1st Quarter Results
BP PLC
8 May 2001
PART 1
BP p.l.c.
Group Results
1st Quarter 2001
London 8 May 2001
FOR IMMEDIATE RELEASE
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BP ANNOUNCES ANOTHER RECORD QUARTER
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First Quarter
1Q 1Q
$ million 2001 2000 %
=======================
Replacement cost profit before exceptional items 3,437 2,677
Special items(a) 45 30
Acquisition amortization(b) 644 -
-----------------------
Pro forma result adjusted for special items 4,126 2,707
=======================
- per ordinary share (pence) 12.58 8.71
- per ordinary share (cents) 18.36 13.93 32%
- per ADS (dollars) 1.10 0.84
=======================
o BP's pro forma result, adjusted for special items, for the first
quarter was $4,126 million compared to $2,707 million a year ago. The
result per share was 18.36 cents compared to 13.93 cents a year ago, an
increase of 32%. Replacement cost profit, before exceptional items, was
$3,437 million compared to $2,677 million a year ago.
o The result reflects the generally favourable trading environment and
performance improvements.
o Return on average capital employed, on a pro forma basis and adjusted
for special items, is 25% compared to 21% a year ago.
o Hydrocarbon production was 13% higher than a year ago. This includes
the net effect of the ARCO acquisition and other portfolio changes.
o The company purchased for cancellation 60 million of its own shares
during the quarter, at a cost of $0.5 billion. Total share purchases
over the past 12 months amount to $2.5 billion.
o Quarterly dividend 5.25 cents per share ($0.315 per ADS).
BP Group Chief Executive, Sir John Browne, commented:
'The result reflects the positive environment, but also continuing
performance improvements which are on track to achieve our announced
targets, with higher reported production being a particular feature.
This gives us confidence that our discipline in cost management and
investment selection is enabling delivery on our agenda for profitable
growth.'
The financial performance information above and elsewhere in the document is
provided in order to enable investors to evaluate better both the company's
current performance, in the context of past performance, and its performance
against that of its competitors. The pro forma result, adjusted for special
items, has been derived from the company's reported UK GAAP accounting
information but is not in itself a recognized UK or US GAAP measure.
(a) The special items refer to non-recurring charges and credits. The
special items for the quarter comprise Burmah Castrol integration costs,
rationalization costs in the North European commercial and industrial
business in Refining and Marketing and a bond redemption charge.
(b) Depreciation and amortization relating to the fixed asset revaluation
adjustment and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions.
Summary results
Exploration and Production's result was again a record, reflecting higher gas
prices, mainly in North America, higher production and lower unit cash costs.
Production was at record levels and up 13% on a year ago; this includes the
net effect of the ARCO acquisition and other portfolio changes. Production was
at a similar level to a year ago, when measured on a consistent first quarter
2001 portfolio basis. Two more successful discoveries offshore Angola were
announced and also a significant oil discovery in the Gulf of Mexico
deepwater. Capital expenditure of $1.9 billion was over twice the level of a
year ago. The go ahead for the $1.3 billion Nam Con Son gas project offshore
Vietnam was announced. The developments of the Crazy Horse and Holstein fields
and the Mardi Gras pipeline in the Gulf of Mexico have been approved.
In Gas and Power, gas sales volumes showed strong growth in the quarter. NGL
margins contracted sharply during the quarter, reflecting the differential
movement in oil and gas prices.
Refining and Marketing's result was significantly higher than a year ago,
reflecting strong refining margins, mainly in the USA, partly offset by
pressure on marketing margins. The acquisition of ARCO and Burmah Castrol and
the full consolidation of the fuels business in Europe also contributed to the
increase. The quarter's result was adversely affected by scheduled refinery
maintenance shutdowns and the Turkish Lira devaluation. Underlying refining
costs have been reduced compared to a year ago, though this effect was more
than offset in the first quarter by higher US West Coast refinery fuel and
electricity costs.
The Chemicals' result for the first quarter was down from the fourth quarter
as higher natural gas prices put pressure on margins for some products,
particularly in the USA, through higher feedstock costs and also increased
operating costs.
Interest expense was $446 million compared with $611 million in the previous
quarter. These amounts include special charges of $10 million and $111 million
respectively relating to the early redemption of bonds. Excluding the special
charges the decrease reflects lower debt and interest rates in the quarter.
The pro forma effective tax rate on replacement cost profit, before
exceptional items, was 28% the same as the previous quarter.
Capital expenditure for the quarter was $2.5 billion, consistent with a 2001
target of between $12-13 billion. This is comparable historic levels of
investment for the enlarged group.
Net debt at the end of the quarter was $16.6 billion. The pro forma ratio of
net debt to net debt plus equity was 24%.
Net cash inflow for the quarter was $3.2 billion, compared with an outflow of
$0.8 billion a year ago, reflecting a very significant improvement in
operating cash flow, partly offset by higher dividend payments.
----------
On 1 January 2001, the natural gas liquids (NGL) operations, located in the
USA and Canada, were moved to the Gas and Power business from Refining and
Marketing. Comparative information has been restated.
The commentaries above and following are based on the pro forma replacement
cost operating results for the quarter, before exceptional items, adjusted for
special items. The results of ARCO and Burmah Castrol have been included with
effect from 14 April and 7 July 2000 respectively. The European fuels joint
venture has been consolidated with effect from 1 August 2000.
Reconciliation of Reported Results to
Pro Forma Results Adjusted for Special Items
Pro forma Result
---------- 1Q 2001 -------- Adjusted for
Special Items
------------------
Reported Acq. Special 1Q 4Q 1Q
$ million Earnings Amort.(a) Items(b) 2001 2000 2000
-----------------------------------------------
Exploration and Production 4,680 456 - 5,136 4,700 3,227
Gas and Power 112 - - 112 183 142
Refining and Marketing 753 188 53 994 1,321 584
Chemicals 81 - - 81 140 259
Other businesses and corporate (127) - - (127) (132) (211)
--------------------------------------------
RC operating profit 5,499 644 53 6,196 6,212 4,001
--------------------------------------------
Interest expense (446) - 10 (436) (500) (296)
Taxation (1,605) - (18) (1,623)(1,605) (930)
MSI (11) - - (11) (17) (68)
--------------------------------------------
RC profit before
exceptional items 3,437 644 45 4,126 4,090 2,707
============================================
Exceptional items before tax 218
Taxation on exceptional items (113)
-----
RC profit after
exceptional items 3,542
Stock holding gains (losses) (238)
-----
HC profit 3,304
=====
(a) Depreciation and amortization relating to the fixed asset revaluation
adjustment and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions.
(b) The special items refer to non-recurring charges and credits. The
special items for the quarter comprise Burmah Castrol integration costs,
rationalization costs in the North European commercial and industrial
business in Refining and Marketing and a bond redemption charge.
Operating Results
First Fourth First
Quarter Quarter Quarter
2001 2000 2000
=======================
Replacement cost operating profit ($m) 5,499 4,763 3,961
-----------------------
Replacement cost profit
before exceptional items ($m) 3,437 2,799 2,677
-----------------------
Profit after exceptional items ($m)
Replacement cost 3,542 2,971 2,553
Historical cost 3,304 2,410 3,085
-----------------------
Per ordinary share (cents)
Pro forma result adjusted for specal items 18.36 18.25 13.93
RC profit before exceptional items 15.29 12.40 13.78
HC profit after exceptional items 14.70 10.53 15.88
Per ADS (cents)
Pro forma result adjusted for special items 110.16 109.50 83.58
RC profit before exceptional items 91.74 74.40 82.68
HC profit after exceptional items 88.20 63.18 95.28
-----------------------
Dividends per ordinary share
cents 5.25 5.25 5.00
pence 3.665 3.617 3.220
Dividends per ADS (cents) 31.5 31.5 30.0
-----------------------
EBITDA(a) (cents)
per ordinary share 33.90 28.82 28.47
per ADS 203.40 172.92 170.82
-----------------------
Adjusted EBITDA(b) (cents)
per ordinary share 34.22 35.01 26.75
per ADS 205.32 210.06 160.50
=======================
(a) Profit for the period before interest, tax, depreciation and
amortization.
(b) Replacement cost profit before exceptional items, adjusted for special
items, and before interest, tax, depreciation and amortization.
Operating Statistics
First Fourth First
Quarter Quarter Quarter
2001 2000 2000
=======================
Crude oil and natural gas liquids production
(mb/d) (Net of Royalties)
UK 511 514 581
Rest of Europe 97 92 91
USA 722 725 794
Rest of World 607 600 515
-----------------------
Total crude oil and liquids production 1,937 1,931 1,981
=======================
Natural gas production (mmcf/d)
UK 2,152 1,893 1,746
Rest of Europe 169 156 184
USA 3,467 3,403 2,256
Rest of World 3,107 3,169 2,123
-----------------------
Total natural gas production 8,895 8,621 6,309
=======================
Gas sales volumes (mmcf/d)
UK 3,395 3,019 2,369
Rest of Europe 251 224 188
USA 8,001 8,206 4,785
Rest of World 7,403 6,007 4,412
-----------------------
Total gas sales volumes 19,050 17,456 11,754
=======================
NGL sales volumes (mb/d)
UK - - -
Rest of Europe - - -
USA 221 169 123
Rest of World 207 241 229
-----------------------
Total NGL sales volumes 428 410 352
=======================
Oil sales volumes (mb/d)
Refined products
UK 259 295 224
Rest of Europe 1,082 1,077 766
USA 1,874 1,973 1,349
Rest of World 553 524 421
-----------------------
Total marketing sales 3,768 3,869 2,760
Trading/supply sales 2,935 2,878 1,621
-----------------------
Total refined product sales 6,703 6,747 4,381
Crude oil 5,253 5,442 6,496
-----------------------
Total oil sales 11,956 12,189 10,877
=======================
Chemicals production (kte)
UK 730 833 867
Rest of Europe 1,688 1,701 1,640
USA 2,257 2,255 2,619
Rest of World 702 596 577
-----------------------
Total production 5,377 5,385 5,703
=======================
Exploration and Production
The first quarter pro forma result was again at a record level, an increase of
$1,909 million over the equivalent quarter last year. The result reflected
higher gas prices, mainly in North America and a strong production
performance. Production was at a record level and up 13% on a year ago, with
natural gas volumes up 41%; this includes the net effect of the ARCO
acquisition and other portfolio changes. Production was at a similar level to
a year ago, when measured on a consistent first quarter 2001 portfolio basis.
Compared with the fourth quarter of 2000 total production increased by 2%.
During the quarter, two further discoveries were announced offshore Angola in
deepwater Block 18 (BP 50% and operator). Success at the Cromio and Cobalto
wells means that oil has been found in all wells drilled to date in Block 18.
A successful well was drilled in the Rhum field (BP 50% and operator), an
earlier discovery in the UK North Sea, for which development is now
technically feasible. Since the quarter end, a discovery has been announced at
Aspen (BP 80% and operator), a former Vastar property near the BP operated
Troika field, in the Gulf of Mexico deepwater with estimated resources of
approximately 150 mmboe. BP also participated in a significant gas discovery
at the IO-1 well on the North West Shelf of Australia (BP 12.5%).
In support of growth, capital expenditure during the quarter was $1.9 billion,
more than double the level of a year ago. 128 rigs were in operation during
the quarter of which 57 were dedicated to increasing North American gas
production. The go ahead for the $1.3 billion Nam Con Son gas project offshore
Vietnam was also announced. BP is operator with a 26.7% interest in the Lan
Tay and Lan Do gas fields and a 32.7% interest in the pipeline.
BP has approved the $6.6 billion developments of the Crazy Horse (BP 75%) and
Holstein (BP 50%), and the Mardi Gras Transportation System, all BP operated.
Recoverable resources for the developments are estimated at over one billion
boe (BP share).
Since the quarter end, BP announced the completion of the sale of certain UK
Southern North Sea gas assets in accord with undertakings given to the
European Commission at the time of the ARCO acquisition.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Replacement cost operating profit 4,680 4,238 3,203
Special items - 49 24
Acquisition amortization 456 413 -
---------------------
Pro forma operating result
adjusted for special items 5,136 4,700 3,227
=====================
Results include:
Exploration expense 169 157 131
=====================
BP average oil realization(a)($/bbl) 24.80 28.08 25.59
Brent oil price ($/bbl) 25.75 29.56 26.90
=====================
BP average natural gas realizations ($/mcf) 4.96 3.76 2.18
=====================
(a) Crude oil and natural gas liquids.
Gas and Power
The pro forma result for the first quarter was $112 million compared with $142
million a year ago. The result reflects growth in natural gas sales, which
were more than offset by a significant contraction in NGL margins as the
natural gas price moved sharply higher. The contribution from Ruhrgas was
similar to a year ago.
In China, BP was selected as the sole foreign participant to enter exclusive
negotiations to secure the position as partner in a joint venture to develop
China's first liquefied natural gas (LNG) import terminal. The project
comprises an LNG regasification terminal near the city of Shenzhen, with a
capacity of three million tonnes a year. This would provide a good strategic
fit with BP's existing Asia Pacific natural gas reserves.
During 2000, BP ordered two LNG ships from Samsung Heavy Industries for
delivery in 2002/2003, together with options for a further three ships. The
first of these options was exercised during the quarter for delivery in 2003.
In the USA, Green Mountain Energy Company, a leading marketer of cleaner and
renewable energy, in which BP acquired an equity stake during 2000, agreed the
country's largest-ever energy aggregation contract encompassing more than
450,000 Ohio electricity customers.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Replacement cost operating profit 112 183 142
Special items - - -
Acquisition amortization - - -
---------------------
Pro forma operating result adjusted for special items 112 183 142
=====================
West Texas Intermediate Oil Price ($/bbl) 28.71 31.99 28.86
Henry Hub gas price(a)($/mmBtu) 7.08 5.28 2.52
=====================
(a) Henry Hub First of the Month Index.
Refining and Marketing
The pro forma result, adjusted for special items, for the first quarter was
$994 million, compared with $584 million a year ago. The result reflects
considerably higher refining margins, particularly in the USA, partly offset
by competitive pressure on marketing margins in the USA and the UK, though
margins were healthier in continental Europe and Asia. The ARCO and Burmah
Castrol acquisitions and the consolidation of the fuels business in Europe
also contributed to the increase. The quarter's result was adversely affected
by significant scheduled refinery maintenance shutdowns, including those at
Texas City and Carson in the USA and at Coryton in the UK, and a foreign
exchange loss of $30 million on the devaluation of the Turkish Lira. The
special items comprise Burmah Castrol integration costs and rationalization
costs in the North European commercial and industrial business. Underlying
refining costs have been reduced compared to a year ago, though this effect
was more than offset in the first quarter by higher US West Coast refinery
fuel and electricity costs.
Retail shop sales were significantly higher, reflecting the addition of 1,800
ARCO service stations and the consolidation of the fuels business in Europe.
During the quarter, BP launched 38 service station sites in the USA, UK,
Australia and New Zealand under the new bp Connect concept, bringing the total
number of these sites to 41 at the end of March. Rollout of bp Connect sites
is now underway in a number of cities in these countries. Clean fuels were
introduced to an additional eight cities in the quarter bringing the total
clean fuels programme to 64 cities worldwide to date.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Replacement cost operating profit 753 792 584
Special items 53 344 -
Acquisition amortization 188 185 -
---------------------
Pro forma operating result
adjusted for special items 994 1,321 584
=====================
Global Indicator Refining Margin(a)($/bbl) 4.25 4.46 2.44
=====================
Refinery throughputs (mb/d)
UK 310 391 281
Rest of Europe 693 727 518
USA 1,522 1,584 1,290
Rest of World 386 383 349
---------------------
Total throughput 2,911 3,085 2,438
=====================
(a) The Global Indicator Refining Margin (GIM) is the average of seven
regional indicator margins weighted for BP's crude refining capacity in
each region. Each regional indicator margin is based on a single
representative crude with product yields characteristic of the typical
level of upgrading complexity.
Chemicals
Chemicals' pro forma result for the first quarter was $81 million, down from
$140 million in the previous quarter. Margins remained under pressure from
high feedstock costs, particularly in the USA, due to increased natural gas
prices. The higher gas prices also adversely affected operating costs.
Production volumes in the first quarter were affected by plant problems at
Grangemouth in Scotland, Lavera in France and Chocolate Bayou in Texas, USA.
The acquisition of Bayer's 50% share of Erdolchemie was completed on 2 May. BP
announced in January its intention to dispose of its plastic fabrications and
fabrics and fibres businesses.
During the quarter, BP, Sinopec and Shanghai Petrochemical submitted a joint
feasibility study report to the Chinese State Planning Council for approval of
a $2.7 billion ethylene cracker and derivatives complex near Shanghai
scheduled to begin operation in 2005.
BP has acquired Dow's interest in the metallocene technology developed jointly
by the two companies.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Replacement cost operating profit 81 (82) 259
Special items - 222 -
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items 81 140 259
=====================
Chemicals Indicator Margin(a)($/te) 93(b) 98 113
=====================
(a) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected
by Chem Systems in their quarterly market analyses, then weighted based
on BP's product portfolio. While it does not cover our entire portfolio,
it includes a broader range of products than our previous indicator.
Among the products and businesses covered in the CIM are the olefins and
derivatives, the aromatics and derivatives, linear alpha olefins, acetic
acid, vinyl acetate monomer and nitriles. Not included are fabrics and
fibres, plastic fabrications, poly alpha olefins, anhydrides,
engineering polymers and carbon fibres, speciality intermediates, and
the remaining parts of the solvents and acetyls businesses.
(b) Provisional. The data for the current quarter is based on two months'
actual and one month of provisional data.
Other Businesses and Corporate
Other Businesses and Corporate comprises Finance, BP Solar, the group's coal
asset and aluminium asset, its investments in PetroChina and Sinopec, interest
income and costs relating to corporate activities worldwide. BP Solar
production for the quarter was 28% higher than a year ago.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Replacement cost operating loss (127) (368) (227)
Special items - 236 16
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items (127) (132) (211)
=====================
Exceptional Items
Exceptional items for the first quarter include the profit on sale of the
Alliance refinery pipeline system.
1Q 4Q 1Q
$ million 2001 2000 2000
=====================
Profit (loss) on sale of fixed assets
and businesses 218 78 (157)
Taxation credit (charge) (113) 94 33
---------------------
Exceptional items after taxation 105 172 (124)
=====================
2001 Dividends
BP today announced a first quarterly dividend for 2001 of 5.25 cents per
ordinary share. Holders of ordinary shares will receive 3.665 pence per share
and holders of American Depositary Receipts (ADRs) $0.315 per ADS share. The
dividend is payable on 11 June 2001 to shareholders on the register on 18 May
2001. Participants in the Dividend Reinvestment Plan (DRIP) or the DRIP
facility in the US Direct Access Plan will receive the dividend in the form of
shares on 11 June 2001. The second quarter 2001 results and dividend will be
announced on 7 August.
Outlook
BP Group Chief Executive, Sir John Browne, concluded:
'The trading environment remains broadly positive, in spite of the
slowdown in the world economy. Oil and natural gas prices have fallen
back from peak levels, but both are expected to remain firm, with oil
prices remaining broadly around the target range announced by OPEC.
'BP's production for 2001 is expected to be consistent with existing
growth targets; second quarter production will reflect the usual
seasonal effects of lower gas offtakes and maintenance shutdowns.
'Refining margins should remain relatively strong, supported by low
levels of product stocks, though with regional variations. Second
quarter refining throughputs are expected to be similar to those of a
year ago, as plant comes back on stream following significant first
quarter maintenance shutdowns. Marketing margins are likely to reflect
more moderate economic growth and continued competition.
'In Chemicals, the difficult economic environment will continue to place
margins under pressure.
'BP's growth strategy is robust to changing market conditions. We will
continue to focus on delivering cost-effective growth in production and
sales and developing our future options to invest in world-class
business opportunities in line with our existing strategy and previously
announced targets. In achieving these aims, we will continue to exercise
rigorous cost, investment and financial discipline.
'A trading statement will be issued around the end of June which will
provide an update on the operating environment for the second quarter.'
----------------------------------------------------------------------
The foregoing discussion, in particular the statements under 'Outlook',
focuses on certain trends and general market and economic conditions
and outlook on production levels or rates, prices, margins and currency
exchange rates and, as such, are forward-looking statements that
involve risk and uncertainty that could cause actual results and
developments to differ materially from those expressed or implied by
this discussion. By their nature, trends and outlook on production,
price, margin and currency exchange rates are difficult to forecast
with any precision, and there are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements, including
levels of industry product supply, demand and pricing; currency
exchange rates; political stability and economic growth in relevant
areas of the world; the ability to successfully integrate after merger;
development and use of new technology and successful partnering; the
actions of competitors, natural disasters and other changes to business
conditions. Additional information, including information on factors
which may affect BP's business, is contained in BP's Annual
Report and Accounts for 2000 and in the Annual Report on Form 20-F
filed with the US Securities and Exchange Commission.
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