2nd Quarter Results Pt 1 of 3

BP PLC
29 July 2003



BP p.l.c.

Group Results

Second Quarter and Half Year 2003



                                                        London 29 July 2003



                           FOR IMMEDIATE RELEASE



               RESULT UP 42%; CONTINUING STRONG CASH GENERATION

---------------------------------------------------------------------------

 Second   First  Second

Quarter Quarter Quarter                                       First Half

   2002    2003    2003   $ million                      2003    2002     %

=======================                                ====================

                          Replacement cost profit

  1,311   3,128   2,454     before exceptional items    5,582   2,235

    351     (27)     32   Special items(a)                  5     471

    537     628     629   Acquisition amortization(b)   1,257   1,075

-----------------------                                --------------------

                          Pro forma result adjusted

  2,199   3,729   3,115     for special items           6,844   3,781    81

=======================                                ====================

   6.77   10.44    8.67   - per ordinary share (pence)  19.11   11.71    63

   9.80   16.70   14.06   - per ordinary share (cents)  30.76   16.86    82

   0.58    1.00    0.85   - per ADS (dollars)            1.85    1.00

=======================                                ====================



o    BP's second quarter pro forma result, adjusted for special items, was

     $3,115 million, compared with $2,199 million a year ago, an increase of

     42%. For the half year, the result was $6,844 million compared with

     $3,781 million, up 81%. Replacement cost profit, before exceptional

     items, for the second quarter and half year was $2,454 million and

     $5,582 million respectively, compared with $1,311 million and $2,235

     million a year ago.



o    The second quarter trading environment was more favourable than a year

     ago.



o    Improved operating performance generated additional income for the

     quarter and half year. Non-cash costs were higher in both periods.



o    Net cash inflow for the quarter and the first half was $2,377 million

     and $5,605 million respectively, compared with an inflow of $1,891

     million and an outflow of $532 million a year ago. Net cash flow from

     operating activities for the quarter and half year was $7,346 million

     and $13,307 million respectively compared with $5,133 million and

     $8,769 million a year ago.



o    The pro forma ratio of net debt to net debt plus equity was 22% 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 17%, compared with 13% a year

     ago.



o    The TNK-BP deal was signed in June. Subject to various consents, it is

     expected to complete later this summer.



o    The quarterly dividend increased from 6.25 cents to 6.50 cents per

     share ($0.39 per ADS). This compares with 6.00 cents a year ago. For

     the half year the dividend showed an increase of 8.5%. In sterling

     terms, the quarterly dividend is 4.039 pence per share compared with

     3.875 pence a year ago; for the half year the increase was 0.8%. The

     company repurchased for cancellation 144 million of its own shares

     during the quarter, at a cost of $1 billion. During the first half,

     299 million shares have been repurchased and cancelled at a cost of

     $2 billion.




BP Group Chief Executive, Lord Browne, said:


     'This is another strong quarterly result. Strategy and performance

     delivery are on track. Cash flow was robust, which has provided 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 second quarter are restructuring costs in

     Exploration and Production, Veba integration costs in Refining and

     Marketing, and a reduction in the provision for costs associated with

     closure of polypropylene capacity in Petrochemicals.



(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 second quarter result was up 24% on a year ago,
reflecting higher average realizations.



In Gas, Power and Renewables, the result reflects the absence of a contribution
from Ruhrgas following the sale of our interest last year, mostly offset by
improved performance.



The Refining and Marketing result increased significantly compared with a year
ago due to higher worldwide refining margins and improved retail margins,
particularly in the USA and Europe, with some offset from utility costs.



The Petrochemicals result reflected higher margins from lower feedstock costs,
with flat demand conditions prevailing.



Interest expense for the quarter was $191 million compared with $220 million for
the prior quarter, primarily reflecting lower average debt levels.



The pro forma effective tax rate on replacement cost profit, before exceptional
items, and adjusted for special items, was 34% compared with 36% a year ago.



Capital expenditure, excluding acquisitions, was $3.2 billion for the quarter.
Total capital expenditure and acquisitions was $3.3 billion. Disposal proceeds
were $1.7 billion.



Net cash inflow was $2,377 million compared with $1,891 million a year ago;
higher cash flow from operating activities was partly offset by higher tax
payments and lower disposal proceeds.



Net debt at the end of the quarter was $16.2 billion. The pro forma ratio of net
debt to net debt plus equity was 22%.



---------



The commentaries above and following are based on the pro forma replacement cost
operating results, before exceptional items, adjusted for special items.



To reflect BP's increased focus on chemical products derived from oil and gas,
the Chemicals segment has been renamed Petrochemicals.


                  Reconciliation of Reported Results to

              Pro Forma Results Adjusted for Special Items



 Pro Forma Result                                            Pro Forma Result

 adjusted for  ----- 2Q 2003 ---------------                   adjusted for

 special items                                                 special items

 -------------------

    2Q     1Q     2Q Special   Acq. Reported                      First Half

  2002   2003   2003  Items* Amort+ Earnings $ million           2003    2002

 ===========================================                   ==============

                                             Exploration and

 2,889  4,888  3,589      12   424     3,153   Production       8,477   5,289

                                             Gas, Power

   114    194    103       -     -       103   and Renewables     297     225

                                             Refining and

   685    854  1,135      41   205       889   Marketing        1,989     972

   246    139    308      (5)    -       313 Petrochemicals       447     354

                                             Other businesses

  (128)  (165)  (134)      -     -      (134)  and corporate     (299)   (253)

 -------------------------------------------                   --------------

                                             RC operating

 3,806  5,910  5,001      48   629     4,324   profit          10,911   6,587

 -------------------------------------------                   --------------

  (314)  (220)  (191)      -     -      (191)Interest expense    (411)   (647)

(1,243)(1,935)(1,635)    (16)    -    (1,619)Taxation          (3,570) (2,100)

   (50)   (26)   (60)      -     -       (60)MSI                  (86)    (59)

 -------------------------------------------                   --------------

                                             RC profit before

 2,199  3,729  3,115      32   629     2,454 exceptional items  6,844   3,781

 -------------------------------------------                   --------------

                                         280 Exceptional items before tax

                                        (149)Taxation on exceptional items

                                       -----

                                       2,585 RC profit after exceptional items

                                        (951)Stock holding losses

                                       -----

                                       1,634 HC profit

                                       =====



* The special items refer to non-recurring charges and credits. The special

  items for the second quarter are restructuring costs in Exploration and

  Production, Veba integration costs in Refining and Marketing, and a

  reduction in the provision for costs associated with closure of

  polypropylene capacity in Petrochemicals.



+ Acquisition amortization is depreciation and amortization relating to the

  fixed asset revaluation adjustments and goodwill consequent upon the ARCO

  and Burmah Castrol acquisitions.


                            Operating Results



 Second   First  Second

Quarter Quarter Quarter                                         First Half

   2002    2003    2003                                        2003    2002

=======================                                      ==============

                         Replacement cost

  3,250   5,125   4,324  operating profit ($m)                9,449   5,308

-----------------------                                      --------------

                         Replacement cost profit

  1,311   3,128   2,454  before exceptional items ($m)        5,582   2,235

-----------------------                                      --------------

                         Profit after exceptional items ($m)

  1,527   3,468   2,585  Replacement cost                     6,053   2,381

  2,058   4,267   1,634  Historical cost                      5,901   3,354

-----------------------                                      --------------

                         Per ordinary share (cents)

                         Pro forma result

   9.80   16.70   14.06    adjusted for special items         30.76   16.86

                         RC profit before

   5.85   14.01   11.08    exceptional items                  25.09    9.97

   9.18   19.11    7.41  HC profit after exceptional items    26.52   14.96



                         Per ADS (cents)

                         Pro forma result

  58.80  100.20   84.36    adjusted for special items        184.56  101.16

                         RC profit before

  35.10   84.06   66.48    exceptional items                 150.54   59.82

  55.08  114.66   44.46  HC profit after exceptional items   159.12   89.76

-----------------------                                      --------------


                        Exploration and Production



   2Q    1Q    2Q                                               First Half

 2002  2003  2003   $ million                                  2003    2002

=================                                            ==============

2,458 4,326 3,153   Replacement cost operating profit         7,479   4,386

   90   139    12   Special items                               151     217

  341   423   424   Acquisition amortization                    847     686

-----------------                                            --------------

                    Pro forma operating result

2,889 4,888 3,589   adjusted for special items                8,477   5,289

=================                                            ==============



                    Results include:

  222   112   101   Exploration expense                         213     346

                    Of which:

  147    50    43   Exploration expenditure written off          93     206

-----------------                                            --------------



                    Production (Net of Royalties)

1,808 1,830 1,712   Crude oil (mb/d)                          1,771   1,781

  244   233   199   Natural gas liquids (mb/d)                  216     239

2,052 2,063 1,911   Total liquids (mb/d)(a)                   1,987   2,020

8,667 9,017 8,439   Natural gas (mmcf/d)                      8,727   8,706

3,546 3,618 3,366   Total hydrocarbons(b)                     3,492   3,521

=================                                            ==============



                    Average realizations

24.27 31.07 25.73   Crude oil ($/bbl)                         28.50   22.07

12.40 19.82 17.49   Natural gas liquids ($/bbl)               18.76   11.77

22.81 29.82 24.90   Total liquids ($/bbl)                     27.47   20.81

 2.45  3.87  3.39   Natural gas ($/mcf)                        3.64    2.36

19.01 26.39 22.43   Total hydrocarbons                        24.49   17.63

=================                                            ==============



                    Average oil marker prices

                    ($/bbl)

25.07 31.47 26.03   Brent                                     28.77   23.12

26.30 34.00 29.02   West Texas Intermediate                   31.53   23.94

25.04 33.16 27.04   Alaska North Slope US West Coast          30.13   22.42

=================                                            ==============



3.38  6.53   5.40   Henry Hub gas price(c) ($/mmBtu)           5.96    2.87



                    UK Gas - National

12.10 21.28 17.44   Balancing Point (p/therm)                 19.35   15.63

=================                                            ==============

(a) Crude oil and natural gas liquids.

(b) Natural gas is converted to oil equivalent at 5.8 billion cubic feet

    = 1 million barrels.

(c) Henry Hub First of the Month Index.






                        Exploration and Production





The pro forma result for the second quarter, adjusted for special items, was
$3,589 million, up 24% from the second quarter of 2002. Special charges were $12
million in respect of our ongoing restructuring activities in the UK. The
acquisition amortization charge included accelerated amortization of $108
million as a result of the impairment of the Kepadong field in Indonesia.



The result for the quarter reflected higher realizations, with liquids up $2.09/
bbl and natural gas up $0.94/mcf on a year ago. North American basin
differentials to the Henry Hub marker price narrowed over the quarter following
the opening of pipeline expansion routes. The result includes a credit of $106
million, reflecting a reduction in the provision for Unrealized Profit in Stock
(UPIS), which removes the upstream margin from downstream inventories, following
a decrease in the Alaska North Slope oil price. This compares with a charge of
$83 million in the equivalent quarter last year.



The half year result also reflected the impact of higher realizations, with
liquids up $6.66/bbl and gas up $1.28/mcf.



During the quarter we had two exploration successes in Angola: Saturno in Block
31 and Clochas in Block 15; along with Saqqara in the Gulf of Suez in Egypt.



Atlantic LNG Train 3 started up ahead of schedule in April and the government of
Trinidad and Tobago approved the Atlantic Train 4 project in June. Construction
of the Baku-Tbilisi-Ceyhan pipeline began in May. Progress in Angola continued
with the approval of the Dalia development by Sonangol in April.



Second quarter production was down 5% (2% after adjusting for divestments). The
decrease, which follows an increase of over 3% in the first quarter, reflects
the pattern of planned quarterly maintenance, the impact of higher prices on
production sharing contract volumes and lower NGL production owing to strong US
gas prices. For the half year, production was down 1% (up 1% after adjusting for
divestments). Declines in existing profit centres were as expected and more than
offset by growth from new profit centres, particularly Trinidad and Deepwater
Gulf of Mexico.



We have continued our programme to improve returns and enhance value by
high-grading our portfolio. We have completed the divestment of several US
onshore and Gulf of Mexico shelf properties and agreed the sale of the Liuhua
and QHD fields in China to the China National Offshore Oil Corporation. On 19
May, the sale of our interest in the Gyda field in Norway to Talisman was
announced. We also announced an agreement in principle to sell 50% of the In
Amenas gas condensate project and 49% of our interest in In Salah gas in Algeria
to Statoil.



Progress continues in the establishment of our new joint venture TNK-BP with the
signing of the agreement with the Alfa Group and Access-Renova on 26 June. The
completion of the deal is subject to various consents.






                          Gas, Power and Renewables





    2Q      1Q      2Q                                           First Half

  2002    2003    2003   $ million                              2003    2002

======================                                        ==============

   114     194     103   Replacement cost operating profit       297     225

     -       -       -   Special items                             -       -

     -       -       -   Acquisition amortization                  -       -

----------------------                                        --------------

                         Pro forma operating result

   114     194     103   adjusted for special items              297     225

======================                                        ==============

                         Gas sales volumes (mmcf/d)

 2,349   3,215   2,581   UK                                    2,896   2,483

   390     473     421   Rest of Europe                          447     402

 8,451  11,734  10,441   USA                                  11,084   8,591

 8,618  11,553  10,839   Rest of World                        11,194   8,952

-----------------------                                       --------------

19,808  26,975  24,282   Total gas sales volumes              25,621  20,428

=======================                                       ==============

                         NGL sales volumes (mb/d)

     -       -       -   UK                                        -       -

     -       -       -   Rest of Europe                            -       -

   189     126     136   USA                                     131     171

   196     232     124   Rest of World                           178     214

-----------------------                                       --------------

   385     358     260   Total NGL sales volumes                 309     385

=======================                                       ==============






                          Gas, Power and Renewables





The pro forma result for the second quarter and half year was $103 million and
$297 million, respectively, compared with $114 million and $225 million a year
ago. The reduction in the second quarter result is due to the absence of a $40
million contribution from Ruhrgas following the sale  of our interest last year,
mostly offset by improved performance. The half year result increased due to
improved performance which more than offset the loss of the $96 million Ruhrgas
contribution.



The second quarter and half year results reflected an increase in gas sales
volumes and strong performance from the global LNG business. Second quarter gas
sales volumes were up 23%, and equity LNG sales up 58%. During the quarter, the
first cargo of LNG was sold from the newly commissioned Train 3 of Atlantic
LNG's facility in Trinidad and Tobago. On 1 July, BP took delivery of the LNG
ship, the British Merchant, which is the third and final ship to be delivered
under the initial phase of the global LNG strategy. Also during the quarter, BP
and Oman LNG signed a memorandum of understanding for the supply of up to 4
million tonnes of LNG over a six-year period to strengthen BP's gas marketing
position in Spain.



Higher gas prices relative to liquids prices in North America in the second
quarter have led to lower production and sales volumes in the natural gas
liquids business and a lower result compared with a year ago. The half year
result was flat.






                         Refining and Marketing





     2Q      1Q      2Q                                         First Half

   2002    2003    2003  $ million                             2003    2002

=======================                                       =============

    603     631     889  Replacement cost operating profit    1,520     671

   (114)     18      41  Special items                           59     (88)

    196     205     205  Acquisition amortization               410     389

-----------------------                                       -------------

                         Pro forma operating result

    685     854   1,135  adjusted for special items           1,989     972

=======================                                       =============

                         Refinery throughputs (mb/d)

    376     377     416  UK                                     397     384

    924     954     991  Rest of Europe                         973     879

  1,464   1,302   1,465  USA                                  1,384   1,429

    339     391     393  Rest of World                          392     357

-----------------------                                       -------------

  3,103   3,024   3,265  Total throughput                     3,146   3,049

=======================                                       =============

   95.8    94.2    96.7  Refining availability(a)(%)           95.4    95.8

=======================                                       =============

                         Oil sales volumes (mb/d)

                         Refined products

    230     279     279  UK                                     279     243

  1,444   1,318   1,358  Rest of Europe                       1,338   1,360

  1,941   1,751   1,822  USA                                  1,787   1,888

    522     645     607  Rest of World                          626     561

-----------------------                                      --------------

  4,137   3,993   4,066  Total marketing sales                4,030   4,052

  2,342   2,811   2,957  Trading/supply sales                 2,884   2,439

-----------------------                                      --------------

  6,479   6,804   7,023  Total refined product sales          6,914   6,491

  4,915   4,529   5,679  Crude oil                            5,104   4,862

-----------------------                                      --------------

 11,394  11,333  12,702  Total oil sales                     12,018  11,353

=======================                                      ==============

                         Global Indicator Refining Margin(b)

                         ($/bbl)

   0.59    3.70    2.15  NWE                                   2.92    0.34

   2.62    6.14    3.59  USGC                                  4.86    2.33

   3.76    4.14    4.73  Midwest                               4.44    2.91

   4.46    6.77    6.34  USWC                                  6.55    4.95

   0.18    2.98    0.66  Singapore                             1.81    0.20

   2.06    4.52    3.27  BP Average                            3.89    1.85

=======================                                      ==============





(a) Refining availability is the weighted average percentage of the period

    that refinery units are available for processing, after accounting for

    downtime such as turnarounds.



(b) 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.






                         Refining and Marketing





The pro forma result for the second quarter, adjusted for special items, was
$1,135 million, compared with $685 million for the same period last year. The
special charge of $41 million for the quarter relates to ongoing Veba
integration costs. The half year result is up $1,017 million compared with the
first half of last year.



The results for the quarter and half year reflect improved worldwide refining
margins and higher marketing margins, particularly retail margins in the USA and
Europe, with some offset from higher utility costs. Improved operating
performance also contributed to the results in the marketing businesses.



Refining throughputs increased by 5%, compared with a year ago, with
availability at 96.7%. Marketing volumes were 2% lower than a year ago.



An additional 760 sites were reimaged, bringing the total number of sites with
the BP Helios to some 12,000 worldwide.






                              Petrochemicals





     2Q      1Q      2Q                                         First Half

   2002    2003    2003   $ million                            2003    2002

=======================                                       =============

    203     139     313   Replacement cost operating profit     452     279

     43       -      (5)  Special items                          (5)     75

      -       -       -   Acquisition amortization                -       -

-----------------------                                       -------------

                          Pro forma operating result

    246     139     308   adjusted for special items            447     354

=======================                                       =============

    109      96     120(b)Chemicals Indicator Margin(a)($/te)   108(b)   95

=======================                                       =============

                          Petrochemicals production (kte)

    837     869     714   UK                                  1,583   1,666

  2,595   2,763   2,681   Rest of Europe                      5,444   5,178

  2,695   2,536   2,503   USA                                 5,039   5,184

    762     812     872   Rest of World                       1,684   1,472

-----------------------                                      --------------

  6,889   6,980   6,770   Total production                   13,750  13,500

=======================                                      ==============



(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. It does not cover our

    entire portfolio of products, and consequently is only indicative rather

    than representative of the margins achieved by BP in any particular

    period. Amongst the products and businesses covered in the CIM are

    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 second quarter is based on two months'

    actuals and one month of provisional data.






                                Petrochemicals





Petrochemicals' pro forma result for the second quarter, after adjusting for
special items, was $308 million, up from $139 million in the first quarter, due
primarily to lower feedstock costs and improved margins in several businesses.
This was the highest quarterly result for the segment since the second quarter
of 2000. Production of 6,770 thousand tonnes in the second quarter was 3% below
the first quarter. Although demand in Europe showed continuing weakness, overall
sales remained flat.



The first half result was 26% above that of a year ago, reflecting improved
margins, cost management and improved reliability of operations. First half
production was 250 thousand tonnes higher than a year ago due to core business
sales growth from Asian PTA and acetic acid plant start-ups and an additional
month of production from Veba.



During the quarter we completed the divestment of our interest in Petrokimia
Nusantara Interindo, PT (PT Peni), our polyethylene joint venture in Indonesia.



The special item for the quarter is a reduction in the provision for costs
associated with the closure of polypropylene capacity in the USA.






                        Other Businesses and Corporate





   2Q    1Q    2Q                                               First Half

 2002  2003  2003   $ million                                  2003    2002

=================                                             =============

 (128) (165) (134)  Replacement cost operating loss            (299)   (253)

    -     -     -   Special items                                 -       -

    -     -     -   Acquisition amortization                      -       -

-----------------                                             -------------

                    Pro forma operating result

 (128) (165) (134)  adjusted for special items                 (299)   (253)

=================                                             =============



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. In July, BP announced that it has agreed
to sell its 50 per cent interest in the Indonesian coal mining company PT Kaltim
Prima Coal to PT Bumi Resources, subject to the receipt of certain shareholder
and other approvals.



                              Exceptional Items



   2Q    1Q    2Q                                               First Half

 2002  2003  2003   $ million                                  2003    2002

=================                                             =============

                    Profit (loss) on sale of fixed assets and

  376   394   280     businesses or termination of operations   674     267

 (160)  (54) (149)  Taxation charge                            (203)   (121)

-----------------                                             -------------

  216   340   131   Exceptional items after taxation            471     146

=================                                             =============



Exceptional items for the second quarter include a gain on the sale of our
interest in the North Sea Forties oil field, partly offset by a provision for
the loss on disposal of QHD in China.



                              2003 Dividends



   2Q    1Q    2Q                                               First Half

 2002  2003  2003   $ million                                  2003    2002

=================                                             =============

                    Dividends per ordinary share

 6.00  6.25  6.50   cents                                     12.75   11.75

3.875 3.947 4.039   pence                                     7.986   7.926



 36.0  37.5  39.0   Dividends per ADS (cents)                  76.5    70.5

-----------------------                                      --------------



BP today announced a second quarterly dividend for 2003 of 6.50 cents per
ordinary share. Holders of ordinary shares will receive 4.039 pence per share
and holders of American Depositary Receipts (ADRs) $0.39 per ADS share. The
dividend is payable on 8 September to shareholders on the register on 15 August.
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 8 September. The third quarter 2003 results and dividend will be announced on
28 October.






                                Outlook


BP Group Chief Executive, Lord Browne, concluded:


   'World economic activity has continued to grow only slowly during the

   second quarter, with OECD industrial production weakening. US consumer

   confidence remains below the levels of last June, but with some signs of

   modest improvement compared with the first quarter of this year. The

   impact of SARS was discernible in lower economic activity in the second

   quarter in Asia, but there are already signs that the region is

   recovering into the second half of the year.



   'Crude oil markets continue to be characterized by relative tightness. On

   the basis of preliminary estimates, OECD commercial inventories ended the

   quarter at the lowest seasonal level for over a decade. Crude oil prices

   have been well supported, averaging $26.03 per barrel (Dated Brent) in

   the second quarter and over $28 per barrel in July to date. The seasonal

   pick-up in oil demand in the second half of the year, OPEC's June

   production cuts and an anticipated slow recovery in Iraqi oil production

   point to continued price support in coming months.



   'US natural gas prices fell back in the second quarter but remained high,

   with the Henry Hub first of the month index averaging $5.40/mmbtu. Gas

   price differentials in the Rockies have narrowed significantly following

   the opening of the Kern River pipeline expansion. High prices have

   instigated a number of market reactions. These, together with mild

   weather, have led to a series of very high storage injections in recent

   weeks, despite falling domestic production. Prices look set to stay above

   residual fuel oil parity during the third quarter.



   'Refining margins have started the third quarter at similar levels to the

   second quarter (BP GIM $3.27/bbl) and remain firm in most regions. OECD

   commercial product inventories are still at five-year lows and should

   continue to underpin refining fundamentals in the short term.



   'The strong retail margins experienced in the second quarter have

   softened and are projected to revert to more typical levels in the third

   quarter.



   'Petrochemical margins in the first half of 2003 were above those of last

   year, with higher product prices for the majority of petrochemical

   products. Recent increases in feedstock costs and flat demand are

   expected to result in a challenging environment in the third quarter.



   'Consistent with our financial framework and plan for the year, we expect

   capital expenditure to be in the range of $14 to 14.5 billion, excluding

   acquisitions. As previously indicated, 2003 is expected to be the peak

   year for our medium term capital spending programme. The $14 to 14.5

   billion range excludes the initial cash payment due on completion of the

   TNK-BP transaction, expected to complete later in the summer. In

   addition, subject to the trading environment, we expect to make payments

   of up to $2 billion to a number of the group's pension funds in the

   second half of 2003, and, if additional funds are available, to pursue

   further share buybacks. We expect gearing to return to the lower half of

   our 25-35% target range following these events.'



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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; currency exchange rates;

     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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