1st Quarter Results Part 1
BP PLC
30 April 2002
PART 1
BP p.l.c.
Group Results
First Quarter 2002
London 30 April 2002
FOR IMMEDIATE RELEASE
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PERFORMANCE AND GROWTH FIRMLY ON TRACK
===========================================================================
1Q
2002
1Q 4Q 1Q vs.
$ million 2002 2001 2001 2001
==========================
Replacement cost profit before exceptional items 924 706 3,001
Special items(a) 120 461 40
Acquisition amortization(b) 538 604 671
--------------------------
Pro forma result adjusted for special items 1,582 1,771 3,712 (57)%
==========================
- per ordinary share (pence) 4.94 5.49 11.31
- per ordinary share (cents) 7.06 7.91 16.51 (57)%
- per ADS (dollars) 0.42 0.47 0.99
==========================
o BP's first quarter pro forma result, adjusted for special items, was
$1,582 million compared to $3,712 million a year ago, a reduction of
57%. The replacement cost profit before exceptional items for the
quarter was $924 million compared with $3,001 million a year ago.
o The trading environment in the first quarter was significantly less
favourable than a year ago for Exploration and Production and Refining
and Marketing.
o Underlying performance improvements are on track for the year's target
of $1.4 billion before tax. First quarter oil and gas production was up
0.75% on a year ago in spite of the effects of OPEC quota reductions, a
warm UK winter and disposals, in total amounting to 100 mboe/d. First
quarter production growth was consistent with the targeted 5.5%
increase for the year.
o Return on average capital employed, on a pro forma basis and adjusted
for special items, was 11% compared with 26% a year ago.
o Quarterly dividend 5.75 cents per share ($0.345 per ADS) compared
with 5.25 cents a year ago, an increase of 9.5%. In sterling terms the
increase was 10.5%.
BP Group Chief Executive, Lord Browne, said:
'Both refining and marketing felt the effects of the poorest trading
environment seen for a decade and chemicals margins remain depressed;
oil and gas realizations were significantly down on a year ago. In
spite of these challenging conditions, BP's result reflects the
enduring performance improvements we have made and continue to make
for the future.'
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 comprise restructuring charges for
Upstream and Chemicals, Veba, Solvay and Erdolchemie integration costs
and litigation costs.
(b) 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 result was down 53% on a year ago as a result of
significantly lower liquids and natural gas realizations. Total hydrocarbon
production for the quarter grew by 0.75% on a year ago despite the impacts of
OPEC cut-backs on BP production, warmer weather in the UK and the divestment of
certain North Sea assets. Production growth remains on track for an annual
increase of 5.5%.
In Gas, Power and Renewables, the result was up slightly compared to a year ago,
primarily due to improvement in NGL margins.
The Refining and Marketing result decreased significantly compared with the
prior year, due to severely depressed refining and marketing margins,
particularly in the USA. Margins did, however, recover to some extent late in
the quarter.
The Chemicals result, compared with the prior quarter, showed improvement,
though trading conditions remain depressed.
Interest expense for the quarter was $333 million, compared to $414 million for
the prior quarter, reflecting lower interest rates partly offset by higher
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, was 35%.
Capital expenditure, excluding acquisitions, was $3.1 billion for the quarter,
consistent with our target of $12-13 billion for the year. Total capital
expenditure and acquisitions was $5.7 billion, including $2.6 billion for the
Veba transaction. Disposal proceeds were $0.3 billion, in line with
expectations.
Net cash outflow for the quarter was $2.4 billion, including $1.5 billion for
the acquisition of 51% of Veba net of cash acquired. Compared to a year ago,
operating cash flow was lower and tax, capital and dividend payments were
higher.
Net debt at the end of the quarter was $22.9 billion. The pro forma ratio of net
debt to net debt plus equity was 32%, compared with 29% at the end of 2001.
The net cash outflow and net debt ratio reflect the Veba acquisition in the
first quarter. Cash inflows from Veba related disposals will provide a
significant offset in the second quarter.
Net special and exceptional items before tax were a $294 million charge.
The changes to UK North Sea tax announced in the recent budget proposals, under
which a supplementary charge would effectively increase the corporation tax rate
from 30% to 40% and provision would be made for 100% first year allowances on
capital expenditure, have no impact on first quarter results. If the budget
proposals are enacted, the changes will be effective from 17 April 2002. This
would increase the group's tax charge rateably for the remainder of 2002 by
around an estimated $200 million, representing around a 2% increase in the
effective tax rate, on the basis of average oil prices experienced in the first
quarter, and additionally a one-off charge of around an estimated $350 million
would be made to increase the group's deferred tax provision for the
supplementary corporation tax. The cash impact for the remainder of 2002 would,
it is anticipated, be broadly neutral, with accelerated capital allowances
offsetting the impact of the tax rate increase.
----------
The financial information for 2001 has been restated to reflect (i) the adoption
by the group of FRS 19 'Deferred Tax' with effect from 1 January 2002 and (ii)
the transfer of the solar, renewables and alternative fuels activities from
Other businesses and corporate to Gas and Power on 1 January 2002. To reflect
this transfer, Gas and Power has been renamed Gas, Power and Renewables from the
same date. See Note 1 on page 20 for further information.
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 2002 -------- Adjusted for
Special Items
-------------------
Reported Acq. Special 1Q 4Q 1Q
$ million Earnings Amort.(a) Items(b) 2002 2001 2001
------------------------------------------------
Exploration and Production 1,928 345 127 2,400 2,374 5,136
Gas, Power and Renewables 111 - - 111 102 100
Refining and Marketing 68 193 26 287 785 994
Chemicals 76 - 32 108 39 81
Other businesses and corporate (125) - - (125) (102) (115)
---------------------------------------------
RC operating profit 2,058 538 185 2,781 3,198 6,196
---------------------------------------------
Interest expense (333) - - (333) (414) (436)
Taxation (792) - (65) (857) (990)(2,040)
MSI (9) - - (9) (23) (8)
---------------------------------------------
RC profit before
exceptional items 924 538 120 1,582 1,771 3,712
=============================================
Exceptional items before tax (109)
Taxation on exceptional items 39
-----
RC profit after
exceptional items 854
Stock holding gains (losses) 442
-----
HC profit 1,296
=====
(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 comprise restructuring charges for
Upstream and Chemicals, Veba, Solvay and Erdolchemie integration costs
and litigation costs.
Operating Results
First Fourth First
Quarter Quarter Quarter
2002 2001 2001
=======================
Replacement cost operating profit ($m) 2,058 1,880 5,472
-----------------------
Replacement cost profit
before exceptional items ($m) 924 706 3,001
-----------------------
Profit (loss) after exceptional items ($m)
Replacement cost 854 694 3,068
Historical cost 1,296 (603) 2,830
-----------------------
Per ordinary share (cents)
Pro forma result adjusted for special items 7.06 7.91 16.51
RC profit before exceptional items 4.12 3.16 13.35
HC profit (loss) after exceptional items 5.78 (2.67) 12.59
Per ADS (cents)
Pro forma result adjusted for special items 42.36 47.46 99.06
RC profit before exceptional items 24.72 18.96 80.10
HC profit (loss) after exceptional items 34.68 (16.02) 75.54
=======================
Exploration and Production
1Q 4Q 1Q
$ million 2002 2001 2001
=====================
Replacement cost operating profit 1,928 1,641 4,666
Special items 127 322 -
Acquisition amortization 345 411 470
---------------------
Pro forma operating result
adjusted for special items 2,400 2,374 5,136
=====================
Results include:
Exploration expense 124 144 169
Of which:
Exploration expenditure written off 59 85 108
=====================
Crude oil and natural gas liquids production
(mb/d) (Net of Royalties)
UK 482 500 511
Rest of Europe 104 116 97
USA 760 772 722
Rest of World 643 629 607
-----------------------
Total liquids production 1,989 2,017 1,937
=======================
Natural gas production
(mmcf/d) (Net of royalties)
UK 1,628 1,715 2,152
Rest of Europe 162 160 169
USA 3,561 3,621 3,467
Rest of World 3,395 3,268 3,107
-----------------------
Total natural gas production 8,746 8,764 8,895
=======================
Average natural gas realizations ($/mcf)
UK 3.12 3.15 3.53
USA 2.13 2.18 7.13
Rest of World 1.93 1.99 3.37
BP Average 2.27 2.33 4.96
=======================
Henry Hub gas price(a) ($/mmbtu) 2.35 2.43 7.08
=======================
Average oil realization(b)($/bbl)
UK 20.67 18.53 25.04
USA 17.26 17.05 24.79
Rest of World 18.63 17.70 23.52
BP Average 18.77 17.72 24.80
=======================
Average oil marker prices ($/bbl)
Brent 21.13 19.41 25.75
West Texas Intermediate 21.54 20.31 28.71
Alaska North Slope US West Coast 19.76 17.79 24.93
=====================
(a) Henry Hub First of the Month Index.
(b) Crude oil and natural gas liquids.
Exploration and Production
The pro forma result for the first quarter was $2,400 million, down $2,736
million on the first quarter of 2001, when adjusted for special items comprising
severance and litigation costs. The severance costs reflect the significant
restructuring which is underway to reposition the business in North America and
the North Sea. The result was significantly affected by lower oil and natural
gas prices. Average liquids realizations declined by around $6 a barrel. In
particular, US realizations were down over $7 a barrel with WTI averaging close
to Brent in the first quarter, compared with a premium of close to $3 a barrel a
year ago. Average natural gas realizations were down some $2.70 per thousand
cubic feet. As US natural gas is sold on a first of the month basis, the recent
improvement in the Henry Hub price has not benefited first quarter realizations.
Production is on track to deliver 5.5% growth for the year with the overall
growth being back-end loaded due to the timing of project start-ups. First
quarter production of 3,497 mboe/d was up 0.75% on a year ago, reflecting the
benefits of new start-ups at Northstar in Alaska, Tambar in Norway and Girassol
in Angola as well as increased production in the Marlin and Pompano fields in
the Gulf of Mexico. These more than offset the effects of OPEC quota reductions
affecting our production in Abu Dhabi, Venezuela and Norway, abnormally warm
weather in the UK (impacting gas liftings), and the sale of certain UK Southern
North Sea assets in 2001, amounting in total to around 100 mboe/d. Liquids
production increased by 2.7%, with gas production down 1.7%.
In mid April, the King field in the Gulf of Mexico came on stream, projected to
be followed by other Gulf of Mexico fields, Princess in the second quarter,
King's Peak in the third quarter and Horn Mountain in the fourth quarter. In
addition, the second LNG train in Trinidad is expected to come on stream in the
third quarter.
In support of continued growth, capital expenditure for the quarter was $2.3
billion, $0.4 billion higher than last year. During the quarter, developments
were approved for the Edfu oil discovery in Egypt and Viscount in the UK North
Sea.
In mid April, BP announced that it was acquiring an additional interest in
Sidanco, an integrated Russian oil and gas company, for $375 million. This
increases BP's interest to 25% plus one share, in line with its current voting
rights.
Gas, Power and Renewables
1Q 4Q 1Q
$ million 2002 2001 2001
=====================
Replacement cost operating profit 111 102 100
Special items - - -
Acquisition amortization - - -
---------------------
Pro forma operating result adjusted for special items 111 102 100
=====================
Gas sales volumes (mmcf/d)
UK 2,619 2,534 3,395
Rest of Europe 413 232 251
USA 8,733 8,094 8,001
Rest of World 9,289 8,867 7,403
-----------------------
Total gas sales volumes 21,054 19,727 19,050
=======================
NGL sales volumes (mb/d)
UK - - -
Rest of Europe - - -
USA 203 226 221
Rest of World 181 215 207
-----------------------
Total NGL sales volumes 384 441 428
=======================
Gas, Power and Renewables
The pro forma result for the first quarter was $111 million compared with $100
million a year ago. The result reflects higher profit from the NGL business,
partly offset by lower profit from trading and marketing. NGL profit has
increased, despite lower volumes, due to margins returning to more normal levels
compared to the exceptionally low levels of a year ago. The trading and
marketing result is down due to lower margins. BP Solar production was up over
30% on a year ago.
Refining and Marketing
1Q 4Q 1Q
$ million 2002 2001 2001
=====================
Replacement cost operating profit 68 379 740
Special items 26 213 53
Acquisition amortization 193 193 201
---------------------
Pro forma operating result
adjusted for special items 287 785 994
=====================
Refinery throughputs (mb/d)
UK 392 415 310
Rest of Europe 833 692 693
USA 1,394 1,371 1,522
Rest of World 375 369 386
---------------------
Total throughput 2,994 2,847 2,911
=====================
Oil sales volumes (mb/d)
Refined products
UK 256 268 259
Rest of Europe 1,275 1,084 1,082
USA 1,834 1,773 1,874
Rest of World 600 612 579
-----------------------
Total marketing sales 3,965 3,737 3,794
Trading/supply sales 2,535 2,710 2,159
-----------------------
Total refined product sales 6,500 6,447 5,953
Crude oil 4,809 4,599 4,482
-----------------------
Total oil sales 11,309 11,046 10,435
=======================
Global Indicator Refining Margin(a)(mb/d)
NWE 0.09 1.53 2.35
USGC 2.04 1.79 6.69
Midwest 2.06 2.63 3.85
USWC 5.43 6.25 10.94
Singapore 0.21 1.20 0.70
BP Average 1.64 2.40 4.25
=====================
(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 $287 million, compared with $994 million a year ago. The special item was
for Veba Oil integration costs. The first quarter result includes Veba Oil
results from 1 February. The decrease in the result of $707 million reflects
significantly lower worldwide refining margins and lower retail margins,
particularly in the USA. Refining margins were down some 60% worldwide versus
first quarter 2001 with significant drops in Europe and the USA where the
majority of BP's refineries are located. US retail margins were down
approximately 60% compared to a year ago and 80% compared to last quarter.
Partially offsetting the lower margins were reduced operating costs that
reflected decreased refinery fuel and electricity costs in the US and ongoing
cost reduction programmes.
Refining throughputs increased by 3% compared with the first quarter of 2001,
due to the effect of the Veba acquisition, which more than offset the
divestments of the Mandan, South Dakota and Salt Lake City, Utah, refineries in
the USA. Marketing volumes increased by 5%, reflecting the impact of the Veba
acquisition; excluding Veba, marketing sales were down approximately 3%, due to
lower aviation and commercial sales.
During the quarter, BP opened an additional 32 BP Connect stations, primarily in
the USA and in London, England, bringing the total number of BP Connect stations
worldwide to 371. An additional 300 sites were reimaged in the first quarter,
bringing the total number of sites with the BP Helios to some 5,300 worldwide.
In February, BP reached agreement to sell its Yorktown, Virginia refinery. The
sale is expected to be completed in the second quarter. In addition, BP
completed the sale of its network of 21 service stations in Japan to Japan
Energy at the end of March.
Also in February, Edinburgh, Scotland became the first city in the world where
BP supplies both sulphur-free unleaded gasoline and sulphur-free diesel. The
sulphur-free products will be available at 18 service stations in the Edinburgh
area, supplied from the Grangemouth refinery.
Chemicals
1Q 4Q 1Q
$ million 2002 2001 2001
=====================
Replacement cost operating profit 76 (67) 81
Special items 32 106 -
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items 108 39 81
=====================
Chemicals Indicator Margin(a)($/te) 96(b) 112 106
=====================
Chemicals production (kte)
UK 829 792 730
Rest of Europe 2,583 2,278 1,688
USA 2,489 2,279 2,257
Rest of World 710 699 702
-----------------------
Total production 6,611 6,048 5,377
=======================
(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 broad range of products. Amongst the products and
businesses covered in the CIM are olefins and derivatives, 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 first quarter is based on two months'
actuals and one month of provisional data.
Chemicals
Chemicals' pro forma result for the first quarter, after adjusting for special
items, was $108 million, up from $39 million in the fourth quarter of 2001. The
increase reflected lower fixed costs due to restructuring, and stronger sales
against a backdrop of weaker margins caused by increased feedstock prices. The
result was an increase of $27 million over a year ago.
Chemicals production of 6,611 thousand tonnes in the first quarter was 1,234
thousand tonnes above the same quarter last year. Higher production was the
result of improving demand and increased capacity from both new plants coming on
stream and the Solvay, Erdolchemie and Veba transactions.
As part of the ongoing restructuring of our portfolio, we announced the closure
of polypropylene capacity: one production line at Chocolate Bayou and the
facility at Cedar Bayou, both in Texas, USA. Special charges for the quarter
were $32 million and relate to major site restructuring and Solvay and
Erdolchemie integration. We also announced the sale of parts of our plastics
fabrication business as part of our overall plan to divest non-core businesses.
Other Businesses and Corporate
1Q 4Q 1Q
$ million 2002 2001 2001
=====================
Replacement cost operating loss (125) (175) (115)
Special items - 73 -
Acquisition amortization - - -
---------------------
Pro forma operating result
adjusted for special items (125) (102) (115)
=====================
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 2002 2001 2001
=====================
Profit (loss) on sale of fixed assets and
businesses or termination of operations (109) (38) 218
Taxation credit (charge) 39 26 (151)
---------------------
Exceptional items after taxation (70) (12) 67
=====================
Exceptional items for the first quarter include the loss on closure of certain
polypropylene facilities in Texas, USA.
2002 Dividends
1Q 4Q 1Q
2002 2001 2001
=====================
Dividends per ordinary share
cents 5.75 5.75 5.25
pence 4.051 4.055 3.665
Dividends per ADS (cents) 34.5 34.5 31.5
-----------------------
BP today announced a first quarterly dividend for 2002 of 5.75 cents per
ordinary share. Holders of ordinary shares will receive 4.051 pence per share
and holders of American Depository Receipts (ADRs) $0.345 per ADS share. The
dividend is payable on 10 June to shareholders on the register on 17 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 10 June. The second quarter 2002 results and dividend will be announced on 30
July.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'Led by the USA, the world economy is showing signs of demand recovery
following its recent growth pause. However, the margin environment for
the downstream and chemicals businesses remains challenging.
'Crude oil prices have risen since the end of February as the market
tightens in response to OPEC's January production cuts and some recovery
in demand. The risk of Middle East supply disruption is keeping the
market volatile and providing some additional support to prices. The
crude oil market is expected to be broadly balanced in the second
quarter, with average realizations currently anticipated to be higher
than in the first quarter.
'US natural gas prices have risen in line with higher oil prices despite
the overhang of gas in storage. Evidence of a recovery in demand and
reduced drilling activity impacting North American production is creating
an expectation that inventories will reduce and that supply and demand
will rebalance over the course of the year. For the second quarter, North
American gas realizations are currently anticipated to be higher than in
the first quarter.
'As indicated in our February presentations, upstream production growth
in 2002 is projected to be biased towards the second half of the year.
Scheduled 2002 second quarter production from both new and existing
fields should see year-on-year second quarter production moving towards
our annual 5.5% growth target - leaving us on track to meet our
performance goal by the end of the year.
'Refining margins have recovered towards the levels seen in the fourth
quarter of last year, with relative strength in the USA offset by
continued weakness in Europe and Asia. The recovery in margins has been
driven by higher US gasoline refining margins as US gasoline stocks have
fallen close to normal seasonal levels. We expect continued volatility
with margins vulnerable to increased oil prices.
'Since mid-March, US retail marketing margins have shown improvement from
the extremely depressed levels earlier in the first quarter. European
marketing margins have been under pressure recently due to product price
increases, but are still above the second quarter of last year. In total,
global second quarter marketing margins are currently anticipated to be
similar to a year ago.
'Chemical margins remain depressed and vulnerable to increases in
feedstock prices. There is, however, continued evidence of a pick-up in
volumes.
'Capital expenditure is on track for the year's target of $12-13 billion,
excluding acquisitions. The net debt ratio, which was above the mid point
of the 25-35% range in the first quarter, following the Veba purchase,
should move towards the middle of the range during the second quarter
with the expected receipt of most of the proceeds from the sale of the
Veba upstream assets.'
----------------------------------------------------------------------
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, debt,
targeted performance improvement, levels of annual investment 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, debt, profitability 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 specific factors accompanying such statements;
future levels of industry product supply, demand and pricing; currency
exchange rates; political stability and economic growth in relevant
areas of the world; development and use of new technology and
successful partnering; the actions of competitors; natural disasters
and other changes to business conditions; and wars and acts of
terrorism and sabotage. Additional information, including information
on factors which may affect BP's business, is contained in BP's Annual
Report and Accounts and in the Annual Report on Form 20-F filed with
the US Securities and Exchange Commission.
----------------------------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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