petrochemicals. Every day they serve

millions of customers with products to the quality of their lives ? fuel

for transport, energy for heat and light, solar power, and petrochemicals

for plastics, fibres and fabrics. Explorers from Amoco and BP have led

the way in finding the world?s giant oil and gas fields and getting energy

to the world?s marketplace. According to Larry Fuller and Peter Sutherland,

co-chairmen, the meeting the demand of energy calls for a blend of outstanding

human and technical skills, sophisticated global organization and two-way

relationships with local communities, customers, contractors, partners,

government and employees. BP Amoco?s aim is to be successful in everything

they do by delivering outstanding performance.

Their business is about discovery

? about finding, producing and marketing the natural energy resources on

which the modern world depends. Their sales revenues, market value, and

oil and gas reserves make BP Amoco one of the three largest integrated

energy companies in the world. They operate in one hundred countries on

six continents. Each day they generate almost three million barrels of

oil equivalent production, of which sixty-five percent is oil and thirty-five

percent natural gas. They have well-established operations in Europe, North

and South America, Australia and much of Africa.

BP Amoco is distinguished by the

financial resources to operate on a global scale, the technical capacity

to seize opportunities, and a flexible management structure. The core of

their business is a world-class set of assets. In Britain they are the

largest producer of oil and gas from the North Sea and West of Shetland.

In the United States they are one of the largest producers of oil and gas,

based on major assets in the Gulf of Mexico, Texas and Alaska. In South

America they are the largest international oil and gas investors in Argentina,

Colombia, Trinidad and Tobago, and Venezuela.

BP Amoco?s transport network criss-crosses

the globe. They operate 23,000 miles of pipeline, most of it in the United

States. They also control an international tanker fleet of more than thirty-five

vessels, either fully owned or on long-term charter. Natural gas can be

used as a fuel with minimal processing, but crude oil needs to be refined

before it becomes a fuel that can power vehicles, ships and places or be

turned into heating oil for industry and commerce. The cost of running

refineries means that each of the eighteen facilities they wholly or partly

own must be highly competitive and efficient. Once refining is completed,

the different products are moved to storage terminals by ship, barge, pipeline

or rail. From there they are usually delivered to customers by road tankers.

Every day they sell or trade 4.4 million barrels of refined products.

On land, on the sea and in the air,

BP Amoco products help to keep the world moving. Each day they serve tem

million customers worldwide. Products are marketed under the red, white

and blue Amoco Brand in the United States and under the green and yellow

BP brand in the rest of the world. In the United States, BP Amoco has about

fifteen thousand service stations. They are a leading supplier of premium

gasoline in America. Outside North America they have a worldwide network

of 11,500 service stations. They operate in about one hundred countries.

BP Amoco is also one of the world?s largest marketers of aviation fuel

and a major supplier of fuels and lubricants to the global shipping industry.

Customers can call for their fueling services at more than eight hundred

ports and six hundred airports.

BP Amoco is the world?s third largest

petrochemicals company, based on a diverse, highly integrated product portfolio

and strong marketing positions in North America, Europe and the Far East.

BP Amoco operates large-scale chemicals manufacturing plants in the United

States, Britain, Belgium, France, Germany and Brazil. Thirteen joint-venture

projects in seven countries give BP Amoco a powerful platform for expansion

in Asia, including China, Singapore, South Korea, and Malaysia. BP Amoco

holds leading position is seven core products ? acetic acid, acrylonitrile,

aromatics, purified terephthalic acid (PTA), alpha-olefins, purified isophthalic

acid (PIA) and polypropylene.

BP Amoco is the world?s largest

producer of PTA, which is used to manufacture polyester, and polybutene

from which engine oil and lubricants are made. They also produce raw materials

for plastics such as polystyrene and polyethylene ? the versatile polymer

use in products from food packing to gas pipes. Another of their products,

polypropylene, is the source of a variety of everyday products. Other BP

Amoco chemical products are used for applications as diverse as pharmaceuticals,

cosmetics, detergents, packaging, coatings, adhesives, fuel additives,

cable insulation, microfilm, cassette tapes, and synthetic rubber.

WHAT THEY STAND FOR

The merger of BP and Amoco combines

the resources, skills and experience of two great companies, companies

that already share similar values and policies. According to Sir John Browne,

the chief executive officer, the formation of BP Amoco will provide an

opportunity to improve our performance by building on the track record

and the highest achievements of each company. BP Amoco will aspire to deliver

excellent performance in every part of our business and to be in touch

with the reality of the world in which they are operating. They want to

build relationships on the basis of mutual advantage ? the needs of those

who do business with them, and the needs of each community in which they

operate.

They aim to conduct their operations without

accidents, no harm to people and no damage to the environment. They apply

their skills, technology, and know-how to the search for creative and constructive

solutions.

Their business policies are universal.

Their commitment is to use these policies to raise their own standards.

BP Amoco?s goal is to play a leading role in meeting these needs from oil,

gas, solar power and petrochemicals without damaging the environment. Innovation

will be the hallmark of the way they work with people, technology, assets,

and relationships. BP Amoco believe that their activities should generate

economic benefits and opportunities and their conduct should be a source

of positive influence. Their business policies focus on five areas ? ethical

conduct; employees; relationships; health, safety and environment; control

and finance. They are committed to respect the rule of law, develop

employment practices, create mutual advantage in all relationships, demonstrate

respect for the natural environment, and manage their financial performance.

They expect that everybody who works for BP Amoco to take responsibility

for living up to these commitments. Their measures of success are the extend

to which they meet those commitments, the long-term value they create for

their shareholders, the pride of their employees in their accomplishments,

the satisfaction of their customers and all those with whom BP Amoco do

business, and the way communities judge their activities.

BP AMOCO CHEMICALS

BP Amoco?s main activities are exploration

and production of crude oil and natural gas; refining, marketing, supply

and transportation; solar power and manufacturing and marketing of petrochemicals.

BP Amoco Chemicals manufactures and markets wide ranges of petrochemicals,

intermediates, plastics, and specialities. Each year they sell more than

25 million of petrochemicals, specialities and fabricated products worldwide,

creating an annual turnover of $9,691 million in 1998. They operate large-scale

manufacturing plants in the United States, the United Kingdom, Belgium,

France, Germany, Malaysia, and Brazil. Thirteen joint-venture businesses

in seven countries give a powerful platform for growth in Asia, including

China, Singapore, South Korea and Malaysia.

BP Amoco Chemicals holds leading

positions in seven core products ? acetic acid, acrylonitrile, aromatics,

purified terephthalic acid (PTA), alpha-olefins, purified isophthalic acid

(PIA) and polypropylene. Some of their products are used internally as

the raw materials for other downstream chemicals, others are sold to customers

for use in application as diverse as pharmaceuticals, cosmetics, detergents,

packaging, wire and cable insulation, lubricants, textiles, agriculture

and agrochemicals, electrical and electronic components, automotive parts,

aerospace and aviation and in the building and construction industry.

One of the main factors in their

success has been in developing and applying advanced technology to their

manufacturing processes and BP Amoco Chemicals owns a number of proprietary

technologies. Among these is Innovene, a gas phase manufacturing process

for polyethylene. They also have leading-edge technology for the manufacture

of polypropylene. Other includes Cativa, an iridium-based catalyst for

acetic acid, naphthalene dicarboxylate (NDC), a chemical that makes polyesters

stronger and more heat-resistant, and their acrylonitrile process, which

is used in 95 percent of the world?s acrylonitrile manufacturing capacity.

On February 17, 2000, BP Amoco Chemicals

announced that they are studying options to debottleneck production at

their purified terephthalic acid (PTA) plant at Cooper River, South Carolina.

BP Amoco is studying options for a new world-scale, 700,000 metric tonne

PTA unit that could be brought on-stream by the end of 2003. (Northern

Light, 2000)

Everybody who works for BP Amoco

Chemicals is responsible for getting health, safety, and the environment

right. Good health, safety, and the environment performance and the health,

safety and security of everyone who works for BP Amoco are critical to

the success of their business. They are committed to respecting the rule

of law, conducting their business with integrity, and showing respect for

human dignity and the rights of the individual wherever they do business.

They are also committed to respect the natural environment and work towards

their goals without no accidents, no harm to people and no damage to the

environment.

FINANCIAL HIGHLIGHTS

January – June 1999 1998

Replacement cost profit before exceptional

items ($m) 1,903 2,358

Replacement cost profit after exceptional

items ($m) 880 2,420

Historical cost profit after exceptional

items ($m) 1,459 1,632

Earnings per ordinary share on replacement

cost profit before exceptional items (cents) 20 25

Dividends per ordinary share (cents) ?

first quarter? second quarter 10.010.0 9.510.0

Dividends per ordinary share (pence) ?

first quarter? second quarter 6.16.2 5.86.0

Dividends per ADS (cents) ? first quarter?

second quarter 60.060.0 57.060.0

Capital expenditure ($m) 3,263 5,065

In the 1998 Annual Report co-chairmen of

BP Amoco described the merger of BP and Amoco as a ?groundbreaking deal

for the oil industry.? A strong second-quarter of 1999 result as merger

cost savings began to come through produced replacement cost profits for

the half of $2,128 million, before exceptional items and after adjusting

for special charges of $225 million. These profits were about 12 percent

down on a year ago. Net debt increased to $15,1 billion. The ratio of net

debt to net debit plus equity was 26%.

The exploration and production business

generated $2,435 million of replacement cost operating profit for the half

year after adjusting for special charges. This represented an improvement

of 10% on the first half of 1998, despite lower oil prices, and reflected

several factors ? higher oil and gas production, lower costs stemming from

savings and the benefits resulting from post-merger rationalization.

Replacement cost operating profit for

the half year was $956 after adjusting for special charges ? down 31% on

the same period in 1998. At $474 million, replacement cost operating profit

after adjusting for special charges was 29% lower than same period in 1998.

Chemicals production was 8% up on the first half of 1998 as sales improved.

LOOKING TO THE FUTURE

On July 15, 1999, BP Amoco announced

new targets. They will lop $4 billion of its annual costs, sell assets

of $10 billion and boost capital spending to a total of $26 billion over

the three years to the end of 2001. According to Sir John, BP Amoco will

continue to improve efficiency and intend to high-grade the portfolio with

$10 billion of disposals. They plan to invest for growth and to maintain

their gearing within a band of around 25% to 30% and to maintain our dividend

policy of paying out 50% of underlying mid-cycle earnings. BP Amoco will

continue to plan on the basis of a low oil price, driving down supply cost

to ensure the group?s robustness at $11 a barrel. Capital spending this

year should be around $7 billion and disposals $2 billion. Some $2.2 billion

of the cost-reduction targets is expected to come from the upstream business,

$1.4 billion from refining and marketing and $400 million from petrochemicals.

After the $10 billion of divestments, the group expects to see gas production

growing by 5% a year, and oil production by 8% a year.

CONCLUSION

BP Amoco is proud to be part of

an organization that does much to improve the quality of life of people

everywhere. They believe that their business should be both competitively

successful and a force for good. They seek to conduct their business in

a manner that is distinctive, responsible and forward-looking. BP Amoco

strives to be a good citizen. This is reflected in their active support

for the people and communities where they operate.

?A good business should be both successful

and a force for good.?