2Q04 Results Part 1 of 2
BP PLC
27 July 2004
BP p.l.c.
Group Results
2nd Quarter and Half Year 2004
London 27 July 2004
FOR IMMEDIATE RELEASE
RECORD HALF-YEAR RESULT; DIVIDEND PER SHARE UP 9%
---------------------------------------------------------------------------
Second First Second
Quarter Quarter Quarter First Half
2003 2004 2004 $ million 2004 2003 %
======================= ====================
Replacement cost profit
2,536 4,170 3,434 for the period (a) 7,604 5,956
629 547 474 Acquisition amortization(b) 1,021 1,257
----------------------- --------------------
3,165 4,717 3,908 Pro forma result 8,625 7,213 20
======================= ====================
8.81 11.61 9.93 - per ordinary share (pence) 21.54 20.14 7
14.29 21.36 17.85 - per ordinary share (cents) 39.21 32.42 21
0.86 1.28 1.07 - per ADS (dollars) 2.35 1.95
======================= ====================
o BP's second quarter pro forma result was $3,908 million, compared with
$3,165 million a year ago, an increase of 23%. For the half year, the
result was $8,625 million compared with $7,213 million, up 20%.
Replacement cost profit for the second quarter and half year was
$3,434 million and $7,604 million respectively, compared with
$2,536 million and $5,956 million a year ago.
o The second quarter result includes a net exceptional and non-operating
charge of $258 million compared with a net gain of $168 million in the
second quarter of 2003.
o The second quarter trading environment was generally stronger than a
year ago, with higher oil and gas realizations and refining margins.
o Net cash inflow for the quarter was $1.5 billion and net cash inflow
for the half year was $5.3 billion, compared with an inflow of
$2.4 billion and an inflow of $5.6 billion a year ago. Net cash flow
from operating activities for the quarter and half year was
$6.9 billion and $14.6 billion respectively, compared with $7.3 billion
and $13.3 billion a year ago.
o The pro forma ratio of net debt to net debt plus equity was 23% at the
end of the quarter.
o Return on average capital employed for the quarter and half year
respectively, on a pro forma basis, was 19.8% and 21.9%, compared with
18.7% and 21.2% a year ago. The cash return for the quarter was 36%
compared with 32% a year ago, and for the half year was 34% compared
with 35% a year ago.
o The quarterly dividend increased from 6.75 cents per share to 7.10
cents per share ($0.426 per ADS). This compares with 6.50 cents per
share a year ago. For the half year the dividend showed an increase of
8.6%. In sterling terms, the quarterly dividend is 3.860 pence per
share compared with 4.039 pence a year ago; for the half year the
decrease was 4.0%. During the first half, the company repurchased for
cancellation 380 million of its own shares, at a cost of $3.25 billion.
The increase in the per share dividend growth rate reflects the
reduction in the number of shares outstanding due to the share buyback
programme. This allows the company's level of dividend payments to be
allocated across a smaller equity base.
BP Group Chief Executive, Lord Browne, said:
'This has been another strong performance against the backdrop of a
robust trading environment. We are on track against our targets of
controlled investment for growth, increasing the dividend and using
additional free cash flow to fund a significant level of share
buybacks. The reduction in the number of shares outstanding has allowed
us to accelerate the per share dividend growth rate. The plans to
prepare the Olefins and Derivatives business for disposal are on
track.'
The pro forma result 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 BP's performance against that of its competitors.
(a) Replacement cost profit for the period includes the net profit or loss
on the sale of fixed assets and businesses or termination of
operations.
(b) Acquisition amortization is depreciation and amortization relating to
the fixed asset revaluation adjustments and goodwill consequent upon
the ARCO and Burmah Castrol acquisitions. The first quarter 2004 and
the first half results for 2003 and 2004 include accelerated
depreciation of the revaluation adjustment in respect of the impairment
of former ARCO assets.
Summary Second Quarter Results
Exploration and Production's second quarter result was up 18% on a year ago
reflecting higher liquids and gas realizations combined with the changing
production composition primarily arising from the greater proportion of
production from Russia, offset partly by exceptional losses and non-operating
charges in the quarter. The corresponding quarter in 2003 contained exceptional
gains and non-operating credits.
The Refining and Marketing result increased 43% compared with a year ago
reflecting stronger refining margins, supported by strong US product demand
coupled with below-normal inventories and the impact of industry-wide refinery
maintenance.
The Petrochemicals result improved from the first quarter reflecting the absence
of large exceptional losses reported in the first quarter together with improved
margins.
In Gas, Power and Renewables, the result increased compared with a year ago due
to a higher contribution from the natural gas liquids business in North America.
Interest and other finance expense for the quarter was $221 million compared
with $228 million for the prior quarter.
The pro forma effective tax rate on replacement cost profit was 35.7%.
Capital expenditure was $3.2 billion for the quarter and there were no
significant acquisitions. Disposal proceeds for the quarter were $0.66 billion.
Net debt at the end of the quarter was $18.2 billion. The pro forma ratio of net
debt to net debt plus equity was 23% at the end of the quarter compared with 22%
at the end of the first quarter.
During the third quarter, shares to the value of $1.25 billion will be issued to
Alfa Group and Access-Renova (AAR) as the first instalment of the deferred
consideration for our investment in TNK-BP.
---------
The commentaries above and following are based on the pro forma replacement cost
results.
TNK-BP operational and financial information has been estimated.
The financial information for 2003 has been restated to reflect (a) the transfer
of natural gas liquids (NGLs) operations from the Exploration and Production
segment to Gas, Power and Renewables on 1 January 2004; (b) the adoption by the
group of Financial Reporting Standard No. 17 'Retirement Benefits' (FRS 17) with
effect from 1 January 2004; and (c) the adoption by the group of Urgent Issues
Task Force Abstract No. 38 'Accounting for ESOP Trusts' with effect from 1
January 2004. For further information see Note 1.
Exceptional and Non-Operating Items
2Q 2004
------------------------------
Exceptional Non-Operating
$ million Items Items and UPIS
------------------------------
Exploration and Production (114) (247)
Refining and Marketing (18) -
Petrochemicals 6 -
Gas, Power and Renewables - -
Other businesses and corporate (1) -
------------------------------
(127) (247)
Taxation 28 88(a)
------------------------------
(99) (159)
==============================
(a) Tax on Non-Operating Items and Unrealized Profit in Stock (UPIS) is
calculated using the pro forma effective tax rate on replacement cost
profit, excluding exceptional items, of 35.5%.
Reconciliation of Reported Results to Pro Forma Results
Pro Forma Result ----- 2Q 2004 ----- Pro Forma Result
-------------------
2Q 1Q 2Q Acq. Reported First Half
2003 2004 2004 Amort+ Earnings* $ million 2004 2003
======================================= ==============
Exploration and
3,858 4,568 4,558 256 4,302 Production 9,126 8,999
Refining and
1,093 941 1,562 218 1,344 Marketing 2,503 1,926
306 (25) 208 - 208 Petrochemicals 183 443
Gas, Power
141 198 216 - 216 and Renewables 414 357
Other businesses
(153) 1,129 (164) - (164) and corporate 965 (319)
--------------------------------------- --------------
RC profit before
5,245 6,811 6,380 474 5,906 interest and tax 13,191 11,406
---------------------------------------- --------------
Interest and Other
(276) (228) (221) - (221) finance expense (449) (581)
(1,744)(1,822)(2,199) - (2,199) Taxation (4,021) (3,526)
(60) (44) (52) - (52) MSI (96) (86)
---------------------------------------- --------------
3,165 4,717 3,908 474 3,434 RC profit 8,625 7,213
---------------------------------------- --------------
462 Stock holding gains (losses)
-----
3,896 HC profit
=====
* Replacement cost profit for the period includes the net profit or loss on
the sale of fixed assets and businesses or termination of operations.
+ Acquisition amortization is depreciation and amortization relating to the
fixed asset revaluation adjustments and goodwill consequent upon the ARCO
and Burmah Castrol acquisitions. The first quarter 2004 and the first half
results for 2003 and 2004 include accelerated depreciation of the
revaluation adjustment in respect of the impairment of former ARCO assets.
Operating Results and Per Share Amounts
Second First Second
Quarter Quarter Quarter First Half
2003 2004 2004 2004 2003
================================ =====================
Replacement cost
Profit before
4,616 6,264 5,906 interest and tax ($m) 12,170 10,149
-------------------------------- ---------------------
Results for the
period ($m)
3,165 4,717 3,908 Pro forma result 8,625 7,213
2,536 4,170 3,434 Replacement cost profit 7,604 5,956
1,585 4,818 3,896 Historical cost profit 8,714 5,804
-------------------------------- ---------------------
Shares in issue at
22,101,622 21,996,888 21,789,115 period end (thousand)21,789,115 22,101,622
- ADS equivalent
3,683,604 3,666,148 3,631,519 (thousand) 3,631,519 3,683,604
Average number of
shares outstanding
22,164,026 22,087,796 21,906,318 (thousand) 21,997,057 22,244,797
- ADS equivalent
3,694,004 3,681,299 3,651,053 (thousand) 3,666,176 3,707,466
Per ordinary share
(cents)
14.29 21.36 17.85 Pro forma result 39.21 32.42
RC profit
11.45 18.88 15.68 for the period 34.56 26.77
HC profit
7.19 21.81 17.80 for the period 39.61 26.09
Per ADS (cents)
85.74 128.16 107.10 Pro forma result 235.26 194.52
RC profit
68.70 113.28 94.08 for the period 207.36 160.62
HC profit
43.14 130.86 106.80 for the period 237.66 156.54
-------------------------------- ---------------------
Exploration and Production
2Q 1Q 2Q First Half
2003 2004 2004 $ million 2004 2003
================= ==============
Replacement cost profit
3,434 4,242 4,302 before interest and tax 8,544 8,152
424 326 256 Acquisition amortization 582 847
----------------- --------------
Pro forma replacement cost result
3,858 4,568 4,558 before interest and tax 9,126 8,999
================= ==============
Results include:
- (123) (160) Asset write-downs/impairment (283) (49)
- - - Environmental charges - -
Restructuring, integration and
(12) - - rationalization costs - (102)
- - - Other - -
106 (66) (87) Unrealized profit in stock (UPIS) (153) (19)
----------------- --------------
94 (189) (247) Total non-operating items and UPIS (436) (170)
333 211 (114) Exceptional items 97 766
================= ==============
Total non-operating items, UPIS
427 22 (361) and exceptional items (339) 596
================= ==============
101 136 108 Exploration expense 244 213
Of which:
43 67 22 Exploration expenditure written off 89 93
----------------- --------------
Production (Net of Royalties)
1,712 2,342 2,321 Crude oil (mb/d) 2,331 1,771
199 191 197 Natural gas liquids (mb/d) 194 216
1,911 2,533 2,518 Total liquids (mb/d)(a) 2,525 1,987
8,439 8,600 8,425 Natural gas (mmcf/d) 8,512 8,727
3,366 4,015 3,971 Total hydrocarbons (mboe/d)(b) 3,993 3,492
================= ==============
Average realizations
25.73 31.30 34.47 Crude oil ($/bbl) 32.85 28.50
17.49 23.14 23.71 Natural gas liquids ($/bbl) 23.43 18.76
24.90 30.48 33.27 Total liquids ($/bbl) 31.85 27.47
3.39 3.79 3.68 Natural gas ($/mcf) 3.74 3.64
22.43 26.48 27.66 Total hydrocarbons ($/bbl) 27.06 24.49
================= ==============
Average oil marker prices
($/bbl)
26.03 32.03 35.32 Brent 33.67 28.77
29.02 35.30 38.28 West Texas Intermediate 36.80 31.53
27.04 34.22 36.99 Alaska North Slope US West Coast 35.61 30.13
================= ==============
Average natural gas marker prices
5.40 5.69 6.00 Henry Hub gas price ($/mmbtu)(c) 5.84 5.96
UK Gas - National
17.44 24.59 20.70 Balancing Point (p/therm) 22.64 19.35
================= ==============
(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 replacement cost result before interest and tax for the second
quarter was $4,558 million, up 18% from the second quarter of 2003. The primary
drivers for the change are the higher realizations in both liquids and gas
combined with the changing composition of production primarily arising from the
greater proportion of production from Russia. This was partly offset by the
exceptional losses and non-operating charges in the quarter. The corresponding
quarter in 2003 contained exceptional gains and non-operating credits.
Included in the results for the quarter was a non-operating charge as a result
of impairments totalling $160 million in respect of a gas processing plant in
the USA and a field in the Gulf of Mexico Shelf.
The second quarter result also includes a charge of $87 million, reflecting an
increase in the provision for Unrealized Profit in Stock (UPIS), which removes
the upstream margin from downstream inventories. This compares with a credit of
$106 million in the equivalent quarter of last year.
Production for the quarter was up 18% from the second quarter of 2003, to 3,971
mboe/d. This reflects increased production from Russia partly offset by
divestments, lower seasonal gas takes in the North Sea, anticipated decline and
unplanned shutdowns at the Mars platform in the Gulf of Mexico and in Trinidad.
The result for the half year also benefited from higher realizations combined
with the changing composition of production primarily resulting from increased
volumes from Russia offset by the above operational items.
Projects in the New Profit Centres remain on track. In the Gulf of Mexico,
offshore installation of the Holstein and Mad Dog Spars was completed, Holstein
topsides have been installed, and the Thunder Horse platform has left the
construction yard in Korea. In Algeria, first gas sales from the In Salah gas
project have been achieved. In Azerbaijan, installation of the Central Azeri
jacket was completed. In Angola, the Kizomba A Floating Production Storage and
Offloading vessel arrived at the field location in Block 15 and hook-up to the
tension leg platform is in progress. In Trinidad the Atlas methanol plant was
brought on line. In Australia, commissioning of North West Shelf Train 4 has
commenced with first gas delivered to the plant.
Projects in Existing Profit Centres are also on track. In the UK the Clair
jacket and deck has been installed offshore. In Egypt, the first steps were
taken towards the development of a major LNG business, with agreements signed to
deliver natural gas to the Damietta plant.
In the second quarter we had a further exploration success in Angola with the
Venus discovery in offshore Block 31 and two discoveries in the Nile Delta in
Egypt, Temsah and Polaris.
During the quarter, we signed sale and purchase agreements in Indonesia for the
divestment of our interest in the Kangean Production Sharing Contract and our
participating interest in the Muriah Production Sharing Contract, in the USA for
the sale of our interest in the South Pass 60 property in the Gulf of Mexico
Shelf and Swordfish in the deepwater Gulf of Mexico. The total net exceptional
losses in respect of these transactions for the quarter were $114 million.
Customer Facing Segments
Refining and Marketing
2Q 1Q 2Q First Half
2003 2004 2004 $ million 2004 2003
======================= =============
Replacement cost profit
888 720 1,344 before interest and tax 2,064 1,516
205 221 218 Acquisition amortization 439 410
----------------------- -------------
Pro forma replacement cost result
1,093 941 1,562 before interest and tax 2,503 1,926
======================= =============
Results include:
- - - Asset write-downs/impairment - -
- - - Environmental charges - -
Restructuring, integration and
(41) - - rationalization costs - (59)
- - - Other - -
----------------------- -------------
(41) - - Total non-operating items - (59)
(49) (140) (18) Exceptional items (158) (101)
======================= =============
Total non-operating and
(90) (140) (18) exceptional items (158) (160)
======================= =============
Refinery throughputs (mb/d)
416 395 404 UK 400 397
991 884 871 Rest of Europe 878 973
1,465 1,265 1,370 USA 1,317 1,384
393 399 377 Rest of World 388 392
----------------------- -------------
3,265 2,943 3,022 Total throughput 2,983 3,146
======================= =============
96.7 95.1 95.1 Refining availability 95.1 95.4
======================= =============
Oil sales volumes (mb/d)
Refined products
279 294 318 UK 306 279
1,358 1,324 1,344 Rest of Europe 1,333 1,338
1,822 1,727 1,724 USA 1,726 1,787
607 679 665 Rest of World 672 626
----------------------- --------------
4,066 4,024 4,051 Total marketing sales 4,037 4,030
2,957 2,917 2,087 Trading/supply sales 2,502 2,884
----------------------- --------------
7,023 6,941 6,138 Total refined product sales 6,539 6,914
5,679 5,104 5,339 Crude oil 5,222 5,104
----------------------- --------------
12,702 12,045 11,477 Total oil sales 11,761 12,018
======================= ==============
Global Indicator Refining Margin(a)
($/bbl)
2.15 2.73 5.29 NWE 4.01 2.92
3.59 6.92 9.18 USGC 8.05 4.86
4.73 4.67 9.01 Midwest 6.84 4.44
6.34 8.06 15.41 USWC 11.73 6.55
0.66 3.42 2.80 Singapore 3.11 1.81
3.27 4.62 7.89 BP Average 6.25 3.89
======================= ==============
(a) 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.
Customer Facing Segments
Refining and Marketing
The pro forma replacement cost result before interest and tax for the second
quarter was $1,562 million. This compares with $1,093 million for the same
period last year, an increase of 43%. The result for the half year represents an
increase of $577 million (30%), at $2,503 million.
Refining margins in the second quarter were stronger for most regions than in
both the equivalent quarter a year ago and the first quarter of 2004, supported
by strong US product demand, coupled with below-normal inventories and the
impact of industry-wide planned and unplanned refinery maintenance. Compared to
the second quarter of 2003, the increase in result was less than suggested by
movements in the Global Indicator Margin (GIM), due to operational outages at
the Texas City Refinery, scheduled refinery turnarounds and higher purchased
energy costs. Marketing margins increased relative to the previous quarter,
particularly at the end of the quarter, but were below seasonal norms due to
pressure from rising crude and product prices.
The improvement relative to the first half of 2003 was attributable to the
stronger refining margins, with overall marketing margins lower due to factors
outlined above.
Refining throughputs for the quarter were 3,022 mb/d, some 7% below the second
quarter of 2003 due to the disposal of the Bayernoil refinery and the planned
turnaround at Cherry Point refinery. The throughputs were some 3% higher than
those in the previous quarter due to lower turnaround activity. The quarter's
refining availability was 95.1%. Marketing sales were 4,051 mb/d, a similar
level to both the equivalent quarter last year and the previous quarter.
During the quarter, BP continued the successful roll-out of its new Ultimate(R)
(a) generation gasoline and diesel fuels with launches in Germany and Austria.
Also in the quarter, BP announced the closure of refining operations at the ATAS
Refinery in Mersin, south eastern Turkey. The site will continue to operate as a
fuels terminal.
The quarter's exceptional charges included an additional charge associated with
the termination of the lubricants operation at the Coryton Refinery and the
closure of a terminal elsewhere in the UK.
The disposal of BP's interests in the Singapore Refining Company Private Limited
was concluded on 30 June.
Shortly after the quarter, BP and the Singapore Petroleum Company Limited (SPC)
announced that conditional agreement had been reached for SPC to purchase BP's
Retail and LPG Business in the Singapore retail network and related assets for
$70 million; the transaction completion is expected towards the end of 2004.
(a) Ultimate(R) is a trademark of BP p.l.c.
Customer Facing Segments
Petrochemicals
2Q 1Q 2Q First Half
2003 2004 2004 $ million 2004 2003
======================= =============
Replacement cost profit
306 (25) 208 before interest and tax 183 443
- - - Acquisition amortization - -
----------------------- -------------
Pro forma replacement cost result
306 (25) 208 before interest and tax 183 443
======================= =============
Results include:
Provision against fixed
assets investments/
- - - asset write-downs/impairment - -
- - - Environmental charges - -
Restructuring, integration and
5 - - rationalization costs - 5
- - - Other - -
----------------------- -------------
5 - - Total non-operating items - 5
2 (154) 6 Exceptional items (148) 9
======================= =============
Total non-operating and
7 (154) 6 exceptional items (148) 14
======================= =============
134 125 131(b)Chemicals Indicator Margin(a)($/te) 128(b) 115
======================= =============
Petrochemicals production (kte)
714 840 856 UK 1,696 1,583
2,681 2,728 2,726 Rest of Europe 5,454 5,444
2,503 2,543 2,514 USA 5,057 5,039
872 1,132 1,075 Rest of World 2,207 1,684
----------------------- --------------
6,770 7,243 7,171 Total production 14,414 13,750
======================= ==============
(a) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected
by Nexant 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 of the margins achieved by
BP in any particular period.
(b) Provisional. The data for the second quarter is based on two months'
actuals and one month of provisional data.
Petrochemicals' pro forma replacement cost result before interest and tax for
the second quarter was $208 million, up from a loss of $25 million in the first
quarter. The improvement is due to the absence of large exceptional losses in
the first quarter and improved margins. The second quarter result was a decrease
of $98 million compared with the second quarter a year ago as higher product
realizations were more than offset by adverse foreign exchange impacts, higher
energy costs and increased feedstock prices. The first half result was 59% lower
than that of a year ago, reflecting exceptional losses and lower margins.
Production of 7,171 thousand tonnes in the second quarter was 72 thousand tonnes
down on the previous quarter due to seasonal turnaround activity. First half
production was 664 thousand tonnes higher than a year ago due to new Asian PTA
capacity and higher asset utilization.
During the second quarter we signed a heads of agreement with our joint venture
partner, Sinopec (BP share 50%), to build a new 500 thousand tonnes a year
acetic acid plant in China. We signed a letter of intent to examine the
viability of expanding production at the BP Zhuhai PTA plant in China (BP share
85%) to 1,200 thousand tonnes a year. We completed the sale of our Speciality
Intermediates Business.
We have progressed with plans to consolidate the Olefins and Derivatives (O&D)
business into a stand-alone entity able to operate separately from the BP Group.
The BP Group plans to sell O&D in due course, possibly commencing the sale
through an Initial Public Offering, depending on market circumstances and
necessary approvals in the second half of 2005. We intend to retain the balance
of our petrochemicals portfolio, comprising the aromatics and acetyls business.
Customer Facing Segments
Gas, Power and Renewables
2Q 1Q 2Q First Half
2003 2004 2004 $ million 2004 2003
====================== ==============
Replacement cost profit
141 198 216 before interest and tax 414 357
- - - Acquisition amortization - -
---------------------- --------------
Pro forma replacement cost result
141 198 216 before interest and tax 414 357
====================== ==============
Results include:
- - - Asset write-downs/impairment - -
- - - Environmental charges - -
Restructuring, integration and
- - - rationalization costs - -
- - - Other - -
---------------------- --------------
- - - Total non-operating items - -
6 - - Exceptional items - 6
====================== ==============
Total non-operating and
6 - - exceptional items - 6
====================== ==============
Gas sales volumes (mmcf/d)
2,581 3,027 2,495 UK 2,761 2,896
421 442 266 Rest of Europe 354 447
10,441 13,618 12,470 USA 13,044 11,084
10,839 13,902 12,070 Rest of World 12,986 11,194
---------------------- --------------
24,282 30,989 27,301 Total gas sales volumes 29,145 25,621
======================= ==============
NGL sales volumes (mb/d)
1 4 8 UK 6 3
- 1 3 Rest of Europe 2 -
289 462 334 USA 397 285
147 244 166 Rest of World 205 199
----------------------- --------------
437 711 511 Total NGL sales volumes 610 487
======================= ==============
The pro forma replacement cost result before interest and tax for the second
quarter and half year was $216 million and $414 million respectively, compared
with $141 million and $357 million a year ago. The primary reason for these
increases is a higher contribution from the natural gas liquids business in
North America.
The half year result also benefited from higher contributions from the global
LNG and Solar businesses whilst the marketing and trading result is down due to
lower margins partly offset by higher gas sales volumes.
During the quarter, the Guangdong Dapeng LNG Company Ltd. (BP share 30%) in
China signed a series of milestone agreements relating to the Guangdong LNG
terminal and trunkline project which is due on stream in 2006. In addition,
since the quarter-end, the Tangguh LNG project in Indonesia (BP share 37.16%)
signed a sale and purchase agreement for the supply of 0.55 million tonnes per
annum for a period of 20 years to Posco, who is currently building an LNG import
terminal at Gwangyang in South Korea. BP Gas Marketing Ltd. has signed an
agreement with the Egyptian Natural Gas Holding Company to purchase LNG under a
long term contract from the Damietta LNG plant which is expected to start
commercial production in 2005.
Other Businesses and Corporate
2Q 1Q 2Q First Half
2003 2004 2004 $ million 2004 2003
====================== =============
Replacement cost profit (loss)
(153) 1,129 (164) before interest and tax 965 (319)
- - - Acquisition amortization - -
---------------------- -------------
Pro forma replacement cost result
(153) 1,129 (164) before interest and tax 965 (319)
====================== =============
Results include:
- - - Asset write-downs/impairment - -
- - - Environmental charges - -
Restructuring, integration and
- - - rationalization costs - -
- - - Other - -
---------------------- --------------
- - - Total non-operating items - -
(12) 1,313 (1) Exceptional items 1,312 (6)
====================== ==============
Total non-operating
(12) 1,313 (1) and exceptional items 1,312 (6)
====================== ==============
Other businesses and corporate comprises Finance, the group's aluminium asset
and interest income and costs relating to corporate activities. In the first
quarter, BP sold its interest in PetroChina for $1.65 billion and its interest
in Sinopec for $0.7 billion. These interests were previously included in other
businesses and corporate.
Dividends
2Q 1Q 2Q First Half
2003 2004 2004 2004 2003
====================== ==============
Dividends per ordinary share
6.50 6.75 7.10 cents 13.85 12.75
4.039 3.807 3.860 pence 7.667 7.986
39.0 40.5 42.6 Dividends per ADS (cents) 83.1 76.5
----------------------- --------------
BP today announced a second quarterly dividend for 2004 of 7.10 cents per
ordinary share. Holders of ordinary shares will receive 3.860 pence per share
and holders of American Depositary Receipts (ADRs) $0.426 per ADS share. The
dividend is payable on 7 September to shareholders on the register on 13 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 7 September. The third quarter 2004 results and dividend will be announced on
26 October 2004.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'The world economy slowed in the second quarter of 2004, although growth
remains above historic trend levels. The pace of economic activity seems
to be easing in the US, while specific policy actions in China have been
put in place to slow domestic demand growth. However, the momentum in
Japan has continued and signs of recovery are emerging within Europe.
Continued global economic growth is expected.
'Oil prices in the second quarter averaged $35.32 per barrel (Dated
Brent), the highest of any quarter for more than 20 years and over 10%
and $3 per barrel higher than in the first quarter. Prices have
strengthened further during July to date, averaging over $37 per barrel.
Prices have been supported by continued strong oil demand growth and
concerns about supply disruptions. OECD commercial inventories have
remained low relative to five year averages even though OPEC production
has increased following the 3 June agreement to raise the OPEC-10 output
ceiling. Oil prices should remain supported by limited spare OPEC
production capacity and further oil demand growth.
'US natural gas prices averaged $6/mmbtu (Henry Hub first of month index)
in the second quarter, up $0.31/mmbtu versus the first quarter. Since the
beginning of May spot gas prices have traded in the upper half of the
residual fuel oil and distillate parity range. The July first of month
price was $6.14/mmbtu, although daily spot prices have since eased below
$6/mmbtu as confidence has grown over gas availability through the summer
cooling period. Working gas in storage remains close to the 5 year
average. US industrial gas demand has increased. Supply is increasing as
imports grow both from Canada and in the form of LNG and as onshore
domestic production rises. Summer temperatures and oil prices will be the
keys to near term gas prices.
'Refining margins in the second quarter strengthened sharply relative to
the first quarter of 2004. Low product inventories, strong global oil
demand growth and concerns about US gasoline supply were all very
supportive. The margin gains were most pronounced in the US but Europe
also benefited. Margins in the third quarter will be increasingly
dependent on perceived demand for distillate. Marketing margins recovered
late in the second quarter but remain exposed to crude and product price
volatility.
'Petrochemical margins in the second quarter improved versus the previous
quarter as continued global economic growth supported demand. Further
growth in demand is anticipated, assuming the global economy remains on
track. Volatility of energy prices and exchange rates will continue to
influence future margins.
'Capital expenditure, excluding acquisitions, for the first half of 2004
was $6.4 billion, and will be around $14 billion for the year, slightly
above our previous forecast primarily due to the weaker US dollar.
The share buyback programme is continuing, reducing the number of
shares outstanding and increasing our ability to accelerate per share
dividend growth.'
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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, costs, demand,
future performance, growth and other trend projections, maintenance,
margins, prices, production, sales, share repurchases, supply and the
timing of projects and pending transactions. 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;
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 2003 and our 2003 Annual Report on Form 20-F filed
with the US Securities and Exchange Commission.
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