25th Apr 2006 07:02
BP PLC25 April 2006 BP p.l.c.Group ResultsFirst Quarter 2006 London 25 April 2006 FOR IMMEDIATE RELEASE--------------------------------------------------------------------------- STRONG PERFORMANCE DELIVERY AND CASH GENERATION=========================================================================== 1Q 2006 1Q 4Q 1Q vs.1Q$ million 2006 2005 2005 2005 ==========================Profit for the period* 5,623 3,685 6,602Inventory holding (gains) losses (358) 747 (1,111) --------------------------Replacement cost profit 5,265 4,432 5,491 (4%) ==========================- per ordinary share (pence) 14.66 12.15 13.55- per ordinary share (cents) 25.66 21.34 25.61 0.2%- per ADS (dollars) 1.54 1.28 1.54 ========================== o BP's first quarter replacement cost profit was $5,265 million, compared with $5,491 million a year ago, a decrease of 4%. Excluding non- operating items, the result increased by 7% on a year ago; on a per share basis this represents an increase of 12%. o The first quarter result included a net non-operating charge of $17 million compared with a net non-operating gain of $542 million in the first quarter of 2005. o The first quarter trading environment was generally stronger than a year ago with higher oil and gas realizations and similar overall marketing margins, but with slightly lower realized refining margins. o Net cash provided by operating activities for the quarter was $8.9 billion compared with $9.4 billion a year ago. o The ratio of net debt to net debt plus equity was 16% compared with 18% a year ago. o The quarterly dividend, to be paid in June, is 9.375 cents per share ($0.5625 per ADS) compared with 8.50 cents per share a year ago, an increase of 10%. In sterling terms, the quarterly dividend is 5.251 pence per share, compared with 4.450 pence per share a year ago, an increase of 18%. During the quarter, the company repurchased 349 million of its own shares at a cost of $4 billion. BP Group Chief Executive, Lord Browne, said: "BP's first quarter result reflected good overall operating performance anda strong recovery in Refining and Marketing from the fourth quarter. The TexasCity refinery is now running at 200 mb/d and further units will be broughtonstream across the balance of 2006. Our actions to control costs are on track.Results are being impacted by higher tax charges. Strong cash generationcontinues to support shareholder distributions through dividends and buybacks". * Profit attributable to BP shareholders. Summary Quarterly Results Exploration and Production's first quarter result benefited from higherrealizations in both liquids and gas versus a year ago, partially offset by theimpact of lower volumes as a consequence of residual hurricane impacts,primarily at Mars in the Gulf of Mexico. The Refining and Marketing result reflects slightly lower realized refiningmargins and similar overall marketing margins as the first quarter of 2005. Themajor impact on the first quarter's result was the margin loss andrecommissioning costs associated with the shutdown of our Texas City refinery,although this was partly offset by improved supply optimization and businessimprovements elsewhere. In Gas, Power and Renewables, the lower first quarter result relative to lastyear reflects negative impacts from non-operating items and IFRS fair valueaccounting charges, partially offset by a higher contribution from marketing andtrading. Finance costs and Other finance expense was $143 million for the quarter. The consolidation adjustment, which removes the margin on sales between segmentsin respect of inventory at the period end, was a charge of $8 million in thefirst quarter. The effective tax rate on replacement cost profit was 35% versus 31.5% a yearearlier. Capital expenditure was $3.3 billion for the quarter; there were no significantacquisitions. Disposal proceeds were $0.7 billion. Net debt at the end of the quarter was $15.7 billion. The ratio of net debt tonet debt plus equity was 16%. During the first quarter, the company repurchased 349 million of its own shares,at a cost of $4 billion. These shares are held in treasury. The commentaries above and following are based on replacement cost profit. The financial information for 2005 has been restated to reflect the following,all with effect from 1 January 2006: (a) the transfer of three equity-accountedentities from Other businesses and corporate to Refining and Marketing followingthe sale of Innovene; (b) the transfer of certain mid-stream assets andactivities from Refining and Marketing and Exploration and Production to Gas,Power and Renewables; and (c) the transfer of Hydrogen for Transport activitiesfrom Gas, Power and Renewables to Refining and Marketing. See Note 1 forfurther details. Non-Operating Items First Quarter$ million 2006 --------Exploration and Production (386)Refining and Marketing 564Gas, Power and Renewables (55)Other businesses and corporate 9 -------- 132Taxation (46) --------Continuing operations 86Innovene operations (96)Taxation (7) (103) --------Total for all operations (17) ======== Reconciliation of Replacement Cost Profit to Profit for the Period First Fourth First Quarter Quarter Quarter$ million 2006 2005 2005 ================================ Exploration and Production 6,823 6,566 6,484Refining and Marketing 1,612 (165) 1,411Gas, Power and Renewables 301 129 412Other businesses and corporate (217) (409) (171)Consolidation adjustments Unrealized profit in inventory (8) 234 (153) Net Profit on transactions between continuing and Innovene operations (a) - 128 96 --------------------------------RC profit before interest and tax 8,511 6,483 8,079 --------------------------------Finance costs and other finance expense (143) (215) (202)Taxation (2,929) (2,029) (2,479)Minority interest (71) (93) (61) --------------------------------RC profit for continuing operations attributable to BP shareholders (b) 5,368 4,146 5,337 ================================Inventory holding gains (losses) for continuing operations 358 (903) 961Profit for the period for continuing operations attributable to BP shareholders 5,726 3,243 6,298Profit (loss) for the period from Innovene operations (c) (103) 442 304 --------------------------------Profit for the period attributable to BP shareholders 5,623 3,685 6,602 ================================RC profit for continuing operations attributable to BP shareholders 5,368 4,146 5,337RC profit (loss) for Innovene operations (103) 286 154 --------------------------------Replacement cost profit 5,265 4,432 5,491 ================================ (a) In the circumstances of discontinued operations, Accounting Standards require that the profits earned by the discontinued operations, in this case the Innovene operations, on sales to the continuing operations be eliminated on consolidation from the discontinued operations, and attributed to the continuing operations and vice versa. This adjustment has two offsetting elements: the net margin on crude refined by Innovene as substantially all crude for their refineries was supplied by BP and most of the refined products manufactured were taken by BP; and the margin on sales of feedstock from BP's US refineries to Innovene's manufacturing plants. The profits attributable to individual segments were not affected by this adjustment. Neither does this representation indicate the profits earned by continuing or Innovene operations, as if they were stand-alone entities, for past periods or likely to be earned in future periods. (b) Replacement cost profit reflects the current cost of supplies. The replacement cost profit for the period is arrived at by excluding from profit inventory holding gains and losses. BP uses this measure to assist investors to assess BP's performance from period to period. Replacement cost profit is not a recognized GAAP measure. Operating cash flow is calculated from the starting point of profit before taxation which includes inventory holding gains and losses. Operating cash flow also reflects working capital movements including inventories, trade and other receivables and trade and other payables. The carrying value of these working capital items will change for various reasons, including movements in oil, gas and products prices. (c) See further detail in Note 2. Per Share Amounts First Fourth First Quarter Quarter Quarter 2006 2005 2005 ================================Results for the period ($m)Profit* 5,623 3,685 6,602Replacement cost profit 5,265 4,432 5,491 -------------------------------- Shares in issue at period end (thousand) 20,341,135 20,657,045 21,367,827- ADS equivalent (thousand) 3,390,189 3,442,841 3,561,305Average number of sharesoutstanding (thousand) 20,521,872 20,792,896 21,441,285- ADS equivalent (thousand) 3,420,312 3,465,483 3,573,548Per ordinary share (cents)Profit for the period 27.40 17.90 30.79RC profit for the period 25.66 21.34 25.61Per ADS (cents)Profit for the period 164.40 107.40 184.74RC profit for the period 153.96 128.04 153.66 ================================ * Profit attributable to BP shareholders. Exploration and Production First Fourth First Quarter Quarter Quarter$ million 2006 2005 2005 =====================Profit before interest and tax(a) 6,816 6,574 6,489Inventory holding (gains) losses 7 (8) (5) ---------------------Replacement cost profit before interest and tax 6,823 6,566 6,484 ===================== Results include: Impairment and gain (loss) on sale ofbusinesses and fixed assets 9 62 940Environmental and other provisions - - -Restructuring, integration and rationalization costs - - -Fair value gain (loss) on embedded derivatives (395) (801) (160)Other - (240) - ---------------------Total non-operating items (386) (979) 780 =====================Exploration expense 189 208 160Of which:Exploration expenditure written off 114 81 84 ===================== Production(Net of royalties)(b) Crude oil (mb/d) 2,360 2,400 2,405Natural gas liquids (mb/d) 173 164 188Total liquids (mb/d)(c) 2,533 2,564 2,593Natural gas (mmcf/d) 8,713 8,458 8,745Total hydrocarbons (mboe/d)(d) 4,035 4,022 4,101 ======================= Average realizations(e) Crude oil ($/bbl) 58.25 53.92 43.37Natural gas liquids ($/bbl) 35.47 39.29 28.14Total liquids ($/bbl) 55.88 52.44 41.74Natural gas ($/mcf) 5.54 6.24 4.26Total hydrocarbons ($/boe) 44.20 44.56 33.60 ======================= Average oil marker prices ($/bbl) Brent 61.79 56.87 47.62West Texas Intermediate 63.29 60.01 49.88Alaska North Slope US West Coast 60.89 57.89 45.07 ===================== Average natural gas marker prices Henry Hub gas price ($/mmbtu)(f) 9.01 13.00 6.27 UK Gas - National Balancing Point (p/therm) 70.00 65.30 37.96 ======================= (a) Profit from continuing operations and includes profit after interest and tax of equity-accounted entities.(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.(f) Henry Hub First of the Month Index. Exploration and Production The replacement cost profit before interest and tax for the first quarter was$6,823 million, representing an increase of 5% over the first quarter of 2005.This result benefited from higher realizations in both liquids and gas,partially offset by the impact of lower volumes as a consequence of residualhurricane impacts, primarily at Mars in the Gulf of Mexico. The result also included fair value losses of $395 million on embeddedderivatives relating to historical long-term North Sea gas contracts. Thecorresponding quarter in 2005 contained fair value losses of $160 million onembedded derivatives and net gains of $940 million on the sales of assets andcharges for impairment. Production for the quarter at 4,035 mboe/d was slightly higher than the fourthquarter of 2005, reflecting the progressive return of production affected byHurricanes Katrina and Rita. Compared to the first quarter of 2005, productionwas at a similar level after taking account of the effect of severe weatherdisruptions. Projects in our New Profit Centres are progressing well. In Trinidad, the firstcargo of LNG from the Atlantic LNG Train 4 plant was loaded in January fordelivery in the UK, and the Cannonball gas development project startedproduction in mid March. In Azerbaijan, good progress has been made on thefilling and commissioning of the BTC pipeline, with the first lifting at Ceyhanin Turkey expected in the second quarter of 2006. In the Gulf of Mexico,progress continued on the Thunder Horse project with the completion of theinstallation of all production and export risers on the platform. Production isexpected to start in the second half of 2006. During the quarter, we were the highest bidder on 73 blocks in the Central Gulfof Mexico lease sale and we were awarded three new exploration blocks inoffshore Pakistan, subject to government approval. We reached agreement for the sales of our 4.84% interest in the Statfjord oiland gas field and of our interest in the Luva gas discovery, both in the NorthSea. Completion of these sales is expected in the second quarter. On 19 Aprilit was announced that we had reached agreement with Apache to sell our remainingGulf of Mexico Shelf assets, with reserves of 59 million barrels of oilequivalent and average daily production of 27 mboe, for $1.3 billion.Completion is expected in mid 2006 once regulatory approvals have been received. Refining and Marketing First Fourth First Quarter Quarter Quarter$ million 2006 2005 2005 ===================== Profit (loss) before interest and tax(a) 2,038 (1,073) 2,353Inventory holding (gains) losses (426) 908 (942) --------------------- Replacement cost profit (loss) before interest and tax 1,612 (165) 1,411 ===================== Results include: Impairment and gain (loss) on sale ofbusinesses and fixed assets 564 50 (27)Environmental and other provisions - - -Restructuring, integration and rationalization costs - - -Fair value gain (loss) on embedded derivatives - - -Other - - - ---------------------Total non-operating items 564 50 (27) ===================== Refinery throughputs (mb/d)UK 111 144 164Rest of Europe 639 664 647USA 976 942 1,400Rest of World 296 288 299 ---------------------Total throughput 2,022 2,038 2,510 =====================Refining availability (%)(b) 79.9 90.9 95.2 ===================== Oil sales volumes (mb/d)Refined products UK 345 358 338Rest of Europe 1,315 1,343 1,323USA 1,599 1,559 1,648Rest of World 567 573 621 -----------------------Total marketing sales 3,826 3,833 3,930Trading/supply sales 2,213 1,448 2,196 -----------------------Total refined product sales 6,039 5,281 6,126Crude oil 3,141 2,710 2,871 -----------------------Total oil sales 9,180 7,991 8,997 ======================= Global Indicator Refining Margin ($/bbl)(c) NWE 2.88 5.51 2.84USGC 10.86 11.64 7.30Midwest 4.89 7.91 3.84USWC 11.22 8.90 12.88Singapore 3.54 4.42 4.98BP Average 6.28 7.60 5.94 ===================== Chemicals production (kte) UK 303 281 317Rest of Europe 842 811 806USA 789 676 1,218Rest of World 1,687 1,638 1,108 -----------------------Total production 3,621 3,406 3,449 ======================= (a) Profit from continuing operations and includes profit after interest andtax of equity-accounted entities. (b) Refining availability is defined as the ratio of units which are availablefor processing, regardless of whether they are actually being used, to totalcapacity. Where there is planned maintenance, such capacity is not regarded asbeing available. During the first quarter of 2006, there was plannedmaintenance of a substantial part of the Texas City refinery. (c) The Global Indicator Refining Margin (GIM) is the average of regionalindicator margins weighted for BP's crude refining capacity in each region. Eachregional indicator margin is based on a single representative crude with productyields characteristic of the typical level of upgrading complexity. The regionalindicator margins may not be representative of the margins achieved by BP in anyperiod because of BP's particular refinery configurations and crude and productslate. Refining and Marketing The replacement cost profit before interest and tax for the first quarter was$1,612 million compared with $1,411 million for the same period last year. Thequarter's result includes a net non-operating gain of $564 million, primarily inrespect of net gains on divestments as described below. The non-operating chargefor the same period last year was $27 million. Compared with the first quarter of 2005, realized refining margins were slightlylower and overall marketing margins were similar. The major impact on the firstquarter's result was the margin loss and recommissioning costs associated withthe shutdown of our Texas City refinery. Compared with the first quarter of2005, the reduction in the result in respect of the Texas City closure,including the impact on associated businesses, was some $650 million. Relativeto the first quarter of 2005, this reduction was partly offset by improvedsupply optimization and business improvements elsewhere. The quarter was alsoadversely impacted by IFRS accounting effects. The refining throughputs for the quarter were 2,022 mb/d compared with 2,510 mb/d for the same quarter last year. The reduction in throughputs was mainly due tothe continued shutdown of our Texas City refinery. Recommissioning of the sitebegan at the end of March, with current throughput of 200 mb/d, and is expectedto continue in a phased manner for the remainder of the year, with the fullfinancial potential of the site not expected to be realized until 2007.Excluding the Texas City refinery, refining availability for the first quarterof 2006 was 96.0%. Marketing sales of 3,826 mb/d compared with 3,930 mb/d for the correspondingperiod in 2005 reflecting divestment activities. During the first quarter of 2006, we completed the disposal of our shareholdingin Zhenhai Refining and Chemicals Company to Sinopec and completed the sale ofour Czech Republic retail network to Osterreichische Mineralol VerwaltungAktiengesellschaft (OMV). Also during the quarter, BP sold its shareholding in Eiffage, the French basedconstruction company, and completed a restructuring of our Olympic Pipelineownership. The rationalization programme for the European marketing businesses is beingimplemented on schedule. Gas, Power and Renewables First Fourth First Quarter Quarter Quarter$ million 2006 2005 2005 ===================== Profit before interest and tax(a) 238 126 426Inventory holding (gains) losses 63 3 (14) ---------------------Replacement cost profit before interest and tax 301 129 412 ===================== Results include: Impairment and gain (loss) on sale ofbusinesses and fixed assets - (26) 63Environmental and other provisions - - -Restructuring, integration and rationalization costs - - -Fair value gain (loss) on embedded derivatives (55) (546) 42Other - 265 - ---------------------Total non-operating items (55) (307) 105 ===================== (a) Profit from continuing operations and includes profit after interest and tax of equity-accounted entities. The replacement cost profit before interest and tax for the first quarter was$301 million compared with $412 million a year ago. The non-operating item forthe first quarter comprises fair value losses on embedded derivatives of $55million. The corresponding quarter in 2005 contained fair value gains of $42million on embedded derivatives and net gains of $63 million on the sales ofassets. The first quarter's result is lower than the same period in 2005 primarily dueto negative impacts from non-operating items and IFRS fair value accountingcharges, partially offset by a higher contribution from marketing and trading. In February, BP announced plans to build a 500 MW $1 billion hydrogen-fuelledpower plant alongside BP's Carson refinery near Los Angeles. The plant isexpected to generate enough low carbon power to serve 325,000 homes in SouthCalifornia. Other Businesses and Corporate First Fourth First Quarter Quarter Quarter$ million 2006 2005 2005 =====================Profit (loss) before interest and tax(a) (215) (409) (171)Inventory holding (gains) losses (2) - - ---------------------Replacement cost profit (loss) before interest and tax (217) (409) (171) ===================== Results include: Impairment and gain (loss) on sale ofbusinesses and fixed assets 1 - -Environmental and other provisions - (4) -Restructuring, integration and rationalization costs - (57) (43)Fair value gain (loss) on embedded derivatives 8 (3) (4)Other - - - ---------------------Total non-operating items 9 (64) (47) ===================== (a) Profit from continuing operations and includes profit after interest and tax of equity-accounted entities. Other businesses and corporate comprises Finance, the group's aluminium asset,interest income and costs relating to corporate activities. The first quarter'sresult includes a net gain of $9 million in respect of non-operating items. Dividends Payable June March June 2006 2006 2005 =====================Dividends per ordinary share cents 9.375 9.375 8.50pence 5.251 5.288 4.450 Dividends per ADS (cents) 56.25 56.25 51.0 ----------------------- BP today announced a dividend of 9.375 cents per ordinary share to be paid inJune. Holders of ordinary shares will receive 5.251 pence per share and holdersof American Depository Receipts (ADRs) $0.5625 per ADS share. The dividend ispayable on 5 June to shareholders on the register on 12 May. Participants in theDividend Reinvestment Plan (DRIP) or the DRIP facility in the US Direct AccessPlan will receive the dividend in the form of shares, also on 5 June. Outlook BP Group Chief Executive, Lord Browne, concluded: "World economic growth appears robust. The US appears to have rebounded in thefirst quarter, Europe continues to show promise of an acceleration of growth,and Asia and Latin America are growing at or around trend. The near-term globaloutlook appears strong. "Crude oil prices averaged $61.79 per barrel (Dated Brent) in the first quarterof 2006, an increase of nearly $5 per barrel from the fourth quarter 2005 andmore than $14 per barrel above the same period last year. Prices rebounded inface of a disruption of Nigerian supplies and heightened geopolitical concerns.Ample inventories and increased OPEC production capacity have failed to stem theincrease. Oil prices are expected to remain strong. "US natural gas prices averaged $9.01/mmbtu (Henry Hub first of month index) inthe first quarter, nearly $4/mmbtu below the fourth quarter of last year. Demandweakness has more than offset supply lost following last year's hurricanes,resulting in a substantial gain in inventories relative to seasonal norms. Mildwinter weather has contributed to demand softness. As a result, prices havefallen below parity with residual fuel oil. US gas prices are expected to trackbroadly with oil prices but are vulnerable to further relative declines ifdemand remains weak. "UK gas prices (National Balancing Point day-ahead) in the first quarteraveraged 70 pence per therm, up from 65.3 pence per therm in the fourth quarterand 32 pence per therm above the same period last year. Cold weather and theclosure of the Rough storage facility in mid-March prompted a brief price spikeabove 150 pence per therm amid concerns about physical supply availability.Prompt prices have recently eased to around 40 pence per therm. "Global average refining margins softened to $6.28/bbl in the first quartercompared with $7.60/bbl in the fourth quarter of 2005. US refinery operationsare still recovering from last autumn's hurricanes and a heavy maintenanceprogramme has extended into the second quarter. So far in April, refiningmargins have risen strongly in anticipation of the US driving season and theimpending switch from MTBE to ethanol-blended reformulated gasoline and arelikely to remain underpinned in the near term. "During the first quarter, an initial improvement in retail margins reversedresulting in an overall decline during the quarter. This was against a backdropof increasing product prices, particularly in February and March. A further risein wholesale gasoline and crude prices is evident in April and marketing marginsare expected to remain volatile. "Recommissioning of the Texas City refinery commenced late in the first quarterof 2006 with current throughput of 200 mb/d, and is expected to continue in aphased manner for the remainder of the year. "The UK Government's announced increase in the North Sea supplemental tax ratewill, when enacted, result in higher tax charges in subsequent quarters. Thisincrease will have two effects; first to create a one-time deferred tax chargeof around $600 million and second to increase the ongoing group effective taxrate by 2%. The full year aggregate effective tax rate is expected to be around39%. "We expect production for 2006 to be consistent with our previously indicatedrange of 4,100 to 4,200 mboe/d (at our planning assumption of $40/barrel), lessany 2006 disposal effects, and less any effects of prices above $40/barrel onvolumes in Production Sharing Contracts. "Our strategy is unchanged. We continue to execute it with discipline and focus.Capital expenditure excluding acquisitions is expected to be around $15billion for the year with divestments in the region of $3 billion. ---------------------------------------------------------------------- The foregoing discussion, in particular the statements under "Outlook", contains forward looking statements particularly those regarding the bringing onstream of units at the Texas City refinery and the expected timing of the realization of the full financial potential of that site; the first lifting of oil from the BTC pipeline at Ceyhan, the timing of production from the Thunder Horse platform; the expected timing of the completion of sales in the Statfjord oil and gas field, our interest in the Luva gas discovery and our remaining Gulf of Mexico Shelf assets; the progress of implementation of the rationalization programme for the European marketing businesses; the expected effect of low carbon power produced from the planned hydrogen-fuelled power plant at Carson; world economic growth; oil prices, US gas prices, refining margins, the effect of the increase in the North Sea supplemental tax rate; the aggregate effective tax rate; production; and capital expenditure. By their nature, forward looking statements involve risks and uncertainties and actual results may differ from those expressed in such statements depending on a variety of factors including the following: the timing of bringing new fields on stream; industry product supply; demand and pricing; currency exchange rates; operational problems; general economic conditions including inflationary pressures; political stability; economic growth in relevant areas of the world; changes in governmental regulations; exchange rate fluctuations; development and use of new technology; the actions of competitors; natural disasters and other changes in business conditions; prolonged adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed in this Announcement. For more information you should refer to our Annual Report and Accounts 2005 and our 2004 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 ExchangeRelated Shares:
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