After the onset of the Covid-19 pandemic in 2020, global primary energy consumption witnessed its largest decline since 1945. Oil prices turned negative for the first time in history, reaching record lows of -$40 a barrel. The result was that BP ended the year with $20 billion worth of losses, a growing debt pile, and a precarious outlook.

However, a swift global economic recovery, fueled by record stimulus packages, has seen a remarkable restoration in oil and gas demand. OPEC has intervened to maintain tight control over supplies over the past year, and it now appears as though the oil market has stabilised at a much higher level today, with Brent oil currently trading at over $80 a barrel.

At these elevated prices, BP generates substantial amounts of free cash flow. The company is now paying down debts whilst simultaneously increasing dividend payments to shareholders and carrying out substantial share buybacks to the tune of $1 billion per quarter (as long as Brent remains above $60 a barrel).

Despite the impressive financial performance this year, and the recovery of oil prices to beyond pre-pandemic levels, BP’s share price has lagged behind. The company now trades on a forward PE ratio of 6.6 and pays out a forward dividend of just under 5%.

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Profile

What are the company's principal business activities, how does it generate its revenues?

BP is one of the largest integrated energy businesses in the world, with operations in over 70 countries, across 6 continents. The company’s primary source of revenue generation still comes from Oil & Gas production, with the company producing just under 3.5 million boepd (barrels of oil equivalent per day) in 2020.

BP is currently organised into four business groups: Production & operations, Customers & products, Gas & low carbon energy, and Innovation & engineering.

Production & operations - At the heart of BP lies its P&O division, where it seeks to discover and develop hydrocarbon resources, operate oil and gas production assets, as well as refineries, pipelines and terminals around the world.

Customers & products - Is focused on innovation in order to grow the company’s convenience and mobility offering to a wider range of customers. The division looks after Castrol lubricants, aviation fuelling, and mobility and ‎convenience as well as fuels

Gas &…

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