3rd Quarter Results Pt 1 of 3
BP PLC
28 October 2003
BP p.l.c.
Group Results
Third Quarter 2003
London 28 October 2003
FOR IMMEDIATE RELEASE
RESULT UP 25%; CONTINUING STRONG CASH GENERATION
---------------------------------------------------------------------------
Third Second Third
Quarter Quarter Quarter Nine Months
2002 2003 2003 $ million 2003 2002 %
======================= ====================
Replacement cost profit
766 2,454 2,142 before exceptional items 7,724 3,001
556 32 228 Special items(a) 233 1,027
977 629 498 Acquisition amortization(b) 1,755 2,052
----------------------- --------------------
Pro forma result adjusted
2,299 3,115 2,868 for special items 9,712 6,080 60
======================= ====================
6.61 8.67 8.07 - per ordinary share (pence) 27.18 18.32 49
10.26 14.06 13.00 - per ordinary share (cents) 43.76 27.12 62
0.62 0.85 0.78 - per ADS (dollars) 2.63 1.62
======================= ====================
o BP's third quarter pro forma result, adjusted for special items, was
$2,868 million, compared with $2,299 million a year ago, an increase of
25%. For the nine months, the result was $9,712 million compared with
$6,080 million, up 60%. Replacement cost profit, before exceptional
items, for the third quarter and nine months was $2,142 million and
$7,724 million respectively, compared with $766 million and $3,001
million a year ago.
o The third quarter overall trading environment was more favourable than
a year ago.
o Improved operating performance generated additional income for the
quarter and nine months. Excluding charges for impairment, non-cash
costs were higher in both periods due to higher depreciation.
o The TNK-BP deal was completed on 29 August. Third quarter results and
production reflect a strong contribution from the joint venture.
o Net cash outflow for the quarter was $2,426 million and net cash inflow
for the nine months was $3,179 million, compared with outflows of
$523 million and $1,055 million a year ago. Net cash flow from
operating activities for the quarter and nine months was $4,891 million
and $18,198 million respectively compared with $4,376 million and
$13,145 million 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, on a pro forma
basis adjusted for special items, was 15%, compared with 13% a year
ago.
o The quarterly dividend was 6.50 cents per share ($0.39 per ADS). This
compares with 6.00 cents a year ago. For the nine months the dividend
showed an increase of 8.5%. In sterling terms, the quarterly dividend
is 3.857 pence per share compared with 3.897 pence a year ago; for the
nine months the increase was 0.2%.
BP Group Chief Executive, Lord Browne, said:
'This has been another good quarter and a strong financial result. We
continue to invest steadily against a clear set of strategic goals, and
to drive hard on operations where there is room for improvement.
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 third quarter comprise net charges resulting from
the reassessment of environmental remediation provisions, Veba
integration costs in Refining and Marketing and a provision to cover
future rental payments on surplus property 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 third quarter result was up 25% on a year ago,
reflecting higher average realizations.
In Gas, Power and Renewables, the result reflects improvement in marketing and
trading, including LNG, partly offset by a lower result for the natural gas
liquids business and restructuring costs related to the Solar business.
The Refining and Marketing result increased 87% compared with a year ago due to
higher refining margins and improved marketing margins, particularly retail
margins in the USA and Europe, with some offset from higher gas fuel costs.
The Petrochemicals result was $184 million down on the prior quarter, reflecting
substantially lower margins due to higher feedstock prices partly offset by
slightly higher demand.
Interest expense for the quarter was $213 million compared with $191 million for
the prior quarter, reflecting increased debt buyback costs and the impact of the
inclusion of TNK-BP, partly offset by an increase in capitalized interest.
The pro forma effective tax rate on replacement cost profit, before exceptional
items, and adjusted for special items, was 35% compared with 34.5% a year ago.
Capital expenditure, excluding acquisitions, was $3.3 billion for the quarter.
Total capital expenditure and acquisitions was $9.2 billion. Disposal proceeds
were $0.9 billion.
Net cash outflow was $2,426 million compared with $523 million a year ago;
higher cash flow from operating activities was more than offset by lower
disposal proceeds.
Net debt at the end of the quarter was $18.5 billion. The pro forma ratio of net
debt to net debt plus equity was 23%.
---------
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.
BP's share of the result of the TNK-BP joint venture has been included within
Exploration and Production with effect from 29 August. TNK-BP operational and
financial information has been estimated.
Reconciliation of Reported Results to
Pro Forma Results Adjusted for Special Items
Pro Forma Result Pro Forma Result
adjusted for ----- 3Q 2003 --------------- adjusted for
special items special items
-------------------
3Q 2Q 3Q Special Acq. Reported Nine Months
2002 2003 2003 Items* Amort+ Earnings $ million 2003 2002
=========================================== ==============
Exploration and
3,050 3,589 3,813 - 293 3,520 Production 12,290 8,339
Gas, Power
87 103 98 - - 98 and Renewables 395 312
Refining and
522 1,135 978 318 205 455 Marketing 2,967 1,494
272 308 124 43 - 81 Petrochemicals 571 626
Other businesses
(116) (134) (320) (10) - (310) and corporate (619) (369)
------------------------------------------- --------------
RC operating
3,815 5,001 4,693 351 498 3,844 profit 15,604 10,402
------------------------------------------- --------------
(300) (191) (213) - - (213)Interest expense (624) (947)
(1,213)(1,635)(1,569) (123) - (1,446)Taxation (5,139) (3,313)
(3) (60) (43) - - (43)MSI (129) (62)
------------------------------------------- --------------
RC profit before
2,299 3,115 2,868 228 498 2,142 exceptional items 9,712 6,080
------------------------------------------- --------------
172 Exceptional items before tax
(4)Taxation on exceptional items
-----
2,310 RC profit after exceptional items
84 Stock holding gains
-----
2,394 HC profit
=====
* The special items refer to non-recurring charges and credits. The special
items for the third quarter comprise net charges resulting from the
reassessment of environmental remediation provisions, Veba integration
costs in Refining and Marketing and a provision to cover future rental
payments on surplus property 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
Third Second Third
Quarter Quarter Quarter Nine Months
2002 2003 2003 2003 2002
======================= ==============
Replacement cost
1,757 4,324 3,844 operating profit ($m) 13,293 7,065
----------------------- --------------
Replacement cost profit
766 2,454 2,142 before exceptional items ($m) 7,724 3,001
----------------------- --------------
Profit after exceptional items ($m)
2,535 2,585 2,310 Replacement cost 8,363 4,916
2,840 1,634 2,394 Historical cost 8,295 6,194
----------------------- --------------
Per ordinary share (cents)
Pro forma result
10.26 14.06 13.00 adjusted for special items 43.76 27.12
RC profit before
3.42 11.08 9.71 exceptional items 34.80 13.39
12.67 7.41 10.85 HC profit after exceptional items 37.37 27.63
Per ADS (cents)
Pro forma result
61.56 84.36 78.00 adjusted for special items 262.56 162.72
RC profit before
20.52 66.48 58.26 exceptional items 208.80 80.34
76.02 44.46 65.10 HC profit after exceptional items 224.22 165.78
----------------------- --------------
Exploration and Production
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
================= ==============
1,572 3,153 3,520 Replacement cost operating profit 10,999 5,958
703 12 - Special items 151 920
775 424 293 Acquisition amortization 1,140 1,461
----------------- --------------
Pro forma operating result
3,050 3,589 3,813 adjusted for special items 12,290 8,339
================= ==============
Results include:
119 101 136 Exploration expense 349 465
Of which:
55 43 75 Exploration expenditure written off 168 261
----------------- --------------
Production (Net of Royalties)
1,736 1,712 1,852 Crude oil (mb/d) 1,798 1,766
247 199 202 Natural gas liquids (mb/d) 211 242
1,983 1,911 2,054 Total liquids (mb/d)(a) 2,009 2,008
8,482 8,439 8,401 Natural gas (mmcf/d) 8,617 8,631
3,445 3,366 3,502 Total hydrocarbons (mboe/d)(b)(c) 3,495 3,496
================= ==============
Average realizations
26.01 25.73 27.72 Crude oil ($/bbl) 28.25 23.35
13.15 17.49 19.39 Natural gas liquids ($/bbl) 18.96 12.23
24.40 24.90 26.79 Total liquids ($/bbl) 27.24 21.99
2.25 3.39 3.08 Natural gas ($/mcf) 3.46 2.32
19.27 22.43 22.58 Total hydrocarbons ($/bbl) 23.88 18.17
================= ==============
Average oil marker prices
($/bbl)
26.91 26.03 28.38 Brent 28.64 24.40
28.26 29.02 30.19 West Texas Intermediate 31.08 25.40
27.26 27.04 28.83 Alaska North Slope US West Coast 29.69 24.06
================= ==============
3.16 5.40 4.97 Henry Hub gas price ($/mmBtu)(d) 5.65 2.94
UK Gas - National
12.74 17.44 15.08 Balancing Point (p/therm) 17.92 14.53
================= ==============
(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) Includes 249 mboe/d production from TNK-BP.
(d) Henry Hub First of the Month Index.
Exploration and Production
The pro forma result for the third quarter, adjusted for special items, was
$3,813 million, up 25% from the third quarter of 2002.
The result for the quarter reflected higher realizations, with liquids up $2.39/
bbl and natural gas up $0.83/mcf on a year ago. North American basin
differentials to the Henry Hub marker price continued to narrow over the quarter
following the opening of pipeline expansion routes. The result includes income
of $15 million reflecting a lower provision for Unrealized Profit in Stock
(UPIS), which removes the upstream margin from downstream inventories. This
compares with a charge of $64 million in the third quarter of last year.
The nine months result of $12,290 million was up $3,951 million on a year ago,
reflecting the impact of significantly higher oil and gas prices and a reduction
in exploration write-offs partly offset by the impact of divestments and higher
depreciation.
Significant progress was made during the quarter toward completion of our
projects in our new profit centres. The Kapok field in Trinidad started up in
July. In preparation for start-up, the Na Kika tension leg platform has arrived
on location in the Gulf of Mexico and the Xikomba Floating Production Storage
and Offloading vessel is on location in Angola. The Holstein Spar has sailed
from the fabrication yard in Finland and the Kizomba A tension leg platform has
arrived in Angola. In Azerbaijan, construction is well advanced on our Azeri
project and the BTC pipeline is on track for start-up in early 2005.
Production for the quarter was up by more than one and a half per cent at 3,502
mboe/d compared with a year ago. This reflects the impacts of the inclusion of
incremental production volumes of 208 mboe/d from TNK-BP offset by a reduction
of 179 mboe/d from divestments. Other factors include strong growth in Trinidad
and decline in our mature areas. Total production for the nine months at 3,495
mboe/d was in line with a year ago.
We are nearing the end of the 2003 programme of high-grading our portfolio with
the completion of previously announced divestments in China and the Lower 48
states in the USA and the sale of 49% of our In Amenas gas project in Algeria.
On 29 August we completed the creation of our joint venture TNK-BP. This sees
the establishment of the third largest integrated oil company in Russia in which
we have a 50% interest. That transaction did not include Alfa Group and Access
Renova's interests in Slavneft or BP's interest in Sakhalin. The TNK-BP result
included for the period 29 August to 30 September benefited from favourable
price conditions in Russia, and production was robust.
Gas, Power and Renewables
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
====================== ==============
57 103 98 Replacement cost operating profit 395 282
30 - - Special items - 30
- - - Acquisition amortization - -
---------------------- --------------
Pro forma operating result
87 103 98 adjusted for special items 395 312
====================== ==============
Gas sales volumes (mmcf/d)
1,809 2,581 2,174 UK 2,653 2,256
353 421 362 Rest of Europe 418 385
9,332 10,441 11,808 USA 11,328 8,841
9,556 10,839 11,133 Rest of World 11,173 9,155
----------------------- --------------
21,050 24,282 25,477 Total gas sales volumes 25,572 20,637
======================= ==============
NGL sales volumes (mb/d)
- - - UK - -
- - - Rest of Europe - -
178 136 188 USA 150 173
185 124 163 Rest of World 173 204
----------------------- --------------
363 260 351 Total NGL sales volumes 323 377
======================= ==============
Gas, Power and Renewables
The pro forma result for the third quarter and nine months was $98 million and
$395 million, respectively, compared with $87 million and $312 million a year
ago. The third quarter and nine month results reflect improvement in marketing
and trading, including LNG, partly offset by a lower result for the natural gas
liquids business, restructuring charges in the Solar business and the absence of
the contribution from Ruhrgas following the sale of our interest last year.
The increased marketing and trading result for the quarter and nine months was
driven by higher gas sales volumes in North America and strong performance from
the Global LNG business. Third quarter gas sales volumes were up 21%, and equity
LNG sales were up 47%. During the quarter, the first delivery of LNG was made to
the recently completed LNG import and regasification facility in Bilbao (BP 25%)
and the first delivery was made to the facility at Cove Point (operated by
Dominion Resources) in the USA, where BP has a contract for capacity access.
The result for the natural gas liquids business for the third quarter and nine
months is substantially down on a year ago due to continued high gas prices
relative to liquids prices in North America, which has led to lower sales
volumes and margins.
The Solar and Renewables result includes a restructuring charge of $45 million
as a result of decisions taken during the quarter to improve future
profitability. This charge provides for consolidation of manufacturing
operations and staff reductions across the business.
Refining and Marketing
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
======================= =============
237 889 455 Replacement cost operating profit 1,975 908
83 41 318 Special items 377 (5)
202 205 205 Acquisition amortization 615 591
----------------------- -------------
Pro forma operating result
522 1,135 978 adjusted for special items 2,967 1,494
======================= =============
Refinery throughputs (mb/d)
394 416 405 UK 399 387
956 991 909 Rest of Europe 951 905
1,455 1,465 1,406 USA 1,391 1,438
349 393 366 Rest of World 383 354
----------------------- -------------
3,154 3,265 3,086 Total throughput 3,124 3,084
======================= =============
96.5 96.7 96.2 Refining availability(a)(%) 95.7 96.0
======================= =============
Oil sales volumes (mb/d)
Refined products
258 279 270 UK 276 248
1,604 1,358 1,293 Rest of Europe 1,323 1,441
1,847 1,822 1,828 USA 1,800 1,874
613 607 657 Rest of World 636 578
----------------------- --------------
4,322 4,066 4,048 Total marketing sales 4,035 4,141
2,589 2,957 2,647 Trading/supply sales 2,805 2,489
----------------------- --------------
6,911 7,023 6,695 Total refined product sales 6,840 6,630
3,648 5,679 5,316 Crude oil 5,175 4,458
----------------------- --------------
10,559 12,702 12,011 Total oil sales 12,015 11,088
======================= ==============
Global Indicator Refining Margin(b)
($/bbl)
1.28 2.15 2.47 NWE 2.77 0.66
1.82 3.59 5.61 USGC 5.11 2.16
3.27 4.73 6.39 Midwest 5.09 3.03
3.54 6.34 9.04 USWC 7.39 4.47
0.47 0.66 1.27 Singapore 1.63 0.28
1.98 3.27 4.59 BP Average 4.13 1.90
======================= ==============
(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 third quarter, adjusted for special items, was $978
million. This compares with $522 million for the same period last year, an
increase of $456 million or 87%.
The special items of $318 million comprise a $246 million charge resulting from
a reassessment of our environmental remediation provisions and ongoing Veba
integration costs of $72 million. In addition, the third quarter result included
charges of $123 million in respect of new environmental remediation provisions
which were not classified as special items.
The nine months result of $2,967 million is up $1,473 million compared with the
first nine months of last year, an increase of 99%.
The results for the quarter and nine months reflect improved refining margins
and higher marketing margins, particularly retail margins in the USA and Europe,
with some offset from higher gas fuel costs. Improved operating performance also
contributed to the results in the marketing businesses.
Refining throughputs decreased by 2%, compared with a year ago, with
availability at 96.2%. Marketing volumes were 6% lower than a year ago, as
expected, largely due to divestments.
During the quarter, an additional 2,037 sites were reimaged, bringing the total
number of sites with the BP Helios to some 14,000 worldwide.
During October, we announced that H&R WASAG has agreed to purchase our European
Special Products business, including the Neuhof base oil refinery in Hamburg,
Germany. The transaction is subject to a number of approvals and appropriate
employee consultation.
Petrochemicals
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
======================= =============
132 313 81 Replacement cost operating profit 533 411
140 (5) 43 Special items 38 215
- - - Acquisition amortization - -
----------------------- -------------
Pro forma operating result
272 308 124 adjusted for special items 571 626
======================= =============
120 134 109(b)Chemicals Indicator Margin(a)($/te) 113(b) 103
======================= =============
Petrochemicals production (kte)
858 714 771 UK 2,354 2,523
2,669 2,681 2,724 Rest of Europe 8,168 7,847
2,570 2,503 2,563 USA 7,602 7,754
783 872 982 Rest of World 2,666 2,255
----------------------- --------------
6,880 6,770 7,040 Total production 20,790 20,379
======================= ==============
(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 third quarter is based on two months'
actuals and one month of provisional data.
Petrochemicals
Petrochemicals pro forma result for the third quarter, after adjusting for
special items, was $124 million, down from $308 million for the prior quarter.
Following a stronger second quarter, petrochemicals margins were much weaker in
the third quarter as a result of higher feedstock costs, particularly in Europe.
Similar margin pressure occurred in the first quarter. The impact of lower
margins was partly offset by slightly higher demand.
The special items of $43 million included a provision to cover future rental
payments on surplus property and a charge resulting from a reassessment of our
environmental remediation provisions.
The nine months result was $55 million below that of a year ago. The effect of
increased volumes and margins was more than offset by lower income from
SARS-affected businesses in Asia, several non-recurring items and portfolio
rationalization.
Petrochemicals production of 7,040 thousand tonnes in the third quarter was 270
thousand tonnes above the second quarter, reflecting capacity additions and
lower turnaround activity. Production for the first nine months was 411 thousand
tonnes higher than last year due to Asian PTA and acetic acid capacity
additions, the Veba acquisition and growth in market demand.
During the quarter, production commenced at a new world-scale high density
polyethylene plant (BP 25%), located in Cedar Bayou, Texas.
Other Businesses and Corporate
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
================= =============
(241) (134) (310) Replacement cost operating loss (609) (494)
125 - (10) Special items (10) 125
- - - Acquisition amortization - -
----------------- -------------
Pro forma operating result
(116) (134) (320) adjusted for special items (619) (369)
================= =============
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 for the quarter is a
credit resulting from a reassessment of our environmental remediation
provisions. Although not classifed as a special item, the result also includes a
charge of $132 million in respect of new environmental remediation provisions.
During October, BP completed the sale of its 50% interest in the Indonesian coal
mining company PT Kaltim Prima Coal to PT Bumi Resources.
Exceptional Items
3Q 2Q 3Q Nine Months
2002 2003 2003 $ million 2003 2002
================= =============
Profit (loss) on sale of fixed assets and
1,794 280 172 businesses or termination of operations 846 2,061
(25) (149) (4) Taxation charge (207) (146)
----------------- -------------
1,769 131 168 Exceptional items after taxation 639 1,915
================= =============
Exceptional items for the third quarter principally relate to net gains from the
sale of various upstream interests.
2003 Dividends
3Q 2Q 3Q Nine Months
2002 2003 2003 2003 2002
================= =============
Dividends per ordinary share
6.00 6.50 6.50 cents 19.25 17.75
3.897 4.039 3.857 pence 11.843 11.823
36.0 39.0 39.0 Dividends per ADS (cents) 115.3 106.5
----------------------- --------------
BP today announced a third quarterly dividend for 2003 of 6.50 cents per
ordinary share. Holders of ordinary shares will receive 3.857 pence per share
and holders of American Depositary Receipts (ADRs) $0.39 per ADS share. The
dividend is payable on 8 December to shareholders on the register on 14
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 8 December. The fourth quarter 2003 results and dividend will be
announced on 10 February 2004.
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'World economic activity has strengthened through the third quarter. The
US appears to have grown strongly, in part owing to further policy
stimulus. Asia has also shown robust growth, in particular in China, but
also in Japan. However, OECD industrial production has been largely flat,
and Europe, as a whole, has grown slowly, with the exception of the UK.
Further economic growth is expected in the fourth quarter.
'Crude oil prices in the third quarter were supported by strong crude
demand on the back of high refining margins, the slow recovery in Iraqi
exports and lower OPEC-10 production following the quota reductions that
became effective in June. Commercial oil inventories remain below normal
seasonal levels but a recovery in US crude stocks has resulted in a
marked narrowing of the WTI-Brent differential. OPEC has announced a new
quota cut, effective 1 November. Oil prices have risen by around $5 per
barrel since OPEC's 24 September announcement. The future path of oil
prices will depend upon the recovery of exports from Iraq and the degree
of OPEC's production restraint.
'US natural gas prices softened in the third quarter but remained high by
historical standards and above residual fuel oil parity. Gas price
differentials in the Rockies and San Juan Basin have narrowed
significantly following the opening of the Kern River pipeline expansion.
High prices throughout 2003 have led to large storage injections through
the summer. Gas in storage has reached historical average levels and is
expected to be sufficient for the forthcoming winter heating season,
assuming normal weather.
'Refining margins have started the fourth quarter below the third quarter
average but remain above historic average levels, particularly in the
USA. The autumn refinery turnaround season is supporting margins at
present but OECD commercial product inventories are recovering. Retail
margins in the third quarter were below the second quarter levels but
continued to be relatively strong, especially in western Europe and
western USA. Fourth quarter margins are expected to soften further and
revert to more typical levels.
'Petrochemical margins in the third quarter fell back from second quarter
levels as a result of increases in feedstock costs despite some recovery
of demand in Europe. Fourth quarter prospects will be influenced by
continued strength in feedstock costs.
'Our capital expenditure, excluding acquisitions, was $9.4 billion for
the nine months. We now expect full year capital expenditure to be
slightly below the $14-14.5 billion range indicated previously, due to
continuous refinement of our spending programmes. As previously
indicated, we expect 2003 to be the peak of our medium term capital
spending programme. As a follow-up to the completion of the TNK-BP deal
in August, we have agreed to invest a further $1.35 billion to expand
TNK-BP to include AAR's 50% interest in Slavneft; we now expect to
complete this transaction by year-end. We also expect to make the
remaining two-thirds of the $2 billion of incremental payments into a
number of the group's pension plans announced in July. We expect gearing
to be within our 25-35% target range following these events. In light of
these factors, we do not currently plan any share buy-backs during the
fourth quarter.'
----------------------------------------------------------------------
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, future
performance, gearing, margins, pension plan support, prices, timing of
pending transactions, 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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