Interim Results - Part 1

BP PLC
7 August 2001


PART 1

BP p.l.c.
Group Results
Second Quarter and Half Year 2001

                                                    London 7 August 2001

                           FOR IMMEDIATE RELEASE

                     RECORD SECOND QUARTER AND FIRST HALF
                      PRODUCTION UP - DIVIDEND INCREASED

---------------------------------------------------------------------------

 Second   First  Second
Quarter Quarter Quarter                                      First Half

   2000    2001    2001   $ million                      2001    2000     %

=======================                                ====================

                          Replacement cost profit
  2,791   3,437   3,032     before exceptional items    6,469   5,468
    442      45     114   Special items(a)                159     472
    377     644     653   Acquisition amortization(b)   1,297     377
-----------------------                                --------------------

                          Pro forma result adjusted
  3,610   4,126   3,799   for special items             7,925   6,317
=======================                                ====================
  10.80   12.58   11.92   - per ordinary share (pence)  24.50   19.41   26%
  16.54   18.36   16.92   - per ordinary share (cents)  35.28   30.47   16%
   0.99    1.10    1.02   - per ADS (dollars)            2.12    1.83
=======================                                ====================

o    BP's pro forma result, adjusted for special items, was a second quarter
     record at $3,799 million compared to $3,610 million a year ago. For the
     half year, the result was a record $7,925 million, compared to
     $6,317 million. The result per share was up by 16%. In sterling terms the
     increase was 26%. Replacement cost profit, before exceptional items, for
     the second quarter and half year was $3,032 million and $6,469 million
     respectively, compared to $2,791 million and $5,468 million a year ago.

o    Return on average capital employed, on a pro forma basis and adjusted for
     special items, was 23% in the second quarter compared to 21% a year ago.

o    The first half results reflect the generally favourable trading
     environment, portfolio changes and performance improvements. Compared to
     a year ago, strength in refining margins and gas prices largely offset
     weakness in the chemicals environment.

o    First half year and second quarter oil and gas production were up 9% and
     4% respectively. Even on a consistent current portfolio basis the increases
     were 1% and 2%. We are on track to deliver the growth target for the
     year, continuing the rapid turnaround in production growth from the low    
     point last year.

o    In July, BP announced a deal with E.ON which, subject to regulatory
     approval, will enhance our position in the European downstream market.

o    The company purchased for cancellation 32 million of its own shares
     during the quarter, at a cost of $283 million.

o    Quarterly dividend up 4.8% at 5.5 cents per share ($0.33 per ADS). First
     half dividend was 10.75 cents per share, compared with 10.0 cents per
     share a year ago.

BP Group Chief Executive, Lord Browne, commented:

     ' Performance improvements in the first half year continue on track to
     deliver our targets. Our disciplined approach to cost management and
     investment selection is delivering profitable growth. I am especially
     delighted with the growth in oil and gas production and the quality of
     the downstream performance. All of this has given us the ability to        
     increase the dividend.'

The pro forma result, adjusted for special items, has been derived from the
company'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, is
provided in order to enable investors to evaluate better both the company'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 quarter and half year comprise, in Refining and Marketing,
     Burmah Castrol integration costs and rationalization costs in the
     European commercial business, and bond redemption charges.

(b)  Depreciation and amortization relating to the fixed asset revaluation
     adjustment and goodwill consequent upon the ARCO and Burmah Castrol
     acquisitions.


                          Summary Quarterly Results

Exploration and Production's second quarter result was up by 8% on a year ago,
reflecting an 11% increase in gas production, higher North American gas prices
and lower exploration expense. ARCO synergies have been fully achieved. There
were discoveries offshore Trinidad, Egypt and the Gulf of Mexico. Developments
have been approved in Angola, Egypt, Alaska, Norway, Azerbaijan and Trinidad
and in July a further 9.7% stake has been acquired in the Tangguh gas project
in Indonesia.

In Gas and Power, the quarter's result reflected further improvement in
marketing and trading.

The record Refining and Marketing result reflected higher refining margins,
the Burmah Castrol acquisition, the consolidation of the fuels business in
Europe and continued unit cost improvements. ARCO synergies have been fully
achieved and Burmah Castrol synergies are on track.

The Chemicals' result was down from the first quarter as margins and costs
remained under pressure from high feedstock and energy prices in a period of
demand weakness, and some plants suffered operational problems.

Interest expense for the quarter and half year reflected lower interest rates,
after adjusting for bond redemption charges.

The pro forma effective tax rate on replacement cost profit, before
exceptional items, was 28% for the half year.

Capital expenditure, excluding acquisitions, for the quarter was $3.3 billion,
and $5.8 billion for the half year. This is consistent with a 2001 outcome of
around $13 billion. Total capital expenditure for the two periods was $3.8
billion and $6.3 billion.

Net debt at the end of the quarter was $18.8 billion. The pro forma ratio of
net debt to net debt plus equity was 25%.

Net cash outflow for the quarter was $2,136 million, reflecting continuing
strong operating cash flow, offset by higher tax payments and capital
expenditure. For the half year there was a net cash inflow of $1,080 million.

---------

The commentaries above and following are based on the pro forma replacement
cost operating results for the quarter and half year, before exceptional
items, adjusted for special items. The results of ARCO and Burmah Castrol have
been included with effect from 14 April and 7 July 2000 respectively. The
European fuels business has been consolidated with effect from 1 August 2000.


                  Reconciliation of Reported Results to
              Pro Forma Results Adjusted for Special Items


 Pro Forma Result                                           Pro Forma Result
 adjusted for  ----- 2Q 2001 ---------------                  adjusted for
 special items                                                special items
 -------------------

    2Q     1Q     2Q Special   Acq. Reported                     First Half
  2000   2001   2001  Items* Amort+ Earnings $ million          2001    2000
 ===========================================                  ==============

                                             Exploration and
 3,627  5,136  3,918       -   477     3,441   Production      9,054   6,854

   114    112    173       -     -       173 Gas and Power       285     256
                                             Refining and

 1,394    994  1,762     109   176     1,477 Marketing         2,756   1,978

   370     81      9       -     -         9 Chemicals            90     629

                                           Other businesses
  (149)  (127)  (128)      -     -      (128)  and corporate    (255)   (360)
 -------------------------------------------                  --------------

                                             RC operating
 5,356  6,196  5,734     109   653     4,972   profit         11,930   9,357
 -------------------------------------------                  --------------

  (403)  (436)  (391)     50     -      (441)Interest expense   (827)   (699)

(1,306)(1,623)(1,523)    (45)    -    (1,478)Taxation         (3,146) (2,236)

   (37)   (11)   (21)      -     -       (21)MSI                 (32)   (105)
 -------------------------------------------                  --------------

                                             RC profit before
 3,610  4,126  3,799     114   653     3,032 exceptional items 7,925   6,317
 -------------------------------------------                  --------------

                                         171 Exceptional items before tax
                                         (72)Taxation on exceptional items
                                       -----
                                       3,131 RC profit after exceptional items
                                          40 Stock holding gains (losses)
                                       -----
                                       3,171 HC profit
                                       =====

* The special items refer to non-recurring charges and credits. The special
  items for the quarter and half year comprise, in Refining and Marketing,
  Burmah Castrol integration costs and rationalization costs in the European
  commercial business, and bond redemption charges.

+ Acquisition amortization is depreciation and amortization relating to the
  fixed asset revaluation adjustment and goodwill consequent upon the ARCO and
  Burmah Castrol acquisitions.

Net special and exceptional items before tax were $12 million credit and $167
million credit for the second quarter and half year respectively.


                            Operating Results

 Second   First  Second
Quarter Quarter Quarter                                         First Half
   2000    2001    2001                                        2001    2000
=======================                                      ==============

                         Replacement cost
  4,337   5,499   4,972  operating profit ($m)               10,471   8,298
-----------------------                                      --------------

                         Replacement cost profit
  2,791   3,437   3,032  before exceptional items ($m)        6,469   5,468
-----------------------                                      --------------

                         Profit after exceptional items ($m)
  2,811   3,542   3,131  Replacement cost                     6,673   5,364

  3,024   3,304   3,171  Historical cost                      6,475   6,109
-----------------------                                      --------------

                         Per ordinary share (cents)
                         Pro forma result
  16.54   18.36   16.92    adjusted for special items         35.28   30.47

                         RC profit before
  12.60   15.29   13.51    exceptional items                  28.80   26.38

                         HC profit after
  13.59   14.70   14.12    exceptional items                  28.82   29.47

                         Per ADS (cents)
                         Pro forma result
  99.24  110.16  101.52    adjusted for special items        211.68  182.82

                         RC profit before
  75.60   91.74   81.06    exceptional items                 172.80  158.28

                         HC profit after
  81.54   88.20   84.72    exceptional items                 172.92  176.82
-----------------------                                      --------------

                         Dividends per ordinary share
   5.00    5.25    5.50  cents                                10.75    10.0

  3.352   3.665   3.911  pence                                7.576   6.572

   30.0    31.5    33.0  Dividends per ADS (cents)             64.5    60.0
-----------------------                                      --------------

                         EBITDA(a) (cents)
  30.27   33.90   32.46  per ordinary share                   66.36   58.74

 181.62  203.40  194.76  per ADS                             398.16  352.44
-----------------------                                      --------------

                         Adjusted EBITDA(b) (cents)
  31.46   34.22   32.00  per ordinary share                   66.22   58.21

 188.76  205.32  192.00  per ADS                             397.32  349.26
=======================                                      ==============

(a) Profit for the period before interest, tax, depreciation and
    amortization.

(b) Replacement cost profit before exceptional items, adjusted for special
    items, and before interest, tax, depreciation and amortization.

                           Operating Statistics

 Second   First  Second
Quarter Quarter Quarter                                         First Half
   2000    2001    2001                                        2001    2000
=======================                                       =============

                         Crude oil and natural gas
                         liquids production (mb/d)
                         (Net of Royalties)
    519     511     471  UK                                     491     550

     88      97      92  Rest of Europe                          95      90

    705     722     742  USA                                    732     749

    585     607     580  Rest of World                          593     550
-----------------------                                       -------------

                         Total crude oil and
  1,897   1,937   1,885  liquids production                   1,911   1,939
=======================                                       =============

                         Natural gas production (mmcf/d)
                         (Net of Royalties)

  1,630   2,152   1,690  UK                                   1,920   1,688

     99     169     121  Rest of Europe                         144     142

  3,188   3,467   3,550  USA                                  3,509   2,760

  2,777   3,107   3,193  Rest of World                        3,150   2,412
-----------------------                                       -------------

  7,694   8,895   8,554  Total natural gas production         8,723   7,002
=======================                                       =============

                         Gas sales volumes (mmcf/d)

  2,424   3,395   2,481  UK                                   2,938   2,396

    148     251     201  Rest of Europe                         226     168

  6,239   8,001   8,516  USA                                  8,259   5,512

  5,006   7,403   6,839  Rest of World                        7,121   4,709
-----------------------                                      --------------

 13,817  19,050  18,037  Total gas sales volumes             18,544  12,785
=======================                                      ==============

                         NGL sales volumes (mb/d)

      -       -       -  UK                                       -       -

      -       -       -  Rest of Europe                           -       -

    129     221     206  USA                                    214     125

    138     207     171  Rest of World                          189     184
-----------------------                                      --------------

    267     428     377  Total NGL sales volumes                403     309
=======================                                      ==============

                         Operating Statistics (continued)

 Second   First  Second
Quarter Quarter Quarter                                         First Half
   2000    2001    2001                                        2001    2000
=======================                                       =============

                         Oil sales volumes (mb/d)
                         Refined products

    227     259     270  UK                                     265     225

    781   1,082   1,031  Rest of Europe                       1,057     774

  1,898   1,874   1,954  USA                                  1,914   1,624

    459     579     601  Rest of World                          590     446
-----------------------                                      --------------

  3,365   3,794   3,856  Total marketing sales                3,826   3,069

  2,071   2,159   2,022  Trading/supply sales                 2,090   1,846
-----------------------                                      --------------

  5,436   5,953   5,878  Total refined product sales          5,916   4,915

  6,271   4,482   4,131  Crude oil                            4,307   6,383
-----------------------                                      --------------

 11,707  10,435  10,009  Total oil sales                     10,223  11,298
=======================                                      ==============

                         Chemicals production (kte)

    658     730     799  UK                                   1,529   1,525

  1,692   1,688   1,796  Rest of Europe                       3,484   3,332

  2,562   2,257   2,108  USA                                  4,365   5,181

    577     702     618  Rest of World                        1,320   1,154
-----------------------                                      --------------

  5,489   5,377   5,321  Total production                    10,698  11,192
=======================                                      ==============

                        Exploration and Production

   2Q    1Q    2Q                                               First Half
 2000  2001  2001   $ million                                  2001    2000
=================                                            ==============

3,019 4,680 3,441   Replacement cost operating profit         8,121   6,222

  259     -     -   Special items                                 -     283

  349   456   477   Acquisition amortization                    933     349
-----------------                                            --------------

                    Pro forma operating result
3,627 5,136 3,918   adjusted for special items                9,054   6,854
=================                                            ==============

                    Results include:
  168   169    81   Exploration expense                         250     299
-----------------                                            --------------

24.98 24.80 24.74   BP average oil realizations(a) ($/bbl)    24.77   25.30

26.88 25.75 27.39   Brent Oil Price ($/bbl)                   26.57   26.89

28.96 28.71 27.88   West Texas Intermediate oil price ($/bbl) 28.30   28.91
=================                                            ==============

                    BP average
 2.51  4.96  3.43   natural gas realizations ($/mcf)           4.21    2.33

 3.44  7.08  4.66   Henry Hub gas price(b) ($/mmBtu)           5.86    2.98
=================                                            ==============

(a) Crude oil and natural gas liquids.

(b) Henry Hub First of the Month Index.

The record second quarter pro forma result, adjusted for special items,
increased by 8% on a year ago. The improved result reflected an 11% increase
in gas production, higher North American gas prices and lower exploration
expense. ARCO synergies have been fully achieved. For the half year the result
also reflected portfolio changes.

Total hydrocarbon production for the quarter was up 4% on the second quarter
of 2000, with natural gas volumes up by 11% and oil production stable. Even on
a consistent current portfolio basis, the increase was 2%. This continues the
recent quarterly achievement of a continuously improving growth rate. For the
half year, the total production was up 9% and on a consistent current
portfolio basis the increase was 1%. During the quarter, production started up
at the Nile and Mica fields in the Gulf of Mexico. In July the Tambar field in
Norway started production.

In support of growth, capital expenditure during the quarter was $2.4 billion
and $4.3 billion for the half year, up 78% on a year ago. The Kizomba
development in Angola was approved along with developments for an NGL plant in
Egypt and the Milne Point extension project in Alaska. In July, the Valhal
flank development offshore Norway, the Azeri Chirag Gunashli phase one
development in Azerbaijan and the Atlas Methanol Plant in Trinidad were
approved.


                   Exploration and Production (continued)

During the quarter, there was a discovery at Cashima (BP 100% and operator)
offshore Trinidad. The Cashima 1 well, which is the first of four exploratory
wells planned for 2001, discovered an estimated one trillion cubic feet of
gas. There were also discoveries in Egypt and in the Gulf of Mexico. In the
quarter, BP (67% and operator) successfully bid for one block in the UKCS 19th
round, adjacent to the block won in the Faeroes in 2000. In addition, BP
signed an agreement to take a 25% interest in Saudi Arabia's largest gas
development, the Core Venture 1 project.

In June, BP announced the sale of its 9.5% stake in the Kashagan discovery
offshore Kazakhstan. Shortly after the quarter end, BP acquired a further 9.7%
stake in the Tangguh LNG project in Indonesia. This increases BP's share of
the project to around 50%.



                               Gas and Power

   2Q     1Q     2Q                                             First Half
 2000   2001   2001   $ million                                2001    2000
===================                                          ==============

  114    112    173   Replacement cost operating profit         285     256

    -      -      -   Special items                               -       -

    -      -      -   Acquisition amortization                    -       -
-------------------                                          --------------

                      Pro forma operating result
  114    112    173   adjusted for special items                285     256
===================                                          ==============

The pro forma result for the second quarter was $173 million compared with
$114 million a year ago, reflecting an improved marketing and trading
performance. The half year's result similarly reflected stronger marketing and
trading, partly offset by pressure on NGL margins.

During the quarter, Heads of Agreement have been signed for the development of
China's first liquefied natural gas (LNG) import terminal at Guangdong. BP
also submitted an initial investment  proposal on behalf of a consortium to
develop a 4,200 kilometre west-east pipeline.

Agreement has been reached with Statoil to purchase 1.6 billion cubic metres
of gas per annum for 15 years with effect from 1 October. This is the first
significant contract for gas supplies to the UK from the Norwegian continental
shelf since the Frigg contract in 1977. In North America BP announced an
agreement in principle for a strategic alliance with the Energy East
Corporation, enabling the two parties to pool their combined expertise in
natural gas acquisition and supply management.

In the USA, BP increased its stake in Green Mountain Energy Company, a leading
marketer of cleaner and renewable energy, from 18.5% to 22.9%. The original
equity stake was acquired during 2000.

                         Refining and Marketing

   2Q    1Q    2Q                                               First Half
 2000  2001  2001   $ million                                  2001    2000
=================                                             =============

1,183   753 1,477   Replacement cost operating profit         2,230   1,767

  141    53   109   Special items                               162     141

   70   188   176   Acquisition amortization                    364      70
-----------------                                             -------------

                    Pro forma operating result
1,394   994 1,762   adjusted for special items                2,756   1,978
=================                                             =============

 4.69  4.25  5.78   Global Indicator Refining Margin(a)($/bbl) 5.02    3.56
-----------------                                             -------------

                    Refinery throughputs (mb/d)

  265   310   315     UK                                        313     273

  535   693   623     Rest of Europe                            658     528

1,853 1,522 1,642     USA                                     1,582   1,573

  368   386   375     Rest of World                             380     360
-----------------                                             -------------

3,021 2,911 2,955   Total throughput                          2,933   2,734
=================                                             =============

(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.

The pro forma result, after adjusting for special items, for the second
quarter was $1,762 million, a quarterly record, and up by $368 million or 26%
on the same period last year. The special items comprised Burmah Castrol
integration costs and restructuring costs for the commercial business in
Europe. The half year result, also a record, was up 39% on a year ago. The
main drivers of the improvement in both periods were higher refining margins,
the impact of consolidation of the fuels joint venture in Europe, the Burmah
Castrol acquisition and unit cost reductions. ARCO synergies have been fully
achieved and Burmah Castrol synergies are on track. US refining margins were
particularly strong for some of the quarter due to tight supply in the US
Midwest and on the West Coast.

Marketing sales in the second quarter increased by 15% versus a year ago
reflecting consolidation of the European fuels business; this factor, together
with the roll-out of BP Connect stores, led to an increase in store sales of
17%. The roll-out of BP Connect continued during the quarter with over 155 BP
Connect stores now open in the UK, USA, Australia and New Zealand. BP's
leadership position in clean fuels continues to grow with BP now providing
clean fuels to 72 cities.

In July BP announced that, subject to regulatory approval, it is to acquire a
majority stake in Veba Oil which owns Aral, Germany's biggest fuels retailer.

Also in July BP announced that it had reached an agreement with Tesoro
Petroleum Corporation to sell the Mandan, North Dakota and Salt Lake City,
Utah refineries in the USA, with associated storage, pipeline, distribution
and gasoline marketing operations, for $677 million, excluding working
capital. The agreement is subject to regulatory approval.

                                Chemicals

   2Q    1Q    2Q                                               First Half
 2000  2001  2001   $ million                                  2001    2000
=================                                             =============

  320    81     9   Replacement cost operating profit            90     579

   50     -     -   Special items                                 -      50

    -     -     -   Acquisition amortization                      -       -
-----------------                                             -------------

                    Pro forma operating result
  370    81     9   adjusted for special items                   90     629
=================                                             =============

  132   106   103(b)Chemicals Indicator Margin(a) ($/te)        104(b)  123
=================                                             =============

(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
broader range of products than our previous indicator. Among 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' pro forma result for the second quarter was $9 million, down from
$81 million in the first quarter. The second quarter and first half 2001
results were sharply down on a year ago, reflecting the severe deterioration
in the trading environment. The results for the second quarter and half year
include $19 million and $40 million respectively for restructuring costs.

In the second quarter, polymer margins and costs remained under pressure from
high feedstock and energy prices in a period of demand weakness. This was
exacerbated by operational problems at three crackers which have since been
resolved.

Production in the second quarter benefited from full ownership of Erdolchemie
from 1 May 2001, but was adversely impacted by the cracker problems at
Grangemouth in Scotland, Lavera in France and Chocolate Bayou in Texas, USA.
In aggregate, second quarter production of 5,321 ktes was similar to the
previous quarter and 3% below the same quarter in 2000. First half 2001
volumes were 4% down on the first half of 2000.

In response to the trading environment, actions are underway to improve
returns by focusing the portfolio, reducing capital expenditure and
implementing additional cost reductions.


                        Other Businesses and Corporate

   2Q    1Q    2Q                                               First Half
 2000  2001  2001   $ million                                  2001    2000
=================                                             =============

 (299) (127) (128)  Replacement cost operating loss            (255)   (526)

  150     -     -   Special items                                 -     166

    -     -     -   Acquisition amortization                      -       -
-----------------                                             -------------

                    Pro forma operating result
 (149) (127) (128)  adjusted for special items                 (255)   (360)
=================                                             =============

Other Businesses and Corporate comprises Finance, BP Solar, the group's coal
asset and aluminium asset, its investments in PetroChina and Sinopec, interest
income and costs relating to corporate activities. BP Solar production for the
half year was 26% higher than a year ago.

                              Exceptional Items

   2Q    1Q    2Q                                               First Half
 2000  2001  2001   $ million                                  2001    2000
=================                                             =============

                    Profit (loss) on sale of fixed assets and
  161   218   171     businesses and termination of operations  389       4

 (141) (113)  (72)  Taxation charge                            (185)   (108)
-----------------                                             -------------

   20   105    99   Exceptional items after taxation            204    (104)
=================                                             =============

Exceptional items for the second quarter include the profit on sale of the
Kashagan discovery in Kazakhstan and loss on the sale of the Carbon Fibers
business in the USA.

                              2001 Dividends

BP today announced a second quarterly dividend for 2001 of 5.5 cents per
ordinary share. Holders of ordinary shares will receive 3.911 pence per share
and holders of American Depository Receipts (ADRs) $0.33 per ADS share. The
dividend is payable on 10 September 2001 to shareholders on the register on 17
August 2001. 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 10 September 2001. The third quarter 2001 results and dividend
will be announced on 6 November 2001.

                           Half Year Review

The Half Year Review will be published in the Financial Times and Wall Street
Journal (Europe) on Friday, 10 August 2001.

                                Outlook

BP Group Chief Executive, Lord Browne, concluded:

   'The oil market remains essentially balanced. Oil prices have fallen from
   their peaks, but OPEC production cuts earlier in the year have prevented
   oversupply. Oil consumption is expected to recover seasonally in the coming
   months. OPEC's actions in regard to supply may support prices within its
   current target price range. US natural gas prices have fallen sharply in
   the face of seasonally lower demand and increasing supply, with rapid stock  
   to building. Prices have returned to levels close parity with fuel oil.
   Refining margins have experienced volatility as product inventories have     
   recovered and margins are likely to settle at levels somewhat lower than     
   recent historic highs. Retail margins have recently risen but are likely to  
   soften owing to competitive pressure. Chemicals margins remain depressed as a
   result of weak demand and excess capacity.

   'BP's focus is now on delivering profitable organic growth, while taking
   advantage of any structural opportunities which the market presents. We
   will continue our particular focus on cost and investment discipline to      
   enable these plans to be realized within our financial framework. In the     
   chemicals business, we are responding to the current trading environment by  
   reducing investment in petrochemicals and implementing additional cost       
   reductions.'

     ----------------------------------------------------------------------

     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
     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. Additional information,
     including information on factors which may affect BP's business, is
     contained in BP's Annual Report and Accounts for 2000 and in the Annual
     Report on Form 20-F filed with the US Securities and Exchange
     Commission.

     ----------------------------------------------------------------------