4th Quarter & Final Results - Part 1
BP Amoco PLC
15 February 2000
PART 1
BP Amoco p.l.c.
Group Results
4th Quarter and Full Year 1999
BP AMOCO ANNOUNCES RECORD QUARTER
---------------------------------------------------------------------------
- Fourth quarter 1999 replacement cost profit, before exceptional items,
was a record $2,123 million, after adjusting for special charges of
$439 million. This is an increase of 145% on a year ago, reflecting the
higher oil price and underlying performance improvements.
- The year's result on an adjusted basis was $6,206 million, up 40% on
1998, representing an adjusted return on average capital employed of
13%, up 3 points on 1998. Special charges in 1999 amounted to
$876 million. The major components of these charges are integration
costs, costs associated with the restructuring programme, asset
write-downs and project costs in respect of process improvement and
outsourcing.
- Performance improvements, mainly reductions in cash costs, contributed
$600 million and $2.5 billion before tax to the results for the fourth
quarter and year respectively.
- The trading environment in 1999 was mixed, with the benefit of higher
oil prices offset by deterioration in both downstream and chemicals
margins.
- Quarterly dividend 5 cents per share ($0.30 per ADS). Total dividends
for the year amount to 20 cents per share ($1.20 per ADS) compared to
19.75 cents per share ($1.185 per ADS) in 1998.
BP Amoco p.l.c. today reported its fourth quarter 1999 results. BP Amoco
Group Chief Executive, Sir John Browne, commented:
'This is a very strong fourth quarter result. It reflects the
continuing underlying improvement in our businesses - and the stronger
crude price - despite the adverse environment in the downstream
businesses.
'We remain well on track to meet the new targets laid out in July of
last year, with over half the targeted performance improvement
achieved in a third of the time.
'This gives me great confidence that we are positioned to take
advantage of the growth opportunities which we have for the new
century.'
Operating Results
Fourth Third Fourth
Quarter Quarter Quarter Year
1998 1999 1999 1999 1998
======================= =============
Replacement cost
999 2,848 2,725 operating profit ($m) 8,894 6,521
----------------------- -------------
Replacement cost profit
515 1,743 1,684 before exceptional items ($m) 5,330 3,959
----------------------- -------------
Profit after exceptional items ($m)
523 1,205 1,195 Replacement cost 3,280 4,611
12 1,848 1,701 Historical cost 5,008 3,220
----------------------- -------------
Earnings per ordinary share+ (cents)
RC profit before
2.68 8.99 8.67 exceptional items 27.48 20.62
HC profit after
0.06 9.53 8.76 exceptional items 25.82 16.77
Earnings per ADS+ (cents)
RC profit before
16.08 53.94 52.02 exceptional items 164.88 123.72
----------------------- -------------
Dividends per ordinary share+
5.0 5.0 5.0 cents 20.0 19.8
3.1 3.0 3.1 pence 12.3 11.9
30.0 30.0 30.0 Dividends per ADS+ (cents) 120.0 118.8
======================= =============
+ Amounts for previous periods have been restated for the 2 for 1 share
split on 4 October 1999.
Income Adjusted for Special Items
Adjusted Adjusted
Results ------- 4Q 1999 --------- Results
4Q 3Q Adjusted Special Reported Year
1998 1999 Results Items* Earnings $ million 1999 1998
===================================== =============
Exploration and
769 2,382 2,676 43 2,633 Production 7,493 3,716
506 662 464 171 293 Refining and Marketing 2,082 2,564
125 193 266 127 139 Chemicals 933 1,150
Other businesses and
(29) (95) (100) 240 (340) corporate (428) (324)
------------------------------------- -------------
1,371 3,142 3,306 581 2,725 RC operating profit 10,080 7,106
------------------------------------- -------------
(308) (355) (305) 24 (329) Interest expense (1,292) (1,165)
(180) (783) (825) (166) (659) Taxation (2,444) (1,450)
(17) (49) (53) - (53) MSI (138) (63)
===================================== =============
RC profit before
866 1,955 2,123 439 1,684 exceptional items 6,206 4,428
------------------------------------- -------------
Exceptional items
(535) before tax
Taxation on
46 exceptional items
-----
RC profit after
1,195 exceptional items
506 Stock holding gains (losses)
-----
1,701 HC profit
=====
* The special items refer to non-recurring charges and credits reported in
the quarter.
Operating Results
Replacement cost profit, before exceptional items, was $2,123 million for
the fourth quarter, after adjusting for special charges of $439 million. The
quarter's adjusted result was up 145% on a year ago. This reflected both
substantial performance improvements and a net benefit from the trading
environment. The year's adjusted result improved by 40% over 1998, against
an environment which was broadly neutral when taken across all of the
businesses.
Exploration and Production replacement cost operating profit, after
adjusting for special charges of $43 million, was a record $2,676 million,
reflecting a doubling of the oil price and cost reductions. The year's
adjusted result was up 102%. This reflected a $4.68 per barrel increase in
oil realizations and significant cost savings. Stable oil production for the
year reflected the net effect of disposals offset by higher production in
recently commissioned fields. Gas production increased by 4.5%.
In Refining and Marketing, replacement cost operating profit, after
adjusting for special charges of $171 million, was $464 million, down 8% on
a year ago. Cost reductions partially offset the pressure on margins from
the rising oil price. The adjusted result for the year was 19% down on the
previous year with the severe deterioration in the environment significantly
offset by performance improvements.
Chemicals' replacement cost operating profit, after adjusting for special
charges of $127 million, was $266 million, up 38% from the third quarter.
This reflects cost reductions and some margin improvements. The year's
adjusted result was 19% down on 1998, reflecting the weaker trading
environment, though significant cost and volume improvements moderated this
effect.
Interest expense for the quarter was $329 million and for the year $1,316
million. Both figures include a special charge of $24 million in respect of
early redemption of bonds. Underlying interest expense was up on 1998
reflecting higher average debt during the year, the effect of which was
partly offset by lower interest rates.
The effective tax rate on replacement cost profit, before exceptional items,
was 28% for both the quarter and the year.
Capital expenditure for the year was $7.3 billion, down 29% on 1998,
reflecting increased focus in the capital programme. This includes $0.4
billion in respect of BP Amoco's purchase of a significant part of Repsol-
YPF's share of assets from the Crescendo Resources partnership. Divestment
proceeds received amounted to $2.4 billion.
Net debt at the end of the year was $13 billion. The ratio of net debt to
net debt plus equity was 23%.
Net cash outflow for the year was $82 million, compared with $906 million a
year ago. This reflects improved operating results and lower capital
expenditure offset by restructuring and merger integration costs and higher
dividend payments.
Operating Statistics
Fourth Third Fourth
Quarter Quarter Quarter Year
1998 1999 1999 1999 1998
======================= =============
Crude oil and natural gas
liquids production (mb/d)
(Net of Royalties)
575 564 605 UK 580 518
99 100 96 Rest of Europe 100 105
856 791 818 USA 804 841
583 592 531 Rest of World 577 585
----------------------- -------------
Total crude oil and
2,113 2,047 2,050 liquids production 2,061 2,049
----------------------- -------------
Natural gas production (mmcf/d)
1,351 1,040 1,546 UK 1,301 1,258
264 112 157 Rest of Europe 164 200
2,459 2,359 2,303 USA 2,369 2,401
1,928 2,406 2,333 Rest of World 2,233 1,949
----------------------- -------------
6,002 5,917 6,339 Total natural gas production 6,067 5,808
----------------------- -------------
Oil sales volumes (mb/d)
Refined products
267 236 233 UK 235 261
810 787 820 Rest of Europe 794 769
1,570 1,552 1,562 USA 1,542 1,504
629 576 656 Rest of World 615 603
----------------------- -------------
3,276 3,151 3,271 Total marketing sales 3,186 3,137
1,498 1,549 2,010 Trading/supply sales 1,816 1,665
----------------------- -------------
4,774 4,700 5,281 Total refined product sales 5,002 4,802
5,660 5,883 5,933 Crude oil 4,984 4,588
----------------------- -------------
10,434 10,583 11,214 Total oil sales 9,986 9,390
----------------------- -------------
Chemicals production+ (kte)
872 914 907 UK 3,737 3,734
1,439 1,475 1,602 Rest of Europe 5,993 5,648
2,283 2,487 2,643 USA 9,917 9,148
490 603 564 Rest of World 2,206 2,040
----------------------- --------------
5,084 5,479 5,716 Total production 21,853 20,570
======================= ==============
+ Includes BP Amoco share of associated undertakings and other interests in
production.
Exploration and Production
Replacement cost operating profit for the fourth quarter was $2,676 million,
after adjusting for special charges of $43 million. The adjusted result was
over three times the amount of the equivalent quarter last year. Average oil
realizations were up by around $12 a barrel and natural gas realizations by
16 cents/mcf. The result benefited from significant cost savings.
Exploration expense was also lower, reflecting increased focus in the
exploration programme.
The replacement cost operating profit for the year was $7,493 million, after
adjusting for special charges of $299 million. This adjusted result was 102%
up on 1998. Oil realizations were $4.68 a barrel higher. These environmental
benefits were significantly complemented by cost savings.
The quarter's oil production was down by 3% compared with a year ago
reflecting the net effect of disposals, mainly the Canadian oil interests,
and higher production from recently commissioned fields. These factors are
also reflected in the year's production levels which show a slight increase.
Gas production was up largely because of increased capacity in Trinidad.
In December, BP Amoco and Repsol-YPF dissolved their partnership, Crescendo
Resources, a major gas producer and processor in Texas and Oklahoma.
Subsequently, BP Amoco purchased a significant part of Repsol-YPF's share of
the assets from the partnership.
Also in December, an agreement was signed in Moscow between BP Amoco and the
other principal shareholders of Sidanco and the principal shareholders of
the Tyumen Oil Company whereby Tyumen will return Chernogorneft to Sidanco.
Chernogorneft was Sidanco's main oil producing subsidiary. In addition,
Sidanco has recently been taken out of bankruptcy.
Also in December, a consortium, in which BP Amoco has a 35% interest,
announced that it had been awarded a deep water concession offshore Brazil,
the BFZ-2 block. This will be BP Amoco's second operatorship in the area.
This concluded a year of great success for the company in terms of both new
discoveries and new opportunities.
4Q 3Q 4Q Year
1998 1999 1999 1999 1998
================= =============
442 2,240 2,633 Replacement cost operating profit ($m) 7,194 3,231
----------------- -------------
Results include:
264 141 111 Exploration expense ($m) 548 921
----------------- -------------
10.92 19.14 22.70 BP Amoco Average oil realizations* ($/bbl)16.74 12.06
----------------- -------------
BP Amoco Average
1.92 1.99 2.08 natural gas realizations ($/mcf) 1.92 1.93
================= =============
* Crude oil and natural gas liquids.
Refining and Marketing
Replacement cost operating profit for the fourth quarter was $464 million,
after adjusting for special charges of $171 million. This adjusted result
was down 8% on a year ago, reflecting the severe drop in refining margins
during the quarter and further pressure on marketing margins. The adverse
effect of the trading environment was significantly offset by cost
reductions. The deterioration in the refining environment led to run cuts at
a number of refineries. The pressure on marketing margins reflected rising
product prices which could not be fully recovered in the market.
The year's adjusted result of $2,082 million also reflected these factors,
with significant cost reductions moderating the effect of the harsher
environment.
On 7 December, it was announced that BP Amoco had agreed with ExxonMobil
Corporation the principles under which their European fuels and lubricants
joint venture will be dissolved in response to the European Commission's
requirement in respect of the Exxon and Mobil merger. Under the agreement -
which is conditional on a number of approvals and appropriate employee
consultation - BP Amoco will purchase Mobil's 30% interest in the fuels
business for around $1.5 billion, subject to adjustments. In addition, the
two companies will divide the assets of the lubricants business broadly in
line with their equity stakes (51% Mobil, 49% BP Amoco).
4Q 3Q 4Q Year
1998 1999 1999 1999 1998
================= =============
506 641 293 Replacement cost operating profit ($m) 1,840 2,564
----------------- -------------
BP Amoco average indicative
1.27 1.30 0.68 global refining margins ($/bbl) 0.91 1.74
----------------- -------------
Refinery throughputs (mb/d)
296 245 279 UK 271 296
569 532 542 Rest of Europe 540 551
1,326 1,376 1,322 USA 1,340 1,489
364 353 365 Rest of World 371 362
----------------- -------------
2,555 2,506 2,508 Total throughput 2,522 2,698
================= =============
Chemicals
Chemicals' replacement cost operating profit for the fourth quarter was $266
million, after adjusting for special charges of $127 million. This adjusted
result was a 38% improvement over the third quarter and reflected cost
reductions across the business and margin improvements for some products.
The annual adjusted result was 19% down on 1998, with the significant
contribution made by lower costs and higher volumes partly offsetting the
effect of the weaker trading environment.
Chemicals production in the fourth quarter was 4% higher than in the third
quarter due mainly to a lower level of maintenance shutdowns. The year's
production was up by 6% reflecting new capacity and debottlenecking partly
offset by disposals. These are quarterly and annual records respectively.
During the quarter, BP Amoco sold its Fibers and Yarns business, located at
several sites in the south eastern USA, and its Plaspack Kunststoffe plastic
net and webbing business, located in Austria. Also during the quarter BP
Amoco and ExxonMobil announced the closure of the Singapore Aromatics
Company, a paraxylene joint venture. The company also announced an agreement
with SINOPEC on a joint feasibility study for a world-scale ethylene cracker
and derivatives complex in Shanghai, China.
4Q 3Q 4Q Year
1998 1999 1999 1999 1998
================= =============
125 143 139 Replacement cost operating profit ($m) 686 1,100
----------------- -------------
675 677 1,001 Chemicals integrated margin (Dm/te) 666 819
================= =============
Other Businesses and Corporate
Other Businesses and Corporate comprises Finance, BP Solarex, the group's
coal asset, interest income and costs relating to corporate activities
worldwide. Replacement cost operating loss for the fourth quarter was $100
million, after adjusting for special charges of $240 million. The adjusted
loss for the year was $428 million.
4Q 3Q 4Q Year
1998 1999 1999 1999 1998
================= =============
(74) (176) (340) Replacement cost operating loss ($m) (826) (374)
================= =============
Exceptional Items
Exceptional items for the fourth quarter include the loss on closure of the
Singapore Aromatics Company, a joint venture between BP Amoco and
ExxonMobil, together with further restructuring relating mainly to
severance. Restructuring costs for the year amounted to $1,943 million of
which some 70% were in respect of severance with the balance relating to
property rationalization, contract termination and associated asset
writedowns.
4Q 3Q 4Q Year
1998 1999 1999 $ million 1999 1998
================= =============
Profit (loss) on sale of fixed assets and
190 (317) (279) businesses and termination of operations (337) 1,048
- (184) (256) Restructuring costs (1,943) -
(198) - - Merger expenses - (198)
16 (37) 46 Taxation credit (charge) 230 (198)
----------------- -------------
8 (538) (489) Exceptional items after taxation (2,050) 652
================= =============
1999 Dividends
BP Amoco p.l.c. today announced a fourth quarterly dividend for 1999 of
5 cents per ordinary share. Holders of ordinary shares will receive 3.125
pence per share and holders of American Depositary Receipts (ADRs) $0.30 per
ADS share. The dividend is payable on 24 March 2000 to shareholders on the
register on 25 February 2000. 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 on 24 March 2000. The first quarter 2000
results and dividend will be announced on 9 May.
Outlook
Crude oil prices continue to respond to OPEC's supply side management and,
though stocks have been substantially reduced, the market remains orderly.
Continuing OPEC restraint, together with firm underlying demand, is likely
to lead to short-term robustness in the oil price, though volatility is to
be expected, dependent on weather and market sentiment. Absent other
significant developments, average prices in 2000 are likely to be above
those experienced in 1999.
Natural gas prices are expected to show normal seasonal variation.
Downstream, the development of marketing margins is likely to depend upon
future movements in crude oil and hence product prices. Refining margins are
expected to remain volatile.
In Chemicals, margins are likely to respond to developments in feedstock
costs assuming firmness in demand. Surplus industry capacity, particularly
new capacity coming on stream in the second half of 2000, together with
continuing euro weakness, are likely to limit upside potential.
BP Amoco Group Chief Executive, Sir John Browne, concluded:
'Capital expenditure is planned to rise significantly in support of the
company's growth agenda, in line with our current set of targets. This
programme will be underpinned by continued emphasis on performance
improvement, with significant further cost savings targeted for 2000.'
----------------------------------------------------------------------
The foregoing discussion, in particular the statements under 'Outlook',
focuses on certain trends and general market and economic conditions
and outlook on production levels or rates, prices, margins 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 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
levels of industry product supply, demand and pricing; currency
exchange rates; political stability and economic growth in relevant
areas of the world; the ability to successfully integrate after merger;
development and use of new technology and successful partnering; the
actions of competitors, natural disasters and other changes to business
conditions. Additional information, including information on factors
which may affect BP Amoco's business, is contained in BP Amoco's Annual
Report and Accounts for 1998 and in the Annual Report on Form 20-F
filed with the US Securities and Exchange Commission.
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