1Q09 part 1 of 2

RNS Number : 2509R

BP PLC

28 April 2009

 



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BP p.l.c.  Group results First quarter 2009

London 28 April 2009 

FOR IMMEDIATE RELEASE

										First
				First		Fourth		First		quarter
				quarter		quarter		quarter		2009 vs
				2009		2008		2008		2008
$ million
Profit (loss) for the period(a)				2,562		(3,344)		7,094
Inventory holding (gains) losses, net of tax				(175)		5,931		(863)
Replacement cost profit				2,387		2,587		6,231		(62)%
-    per ordinary share (cents)				12.75		13.93		33.01		(61)%
-    per ADS (dollars)				0.77		0.84		1.98

• BP's first-quarter replacement cost profit was $2,387 million, compared with $6,231 million a year ago, a decrease of 62%. 

• Non-operating items and fair value accounting effects for the first quarter had a net $194 million unfavourable impact compared to a net $4 million unfavourable impact in the first quarter of 2008 - see further details on page 2. 

• Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $368 million for the first quarter, compared to $246 million for the same period last year. This net increase in costs was primarily due to a reduction in the expected return on pension plan assets. 

• The effective tax rate on replacement cost profit for the quarter was 37.5%, compared to 37.0% for the same period last year.

• Net cash provided by operating activities for the quarter was $5.6 billion compared with $10.9 billion a year ago.

• Net debt at the end of the quarter was $26.7 billion. The ratio of net debt to net debt plus equity was 23% compared with 19% a year ago.

• Total capital expenditure for the first quarter was $4.6 billion. Capital expenditure, excluding acquisitions and asset exchanges, is expected to be less than $20 billion for the year. Disposal proceeds were $0.3 billion for the quarter.

• The quarterly dividend, to be paid in June, is 14 cents per share ($0.84 per ADS) compared with 13.525 cents per share a year ago, an increase of 4%. In sterling terms, the quarterly dividend is 9.584 pence per share, compared with 6.830 pence per share a year ago, an increase of 40%. 

(a)	Profit (loss) attributable to BP shareholders.

The commentaries above and following are based on replacement cost profit and should be read in conjunction with the cautionary statement on page 17.

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Analysis of replacement cost profit before interest and tax and reconciliation to profit for the period

				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
$ million
Exploration and Production				4,320		4,756		10,072
Refining and Marketing				1,090		416		1,249
Other businesses and corporate				(761)		(680)		(213)
Consolidation adjustment(a)				(405)		633		(784)
RC profit before interest and tax(b)				4,244		5,125		10,324
Finance costs and net finance income or expense relating to
pensions and other post-retirement benefits				(368)		(251)		(246)
Taxation on a replacement cost basis				(1,454)		(2,145)		(3,729)
Minority interest				(35)		(142)		(118)
Replacement cost profit attributable to BP shareholders				2,387		2,587		6,231
Inventory holding gains (losses)				254		(8,788)		1,326
Taxation (charge) credit on inventory holding gains and losses				(79)		2,857		(463)
Profit for the period attributable to BP shareholders				2,562		(3,344)		7,094

(a)	The consolidation adjustment for the first quarter is the outcome of higher margins and volumes; in the fourth quarter of 2008 it was impacted by a significant fall in prices; in the first quarter of 2008 it was impacted by higher volumes.
(b)	Replacement cost profit reflects the replacement cost of supplies. For further information see page 14.

Total of non-operating items and fair value accounting effects(a)(b) 

				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
$ million
Exploration and Production				469		497		(635)
Refining and Marketing				(459)		(228)		710
Other businesses and corporate				(321)		(301)		(81)
				(311)		(32)		(6)
Taxation credit (charge)(c)				117		14		2
				(194)		(18)		(4)

(a)	An analysis of non-operating items by type is provided on page 15 and an analysis by region is shown on pages 5, 7 and 8.
(b)	Information on fair value accounting effects is non-GAAP. For further details, see page 16.
(c)	Tax is calculated using the quarter's effective tax rate on replacement cost profit.

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Per share amounts

				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
Per ordinary share (cents)(a)
Profit (loss) for the period				13.69		(17.62)		37.58
RC profit for the period				12.75		13.93		33.01
Per ADS (dollars)(a)
Profit (loss) for the period				0.82		(1.06)		2.25
RC profit for the period				0.77		0.84		1.98

(a)	See Note 4 on page 20 for details of the calculation of earnings per share.

Net debt ratio - net debt: net debt + equity

				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
$ million
Gross debt				34,698		33,204		29,871
Less: fair value asset (liability) of hedges related to finance debt				(323)		(34)		1,234
				35,021		33,238		28,637
Cash and cash equivalents				8,360		8,197		4,820
Net debt				26,661		25,041		23,817
Equity				91,179		92,109		99,165
Net debt ratio				23%		21%		19%

Net debt and net debt ratio are non-GAAP measures. Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt, for which hedge accounting is claimed. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'. We believe that net debt and net debt ratio provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders.

Dividends

Dividends Payable

BP today announced a dividend of 14 cents per ordinary share to be paid in June. Holders of ordinary shares will receive 9.584 pence per share and holders of American Depositary Receipts $0.84 per ADS. The dividend is payable on 8 June 2009 to shareholders on the register on 15 May 2009. 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 June 2009.

Dividends Paid				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
Dividends paid per ordinary share
cents				14.000		14.000		13.525
pence				9.818		8.705		6.813
Dividends paid per ADS (cents)				84.00		84.00		81.15

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Exploration and Production

$ million				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
Profit before interest and tax(a)				4,286		4,497		10,054
Inventory holding (gains) losses				34		259		18
Replacement cost profit before interest and tax				4,320		4,756		10,072
By region
US				1,143		1,299		3,085
Non-US				3,177		3,457		6,987
				4,320		4,756		10,072

(a)	Includes profit after interest and tax of equity-accounted entities.

The replacement cost profit before interest and tax for the first quarter was $4,320 million, a decrease of 57% compared with the first quarter of 2008. This decrease was primarily due to lower realizations and lower earnings from equity-accounted entities, primarily TNK-BP due to lower prices and the effect of lagged tax reference prices. This was partly offset by significantly lower costs, the impact of higher reported volumes and a strong contribution from the gas marketing and trading business. Unit production costs were 11% lower than in the first quarter of 2008.

Additionally, the result reflected a net non-operating gain of $311 million in the first quarter, which was mainly attributable to fair value gains on embedded derivatives. The corresponding quarter of 2008 contained a net non-operating charge of $376 million. In the first quarter, fair value accounting effects had a favourable impact of $158 million compared with an unfavourable impact of $259 million a year ago.

Reported production for the quarter was 4,016mboe/d, more than 2% higher than the first quarter of 2008. After adjusting for entitlement impacts in our production-sharing agreements (PSAs) and the effect of OPEC quota restrictions, production was more than 4% higher than the first quarter of 2008. This primarily reflects the ramp-up of production from major projects that started up in 2008. As previously indicated, we expect production in 2009 to be higher than 2008. The actual growth rate will depend on a number of factors, including the oil price and its impact on PSAs and OPEC quota restrictions. We expect the quarterly phasing of underlying production during the year to reflect the normal seasonal effects associated with turnaround activity in the second and third quarters.

In the Gulf of Mexico, production from Thunder Horse continued to ramp up during the quarter as wells in Thunder Horse North came onstream. In Russia, TNK-BP announced that it had commenced commercial production from the Urna and Ust-Tegus fields in the Uvat area of the Tyumen region.

On 3 March, Sonangol and BP announced the Leda oil discovery in ultra-deepwater Block 31, offshore Angola (BP 26.67% and operator). This is the seventeenth discovery made by BP in Block 31.

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Exploration and Production

$ million				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
Non-operating items
US				71		(318)		(8)
Non-US				240		562		(368)
				311		244		(376)
Fair value accounting effects(a)
US				208		11		(142)
Non-US				(50)		242		(117)
				158		253		(259)
Exploration expense
US				44		128		72
Non-US				75		111		221
				119		239		293
Production (net of royalties)(b)
Liquids (mb/d) (net of royalties)(c)
US				643		590		554
Europe				212		216		235
Russia				822		827		818
Rest of World				827		827		846
				2,504		2,460		2,453
Natural gas (mmcf/d) (net of royalties)
US				2,335		2,243		2,149
Europe				838		858		996
Russia				642		621		512
Rest of World				4,952		4,891		4,807
				8,767		8,613		8,464
Total hydrocarbons (mboe/d)(d)
US				1,046		976		925
Europe				357		365		406
Russia				933		934		906
Rest of World				1,680		1,670		1,676
				4,016		3,945		3,913
Average realizations(e)
Total liquids ($/bbl)				41.26		52.09		90.92
Natural gas ($/mcf)				3.63		5.08		5.88
Total hydrocarbons ($/boe)				31.40		40.94		62.27

(a)	These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 16.
(b)	Includes BP's share of production of equity-accounted entities.
(c)	Crude oil and natural gas liquids.
(d)	Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
(e)	Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
Because of rounding, some totals may not agree exactly with the sum of their component parts.

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Refining and Marketing

				First		Fourth		First
				quarter		quarter		quarter
				2009		2008		2008
$ million
Profit (loss) before interest and tax(a)				1,417		(8,064)		2,573
Inventory holding (gains) losses				(327)		8,480		(1,324)
Replacement cost profit (loss) before interest and tax				1,090		416		1,249
By region
US				308		(735)		154
Non-US				782		1,151		1,095
				1,090		416		1,249

(a)	Includes profit after interest and tax of equity-accounted entities.

The replacement cost profit before interest and tax for the first quarter was $1,090 million compared with $1,249 million for the same period last year. The quarter's result included a net non-operating charge of $350 million, primarily relating to restructuring. This compares with a net non-operating gain of $609 million for the same period last year. In the first quarter, fair value accounting effects had an unfavourable impact of $109 million. A year ago, the impact was $101 million favourable. 

Compared to the same quarter last year, the segment's performance was significantly better, with the benefits of improved operational and cost momentum more than offsetting the effects of a weaker environment. Despite the improved global refining indicator margins, actual refining margins were worse than the same quarter last year. Upgrading margins were particularly poor in the first quarter due to narrowing of the gasoline-distillate and light-heavy crude spreads, which adversely impacted our highly upgraded facilities. Petrochemicals margins and volumes were also significantly worse than a year ago. These environmental effects were more than offset by a substantially improved operational performance in refining, a very strong supply and trading contribution and significant cost improvements from our simplification and efficiency efforts and the absence of major restoration and repair costs.

In the first quarter, US refining margins returned to a modest premium relative to other regions and the unusual adverse impacts from prior-month pricing of domestic pipeline barrels, that impacted our fourth-quarter results, were not repeated. Consequently, the operational momentum from the restoration of our US refineries to full capability, combined with significantly lower costs from our simplification efforts and very strong supply and trading, delivered a much improved US result.

Outside the US, we did not see a repeat of the adverse foreign exchange impacts from the fourth quarter. Therefore, despite significantly lower refining and petrochemical margins, through good cost management and strong supply and trading performance, we delivered a similar performance to the first quarter of 2008 after adjusting for non-operating items and fair value accounting effects.

Refining throughput for the quarter was 2,246mb/d compared to 2,166mb/d for the same period a year ago. Solomon availability was nearly one percentage point above the fourth quarter of 2008 and more than four percentage points higher than the first quarter of 2008, the increases being driven primarily by improvements at the Texas City refinery. 

The overall weak environment for marketing and petrochemicals is expected to continue. Refining margins were weak in March and the extent of seasonal demand factors will be a significant determinant of refining margins in the second quarter. Our refining availability is expected to remain higher than in 2008. Scheduled maintenance in the second quarter is expected to have a greater impact than in the first quarter.

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 Refining and Marketing

				First		Fourth		First
				quarter		quarter		quarter
$ million				2009		2008		2008
Non-operating items
US				(134)		43		774
Non-US				(216)		(206)		(165)
				(350)		(163)		609
Fair value accounting effects(a)
US				65		(91)		95
Non-US				(174)		26		6
				(109)		(65)		101
Refinery throughputs (mb/d)
US				1,164		1,063		1,076
Europe				783		697		775
Rest of World				299		272		315
Total throughput				2,246		2,032		2,166
Refining availability (%)(b)				92.3		91.4		88.0
Oil sales volumes (mb/d)
Refined products
US				1,402		1,435		1,455
Europe				1,529		1,564		1,565
Rest of World				617		667		692
Total marketing sales				3,548		3,666		3,712
Trading/supply sales				2,170		1,779		2,047
Total refined product sales				5,718		5,445		5,759
Crude oil				1,844		1,540		1,860
Total oil sales				7,562		6,985		7,619
Global Indicator Refining Margin ($/bbl)(c)
NWE				4.67		7.48		4.79
USGC				6.69		2.49		6.21
US Midwest				7.03		2.53		1.11
USWC				9.96		6.80		5.91
Singapore				2.51		5.16		4.76
BP Average				6.20		5.20		4.57
Chemicals production (kte)
US				713		579		1,036
Europe				788		612		969
Rest of World				1,119		1,196		1,531
Total production				2,620		2,387		3,536

(a)	These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 16.
(b)	Refining availability represents Solomon Associates' operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory maintenance downtime.
(c)	The Global Indicator Refining Margin (GIM) is the average of 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.

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Other businesses and corporate

				First		Fourth		First
				quarter		quarter		quarter
$ million				2009		2008		2008
Profit (loss) before interest and tax(a)				(800)		(729)		(193)
Inventory holding (gains) losses				39		49		(20)
Replacement cost profit (loss) before interest and tax				(761)		(680)		(213)
By region
US				(279)		(277)		(152)
Non-US				(482)		(403)		(61)
				(761)		(680)		(213)
Results include
Non-operating items
US				(116)		(115)		(49)
Non-US				(205)		(186)		(32)
				(321)		(301)		(81)

(a)	Includes profit after interest and tax of equity-accounted entities.

Other businesses and corporate comprises the Alternative Energy business, Shipping, the group's aluminium asset, Treasury (which includes interest income on the group's cash and cash equivalents), and corporate activities worldwide.

The replacement cost loss before interest and tax for the first quarter was $761 million, compared with a loss of $213 million a year ago. The net non-operating charge for the first quarter was $321 million, compared with a net charge of $81 million a year ago. The first-quarter loss, excluding non-operating items, was in line with the guidance provided in our 2008 full-year results announcement.

In Alternative Energy, we announced the completion of phase I of the 100MW Flat Ridge Wind Farm in Barber County, Kansas, US, a 50:50 joint venture between BP and Westar Energy, Inc. On 15 April, commercial operations commenced at the Fowler Ridge Wind Farm in Benton County, Indiana, the largest in the US Midwest at 400MW, where BP and Dominion are equal partners in a total capacity of approximately 300MW. BP's total net wind

capacity(b) as at the end of the first quarter was 678MW, compared to 172MW a year ago.

During the fourth quarter, we announced plans to refocus BP Solar's manufacturing activities in order to reduce unit costs and improve competitiveness. As part of this programme, module assembly will be phased out at Frederick, Maryland, in the US, and our cell manufacture and module assembly facilities in Madrid, Spain, will close. 

Solar sales in the first quarter were 15MW, compared to 34MW in the same period in 2008, reflecting ongoing weak demand in the market.

On 18 February, our Biofuels business announced the formation of a 50:50 joint venture between BP and the Verenium Corporation. Together the companies have agreed to commit $45 million in funding and assets to the joint venture to develop and commercialize cellulosic ethanol from non-food feedstocks.

(b)	Net wind capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities.

 

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