1st Quarter Results (1 of 3)
BP PLC
29 April 2003
BP p.l.c.
Group Results
First Quarter 2003
London 29 April 2003
FOR IMMEDIATE RELEASE
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RECORD RESULT, UP 136% - STRONG CASH FLOW
===========================================================================
1Q
2003
1Q 4Q 1Q vs.1Q
$ million 2003 2002 2002 2002
==========================
Replacement cost profit before exceptional items 3,128 1,697 924
Special items(a) (27) 416 120
Acquisition amortization(b) 628 522 538
--------------------------
Pro forma result adjusted for special items 3,729 2,635 1,582 136%
==========================
- per ordinary share (pence) 10.44 7.61 4.94
- per ordinary share (cents) 16.70 11.78 7.06 137%
- per ADS (dollars) 1.00 0.71 0.42
==========================
o BP's first quarter pro forma result, adjusted for special items, was a
record $3,729 million compared with $1,582 million a year ago, an
increase of 136%. The result per ADS exceeds $1.00 for the first time.
Replacement cost profit before exceptional items for the quarter was
$3,128 million compared with $924 million a year ago.
o The first quarter trading environment was significantly more favourable
than a year ago for both Exploration and Production and Refining and
Marketing.
o Improved volumes and cost efficiencies are reflected in the first
quarter results.
o Net cash inflow for the quarter was $3.2 billion compared with an
outflow of $2.4 billion a year ago, reflecting higher cash flow from
operating activities, higher disposal proceeds and lower acquisitions.
Net cash flow from operating activities was $6.0 billion compared with
$3.6 billion a year ago.
o The pro forma ratio of net debt to net debt plus equity was 24% at the
end of the quarter.
o Return on average capital employed for the quarter, on a pro forma
basis adjusted for special items, was 20%, compared with 10% a year
ago.
o The quarterly dividend is 6.25 cents per share ($0.375 per ADS)
compared with 5.75 cents per share a year ago, an increase of 8.7%. In
sterling terms, the quarterly dividend is 3.947 pence per share
compared with 4.051 pence per share a year ago, a decrease of 2.6%. The
company repurchased for cancellation 155 million of its own shares
during the quarter, at a cost of $999 million.
BP Group Chief Executive, Lord Browne, said:
'This is a strong quarterly result. Strategy continues to be
implemented with growth on track and strong performance delivery. Cash
flow is robust, providing the opportunity for a good shareholder return
through dividends and share buybacks.'
The pro forma result, adjusted for special items, has been derived from the
group's reported UK GAAP accounting information but is not in itself a
recognized UK or US GAAP measure. This financial performance information and
measures derived therefrom, shown above and elsewhere in the document, are
provided in order to enable investors to evaluate better both BP's current
performance, in the context of past performance, and its performance against
that of its competitors.
(a) The special items refer to non-recurring charges and credits. The
special items for the first quarter are restructuring and impairment
charges in Exploration and Production, Veba integration costs in
Refining and Marketing and tax restructuring benefits.
(b) Acquisition amortization is depreciation and amortization relating to
the fixed asset revaluation adjustments and goodwill consequent upon
the ARCO and Burmah Castrol acquisitions.
Summary Quarterly Results
Exploration and Production's first quarter result was double that of a year ago,
reflecting higher average realizations.
In Gas, Power and Renewables, the result reflects improvement in the marketing
and trading and natural gas liquids businesses, partly offset by the absence of
the Ruhrgas contribution.
The Refining and Marketing result increased significantly compared to a year ago
due to higher worldwide refining margins and improved retail margins,
particularly in the USA.
The Chemicals result was flat compared with the prior quarter, with higher
volumes and lower costs offset by weaker margins due to higher feedstock costs,
particularly in Europe.
Interest expense for the quarter was $220 million, compared to $317 million
excluding bond redemption charges for the prior quarter, reflecting lower
average debt. In addition, the prior quarter included the impact of revaluing
certain provisions at a lower interest rate.
The pro forma effective tax rate on replacement cost profit, before exceptional
items, and adjusted for special items, was 34%. The special items in the quarter
include tax restructuring benefits.
Capital expenditure was $2.9 billion for the quarter; there were no
acquisitions. Disposal proceeds were $2.5 billion.
Net debt at the end of the quarter was $17.7 billion. The pro forma ratio of net
debt to net debt plus equity was 24%, compared with 28% at the end of 2002.
Net special and exceptional items before tax were a $237 million credit.
----------
The commentaries above and following are based on the pro forma replacement cost
operating results, before exceptional items, adjusted for special items.
Reconciliation of Reported Results to
Pro Forma Results Adjusted for Special Items
Pro forma Result
---------- 1Q 2003 -------- adjusted for
special items
-------------------
Reported Acq. Special 1Q 4Q 1Q
$ million Earnings Amort.(a) Items(b) 2003 2002 2002
------------------------------------------------
Exploration and Production 4,326 423 139 4,888 3,666 2,400
Gas, Power and Renewables 194 - - 194 72 111
Refining and Marketing 631 205 18 854 587 287
Chemicals 139 - - 139 139 108
Other businesses and corporate (165) - - (165) (146) (125)
---------------------------------------------
RC operating profit 5,125 628 157 5,910 4,318 2,781
---------------------------------------------
Interest expense (220) - - (220) (317) (333)
Taxation (1,751) - (184) (1,935)(1,360) (857)
MSI (26) - - (26) (6) (9)
---------------------------------------------
RC profit before
exceptional items 3,128 628 (27) 3,729 2,635 1,582
=============================================
Exceptional items before tax 394
Taxation on exceptional items (54)
-----
RC profit after
exceptional items 3,468
Stock holding gains (losses) 799
-----
HC profit 4,267
=====
(a) Acquisition amortization is depreciation and amortization relating to
the fixed asset revaluation adjustments 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 first quarter are restructuring and impairment
charges in Exploration and Production, Veba integration costs in
Refining and Marketing and tax restructuring benefits.
Operating Results
First Fourth First
Quarter Quarter Quarter
2003 2002 2002
=======================
Replacement cost operating profit ($m) 5,125 3,181 2,058
-----------------------
Replacement cost profit
before exceptional items ($m) 3,128 1,697 924
-----------------------
Profit (loss) after exceptional items ($m)
Replacement cost 3,468 825 854
Historical cost 4,267 651 1,296
-----------------------
Per ordinary share (cents)
Pro forma result adjusted for special items 16.70 11.78 7.06
RC profit before exceptional items 14.01 7.58 4.12
HC profit after exceptional items 19.11 2.92 5.78
Per ADS (cents)
Pro forma result adjusted for special items 100.20 70.68 42.36
RC profit before exceptional items 84.06 45.48 24.72
HC profit after exceptional items 114.66 17.52 34.68
=======================
Exploration and Production
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Replacement cost operating profit 4,326 3,248 1,928
Special items 139 99 127
Acquisition amortization 423 319 345
---------------------
Pro forma operating result
adjusted for special items 4,888 3,666 2,400
=====================
Results include:
Exploration expense 112 179 124
Of which:
Exploration expenditure written off 50 124 59
=====================
Crude oil and natural gas liquids production
(mb/d) (Net of Royalties)
UK 471 472 482
Rest of Europe 95 96 104
USA 773 756 760
Rest of World 724 725 643
-----------------------
Total liquids production 2,063 2,049 1,989
=======================
Natural gas production(a)
(mmcf/d) (Net of royalties)
UK 1,798 1,752 1,628
Rest of Europe 131 140 162
USA 3,437 3,360 3,561
Rest of World 3,651 3,684 3,395
-----------------------
Total natural gas production 9,017 8,936 8,746
=======================
Average liquids realizations(b) ($/bbl)
UK 30.67 26.54 20.67
USA 29.36 23.28 17.26
Rest of World 29.48 25.06 18.63
BP Average 29.82 24.78 18.77
=======================
Average oil marker prices ($/bbl)
Brent 31.47 26.88 21.13
West Texas Intermediate 34.00 28.31 21.54
Alaska North Slope US West Coast 33.16 26.86 19.76
=====================
Average natural gas realizations ($/mcf)
UK 3.32 2.88 3.12
USA 5.27 3.31 2.13
Rest of World 2.70 2.40 1.93
BP Average 3.87 2.87 2.27
=======================
Average natural gas marker prices
Henry Hub gas price(c) ($/mmbtu) 6.53 3.99 2.35
UK Gas - National Balancing Point (p/therm) 21.28 19.09 19.22
=======================
(a) Natural gas is converted to oil equivalent at 5.8 billion cubic feet
= 1 million barrels.
(b) Crude oil and natural gas liquids.
(c) Henry Hub First of the Month Index.
Exploration and Production
The pro forma result for the first quarter, adjusted for special items, was
$4,888 million, double that of the first quarter of 2002. Special charges are
$90 million in respect of our restructuring activities in North America and the
UK and a $49 million write-down of the Viscount asset in the North Sea. The
acquisition amortization charge included accelerated amortization of $103
million due to the impairment of the Yacheng field in China.
The result for the quarter benefited from strong realizations, with liquids up
$11.05/bbl and natural gas up $1.60/mcf on a year ago. North American natural
gas realizations lagged the increase in the Henry Hub marker price, as the
effects of cold weather and low inventories were partly offset by an increase in
regional differentials caused by pipeline constraints. The improved realizations
were partly mitigated by a charge of $125 million for Unrealized Profit in Stock
(UPIS) to remove the additional upstream margin from downstream inventories
following an increase in the Alaska North Slope oil price. This compares to a
charge of $56 million in the equivalent quarter last year.
On 1 April, two new discoveries were announced in Angola's deep offshore Block
17: Acacia-1 and Hortensia-1. During the quarter we approved the Shah Deniz
project in Azerbaijan, Greater Plutonio and Dalia in Angola and Rhum in the
North Sea.
First quarter production was a record, increasing by over 3% to 3,618 mboe/d
compared with a year ago as a result of the ramp up of production in the
Deepwater Gulf of Mexico and Trinidad as new projects continue to be added, and
the impact of our increased interest in Sidanco, partly offset by declines in
mature areas. The impact of acquisition and divestment activity over the past
year has had a broadly neutral effect on the quarter on quarter comparison.
In support of improved returns in all stages of the life cycle and to enhance
value, we completed in the quarter the divestment of shallow water Gulf of
Mexico assets to Apache and the exchange of our interest in Block A-18 in the
Malaysia Thailand Joint Development Area for Amerada Hess's interests in
Colombia. In addition, we completed the sale of other US assets. On 2 April, we
completed the sale of the Forties oil field in the North Sea to Apache. In
February, we announced agreements with Perenco to sell a package of North Sea
gas production assets and interests in Boqueron and Desarrollo Zuli Occidental
(DZO) in Venezuela.
In February, we called our $420 million Exchangeable Bonds which were
exchangeable for Lukoil ADSs. Bondholders converted to ADSs before the
redemption date. This transaction completed the monetization of our stake in the
Russian oil company Lukoil. The stake in Lukoil was obtained through the
acquisition of ARCO.
Repsol exercised their option in January to acquire a further 20% of our
upstream interests in Trinidad. Our interest in BP Trinidad and Tobago LLC is
now 70% and the transaction provides further leverage to access the gas markets
and growth opportunities in Spain. We also sold 12.5% of the Tangguh liquefied
natural gas project to China National Offshore Oil Corporation as part of our
strategy to serve gas markets in Southern China.
Gas, Power and Renewables
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Replacement cost operating profit 194 72 111
Special items - - -
Acquisition amortization - - -
---------------------
Pro forma operating result adjusted for special items 194 72 111
=====================
Gas sales volumes (mmcf/d)
UK 3,215 2,715 2,619
Rest of Europe 473 442 413
USA 11,734 10,723 8,733
Rest of World 11,553 10,659 9,289
-----------------------
Total gas sales volumes 26,975 24,539 21,054
=======================
NGL sales volumes (mb/d)
UK - - -
Rest of Europe - - -
USA 126 262 153
Rest of World 232 244 231
-----------------------
Total NGL sales volumes 358 506 384
=======================
Gas, Power and Renewables
The pro forma result for the first quarter was $194 million compared with $111
million a year ago. The result reflects improved marketing and trading and
natural gas liquids performance, partly offset by the absence of a contribution
from Ruhrgas.
Marketing margins were up significantly in North America as a result of
prolonged cold weather in the northeast and midwest markets and an unusually
large draw-down of gas in storage. In addition, North American gas volumes were
35% above the same period last year. The global LNG business continued to grow
profitably as supply and shipping flexibility allowed the capture of additional
business in Asia and the USA. In Spain, the Bilbao electricity generation plant
(BP 25%) was commissioned as part of our gas to power strategy. The LNG ship
British Innovator was delivered on 29 March.
The first quarter natural gas liquids result was up due to higher liquids prices
and improved margins on winter propane sales, partly offset by the negative
processing margins that resulted from gas prices increasing more than liquids
prices.
In Renewables, our solar business launched a new branded offer in California in
the USA.
Refining and Marketing
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Replacement cost operating profit 631 (36) 68
Special items 18 420 26
Acquisition amortization 205 203 193
---------------------
Pro forma operating result
adjusted for special items 854 587 287
=====================
Refinery throughputs (mb/d)
UK 377 392 392
Rest of Europe 954 959 833
USA 1,302 1,439 1,394
Rest of World 391 367 375
---------------------
Total throughput 3,024 3,157 2,994
=====================
Oil sales volumes (mb/d)
Refined products
UK 279 269 256
Rest of Europe 1,318 1,541 1,275
USA 1,751 1,875 1,834
Rest of World 645 611 600
-----------------------
Total marketing sales 3,993 4,296 3,965
Trading/supply sales 2,811 2,064 2,535
-----------------------
Total refined product sales 6,804 6,360 6,500
Crude oil 4,529 5,314 4,809
-----------------------
Total oil sales 11,333 11,674 11,309
=======================
Global Indicator Refining Margin(a)(mb/d)
NWE 3.70 2.19 0.09
USGC 6.14 2.98 2.04
Midwest 4.14 4.09 2.06
USWC 6.77 3.95 5.43
Singapore 2.98 1.41 0.21
BP Average 4.52 2.76 1.64
=====================
(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.
Refining and Marketing
The pro forma result for the first quarter, after adjusting for special items,
was $854 million, compared with $287 million a year ago. The special charge of
$18 million for the quarter relates to ongoing Veba integration costs.
The increase in the result reflects improved worldwide refining margins, with
some offset from higher utility costs. Refining throughputs increased by 1%.
During the quarter, BP commissioned three new clean fuels units.
The marketing environment reflected margins at normal levels, with US retail
margins significantly up from the depressed levels of a year ago. Marketing
volumes were flat compared with a year ago.
During the quarter, an additional 600 sites were reimaged, bringing the total
number of sites with the BP Helios to some 11,000 worldwide.
Chemicals
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Replacement cost operating profit 139 104 76
Special items - 35 32
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items 139 139 108
=====================
Chemicals Indicator Margin(a)($/te) 90(b) 108 80
=====================
Chemicals production (kte)
UK 869 698 829
Rest of Europe 2,763 2,679 2,583
USA 2,536 2,447 2,489
Rest of World 812 785 710
-----------------------
Total production 6,980 6,609 6,611
=======================
(a) The Chemicals Indicator Margin (CIM) is a weighted average of externally
based product margins. It is based on market data collected by Nexant
(formerly 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 broad range of products. Among the
products and businesses covered in the CIM are the olefins and
derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs),
acetic acid, vinyl acetate monomers and nitriles. Not included are
fabrics and fibres, plastic fabrications, poly alpha-olefins (PAOs),
anhydrides, speciality intermediates, and the remaining parts of the
solvents and acetyls businesses.
(b) Provisional. The data for the first quarter is based on two months'
actuals and one month of provisional data.
Chemicals
Chemicals' pro forma result for the first quarter was $139 million, flat
compared with the fourth quarter of 2002, after adjusting for special items. The
result reflects margin pressure from higher feedstock costs for most of the
quarter, particularly in Europe, offset by higher volumes and lower costs. The
first quarter result was an increase of $31 million over the same quarter last
year due to better margins, increased production and improved unit costs.
Chemicals production of 6,980 thousand tonnes in the first quarter was a record
and 371 thousand tonnes above the previous quarter. Higher production was due to
increased plant utilization and one of our new Asian PTA plants coming on
stream.
During the quarter, we continued to reduce cash fixed costs per tonne of
capacity through planned cost reductions.
As part of the ongoing restructuring of our portfolio, we completed the
divestment of the two remaining Burmah Castrol chemicals businesses, Fosroc
Mining and Sericol. We also announced our intention to divest our speciality
intermediates business (trimellitic anhydride, purified isophthalic acid (PIA)
and maleic anhydride) based in Joliet, Illinois in the USA, plus the economic
interest in our European PIA business.
Other Businesses and Corporate
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Replacement cost operating loss (165) (207) (125)
Special items - 61 -
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items (165) (146) (125)
=====================
Other businesses and corporate comprises Finance, the group's coal asset and
aluminium asset, its investments in PetroChina and Sinopec, interest income and
costs relating to corporate activities.
Exceptional Items
1Q 4Q 1Q
$ million 2003 2002 2002
=====================
Profit (loss) on sale of fixed assets and
businesses or termination of operations 394 (893) (109)
Taxation (charge) credit (54) 21 39
---------------------
Exceptional items after taxation 340 (872) (70)
=====================
Exceptional items for the first quarter principally relate to net gains from the
sale of certain upstream interests.
2003 Dividends
1Q 4Q 1Q
2003 2002 2002
=====================
Dividends per ordinary share
cents 6.25 6.25 5.75
pence 3.947 3.815 4.051
Dividends per ADS (cents) 37.5 37.5 34.5
-----------------------
BP today announced a first quarterly dividend for 2003 of 6.25 cents per
ordinary share. Holders of ordinary shares will receive 3.947 pence per share
and holders of American Depository Receipts (ADRs) $0.375 per ADS share. The
dividend is payable on 9 June to shareholders on the register on 16 May.
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, also
on 9 June. The second quarter 2003 results and dividend will be announced on 29
July.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'World economic activity has remained weak during the first quarter with
few signs of an imminent recovery. Confidence has declined in the USA,
Europe and more recently in parts of Asia. OECD industrial production has
remained essentially flat.
'Oil markets have been driven by the impact of war in Iraq, together with
the loss of Venezuelan and Nigerian exports and a cold winter in the
northern hemisphere. Dated Brent averaged $31.47/bbl in the first
quarter. OECD commercial oil inventories declined to record lows in
February in terms of forward days' cover, but appear to have stabilized
recently. Rising OPEC production from the middle of the first quarter
compensated for the loss of Iraqi exports. Crude prices have since fallen
back to around $25/bbl. Oil supplies have proven adequate even without
the release of strategic stocks. The prospect for prices depends upon a
particularly wide range of uncertainties which include the timing and
level of the return of Iraqi oil exports and the extent to which OPEC's
earlier production increases are reversed.
'US natural gas prices have fallen back from the high levels of the first
quarter (Henry Hub first of month index average of $6.53/mmbtu) after the
end of the winter heating season. Prices remain above fuel oil parity in
face of the challenge to refill gas in storage while production continues
to fall. The opening of new pipeline infrastructure later in the second
quarter has the potential to narrow differentials in the Rockies.
'Refining margins have begun the second quarter somewhat below the
average for the first quarter (BP GIM $4.52/bbl) but remain firm in most
regions. OECD commercial product inventories are at five year lows and
may continue to underpin refining fundamentals in the short term. Retail
margins strengthened towards the end of the first quarter, although
prices to the consumer are now falling in line with product prices.
'Chemicals margins have been sharply lower than in the fourth quarter of
last year, due to feedstock costs rising more rapidly than prices for the
majority of petrochemical products. Recent declines in oil prices have
begun to restore margins although weak demand conditions persist.
'Consistent with our financial framework and plan for the year, we expect
capital investment to be in the range of $14 to 14.5 billion, excluding
acquisitions. This excludes the initial cash payment due on completion of
the TNK-BP transaction, expected to complete in the summer. We expect
gearing to return to the lower half of our 25-35% target range following
this transaction.'
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The foregoing discussion, in particular the statements under 'Outlook',
contains forward looking statements particularly those regarding future
performance, prices, margins, returns, dividends, capital expenditure,
investments, divestments, gearing, BP's asset portfolio and changes in
it, timing of pending transactions, share repurchases, and other trend
projections. Forward looking statements by their nature involve risks
and uncertainties and actual results may differ from those expressed in
such statements depending on a variety of factors including the
following: the timing of bringing new fields on stream; industry
product supply, demand and pricing; operational problems; general
economic conditions; political stability and economic growth in
relevant areas of the world; changes in governmental regulations;
exchange rate fluctuations; development and use of new technology and
successful commercial relationships; the actions of competitors;
natural disasters and other changes in business conditions; prolonged
adverse weather conditions; and wars and acts of terrorism or sabotage.
For more information you should refer to our Annual Report and Accounts
2002 and our Annual Report on Form 20-F filed with the US Securities
and Exchange Commission.
----------------------------------------------------------------------
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