Interim Results
BP PLC
30 July 2002
PART 1
BP p.l.c.
Group Results
Second Quarter and Half Year 2002
London 30 July 2002
FOR IMMEDIATE RELEASE
PERFORMANCE AND GROWTH FIRMLY ON TRACK
---------------------------------------------------------------------------
Second First Second
Quarter Quarter Quarter First Half
2001 2002 2002 $ million 2002 2001 %
======================= ====================
Replacement cost profit
2,648 924 1,293 before exceptional items 2,217 5,649
103 120 351 Special items(a) 471 143
680 538 537 Acquisition amortization(b) 1,075 1,351
----------------------- --------------------
Pro forma result adjusted
3,431 1,582 2,181 for special items 3,763 7,143 (47)
======================= ====================
10.77 4.94 6.71 - per ordinary share (pence) 11.65 22.08 (47)
15.29 7.06 9.72 - per ordinary share (cents) 16.78 31.80 (47)
0.92 0.42 0.59 - per ADS (dollars) 1.01 1.91
======================= ====================
o BP's second quarter pro forma result, adjusted for special items, was
$2,181 million, compared with $3,431 million a year ago, a reduction of
36%. For the half year, the result was $3,763 million compared to
$7,143 million. Replacement cost profit, before exceptional items, for
the second quarter and half year was $1,293 million and $2,217 million
respectively, compared with $2,648 million and $5,649 million a year
ago.
o The second quarter and first half results reflect a less favourable
environment than a year ago for Exploration and Production and Refining
and Marketing. For the half year, oil realizations were down nearly $4
per barrel, gas realizations were down nearly $2 per thousand cubic
feet, and the indicator refining margin was down over $3 per barrel.
Demand for most chemical products has improved but margins remain weak.
o Underlying performance improvements were $0.4 billion before tax for
the half year. We are on track for the year's target of $1.4 billion
before tax. Hydrocarbon production increased by over 5% and over 3% in
the second quarter and half year respectively. This is consistent with
the targeted increase for the year.
o First half year return on average capital employed, on a pro forma
basis adjusted for special items, was 13% compared with 24% in 2001.
o Quarterly dividend increased from 5.75 cents to 6.0 cents per share
($0.36 per ADS). This compares with 5.5 cents a year ago. For the half
year the dividend showed an increase of 9%. In sterling terms, the
quarterly dividend was 3.875 pence per share compared with 3.911 pence
a year ago; for the half year the increase was 5%.
BP Group Chief Executive, Lord Browne, said:
'Although the upstream and downstream business environment showed some
improvement over the first quarter, the half year's trading conditions
were significantly less favourable than a year ago. Our continued
performance delivery has underpinned our capability to increase the
dividend.'
The pro forma result, adjusted for special items, has been derived from the
group's reported UK GAAP accounting information but is not in itself a
recognized UK or US GAAP measure. This financial performance information and
measures derived therefrom, shown above and elsewhere in the document, are
provided in order to enable investors to evaluate better both BP's current
performance, in the context of past performance, and its performance against
that of its competitors.
(a) The special items refer to non-recurring charges and credits. The
special items for the second quarter comprise restructuring charges for
Exploration and Production and Chemicals, business interruption
insurance proceeds and costs related to a pipeline incident in Refining
and Marketing, Veba, Solvay and Erdolchemie integration costs and an
adjustment to the North Sea deferred tax balance for the supplementary
UK corporation tax rate.
(b) Depreciation and amortization relating to the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions.
Summary Quarterly Results
Exploration and Production's second quarter result was down 26% on a year ago
due to significantly lower liquids and natural gas realizations, down 8% and 29%
respectively. Total hydrocarbon production for the quarter was at a record level
and up over 5% compared to the same period last year.
In Gas, Power and Renewables, the result was down 29% compared to a year ago,
primarily reflecting weaker market conditions.
The Refining and Marketing result decreased 61%, reflecting significantly lower
worldwide refining margins, down 64% compared to the second quarter of 2001.
The Chemicals result increased significantly compared with the prior quarter,
reflecting higher margins.
Interest expense for the quarter was $314 million, compared to $333 million for
the prior quarter, reflecting slightly lower interest rates, with average debt
similar in both quarters. Interest expense for the half year, adjusted for
special items, was down $180 million from a year ago, reflecting lower interest
rates.
The pro forma effective tax rate on replacement cost profit, before exceptional
items, and adjusted for special items, was 36%. Special items include a $355
million adjustment to the North Sea deferred tax balance for the supplementary
UK corporation tax rate.
The deal with E.ON announced last year has now been completed. Following BP's
acquisition of 51% of Veba Oil in the first quarter, most of Veba's upstream
oil and gas assets were sold to Petro-Canada in May, with BP receiving $1.5
billion proceeds. On 30 June, E.ON's remaining 49% stake in Veba Oil was
acquired for $2.4 billion. In addition, following a decision on 5 July by the
German Minister for Economics and Technology (which is now being challenged in
the German Courts), E.ON acquired BP's 25.5% stake in Ruhrgas for $2.4 billion.
Capital expenditure, excluding acquisitions, was $3.0 billion for the quarter.
Total capital expenditure and acquisitions was $6.1 billion, including $2.4
billion for the purchase of the remaining 49% of Veba. Disposal proceeds were
$2.5 billion for the quarter, including $1.5 billion from the sale of Veba
upstream assets.
Net cash inflow was $1,891 million, compared to an outflow of $2,136 million a
year ago; tax payments were lower and disposal proceeds higher.
Net debt at the end of the quarter was $19.8 billion. The pro forma ratio of net
debt to net debt plus equity was 28%, compared with 29% at the end of 2001.
Net special and exceptional items before tax were a credit to income of $357
million and $63 million in the quarter and half year, respectively. In addition,
there was a tax special item of $355 million in the second quarter. The sale of
the Ruhrgas interest in the third quarter is expected to result in an
exceptional gain of $1.6 billion.
---------
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.
---------
SEC Filing of Results: BP notes that the US Public Company Accounting Reform and
Investor Protection Act 2002 is expected to become law imminently and that the
Act requires the SEC to issue new rules relating to certain of the Act's
provisions. In light of the uncertainty as to the scope and content of these
rules and of the short notice of the effectiveness of the Act for foreign
private issuers, BP expects to delay the filing of its Form 6-K containing
second quarter financial information with the reconciliation to US GAAP until
around 3 September 2002.
Reconciliation of Reported Results to
Pro Forma Results Adjusted for Special Items
Pro Forma Result Pro Forma Result
adjusted for ----- 2Q 2002 --------------- adjusted for
special items special items
-------------------
2Q 1Q 2Q Special Acq. Reported First Half
2001 2002 2002 Items* Amort+ Earnings $ million 2002 2001
=========================================== ==============
Exploration and
3,918 2,400 2,889 90 341 2,458 Production 5,289 9,054
Gas, Power
161 111 114 - - 114 and Renewables 225 261
Refining and
1,762 287 685 (114) 196 603 Marketing 972 2,756
9 108 246 43 - 203 Chemicals 354 90
Other businesses
(116) (125) (128) - - (128) and corporate (253) (231)
------------------------------------------- --------------
RC operating
5,734 2,781 3,806 19 537 3,250 profit 6,587 11,930
------------------------------------------- --------------
(391) (333) (314) - - (314)Interest expense (647) (827)
(1,894) (857)(1,243) 348 - (1,591)Taxation (2,100) (3,934)
(18) (9) (68) (16) - (52)MSI (77) (26)
------------------------------------------- --------------
RC profit before
3,431 1,582 2,181 351 537 1,293 exceptional items 3,763 7,143
------------------------------------------- --------------
376 Exceptional items before tax
(160)Taxation on exceptional items
-----
1,509 RC profit after exceptional items
531 Stock holding gains
-----
2,040 HC profit
=====
* The special items refer to non-recurring charges and credits. The special
items for the second quarter comprise restructuring charges for
Exploration and Production and Chemicals, business interruption insurance
proceeds and costs related to a pipeline incident in Refining and
Marketing, Veba, Solvay and Erdolchemie integration costs and an
adjustment to the North Sea deferred tax balance for the supplementary UK
corporation tax rate.
+ Acquisition amortization is depreciation and amortization relating to the
fixed asset revaluation adjustments and goodwill consequent upon the ARCO
and Burmah Castrol acquisitions.
Operating Results
Second First Second
Quarter Quarter Quarter First Half
2001 2002 2002 2002 2001
======================= ==============
Replacement cost
4,945 2,058 3,250 operating profit ($m) 5,308 10,417
----------------------- --------------
Replacement cost profit
2,648 924 1,293 before exceptional items ($m) 2,217 5,649
----------------------- --------------
Profit after exceptional items ($m)
2,701 854 1,509 Replacement cost 2,363 5,769
2,741 1,296 2,040 Historical cost 3,336 5,571
----------------------- --------------
Per ordinary share (cents)
Pro forma result
15.29 7.06 9.72 adjusted for special items 16.78 31.80
RC profit before
11.80 4.12 5.77 exceptional items 9.89 25.15
12.21 5.78 9.10 HC profit after exceptional items 14.88 24.80
Per ADS (cents)
Pro forma result
91.74 42.36 58.32 adjusted for special items 100.68 190.80
RC profit before
70.80 24.72 34.62 exceptional items 59.34 150.90
73.26 34.68 54.60 HC profit after exceptional items 89.28 148.80
----------------------- --------------
Exploration and Production
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
================= ==============
3,427 1,928 2,458 Replacement cost operating profit 4,386 8,093
- 127 90 Special items 217 -
491 345 341 Acquisition amortization 686 961
----------------- --------------
Pro forma operating result
3,918 2,400 2,889 adjusted for special items 5,289 9,054
================= ==============
Results include:
81 124 222 Exploration expense 346 250
Of which:
22 59 147 Exploration expenditure written off 206 130
----------------- --------------
Crude oil and natural gas
liquids production (mb/d)
(Net of Royalties)
471 482 481 UK 481 491
92 104 108 Rest of Europe 106 95
742 760 791 USA 775 732
580 643 672 Rest of World 658 593
----------------- --------------
1,885 1,989 2,052 Total liquids production 2,020 1,911
================= ==============
Natural gas production(a)
(mmcf/d)(Net of Royalties)
1,690 1,628 1,602 UK 1,615 1,920
121 162 157 Rest of Europe 159 144
3,550 3,561 3,565 USA 3,563 3,509
3,193 3,395 3,343 Rest of World 3,369 3,150
----------------- --------------
8,554 8,746 8,667 Total natural gas production 8,706 8,723
================= ==============
Average liquids realizations(b)
($/bbl)
26.58 20.67 24.59 UK 22.59 25.78
23.58 17.26 21.81 USA 19.61 24.18
23.93 18.63 22.20 Rest of World 20.43 23.72
24.74 18.77 22.81 BP Average 20.81 24.77
================= ==============
Average oil marker prices
($/bbl)
27.39 21.13 25.07 Brent 23.12 26.57
27.88 21.54 26.30 West Texas Intermediate 23.94 28.30
26.05 19.76 25.04 Alaska North Slope US West Coast 22.42 25.49
================= ==============
Average natural gas realizations
($/mcf)
2.85 3.12 2.50 UK 2.81 3.23
4.35 2.13 2.76 USA 2.44 5.73
2.58 1.93 2.04 Rest of World 1.98 2.97
3.43 2.27 2.45 BP Average 2.36 4.21
----------------- --------------
4.66 2.35 3.38 Henry Hub gas price(c) ($/mmBtu) 2.87 5.86
UK Gas - National
21.66 19.22 12.10 Balancing Point (p/therm) 15.63 22.21
================= ==============
(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 second quarter was $2,889 million, down $1,029
million compared to a year ago, when adjusted for special items of $90 million
relating to significant restructuring to reposition the business in North
America and the North Sea.
Total hydrocarbon production for the quarter at 3,546 mboe/d was at a record
level, up 5.5% on a year ago reflecting the continued ramp-up of projects
commissioned in 2001, start-up of the King field in the Gulf of Mexico, improved
operating efficiencies, and the increased interest in Sidanco which more than
offset the impact of OPEC related quota restrictions and divestments.
The quarter's result was significantly affected by lower oil and natural gas
prices compared to a year ago. Average liquids realizations declined by some $2
a barrel. Both Brent and WTI marker prices were down, and the realizations were
also impacted by significantly lower North American NGL prices. The result
included a charge of $83 million for Unrealized Profit In Stock (UPIS) to remove
the upstream margin from downstream inventories, following oil price rises since
the first quarter. The equivalent quarter last year included a UPIS credit of
$40 million. Overall gas realizations were down by around $1 a thousand cubic
feet. North American gas realizations also suffered from widening regional
differentials to the Henry Hub marker caused by short term transportation
capacity restrictions from the San Juan and Rockies basins. European gas prices
also fell. Higher exploration expense was mainly due to an $85 million write-off
relating to the Neptune prospect in the deepwater Gulf of Mexico. BP
relinquished the lease after concluding that the discovered volumes did not rank
highly enough in BP's portfolio of investment opportunities.
The half year result at $5,289 million, down $3,765 million on a year ago, also
reflected the impact of significantly lower oil and gas prices and higher
exploration expense, partly offset by strong underlying improvements through
volume growth and lower lifting costs, which were 6% down on a year ago.
In support of our long term growth plans, capital expenditure was $4.44 billion
for the half year excluding acquisitions of $0.44 billion. Projected start-ups
in the second half include King's Peak, Horn Mountain and Princess in the Gulf
of Mexico and Trinidad's LNG Train 2. Approvals were given for the second phase
of the Azeri-Chirag-Gunashli development (BP 34% and operator) in Azerbaijan and
the Baku-Tbilisi-Ceyhan pipeline from the Caspian Sea to the Mediterranean.
Gas, Power and Renewables
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
====================== ==============
161 111 114 Replacement cost operating profit 225 261
- - - Special items - -
- - - Acquisition amortization - -
---------------------- --------------
Pro forma operating result
161 111 114 adjusted for special items 225 261
====================== ==============
Gas sales volumes (mmcf/d)
2,481 2,619 2,349 UK 2,483 2,938
201 413 390 Rest of Europe 402 226
8,516 8,733 8,451 USA 8,591 8,259
6,839 9,289 8,618 Rest of World 8,952 7,121
----------------------- --------------
18,037 21,054 19,808 Total gas sales volumes 20,428 18,544
======================= ==============
NGL sales volumes (mb/d)
- - - UK - -
- - - Rest of Europe - -
206 203 189 USA 196 214
171 181 196 Rest of World 189 189
----------------------- --------------
377 384 385 Total NGL sales volumes 385 403
======================= ==============
Gas, Power and Renewables
The pro forma result for the second quarter and half year was $114 million and
$225 million respectively, compared with $161 million and $261 million a year
ago. The reduction in the second quarter result is due to less volatile trading
conditions compared to the second quarter of 2001. The contributions in the
second quarter from the NGL business and Ruhrgas are both slightly up on the
comparative period in 2001. The half year result similarly reflects a lower
marketing and trading result, partly offset by an improvement from the NGL
business. BP Solar production continues to expand, and is up over 30% in the
first half compared to a year ago.
During the quarter, BP announced it had reached agreement to sell its UK
contract energy management business to Elyo, a subsidiary of Tractebel.
In June, BP purchased a 5% stake in Enagas, the Spanish national gas
infrastructure company, for $70 million. This investment enhances our equity gas
position in Trinidad and Algeria by supporting and growing our access to the
Spanish market.
Refining and Marketing
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
======================= =============
1,464 68 603 Replacement cost operating profit 671 2,204
109 26 (114) Special items (88) 162
189 193 196 Acquisition amortization 389 390
----------------------- -------------
Pro forma operating result
1,762 287 685 adjusted for special items 972 2,756
======================= =============
Refinery throughputs (mb/d)
315 392 376 UK 384 313
623 833 924 Rest of Europe 879 658
1,642 1,394 1,464 USA 1,429 1,582
375 375 339 Rest of World 357 380
----------------------- -------------
2,955 2,994 3,103 Total throughput 3,049 2,933
======================= =============
Oil sales volumes (mb/d)
Refined products
270 256 230 UK 243 265
1,031 1,275 1,444 Rest of Europe 1,360 1,057
1,954 1,834 1,941 USA 1,888 1,914
601 600 522 Rest of World 561 590
----------------------- --------------
3,856 3,965 4,137 Total marketing sales 4,052 3,826
2,022 2,535 2,342 Trading/supply sales 2,439 2,090
----------------------- --------------
5,878 6,500 6,479 Total refined product sales 6,491 5,916
4,131 4,809 4,915 Crude oil 4,862 4,307
----------------------- --------------
10,009 11,309 11,394 Total oil sales 11,353 10,223
======================= ==============
Global Indicator Refining Margin(a)
($/bbl)
3.35 0.09 0.59 NWE 0.34 2.85
7.71 2.04 2.62 USGC 2.33 7.21
10.51 2.06 3.76 Midwest 2.91 7.18
9.11 5.43 4.46 USWC 4.95 10.02
0.96 0.21 0.18 Singapore 0.20 0.83
5.78 1.64 2.06 BP Average 1.85 5.02
======================= ==============
(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, after adjusting for special items, for the second quarter
was $685 million, down $1,077 million from the same period last year. The
special items included business interruption insurance proceeds of $184 million,
partly offset by costs of $47 million associated with an Olympic pipeline
incident in 1999, and Veba integration costs of $23 million. The half year
result is down $1,784 million on a year ago. The results for both periods
reflect substantially lower worldwide refining margins and lower US retail
margins in the first quarter.
Refining throughputs increased by 5% compared with the second quarter of 2001,
due to the effect of the Veba acquisition, which more than offset the
divestments of the Mandan, Salt Lake City and Yorktown refineries in the USA.
Marketing volumes increased by 7% reflecting the Veba acquisition; excluding
Veba, volumes were down 4% due to lower aviation fuel demand, retail divestments
and reductions in lower-margin marine and commercial sales.
Retail shop sales for the second quarter increased by 67% compared with a year
ago, primarily reflecting the Veba acquisition; excluding Veba, retail shop
sales were up 13%, reflecting the impact of new BP Connect stations and
worldwide growth in shop sales.
During the quarter, BP opened an additional 62 BP Connect stations, primarily in
the USA and UK, bringing the total number of BP Connect stations worldwide to
433. An additional 1,600 sites were reimaged in the second quarter, bringing the
total number of sites with the BP helios to some 6,900 worldwide.
In May, BP announced that it had taken the first step to phase out MTBE, by the
end of the year, in the gasoline it sells in California, by signing contracts
with several ethanol suppliers. In addition, BP has introduced ultra low sulphur
emission control diesel fuel in California.
Chemicals
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
======================= =============
9 76 203 Replacement cost operating profit 279 90
- 32 43 Special items 75 -
- - - Acquisition amortization - -
----------------------- -------------
Pro forma operating result
9 108 246 adjusted for special items 354 90
======================= =============
105 80 109(b)Chemicals Indicator Margin(a)($/te) 95(b) 104
======================= =============
Chemicals production (kte)
799 829 837 UK 1,666 1,529
1,796 2,583 2,595 Rest of Europe 5,178 3,484
2,108 2,489 2,695 USA 5,184 4,365
618 710 762 Rest of World 1,472 1,320
----------------------- --------------
5,321 6,611 6,889 Total production 13,500 10,698
======================= ==============
(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 second quarter is based on two months'
actuals and one month of provisional data.
Chemicals
Chemicals' pro forma result for the second quarter, after adjusting for special
items, was $246 million, up from $108 million in the first quarter, reflecting
lower unit costs and firmer margins. The half year result is $264 million above
that of a year ago, reflecting increased sales volumes, partly offset by weaker
margins. Operating costs were lower due to restructuring benefits and
reliability improvements. Special charges for the quarter include $29 million
for restructuring of our Research and Technology facilities and Solvay and
Erdolchemie integration costs of $14 million.
Record production of 6,889 thousand tonnes in the second quarter was 278
thousand tonnes above the first quarter. Production for the second quarter and
first half was 29% and 26% higher than a year ago, respectively, as a result of
the Solvay, Erdolchemie and Veba transactions, new plants, improved reliability
and improving demand.
During the quarter, we completed the sale of our plastics fabrication business
as part of our overall plan to divest non-core businesses.
Other Businesses and Corporate
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
================= =============
(116) (125) (128) Replacement cost operating loss (253) (231)
- - - Special items - -
- - - Acquisition amortization - -
----------------- -------------
Pro forma operating result
(116) (125) (128) adjusted for special items (253) (231)
================= =============
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.
Exceptional Items
2Q 1Q 2Q First Half
2001 2002 2002 $ million 2002 2001
================= =============
Profit (loss) on sale of fixed assets and
171 (109) 376 businesses or termination of operations 267 389
(118) 39 (160) Taxation credit (charge) (121) (269)
----------------- -------------
53 (70) 216 Exceptional items after taxation 146 120
================= =============
Exceptional items for the second quarter include a gain on the redemption of
certain preferred limited partnership interests BP retained following the Altura
Energy common interest disposal in 2000 in exchange for BP loan notes held by
the partnership, partly offset by a loss on the sale of the plastics fabrication
business.
2002 Dividends
2Q 1Q 2Q First Half
2001 2002 2002 2002 2001
================= =============
Dividends per ordinary share
5.50 5.75 6.00 cents 11.75 10.75
3.911 4.051 3.875 pence 7.926 7.576
33.0 34.5 36.0 Dividends per ADS (cents) 70.5 64.5
----------------------- --------------
BP today announced a second quarterly dividend for 2002 of 6.0 cents per
ordinary share. Holders of ordinary shares will receive 3.875 pence per share
and holders of American Depository Receipts (ADRs) $0.36 per ADS share. The
dividend is payable on 9 September to shareholders on the register on 16 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 9 September
Outlook
BP Group Chief Executive, Lord Browne, concluded:
'The world economy continued to recover during the second quarter and further
growth is expected in the third quarter, though recent financial market weakness
poses a downside risk to this economic outlook. BP's overall trading environment
improved to around 'mid-cycle' during the second quarter, but was below this
level on average for the half year.
'Crude oil prices have remained firm. The market has shown some signs of
underlying strength as inventories stabilized rather than built seasonally. OPEC
left its production quotas unchanged at its June meeting. Geopolitical concerns
have remained. Realized prices are expected to remain close to the range
experienced in the second quarter, assuming OPEC production continues around
current levels.
'US natural gas prices have softened and are at a discount to residual fuel oil.
Gas in storage is at a high level and summer injections to date have been strong
despite the commissioning of new gas fired power generation capacity. Third
quarter realizations are expected to be in a lower range than in the second
quarter.
'Full year production remains on track to grow at our target annual rate, as new
projects, including King's Peak, Horn Mountain and Princess in the Gulf of
Mexico and Trinidad LNG train 2 are due on stream during the second half of the
year.
'Refining margins have been volatile across all regions. Product inventories are
high compared with 1997-2001 average levels and this situation is likely to
continue during the third quarter, limiting upward potential in refining
margins.
'Retail margins have stabilized, having recovered from the low levels
experienced during the first quarter. Competitive pressure, especially in the
USA, remains strong.
'During the second quarter, demand for most chemical products improved, in part
reflecting restocking by end-users. Margins, however, still remain weak and any
strengthening is dependent upon continued global economic recovery.
'Capital expenditure is on track for the upper end of the year's target range of
$12-13 billion, excluding acquisitions. The net debt ratio was below the
mid-point of the 25-35% range at the end of the second quarter and is likely to
remain relatively stable around this level as the payment for the purchase of
the remaining interest in Veba has been offset by the receipt of Ruhrgas
proceeds in July. The company intends to restart its share buyback programme and
to operate it whilst the trading environment is above mid-cycle.'
----------------------------------------------------------------------
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, 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; 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.
----------------------------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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