3rd Quarter Results Part 1
BP PLC
29 October 2002
BP p.l.c.
Group Results
Third Quarter 2002
London 29 October 2002
FOR IMMEDIATE RELEASE
UNDERLYING PERFORMANCE IMPROVEMENT CONTINUES
---------------------------------------------------------------------------
Third Second Third
Quarter Quarter Quarter Nine Months
2001 2002 2002 $ million 2002 2001 %
======================= ====================
Replacement cost profit
1,936 1,293 761 before exceptional items 2,978 7,585
79 351 556 Special items(a) 1,027 222
630 537 977 Acquisition amortization(b) 2,052 1,981
----------------------- --------------------
Pro forma result adjusted
2,645 2,181 2,294 for special items 6,057 9,788 (38)
======================= ====================
8.20 6.71 6.61 - per ordinary share (pence) 18.26 30.28 (40)
11.80 9.72 10.24 - per ordinary share (cents) 27.02 43.60 (38)
0.71 0.59 0.61 - per ADS (dollars) 1.62 2.62
======================= ====================
o BP's third quarter pro forma result, adjusted for special items, was
$2,294 million, compared with $2,645 million a year ago, a reduction of
13%. For the nine months, the result was $6,057 million compared to
$9,788 million, down 38%. Replacement cost profit, before exceptional
items, for the third quarter and nine months was $761 million and
$2,978 million respectively, compared with $1,936 million and $7,585
million a year ago.
o The third quarter trading environment was similar to a year ago for
Exploration and Production but less favourable for Refining and
Marketing. The nine months trading environment was significantly less
favourable than a year ago for both businesses.
o Underlying performance improvements were $0.8 billion before tax for
the nine months. The outcome for the year is expected to be in the
range of $1.2-$1.4 billion. Hydrocarbon production increased by around
4% and 3% for the third quarter and nine months respectively. The
increase for the year is expected to be about 3%.
o There were significant exceptional and special items in the third
quarter. Exceptional profits after tax of $1,769 million were
principally related to the sale of BP's interest in Ruhrgas. Special
charges after tax were $556 million, comprising mainly impairment
charges and a provision. In addition, there was accelerated acquisition
amortization of $405 million, reflecting impairment of former ARCO
assets.
o Return on average capital employed for the nine months, on a pro forma
basis adjusted for special items, was 13% compared with 22% in 2001.
o Quarterly dividend is 6.0 cents per share ($0.36 per ADS). This
compares with 5.5 cents a year ago. For the nine months the dividend
showed an increase of 9%. In sterling terms, the quarterly dividend is
3.897 pence per share compared with 3.805 pence a year ago; for the
nine months the increase was 4%. The company purchased for cancellation
100 million of its own shares during the quarter, at a cost of
$750 million.
BP Group Chief Executive, Lord Browne, said:
'Our trading environment has shown little improvement overall and, for
the nine months, is well down on a year ago. Performance improvements
have been impacted by weaker than expected production.'
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. Further
details are shown on page 3.
(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 third quarter 2002
includes accelerated depreciation of the revaluation adjustment in
respect of the impairment of former ARCO assets.
Summary Quarterly Results
Exploration and Production's third quarter result was similar to a year ago with
higher production and stronger oil realizations offset by weaker gas
realizations. Total hydrocarbon production for the quarter was up around 4% on a
year ago. There were new discoveries in Angola, Trinidad and the Gulf of Mexico.
In Gas, Power and Renewables, the result reflected less favourable marketing and
trading conditions and the sale of the Ruhrgas interest, partly offset by an
improved NGL result.
The Refining and Marketing result decreased significantly, primarily reflecting
lower worldwide refining margins than a year ago.
The Chemicals result was slightly above the prior quarter's, primarily due to
reduced fixed costs.
Interest expense for the quarter was $300 million, compared to $314 million for
the prior quarter, reflecting lower average debt.
The pro forma effective tax rate on replacement cost profit, before exceptional
items, and adjusted for special items, was 34.5% compared to 35.4% a year ago.
The effective tax rate on special items was 49%, reflecting the tax relief
expected on the asset impairments in Exploration and Production and related
restructuring.
Capital expenditure, was $3.2 billion for the quarter. There were no significant
acquisitions in the third quarter. Disposal proceeds were $2.9 billion,
including $2.3 billion for the sale of the Ruhrgas interest.
Net cash outflow was $523 million, compared to an inflow of $905 million a year
ago. Higher disposal proceeds were more than offset by the payment for the
remaining interest in Veba and lower operating cash flow.
Net debt at the end of the quarter was $21.0 billion. The pro forma ratio of net
debt to net debt plus equity was 29%.
---------
The financial information for 2001 has been restated to reflect (i) the adoption
by the group of FRS 19 'Deferred Tax' with effect from 1 January 2002; and (ii)
the transfer of the solar, renewables and alternative fuels activities from
Other businesses and corporate to Gas and Power on 1 January 2002. To reflect
this transfer, Gas and Power has been renamed Gas, Power and Renewables from the
same date. See Note 1 on page 20 for further information.
The commentaries above and following are based on the pro forma replacement cost
operating results, before exceptional items, adjusted for special items.
Reconciliation of Reported Results to
Pro Forma Results Adjusted for Special Items
Pro Forma Result Pro Forma Result
adjusted for ----- 3Q 2002 --------------- adjusted for
special items special items
-------------------
3Q 2Q 3Q Special Acq. Reported Nine months
2001 2002 2002 Items* Amort+ Earnings $ million 2002 2001
=========================================== ==============
Exploration and
3,070 2,889 3,050 703 775 1,572 Production 8,339 12,124
Gas, Power
125 114 87 30 - 57 and Renewables 312 386
Refining and
1,289 685 522 83 202 237 Marketing 1,494 4,045
113 246 272 140 - 132 Chemicals 626 203
Other businesses
(117) (128) (116) 125 - (241) and corporate (369) (348)
------------------------------------------- --------------
RC operating
4,480 3,806 3,815 1,081 977 1,757 profit 10,402 16,410
------------------------------------------- --------------
(367) (314) (300) - - (300)Interest expense (947) (1,194)
(1,456)(1,243)(1,213) (525) - (688)Taxation (3,313) (5,390)
(12) (68) (8) - - (8)MSI (85) (38)
------------------------------------------- --------------
RC profit before
2,645 2,181 2,294 556 977 761 exceptional items 6,057 9,788
------------------------------------------- --------------
1,794 Exceptional items before tax
(25)Taxation on exceptional items
-----
2,530 RC profit after exceptional items
305 Stock holding gains
-----
2,835 HC profit
=====
* The special items refer to non-recurring charges and credits. The special
items for the third quarter include impairment charges and restructuring
costs in Exploration and Production, an impairment charge in Gas, Power
and Renewables, integration and certain other costs in Refining and
Marketing, an impairment charge in Chemicals, and a provision to cover
future rental payments on surplus leasehold office accommodation in Other
Businesses and Corporate.
+ Acquisition amortization is depreciation and amortization relating to the
fixed asset revaluation adjustments and goodwill consequent upon the ARCO
and Burmah Castrol acquisitions. The third quarter 2002 includes
accelerated depreciation of the revaluation adjustment in respect of the
impairment of former ARCO assets.
Operating Results
Third Second Third
Quarter Quarter Quarter Nine Months
2001 2002 2002 2002 2001
======================= ==============
Replacement cost
3,730 3,250 1,757 operating profit ($m) 7,065 14,147
----------------------- --------------
Replacement cost profit
1,936 1,293 761 before exceptional items ($m) 2,978 7,585
----------------------- --------------
Profit after exceptional items ($m)
1,993 1,509 2,530 Replacement cost 4,893 7,762
1,588 2,040 2,835 Historical cost 6,171 7,159
----------------------- --------------
Per ordinary share (cents)
Pro forma result
11.80 9.72 10.24 adjusted for special items 27.02 43.60
RC profit before
8.63 5.77 3.39 exceptional items 13.28 33.78
7.09 9.10 12.65 HC profit after exceptional items 27.53 31.89
Per ADS (cents)
Pro forma result
70.80 58.32 61.44 adjusted for special items 162.12 261.60
RC profit before
51.78 34.62 20.34 exceptional items 79.68 202.68
42.54 54.60 75.90 HC profit after exceptional items 165.18 191.34
----------------------- --------------
Exploration and Production
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
================= ==============
2,627 2,458 1,572 Replacement cost operating profit 5,958 10,720
- 90 703 Special items 920 -
443 341 775 Acquisition amortization 1,461 1,404
----------------- --------------
Pro forma operating result
3,070 2,889 3,050 adjusted for special items 8,339 12,124
================= ==============
Results include:
86 222 119 Exploration expense 465 336
Of which:
23 147 55 Exploration expenditure written off 261 153
----------------- --------------
Crude oil and natural gas
liquids production (mb/d)
(Net of Royalties)
457 481 414 UK 459 480
96 108 107 Rest of Europe 106 95
741 791 754 USA 768 735
589 672 708 Rest of World 675 592
----------------- --------------
1,883 2,052 1,983 Total liquids production 2,008 1,902
================= ==============
Natural gas production(a)
(mmcf/d)(Net of Royalties)
1,305 1,602 1,240 UK 1,488 1,713
139 157 131 Rest of Europe 150 143
3,577 3,565 3,450 USA 3,525 3,531
3,298 3,343 3,661 Rest of World 3,468 3,200
----------------- --------------
8,319 8,667 8,482 Total natural gas production 8,631 8,587
================= ==============
Average liquids realizations(b)
($/bbl)
24.34 24.59 26.26 UK 23.74 25.33
22.38 21.81 22.94 USA 20.71 23.58
22.71 22.20 24.43 Rest of World 21.81 23.40
23.08 22.81 24.40 BP Average 21.99 24.22
================= ==============
Average oil marker prices
($/bbl)
25.30 25.07 26.91 Brent 24.40 26.14
26.72 26.30 28.26 West Texas Intermediate 25.40 27.77
24.05 25.04 27.26 Alaska North Slope US West Coast 24.06 25.01
================= ==============
Average natural gas realizations
($/mcf)
2.52 2.50 2.58 UK 2.75 3.05
2.63 2.76 2.34 USA 2.41 4.68
2.27 2.04 1.99 Rest of World 1.99 2.73
2.49 2.45 2.25 BP Average 2.32 3.66
----------------- --------------
2.93 3.38 3.16 Henry Hub gas price(c) ($/mmBtu) 2.94 4.88
UK Gas - National
17.07 12.10 12.74 Balancing Point (p/therm) 14.53 22.17
================= ==============
(a) Natural gas is converted to oil equivalent at 5.8 billion cubic feet
= 1 million barrels.
(b) Crude oil and natural gas liquids.
(c) Henry Hub First of the Month Index.
Exploration and Production
The pro forma result for the third quarter was $3,050 million, similar to the
third quarter of 2001 when adjusted for special charges of $686 million and
accelerated acquisition amortization of $405 million, relating to the
impairments of Shearwater in the North Sea, Rhourde El Baguel in Algeria, LL652
and Boqueron in Venezuela, Pagerungan in Indonesia and Badami in Alaska,
following full technical reassessments and evaluations of future investment
opportunities. In addition, there were special restructuring charges of $17
million.
Overall hydrocarbon production for the quarter at 3,445 mboe/d was up around 4%
on a year ago reflecting new production from Alaska, Deep Water Gulf of Mexico,
Trinidad, Angola and China and from our increased holding in Sidanco. These
increases more than offset the impact of operational problems in the UK and USA
and tropical storms in the Gulf of Mexico. During the quarter, King's Peak in
the Gulf of Mexico and Trinidad LNG train 2 came on stream. Horn Mountain,
Aspen, Princess and the Vietnam integrated gas project are due on stream in the
fourth quarter.
The third quarter result reflected an increase in liquids realizations of $1.32/
bbl. There was some offset from the charge of $64 million for Unrealized Profit
In Stock (UPIS) to remove the upstream margin from downstream inventories
following price rises since the second quarter. There was a negligible UPIS
effect in the equivalent quarter last year. Overall natural gas realizations
were down by $0.24 per thousand cubic feet. North American natural gas
realizations suffered from widening regional differentials to the Henry Hub
marker caused by continued transportation capacity restrictions and weak local
demand in the Rockies region.
The nine months result at $8,339 million, down $3,785 million on a year ago,
reflected the impact of significantly lower oil and gas prices and higher
exploration expense, mainly due to the second quarter write-off of the Neptune
project in the Gulf of Mexico; these adverse factors were partly offset by
volume growth and unit lifting cost reductions. Total hydrocarbon production for
the nine months at 3,496 mboe/d was up 3% compared with a year ago.
During the quarter BP participated in three discoveries: in Angola, the
Plutao oil discovery in Block 31 (BP 26.7% and operator), offshore Trinidad,
the Iron Horse gas discovery (BP 90% and operator) and in the Gulf of Mexico,
the Great White prospect (BP 33%).
Gas, Power and Renewables
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
====================== ==============
125 114 57 Replacement cost operating profit 282 386
- - 30 Special items 30 -
- - - Acquisition amortization - -
---------------------- --------------
Pro forma operating result
125 114 87 adjusted for special items 312 386
====================== ==============
Gas sales volumes (mmcf/d)
2,170 2,349 1,809 UK 2,256 2,682
170 390 353 Rest of Europe 385 207
8,692 8,451 9,332 USA 8,841 8,403
7,331 8,618 9,556 Rest of World 9,155 7,191
----------------------- --------------
18,363 19,808 21,050 Total gas sales volumes 20,637 18,483
======================= ==============
NGL sales volumes (mb/d)
- - - UK - -
- - - Rest of Europe - -
233 189 178 USA 190 220
162 196 185 Rest of World 187 180
----------------------- --------------
395 385 363 Total NGL sales volumes 377 400
======================= ==============
Gas, Power and Renewables
The pro forma result for the third quarter and nine months, adjusted for special
items, was $87 million and $312 million respectively, compared with $125 million
and $386 million a year ago. The special item of $30 million relates to the
impairment of a cogeneration power plant in the UK. The third quarter's
marketing and trading result was down, despite a 15% increase in gas sales
volumes, due to lower margins in North America and losses associated with the
unscheduled shutdown of the UK/Belgium Interconnector. The NGL business result
was up on a year ago due to improved margins. The result includes only one month
of contribution from Ruhrgas due to the disposal of this investment during the
third quarter. The nine months result reflects lower marketing and trading
margins and a lower Ruhrgas contribution, partly offset by an improvement in the
NGL business.
During the quarter BP and its partners entered into two liquefied natural gas
(LNG) agreements with China National Offshore Oil Corporation. The Australian
North West Shelf consortium (BP 16.6%) was selected to supply up to 3.3 million
tonnes a year to China's Guangdong terminal (BP 30%). In addition, an agreement
was signed to supply LNG to the Fujian terminal from Indonesia's Tangguh natural
gas project (BP 49.7%). The 25-year LNG Sales and Purchase Agreement will
involve the supply of up to 2.6 million tonnes of LNG a year to Fujian. Both
projects are due to start up in 2006 or 2007. Separately, a supply and purchase
agreement has been signed with Qatar Liquefied Gas Company Ltd. (Qatargas) for
the delivery of 750,000 tonnes of LNG per year to the Spanish market over a
three year period. The first LNG cargo to Spain is scheduled for delivery in the
third quarter of 2003.
In North America, BP announced a multi-year agreement with Kinder Morgan that
will provide BP with natural gas supply and gas transportation and storage
facilities on Kinder Morgan's Texas intra-state pipeline systems.
Refining and Marketing
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
======================= =============
990 603 237 Replacement cost operating profit 908 3,194
112 (114) 83 Special items (5) 274
187 196 202 Acquisition amortization 591 577
----------------------- -------------
Pro forma operating result
1,289 685 522 adjusted for special items 1,494 4,045
======================= =============
Refinery throughputs (mb/d)
414 376 394 UK 387 347
646 924 956 Rest of Europe 905 654
1,568 1,464 1,455 USA 1,438 1,578
375 339 349 Rest of World 354 379
----------------------- -------------
3,003 3,103 3,154 Total throughput 3,084 2,958
======================= =============
Oil sales volumes (mb/d)
Refined products
269 230 258 UK 248 266
1,058 1,444 1,604 Rest of Europe 1,441 1,055
1,863 1,941 1,847 USA 1,874 1,897
612 522 613 Rest of World 578 599
----------------------- --------------
3,802 4,137 4,322 Total marketing sales 4,141 3,817
2,744 2,342 2,589 Trading/supply sales 2,489 2,308
----------------------- --------------
6,546 6,479 6,911 Total refined product sales 6,630 6,125
4,680 4,915 3,648 Crude oil 4,458 4,431
----------------------- --------------
11,226 11,394 10,559 Total oil sales 11,088 10,556
======================= ==============
Global Indicator Refining Margin(a)
($/bbl)
1.74 0.59 1.28 NWE 0.66 2.48
3.24 2.62 1.82 USGC 2.16 5.87
7.20 3.76 3.27 Midwest 3.03 7.20
8.17 4.46 3.54 USWC 4.47 9.40
0.75 0.18 0.47 Singapore 0.28 0.80
3.83 2.06 1.98 BP Average 1.90 4.62
======================= ==============
(a) The Global Indicator Refining Margin (GIM) is the average of seven
regional indicator margins weighted for BP's crude refining capacity in
each region. Each regional indicator margin is based on a single
representative crude with product yields characteristic of the typical
level of upgrading complexity.
Refining and Marketing
The pro forma result, adjusted for special items, for the third quarter was $522
million, a decrease of $767 million or 60% on the same period last year. The
special items comprised Veba and other European integration costs of $54
million, settlement costs associated with a pre-acquisition ARCO US MTBE supply
contract of $22 million, and costs related to the Olympic pipeline incident of
$7 million. Although not classified as a special item, the third quarter result
also included a charge of $80 million in respect of environmental liabilities.
For the nine months the result was $1,494 million, down $2,551 million or 63%.
Significantly lower refining margins are the primary reason for the decreases
versus last year. Refining margins declined in the third quarter compared with
the second quarter, reflecting high product stocks early in the quarter and
pressure from higher crude prices. Retail margins for the quarter were lower
than a year ago, particularly in the US, with the nine months similar to the
prior year. Partly offsetting the poorer trading environment were the
contributions from Veba and improved refining and marketing operational
performance.
Refining throughputs increased by 5% compared with the third quarter of 2001 due
to the Veba acquisition and better availability; these factors more than offset
the Yorktown, Mandan and Salt Lake City refinery divestments. Marketing volumes
increased by 14%, largely due to Veba. Excluding Veba marketing volumes were
flat.
Shop sales increased by 64%, primarily due to Veba. Excluding Veba shop sales
increased by 11%, reflecting the growing number of BP Connect stations and same
store sales growth.
During the quarter, BP opened an additional 13 BP Connect stations, primarily in
the USA and UK, bringing the total number of BP Connect stations worldwide to
446. An additional 1,900 sites were reimaged in the third quarter, bringing the
total number of sites with the BP Helios to some 8,800 worldwide.
Chemicals
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
======================= =============
105 203 132 Replacement cost operating profit 411 195
8 43 140 Special items 215 8
- - - Acquisition amortization - -
----------------------- -------------
Pro forma operating result
113 246 272 adjusted for special items 626 203
======================= =============
114 109 115(b)Chemicals Indicator Margin(a)($/te) 101(b) 109
======================= =============
Chemicals production (kte)
804 837 858 UK 2,523 2,333
2,164 2,595 2,669 Rest of Europe 7,847 5,648
2,299 2,695 2,570 USA 7,754 6,664
703 762 783 Rest of World 2,255 2,023
----------------------- --------------
5,970 6,889 6,880 Total production 20,379 16,668
======================= ==============
(a) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected
by Chem Systems in their quarterly market analyses, then weighted based
on BP's product portfolio. While it does not cover our entire portfolio,
it includes a broad range of products. Amongst the products and
businesses covered in the CIM are olefins and derivatives, aromatics and
derivatives, linear alpha-olefins, acetic acid, vinyl acetate monomer
and nitriles. Not included are fabrics and fibres, plastic fabrications,
poly alpha-olefins, anhydrides, engineering polymers and carbon fibres,
speciality intermediates, and the remaining parts of the solvents and
acetyls businesses.
(b) Provisional. The data for the third quarter is based on two months'
actuals and one month of provisional data.
Chemicals
Chemicals' pro forma result for the third quarter, adjusted for special items,
was $272 million, which is slightly above the second quarter primarily due to
lower fixed costs. The special item of $140 million is a writedown of our
Indonesian manufacturing assets following a review of its immediate prospects
and opportunities for future growth in a highly competitive regional market.
The third quarter result was $159 million higher than a year ago, primarily
reflecting a lower cost structure and the benefits of portfolio additions,
restructuring and reliability improvements. The nine months result was $626
million compared with $203 million in 2001 due to volume growth through improved
operations, organic growth and acquisitions, and lower costs, against a weaker
margin environment.
Chemicals production for the third quarter and nine months was up 15% and 22%
respectively, as a result of the Solvay, Erdolchemie and Veba transactions, new
plants and improved reliability.
During the quarter we completed the sale of two-thirds of our interest in the
European ethylene pipeline company, ARG, in accordance with EU commission
requirements in relation to the Veba acquisition.
Other Businesses and Corporate
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
================= =============
(117) (128) (241) Replacement cost operating loss (494) (348)
- - 125 Special items 125 -
- - - Acquisition amortization - -
----------------- -------------
Pro forma operating result
(117) (128) (116) adjusted for special items (369) (348)
================= =============
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. The special item of $125 million is a
provision to cover future rental payments on surplus leasehold office
accommodation.
Exceptional Items
3Q 2Q 3Q Nine Months
2001 2002 2002 $ million 2002 2001
================= =============
Profit (loss) on sale of fixed assets and
184 376 1,794 businesses or termination of operations 2,061 573
(127) (160) (25) Taxation credit (charge) (146) (396)
----------------- -------------
57 216 1,769 Exceptional items after taxation 1,915 177
================= =============
Exceptional items for the third quarter include the profit on disposal of BP's
Ruhrgas interest and an electronic payment system.
2002 Dividends
3Q 2Q 3Q Nine Months
2001 2002 2002 2002 2001
================= ==============
Dividends per ordinary share
5.50 6.00 6.00 cents 17.75 16.25
3.805 3.875 3.897 pence 11.823 11.381
33.0 36.0 36.0 Dividends per ADS (cents) 106.5 97.5
----------------------- --------------
BP today announced a third quarterly dividend for 2002 of 6.0 cents per ordinary
share. Holders of ordinary shares will receive 3.897 pence per share and holders
of American Depositary Receipts (ADRs) $0.36 per ADS share. The dividend is
payable on 9 December to shareholders on the register on 15 November.
Participants in the Dividend Reinvestment Plan (DRIP) or the DRIP facility in
the US Direct Access Plan will receive the dividend in the form of shares, also
on 9 December.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'The world economy sustained its gradual recovery in the third quarter,
and some modest growth is expected to continue in the fourth quarter,
though the current environment has little upside and significant downside
risks. BP's overall trading environment remained broadly at 'mid-cycle'
during the third quarter.
'Recent demand growth has been partly met by increased OPEC production,
though quotas remain unchanged. Oil inventories are below normal seasonal
levels. In the fourth quarter, assuming a normal seasonal demand increase
and no material increase in OPEC production beyond high September levels,
crude oil prices should remain around third quarter levels.
'Though storage levels for US natural gas remain high relative to
seasonal norms, prices have strengthened recently. This reflects
declining production and the expectation of firming seasonal demand.
'Refining margins have improved in recent weeks, and are now above the
weak third quarter level, with commercial product inventories below the
1997-2001 average. Oil product inventories are likely to tighten further
during the fourth quarter and should underpin margins.
'Average third quarter retail margins were broadly in line with the
second quarter, though US margins came under pressure in the latter part
of the quarter. Retail margins may come under further pressure in the
fourth quarter reflecting a seasonal slowdown in demand and an
increasingly competitive market.
'The Chemicals business environment has weakened in recent weeks with
demand softening and margins under pressure from high feedstock prices.
'Capital expenditure is on track for the upper end of the year's target
range, at around $13 billion, excluding acquisitions. The net debt ratio
was below the mid-point of the 25-35% range at the end of the third
quarter and is likely to remain relatively stable around this level for
the remainder of the year.'
----------------------------------------------------------------------
The foregoing discussion, in particular certain statements in the
introductory bullet point assessment and under 'Outlook', focuses
on certain trends and general market and economic conditions and
outlook on production levels or rates, prices, margins, debt, targeted
performance improvement, levels of annual investment and currency
exchange rates and, as such, are forward-looking statements that
involve risk and uncertainty that could cause actual results and
developments to differ materially from those expressed or implied by
this discussion. By their nature, trends and outlook on production,
price, margin, debt, profitability and currency exchange rates are
difficult to forecast with any precision, and there are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including specific factors accompanying such statements;
future levels of industry product supply, demand and pricing; currency
exchange rates; political stability and economic growth in relevant
areas of the world; development and use of new technology and
successful partnering; the actions of competitors; natural disasters
and other changes to business conditions; prolonged adverse weather
conditions; and wars and acts of terrorism and sabotage. Additional
information, including information on factors which may affect BP's
business, is contained in BP's Annual Report and Accounts and in the
Annual Report on Form 20-F filed with the US Securities and Exchange
Commission.
----------------------------------------------------------------------
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