1st Quarter Results Pt 1 of 2
BP PLC
26 April 2005
BP p.l.c.
Group Results
First Quarter 2005
London 26 April 2005
FOR IMMEDIATE RELEASE
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RECORD QUARTERLY RESULT AND STRENGTHENING CASH FLOW
===========================================================================
1Q
2005
1Q 4Q 1Q vs.1Q
$ million 2005 2004 2004 2004
==========================
Profit for the period* 6,602 3,010 4,912
Inventory holding (gains) losses (1,111) 494 (648)
--------------------------
Replacement cost profit 5,491 3,504 4,264 29%
==========================
- per ordinary share (pence) 13.55 8.71 10.49
- per ordinary share (cents) 25.61 16.23 19.30 33%
- per ADS (dollars) 1.54 0.97 1.16
==========================
o BP's first quarter replacement cost profit was $5,491 million compared
with $4,264 million a year ago, an increase of 29%.
o The first quarter result includes a net non-operating gain of
$535 millon compared with $776 million in the first quarter of 2004.
This includes gains from the sale of BP's interests in the Ormen Lange
field and the Interconnector pipeline.
o The first quarter trading environment was generally stronger than a
year ago with higher oil and gas realizations, higher refining and
chemicals margins, but with lower retail marketing margins.
o Net cash provided by operating activities for the quarter was
$9.4 billion compared with $7 billion a year ago.
o The ratio of net debt to net debt plus equity was 18% compared with 20%
a year ago.
o The quarterly dividend, to be paid in June, is 8.50 cents per share
($0.51 per ADS) compared with 6.75 cents per share a year ago, an
increase of 26%. In sterling terms, the quarterly dividend is
4.450 pence per share, compared with 3.807 pence per share a year ago,
an increase of 17%. The company repurchased 193 million of its own
shares during the quarter at a cost of $2 billion.
BP Group Chief Executive, Lord Browne, said:
'This strong start in 2005 reflects the results of our significant
investment programme over the past few years and improvements in
underlying performance. In addition, continuing higher oil prices have
generated substantial additional cash flow which has been applied to
the share buyback programme.
* Profit attributable to BP shareholders.
Summary Quarterly Results
Exploration and Production's record first quarter result was up 53% on a year
ago reflecting higher realizations in both liquids and gas, and higher volumes,
partially offset by the impact of planned higher revenue investment and costs.
In addition, the result includes net gains from non-operating items.
The Refining and Marketing result increased 54% compared with a year ago
reflecting improved refining margins, offset partly by lower retail marketing
margins.
In Gas, Power and Renewables the improved result reflects primarily a higher
result in the natural gas liquids business, and gains from non-operating items.
Interest and Other finance expense was $201 million for the quarter compared
with $269 million in the previous quarter. A major component of the decrease is
the absence in the first quarter of the revaluation of provisions in the fourth
quarter of 2004.
The effective tax rate on replacement cost profit was 32%. This rate benefits
from the release of provisions for previous years as a result of current period
restructuring actions, risk reassessment and tax settlements.
Capital expenditure was $2.8 billion for the quarter. There were no acquisitions
in the quarter. Disposal proceeds were $1.3 billion.
Net debt at the end of the quarter was $18 billion. The ratio of net debt to net
debt plus equity was 18%, compared with 22% at the end of 2004.
During the first quarter, the company repurchased 193 million of its own shares,
at a cost of $2 billion. Of these, 77 million shares were cancelled and the
remainder are held in treasury.
--------
The commentaries above and following are based on replacement cost profit.
TNK-BP operational and financial information has been estimated.
The financial information for 2004 has been restated to reflect the following,
all with effect from 1 January 2005: (a) the adoption by the group of
International Financial Reporting Standards (IFRS) (see Note 1); (b) the
transfer of the aromatics and acetyls operations from the former Petrochemicals
segment to the Refining and Marketing segment; (c) the transfer of the olefins
and derivatives operations from the former Petrochemicals segment to Other
businesses and corporate; (d) the transfer of the Grangemouth and Lavera
refineries from the Refining and Marketing segment to Other businesses and
corporate; (e) the transfer of the Mardi Gras pipeline from the Exploration and
Production segment to the Refining and Marketing segment; and (f) the transfer
of the Hobbs fractionator from the Gas, Power and Renewables segment to Other
businesses and corporate. Note 2 provides further detail of the resegmentation.
Non-Operating Items
First
Quarter
$ million 2005
--------
Exploration and Production 780
Refining and Marketing (27)
Gas, Power and Renewables 105
Other businesses and corporate (71)
--------
787
Taxation(a) (252)
--------
535
========
(a) Tax on Non-Operating Items is calculated using the effective tax rate
on replacement cost profit.
Reconciliation of Replacement Cost Profit to Profit for the Period
First Fourth First
Quarter Quarter Quarter
$ million 2005 2004 2004
================================
Exploration and Production 6,486 4,750 4,242
Refining and Marketing 1,421 1,337 920
Gas, Power and Renewables 404 495 201
Other businesses and corporate 207 (1,216) 1,094
Consolidation adjustment (153) 57 (66)
--------------------------------
RC profit before interest and tax 8,365 5,423 6,391
--------------------------------
Interest and Other finance expense (201) (269) (174)
Taxation (2,612) (1,591) (1,919)
Minority interest (61) (59) (34)
--------------------------------
RC profit(a) 5,491 3,504 4,264
--------------------------------
Inventory holding gains (losses) 1,111 (494) 648
--------------------------------
Profit for the period* 6,602 3,010 4,912
================================
(a) Replacement cost profit reflects the current cost of supplies. The
replacement cost profit for the period is arrived at by excluding from
profit inventory holding gains and losses. BP uses this measure to
assist investors to assess BP's performance from period to period.
Replacement cost profit is not a recognized GAAP measure. Operating cash
flow is calculated from the starting point of profit before taxation
which includes inventory holding gains and losses. Operating cash flow
also reflects working capital movements including inventories, trade and
other receivables and trade and other payables. The carrying value of
these working capital items will change for various reasons, including
movements in oil, gas and products prices.
Per Share Amounts
First Fourth First
Quarter Quarter Quarter
2005 2004 2004
================================
Results for the period ($m)
Profit* 6,602 3,010 4,912
Replacement cost profit 5,491 3,504 4,264
--------------------------------
Shares in issue at period end (thousand) 21,367,827 21,525,978 21,996,888
- ADS equivalent (thousand) 3,561,305 3,587,663 3,666,148
Average number of shares
outstanding (thousand) 21,441,285 21,607,872 22,087,796
- ADS equivalent (thousand) 3,573,548 3,601,312 3,681,299
Per ordinary share (cents)
Profit for the period 30.79 14.00 22.24
RC profit for the period 25.61 16.23 19.30
Per ADS (cents)
Profit for the period 184.74 84.00 133.44
RC profit for the period 153.66 97.38 115.80
================================
* Profit attributable to BP shareholders.
Exploration and Production
1Q 4Q 1Q
$ million 2005 2004 2004
=====================
Profit before interest and tax(a) 6,491 4,747 4,250
Inventory holding (gains) losses (5) 3 (8)
---------------------
Replacement cost profit before interest and tax 6,486 4,750 4,242
=====================
Results include:
Impairment and gain (loss) on sale of
businesses and fixed assets 940 (236) 25
Environmental and other provisions - - -
Restructuring, integration and rationalization costs - - -
Fair value gain (loss) on embedded derivatives (160) - -
Other - 8 -
---------------------
Total non-operating items 780 (228) 25
=====================
Exploration expense 160 258 136
Of which:
Exploration expenditure written off 84 151 67
=====================
Production(Net of royalties)
Crude oil (mb/d) 2,405 2,396 2,342
Natural gas liquids (mb/d) 188 197 191
Total liquids (mb/d)(b) 2,593 2,593 2,533
Natural gas (mmcf/d) 8,745 8,714 8,600
Total hydrocarbons (mboe/d)(c) 4,101 4,095 4,015
=======================
Average realizations
Crude oil ($/bbl) 43.37 41.01 31.30
Natural gas liquids ($/bbl) 28.14 31.20 23.14
Total liquids ($/bbl) 41.74 39.88 30.48
Natural gas ($/mcf) 4.26 4.28 3.79
Total hydrocarbons ($/boe) 33.60 32.64 26.48
=======================
Average oil marker prices ($/bbl)
Brent 47.62 43.85 32.03
West Texas Intermediate 49.88 48.29 35.30
Alaska North Slope US West Coast 45.07 42.62 34.22
=====================
Average natural gas marker prices
Henry Hub gas price ($/mmbtu)(d) 6.27 7.07 5.69
UK Gas - National Balancing Point (p/therm) 37.96 28.51 24.59
=======================
(a) Includes profit after interest and tax of equity-accounted entities.
(b) Crude oil and natural gas liquids.
(c) Natural gas is converted to oil equivalent at 5.8 billion cubic feet
= 1 million barrels.
(d) Henry Hub First of the Month Index.
Exploration and Production
The replacement cost profit before interest and tax for the first quarter was
$6,486 million, a record result, representing an increase of 53% over the first
quarter of 2004. This result benefited from higher realizations in both liquids
and gas, and higher volumes, partially offset by the impact of planned higher
revenue investment and costs. In addition, the result includes gains of $1,070
million on the sales of assets primarily from our interest in the Ormen Lange
field.
The result also includes charges for impairments of $130 million, relating to
fields in the UK North Sea, and fair value losses of $160 million on embedded
derivatives in certain long term gas contracts where the contract price is tied
to oil and electricity prices rather than indexed to the gas price. The
corresponding quarter in 2004 contained charges of $186 million for impairments,
and gains on sales of assets of $211 million.
Production for the quarter at 4,101 mboe/d reflected the continuing ramp-up of
production in the New Profit Centres and increased volumes from TNK-BP, partly
offset by operational issues in the North Sea and the expected decline in our
Existing Profit Centres.
Projects in the New Profit Centres remain on track. In the Gulf of Mexico, the
Mad Dog project achieved first production in January 2005, and the Thunder Horse
integrated hull and topsides has left the construction yard in Corpus Christi
for installation offshore. In Azerbaijan, the Azeri project achieved first
production in February, and construction on the BTC pipeline remains on track.
In the Existing Profit Centres, the Clair project in the UK North Sea commenced
production in February. In addition, we sanctioned investment in the Saqqara gas
field in Egypt and received approval from the Indonesian government for the
Tangguh gas project.
We have had exploration success in Angola with the 'Palas-1' and 'Ceres-1' oil
discoveries in ultra-deepwater Block 31. These are the fifth and sixth
successful discoveries that BP has drilled in Block 31. We have also been
awarded three blocks in Algeria's sixth international licensing round.
Customer Facing Segments
Refining and Marketing
1Q 4Q 1Q
$ million 2005 2004 2004
=====================
Profit before interest and tax(a) 2,363 811 1,473
Inventory holding (gains) losses (942) 526 (553)
---------------------
Replacement cost profit before interest and tax 1,421 1,337 920
=====================
Results include:
Impairment and gain (loss) on sale of
businesses and fixed assets (27) (333) (160)
Environmental and other provisions - - -
Restructuring, integration and rationalization costs - (32) -
Fair value gain (loss) on embedded derivatives - - -
Other - - -
---------------------
Total non-operating items (27) (365) (160)
=====================
Refinery throughputs (mb/d)(b)
UK 164 218 198
Rest of Europe 647 601 710
USA 1,400 1,436 1,265
Rest of World 299 296 399
---------------------
Total throughput 2,510 2,551 2,572
=====================
Refining availability 95.2 96.5 95.1
=====================
Oil sales volumes (mb/d)
Refined products
UK 338 335 297
Rest of Europe 1,323 1,363 1,352
USA 1,648 1,664 1,683
Rest of World 621 627 652
-----------------------
Total marketing sales 3,930 3,989 3,984
Trading/supply sales 2,196 2,194 2,502
-----------------------
Total refined product sales 6,126 6,183 6,486
Crude oil 3,635 3,731 4,058
-----------------------
Total oil sales 9,761 9,914 10,544
=======================
Global Indicator Refining Margin ($/bbl)(c)
NWE 2.84 4.72 2.73
USGC 7.30 5.52 6.92
Midwest 3.84 1.65 4.67
USWC 12.88 10.36 8.06
Singapore 4.98 8.02 3.42
BP Average 5.94 5.69 4.89
=====================
Chemicals production (kte)
UK 317 316 303
Rest of Europe 806 779 797
USA 1,218 1,122 1,183
Rest of World 1,009 990 1,040
-----------------------
Total production 3,350 3,207 3,323
=======================
(a) Includes profit after interest and tax of equity-accounted entities.
(b) Refinery throughputs exclude the Grangemouth and Lavera refineries
which were transferred to Other businesses and corporate effective
1 January 2005.
(c) The Global Indicator Refining Margin (GIM) is the average of six
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. The regional indicator margins may not
be representative of the margins achieved by BP in any period because
of BP's particular refinery configurations and crude and product slate.
The GIM data shown above excludes the Grangemouth and Lavera
refineries.
Customer Facing Segments
Refining and Marketing
The replacement cost profit before interest and tax for the first quarter was
$1,421 million. This compares with $920 million for the same period last year,
an increase of 54%.
The year-on-year improved result reflects improved refining margins, offset
partly by lower retail marketing margins. Improved refining margins were
supported by strong product demand, together with the continuing weakness in the
relative price of extra-heavy sour crudes. Retail marketing margins in the first
quarter were significantly lower than those of a year ago, reflecting sustained
pressure from rising crude and product prices.
The quarter's result includes a charge of $27 million for non-operating items.
This comprises a gain on the sale of assets of $14 million relating to the sale
of marketing assets and an impairment charge of $41 million. This compares with
a loss on the sale of assets of $160 million in the same period last year due
principally to the disposal of BP's interests in the Singapore Refining Company
Private Limited (SRC).
Refining throughputs for the quarter were 2,510 mb/d, some 62 mb/d lower than in
the first quarter of 2004, due principally to the disposal of BP's interests in
the SRC and the closure of refining operations at the ATAS Refinery in Mersin,
south eastern Turkey, in 2004. Refining availability was 95.2%, in line with
that of the first quarter of 2004. Marketing sales were 3,930 mb/d, slightly
below those of a year ago.
The Texas City Refinery in Texas, USA, experienced a tragic explosion on 23
March at the Isomerization unit. The financial impact on the quarter was
minimal.
During the quarter, BP and the South Coast Air Quality Management District of
California agreed to the settlement of two outstanding lawsuits regarding the
Carson Refinery. The quarter's result includes a charge of $35 million in
respect of this settlement, including local community programmes relating to air
quality and its impacts.
Also in the quarter, BP and Sinopec Corporation of China signed a joint venture
contract to build a world-scale acetic acid plant in Nanjing, east China's
Jiangsu province. The 500,000 tons per annum operation is planned to come on
stream in the second half of 2007.
Customer Facing Segments
Gas, Power and Renewables
1Q 4Q 1Q
$ million 2005 2004 2004
=====================
Profit before interest and tax(a) 418 523 191
Inventory holding (gains) losses (14) (28) 10
---------------------
Replacement cost profit before interest and tax 404 495 201
=====================
Results include:
Impairment and gain (loss) on sale of
businesses and fixed assets 63 40 -
Environmental and other provisions - - -
Restructuring, integration and rationalization costs - - -
Fair value gain (loss) on embedded derivatives 42 - -
Other - - -
---------------------
Total non-operating items 105 40 -
---------------------
Gas sales volumes (mmscf/d)
UK 5,413 3,456 6,328
Rest of Europe 387 449 442
USA 14,188 13,852 13,618
Rest of World 15,628 13,659 13,902
-----------------------
Total gas sales volumes 35,616 31,416 34,290
=======================
NGL sales volumes (mb/d)
UK 10 11 4
Rest of Europe 13 12 1
USA 371 421 462
Rest of World 254 240 244
-----------------------
Total NGL sales volumes 648 684 711
=======================
(a) Includes profit after interest and tax of equity-accounted entities.
The replacement cost profit before interest and tax for the first quarter was
$404 million compared with $201 million a year ago. The result reflects
primarily a higher result in the natural gas liquids business, and gains from
non-operating items.
The natural gas liquids result has improved due to the higher level of liquids
prices and the wider spread between natural gas and natural gas liquid prices.
Non-operating items include a gain on disposal of BP's interest in
Interconnector UK Ltd. and net fair value gains on embedded derivatives.
Other Businesses and Corporate
1Q 4Q 1Q
$ million 2005 2004 2004
=====================
Profit (loss) before interest and tax(a) 357 (1,209) 1,191
Inventory holding (gains) losses (150) (7) (97)
---------------------
Replacement cost profit before interest and tax 207 (1,216) 1,094
=====================
Results include:
Impairment and gain (loss) on sale of
businesses and fixed assets (24) (1,101) 1,257
Environmental and other provisions - - -
Restructuring, integration and rationalization costs (43) (90) -
Fair value gain (loss) on embedded derivatives (4) - -
Other - 66 -
---------------------
Total non-operating items (71) (1,125) 1,257
=====================
Analysis of replacement cost result
before interest and tax(a)
Olefins and Derivatives 356 (964) (105)
Other (149) (252) 1,199
---------------------
207 (1,216) 1,094
=====================
(a) Includes profit after interest and tax of equity-accounted entities.
Other businesses and corporate comprises Olefins and Derivatives, Finance, the
group's aluminium asset, interest income and costs related to corporate
activities. The group's interests in PetroChina and Sinopec were divested in
January 2004. The first quarter result includes a charge of $71 million for
non-operating items. This primarily comprises a charge in respect of the
separation of the Olefins and Derivatives businesses of $43 million and an asset
impairment of $23 million, also related to the Olefins and Derivatives
businesses. The Olefins and Derivatives result showed a marked increase over a
year ago due to higher margins.
Dividends Payable
June March June
2005 2005 2004
=====================
Dividends per ordinary share
cents 8.50 8.50 6.75
pence 4.450 4.522 3.807
Dividends per ADS (cents) 51.0 51.0 40.5
-----------------------
BP today announced a dividend of 8.50 cents per ordinary share to be paid in
June. Holders of ordinary shares will receive 4.450 pence per share and holders
of American Depository Receipts (ADRs) $0.51 per ADS share. The dividend is
payable on 6 June to shareholders on the register on 13 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 6 June.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'World economic growth was sustained into the first quarter of 2005
across all regions. The current outlook is for some moderation of global
growth towards trend rates through 2005.
'Oil prices reached a further record average of $47.62 per barrel (Dated
Brent) in the first quarter, $3.77 per barrel higher than in the fourth
quarter. Prices appear to have been supported by high demand growth and
limited spare production capacity notwithstanding that OECD commercial
inventories are above seasonal five year average levels.
'US gas prices averaged $6.27/mmbtu (Henry Hub first of month index) in
the first quarter, down by $0.80/mmbtu versus the fourth quarter. Working
gas inventories remain above year-earlier and five year average levels
but the futures market continues to signal a supply-constrained market.
'Refining margins improved by 25c/bbl versus the fourth quarter. Margins
increased sharply towards the end of March and that strength has been
maintained into April. Second quarter margins to date are currently above
last year's second quarter levels, supported by demand growth and
concerns about US gasoline supplies in the driving season. Retail
marketing margins were extremely weak during the first quarter because of
steadily rising product prices. Slightly weaker oil prices have
contributed to improved marketing margins in the second quarter to date,
but the depth and sustainability of the improvement is uncertain.
'Our strategy is unchanged. We continue to execute it with discipline and
focus. Strengthening cash flow enabled shareholder distributions in the
form of dividends and share buybacks amounting to $4 billion in the
quarter.'
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The foregoing discussion, in particular the statements under 'Outlook',
contains forward looking statements particularly those regarding BP's
asset portfolio and changes in it, capital expenditure, cash flow,
dividends, future performance, growth and other trend projections,
margins, movements in working capital items, production, share
buybacks, and the timing of projects and operations. By their nature,
forward looking statements 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;
currency exchange rates; operational problems; general economic
conditions including inflationary pressures; 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; wars and acts of
terrorism or sabotage; and other factors discussed in this
Announcement. For more information you should refer to our Annual
Report and Accounts 2004 and our 2003 Annual Report on Form 20-F filed
with the US Securities and Exchange Commission.
----------------------------------------------------------------------
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