29th Apr 2008 07:01
BP PLC29 April 2008 BP p.l.c.Group resultsFirst quarter 2008 London 29 April 2008 FOR IMMEDIATE RELEASE ---------------------- First First Fourth First quarter quarter quarter quarter 2008 vs 2008 2007 2007 2007 =========================================$ millionProfit for the period(a) 7,619 4,399 4,664Inventory holding (gains) losses, net of tax(b) (1,031) (1,004) (220) -----------------------------------------Replacement cost profit(b) 6,588 3,395 4,444 48% ========================================= - per ordinary share (pence) 17.63 8.75 11.76- per ordinary share (cents) 34.90 17.90 22.93 52%- per ADS (dollars) 2.09 1.07 1.38 ========================================= • BP's first-quarter replacement cost profit was $6,588 million, comparedwith $4,444 million a year ago, an increase of 48%. • Non-operating items and fair value accounting effects for the firstquarter had a net $4 million unfavourable impact compared to a net $36 millionfavourable impact in the first quarter of 2007 - see further details on page 3.Non-operating items for the first quarter included a pre-tax charge of $307million for restructuring, integration and rationalization costs associated withBP's forward agenda. • Net cash provided by operating activities for the quarter was $10.9billion compared with $8.0 billion a year ago. • The effective tax rate on replacement cost profit(b) for the quarterwas 37%; the rate was 34% a year ago. • Net debt at the end of the quarter was $23.8 billion. The ratio of netdebt to net debt plus equity was 19% compared with 20% a year ago. Net debt hasbeen redefined as described on page 5. • Capital expenditure, excluding acquisitions and asset exchanges, was$7.1 billion for the quarter. Total capital expenditure and acquisitions was$9.0 billion. Capital expenditure excluding acquisitions and asset exchanges,and excluding the accounting for our transaction with Husky, is expected to bearound $21-22 billion for the year. Disposal proceeds were $0.3 billion for thequarter. • The quarterly dividend, to be paid in June, is 13.525 cents per share($0.8115 per ADS) compared with 10.325 cents per share a year ago, an increaseof 31%. In sterling terms, the quarterly dividend is 6.830 pence per share,compared with 5.151 pence per share a year ago, an increase of 33%. During thequarter, the company repurchased 91 million of its own shares for cancellationat a cost of $1 billion. (a)Profit attributable to BP shareholders. (b)With effect from 1 January 2008, replacement cost profit excludes inventoryholding gains and losses net of tax. Comparative amounts have been amended tothe new basis. See page 2 for further details. The commentaries above and following are based on replacement cost profit andshould be read in conjunction with the cautionary statement on page 11. Analysis of replacement cost profit and reconciliation to profit for the period ---------------------------------------------------------------- First Fourth First quarter quarter quarter 2008 2007 2007 ==================================$ millionExploration and Production 10,072 7,870 6,306Refining and Marketing 1,249 (1,296) 804Other businesses and corporate (213) (427) (98)Consolidation adjustment (195) (267) 42 ----------------------------------RC profit before interest and tax(a) 10,913 5,880 7,054 ---------------------------------- Finance costs and net finance income relating to pensions and other post-retirement benefits (246) (242) (171)Taxation on a replacement cost basis(b) (3,947) (2,138) (2,357)Minority interest (132) (105) (82) ----------------------------------Replacement cost profit attributable to BP shareholders(b) 6,588 3,395 4,444 ================================== Inventory holding gains (losses) 1,593 1,427 303Taxation (charge) credit on inventory holding gains and losses(b) (562) (423) (83) ----------------------------------Profit for the period attributable to BP shareholders 7,619 4,399 4,664 ================================== (a)Replacement cost profit reflects the current cost of supplies. Thereplacement cost profit for the period is arrived at by excluding from profitinventory holding gains and losses. BP uses this measure to assist investors toassess BP's performance from period to period. Replacement cost profit is not arecognized GAAP measure. (b)Effective 1 January 2008, replacement cost profit excludes inventory holdinggains and losses and their associated tax effect. Previously, replacement costprofit excluded inventory holding gains and losses while the tax charge remainedunadjusted and included the tax effect on inventory holding gains and losses.Comparative amounts have been amended to the new basis and the impact of thechange is shown in the table below. There is no impact on profit for the period. Fourth First quarter quarter 2007 2007 ====================$ millionReplacement cost profit attributable to BP shareholders -as previously reported 2,972 4,361 -tax effect on inventory holding gains and losses 423 83 -------------------- -as amended 3,395 4,444 ==================== Non-operating items and fair value accounting effects ------------------------------------------------------ Non-operating items(a) First Fourth First quarter quarter quarter 2008 2007 2007 ================================$ millionExploration and Production (376) (654) 757Refining and Marketing 609 (1,146) (229)Other businesses and corporate (81) (87) 34 -------------------------------- 152 (1,887) 562Taxation(b) (56) 715 (192) -------------------------------- 96 (1,172) 370 ================================ Fair value accounting effects(c) First Fourth First quarter quarter quarter$ million 2008 2007 2007 ================================Exploration and ProductionUnrecognized gains (losses) brought forward from previous period 107 234 155Unrecognized (gains) losses carried forward (366) (107) (124) --------------------------------Favourable (unfavourable) impact relative to management's measure of performance (259) 127 31 ================================Refining and Marketing(d)Unrecognized gains (losses) brought forward from previous period 429 367 72Unrecognized (gains) losses carried forward (328) (429) (611) --------------------------------Favourable (unfavourable) impact relative to management's measure of performance 101 (62) (539) ================================ (158) 65 (508)Taxation(b) 58 (25) 174 -------------------------------- (100) 40 (334) ================================ Total of non-operating items and fair value accounting effects First Fourth First quarter quarter quarter 2008 2007 2007 ================================$ millionExploration and Production (635) (527) 788Refining and Marketing 710 (1,208) (768)Other businesses and corporate (81) (87) 34 -------------------------------- (6) (1,822) 54Taxation(b) 2 690 (18) -------------------------------- (4) (1,132) 36 ================================(a)An analysis of non-operating items by type is provided on page 20 and ageographical split is shown on pages 7, 9 and 10. (b)Tax is calculated using the quarter's effective tax rate on replacement costprofit. Amounts for comparative periods have been amended to reflect aredefinition of the effective tax rate on replacement cost profit arising as aresult of the exclusion of tax effects on inventory holding gains and losses asdescribed on page 2. (c)An explanation of fair value accounting effects is provided on page 11. (d)Fair value accounting effects, in respect of the first quarter 2007 for theRefining and Marketing segment, have been revised from those disclosedpreviously. The revisions reflect changes in the basis for valuation of certainforward supply contracts to be consistent with the method used for other forwardsupply contracts when calculating management's internal measure of performance.The changes to comparative figures are not material in relation to management'sinternal measure of the Refining and Marketing segment's performance. Thechanges have no impact on the results reported under IFRS. Per share amounts ----------------- First Fourth First quarter quarter quarter 2008 2007 2007 ====================================Results for the period ($ million)Profit(a) 7,619 4,399 4,664Replacement cost profit 6,588 3,395 4,444 ------------------------------------ Shares in issue at period end (thousand)(b) 18,877,537 18,922,786 19,290,540- ADS equivalent (thousand)(b) 3,146,256 3,153,798 3,215,090Average number of shares outstanding (thousand)(b) 18,875,611 18,979,138 19,384,508- ADS equivalent (thousand)(b) 3,145,935 3,163,190 3,230,751Shares repurchased in the period (thousand) 90,996 121,175 237,916 Per ordinary share (cents)Profit for the period 40.36 23.15 24.06RC profit for the period 34.90 17.90 22.93 Per ADS (cents)Profit for the period 242.16 138.90 144.36RC profit for the period 209.40 107.40 137.58 ------------------------------------ (a)Profit attributable to BP shareholders.(b)Excludes treasury shares. Dividends --------- Dividends Payable BP today announced a dividend of 13.525 cents per ordinary share to be paid inJune. Holders of ordinary shares will receive 6.830 pence per share and holdersof American Depository Receipts (ADRs) $0.8115 per ADS. The dividend is payableon 9 June to shareholders on the register on 16 May. Participants in theDividend Reinvestment Plan (DRIP) or the DRIP facility in the US Direct AccessPlan will receive the dividend in the form of shares, also on 9 June. Dividends Paid First Fourth First quarter quarter quarter 2008 2007 2007 ================================= Dividends paid per ordinary share cents 13.525 10.825 10.325 pence 6.813 5.308 5.258Dividends paid per ADS (cents) 81.15 64.95 61.95 ================================= Net debt ratio - net debt: net debt + equity --------------------------------------------- First Fourth First quarter quarter quarter 2008 2007 2007 =================================$ millionGross debt 29,871 31,045 23,728Less: fair value asset (liability) of hedges related to finance debt 1,234 666 328 --------------------------------- 28,637 30,379 23,400Cash and cash equivalents 4,820 3,562 1,956 ---------------------------------Net debt 23,817 26,817 21,444 =================================Equity 99,704 94,652 85,749Net debt ratio 19% 22% 20% ================================= Net debt has been redefined to include the fair value of associated derivativefinancial instruments that are used to hedge foreign exchange and interest raterisks relating to finance debt, for which hedge accounting is claimed. Thederivatives are reported on the balance sheet within the headings 'Derivativefinancial instruments'. Amounts for comparative periods are presented on aconsistent basis. See note 2(c) on page 24 for further information. Exploration and Production -------------------------- $ million First Fourth First quarter quarter quarter 2008 2007 2007 =================================Profit before interest and tax(a) 10,054 7,950 6,317Inventory holding (gains) losses 18 (80) (11) ---------------------------------Replacement cost profit before interest and tax 10,072 7,870 6,306 ================================= By region:UK 923 725 1,122Rest of Europe 276 266 727US 3,085 2,240 1,731Rest of World 5,788 4,639 2,726 --------------------------------- 10,072 7,870 6,306 ================================= (a)Includes profit after interest and tax of equity-accounted entities. The replacement cost profit before interest and tax for the first quarter was$10,072 million, an increase of 60% over the first quarter of 2007. This resultbenefited from higher oil and gas realizations and a higher contribution fromthe gas marketing and trading and LNG businesses. This was partly offset byhigher costs, primarily reflecting the impacts of higher depreciation andsector-specific inflation. The result also included higher income fromequity-accounted entities, primarily from TNK-BP due to higher prices. Inaddition, BP's share of income from TNK-BP benefited from the effect of laggedtax reference prices. The result included a net non-operating charge of $376 million with the mostsignificant items being fair value losses on embedded derivatives partly offsetby the release of certain provisions. The corresponding quarter in 2007contained a net non-operating gain of $757 million. In the first quarter, fairvalue accounting effects had an unfavourable impact of $259 million comparedwith a favourable impact of $31 million a year ago. Reported production for the quarter was 3,913mboe/d and was flat compared withthe first quarter of 2007. After adjusting for the impact of lower entitlementin our production-sharing agreements (PSAs), production was more than 5% higherthan the first quarter of 2007. This primarily reflects the ramp-up ofproduction following the start-up of major projects in 2007. As previouslyindicated, if oil prices remain at $100 per barrel we expect 2008 reportedproduction to be broadly flat compared with 2007, with underlying productiongrowth being offset by PSA entitlement impacts. We expect the quarterly phasingof underlying production during the year to reflect the normal seasonal effectsassociated with turnaround activity in the second and third quarters. During the quarter, we had first production from the Mondo field within theKizomba C development in Angola, where BP holds a 26.67% interest. Shortly afterthe end of the quarter, production commenced at Deep Water Gunashli on schedule;this completes the third and final phase of development of theAzeri-Chirag-Gunashli field (BP 34.1% and operator) in the Azerbaijan sector ofthe Caspian Sea. We had exploration success in Angola with the Portiadiscovery, in Egypt with the Satis discovery and in the North Sea with adiscovery close to the Foinaven production facility. On 31 March, we completed the deal with Husky Energy Inc. to create anintegrated North American oil sands business by means of two separate jointventures, one of which gives BP a 50% interest in Husky's Sunrise field inAlberta, Canada. Capital expenditure of $2,848 million in respect of thistransaction is reflected in the first quarter of 2008. Shortly after the end of the quarter, we announced the Kodiak discovery in thedeepwater Gulf of Mexico and, jointly with ConocoPhillips, announced that wehave combined resources to start Denali - The Alaska Gas Pipeline. Exploration and Production -------------------------- $ million First Fourth First quarter quarter quarter 2008 2007 2007 =================================Non-operating itemsUK (694) (567) 152Rest of Europe - (3) 533US (8) 213 (7)Rest of World 326 (297) 79 --------------------------------- (376) (654) 757 ================================= Fair value accounting effects(a)UK 17 (11) 38Rest of Europe - - -US (142) 19 (6)Rest of World (134) 119 (1) --------------------------------- (259) 127 31 =================================Exploration expenseUK 92 17 20Rest of Europe - - -US 72 61 77Rest of World 129 123 59 --------------------------------- 293 201 156 ================================= Production (net of royalties)(b)Liquids (mb/d) (net of royalties)(c)UK 191 199 236Rest of Europe 44 50 59US 554 523 526Rest of World 1,664 1,697 1,625 --------------------------------- 2,453 2,469 2,446 =================================Natural gas (mmcf/d) (net of royalties)UK 971 853 907Rest of Europe 25 26 41US 2,149 2,183 2,163Rest of World 5,319 5,275 5,391 --------------------------------- 8,464 8,337 8,502 =================================Total hydrocarbons (mboe/d)(d)UK 358 346 393Rest of Europe 48 55 66US 925 900 899Rest of World 2,582 2,606 2,554 --------------------------------- 3,913 3,907 3,912 ================================= Average realizations(e)Total liquids ($/bbl) 90.92 82.72 53.43Natural gas ($/mcf) 5.88 4.83 4.86Total hydrocarbons ($/boe) 62.27 56.03 41.06 ================================= (a)These effects represent the favourable (unfavourable) impact relative tomanagement's measure of performance. Further information on fair valueaccounting effects is provided on pages 3 and 11. (b)Includes BP's share of production of equity-accounted entities. (c)Crude oil and natural gas liquids. (d)Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1million barrels. (e)Based on sales of consolidated subsidiaries only - this excludesequity-accounted entities. (f)Because of rounding, some totals may not agree exactly with the sum of theircomponent parts. Refining and Marketing ------------------------ First Fourth First quarter quarter quarter 2008 2007 2007 =================================$ millionProfit (loss) before interest and tax(a) 2,840 67 1,095Inventory holding (gains) losses (1,591) (1,363) (291) ---------------------------------Replacement cost profit (loss) before interest and tax 1,249 (1,296) 804 ================================= By region:UK 107 134 (42)Rest of Europe 629 278 298US 154 (1,805) 129Rest of World 359 97 419 --------------------------------- 1,249 (1,296) 804 ================================= (a)Includes profit after interest and tax of equity-accounted entities. Refining and Marketing comprises Fuels Value Chains (FVC) and InternationalBusinesses. The FVCs include refineries, supply, logistics and marketing andtrading activities. The International Businesses include lubricants, chemicals,LPG, aviation and marine fuels. The replacement cost profit before interest and tax for the first quarter was$1,249 million compared with $804 million for the same period last year. Thequarter's result included a net non-operating gain of $609 million, primarily inrespect of the gain recognized on the contribution of the Toledo refinery into ajoint venture with Husky Energy Inc., as part of the integrated North Americanoil sands deal completed on 31 March 2008. This compares with a netnon-operating charge of $229 million for the same period last year. In the firstquarter, fair value accounting effects had a favourable impact of $101 million.A year ago, the impact was $539 million unfavourable. Compared with the first quarter of 2007, our result reflected the adverseimpacts of a significantly lower US refining margin environment and higherturnaround activities, primarily at the Carson refinery. In the FVCs, we saw weaker US integrated margins, particularly on the WestCoast, which more than offset improved performance in other regions. The averagerefining Global Indicator Margin (GIM) and BP's actual refining margin for thefirst quarter were both significantly lower than those in the first quarter of2007. Marketing margins were steady year on year, with slightly lower volumesversus a year ago. Refining availability continued to improve for the sixth successive quarter,reaching 88.0% for the first quarter of 2008 compared with 81.6% in the firstquarter of 2007. During the quarter, we completed the largest turnaround in thehistory of the Carson refinery, restored the Whiting refinery to its full cleanfuel capability of 360mb/d in March and successfully restarted the sour crudedistillation capacity at the Texas City refinery with most of its economiccapability on track to be restored by mid-2008. Refining throughput for the quarter was 2,166mb/d compared with 2,232mb/d forthe same quarter last year. The lower throughput was mainly due to theturnaround activities at Carson. Our International Businesses made a significant contribution to the segmentresult in both the first quarter and in the same period a year ago. We continuedto make progress on reducing complexity and costs in the lubricants and aviationfuels businesses through portfolio simplification. Operations at our new 900ktepa Zhuhai purified terephthalic acid (PTA) plant,which was successfully commissioned in early 2008, continued to improve with theproduction rate reaching over 90% in March. On 17 March 2008, BP and Irving Oil entered into a memorandum of understandingto work together on the next phase of engineering, design, and feasibility forthe proposed Eider Rock refinery in Saint John, New Brunswick, Canada. BP willcontribute $40 million as its share of funding for this stage of the study andthe two companies will also investigate the possibility of forming a jointventure to build the refinery should they decide to proceed. Refining margins have improved to date in the second quarter but still remainsignificantly lower than the same quarter last year. The segment marketingbusinesses are likely to continue to experience pressure from the effects ofhigher product prices and a slowing of the OECD economies. We expect continuedimprovement in BP's refining availability as the units at Texas City comeonstream progressively during the rest of the year. Refining and Marketing ---------------------- First Fourth First quarter quarter quarter$ million 2008 2007 2007 =================================Non-operating itemsUK (49) (10) (163)Rest of Europe (85) (56) (12)US 774 (977) (58)Rest of World (31) (103) 4 --------------------------------- 609 (1,146) (229) =================================Fair value accounting effects(a)UK (4) 1 (181)Rest of Europe 36 5 (165)US 95 (32) (165)Rest of World (26) (36) (28) --------------------------------- 101 (62) (539) =================================Refinery throughputs (mb/d)UK - - 148Rest of Europe 775 689 640US 1,076 996 1,152Rest of World 315 313 292 ---------------------------------Total throughput 2,166 1,998 2,232 =================================Refining availability (%)(b) 88.0 84.0 81.6 =================================Oil sales volumes (mb/d)Refined productsUK 321 328 335Rest of Europe 1,244 1,330 1,246US 1,455 1,455 1,564Rest of World 692 680 624 ---------------------------------Total marketing sales 3,712 3,793 3,769Trading/supply sales 2,047 1,696 2,026 ---------------------------------Total refined product sales 5,759 5,489 5,795Crude oil 1,860 1,659 2,017 ---------------------------------Total oil sales 7,619 7,148 7,812 =================================Global Indicator Refining Margin ($/bbl)(c)NWE 4.79 4.84 4.16USGC 6.21 6.82 10.14Midwest 1.11 3.39 7.62USWC 5.91 8.49 22.21Singapore 4.76 5.80 4.84BP Average 4.57 5.68 9.45 =================================Chemicals production (kte)UK 261 228 256Rest of Europe 708 660 748US 1,036 1,088 1,076Rest of World 1,531 1,497 1,520 ---------------------------------Total production 3,536 3,473 3,600 ================================= (a)These effects represent the favourable (unfavourable) impact relative tomanagement's measure of performance. Further information on fair valueaccounting effects is provided on pages 3 and 11. (b)Refining availability is defined as the ratio of units which are availablefor processing, regardless of whether they are actually being used, to totalcapacity. Where there is planned maintenance, such capacity is not regarded asbeing available. (c)The Global Indicator Refining Margin (GIM) is the average of regionalindicator margins weighted for BP's crude refining capacity in each region. Eachregional indicator margin is based on a single representative crude with productyields characteristic of the typical level of upgrading complexity. The regionalindicator margins may not be representative of the margins achieved by BP in anyperiod because of BP's particular refinery configurations and crude and productslate. Other businesses and corporate ------------------------------ First Fourth First quarter quarter quarter$ million 2008 2007 2007 ================================= Profit (loss) before interest and tax(a) (193) (443) (97)Inventory holding (gains) losses (20) 16 (1) ---------------------------------Replacement cost profit (loss) before interest and tax (213) (427) (98) ================================= By region:UK (119) (87) (26)Rest of Europe - 5 21US (152) (336) (133)Rest of World 58 (9) 40 --------------------------------- (213) (427) (98) =================================Results include:Non-operating itemsUK (6) (28) -Rest of Europe (13) (2) 28US (49) (57) 6Rest of World (13) - - --------------------------------- (81) (87) 34 ================================= (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 incomeon the group's cash and cash equivalents), and corporate activities worldwide. The replacement cost profit before interest and tax for the first quarter was aloss of $213 million, compared with a loss of $98 million a year ago. The net non-operating charge for the first quarter was $81 million, including acharge for restructuring costs and other provisions, partly offset by a netdisposal gain. This compares with a net non-operating gain of $34 million a yearago. Our estimates of 2008 charges for Other businesses and corporate, excludingnon-operating items, remain in line with the $1,500 million (+/- $200 million)guidance provided in our 2008 strategy presentation. At the start of the year, our Alternative Energy business broadened its scope toinclude BP's biofuels business, carbon capture and storage (CCS), clean coal anddistributed energy, alongside the existing solar, wind, gas-fired power andhydrogen energy activities. In January, we announced our intention to pursuedevelopment options for a hydrogen power plant in Abu Dhabi with Abu DhabiFuture Energy Company (Masdar), through our Hydrogen Energy joint venture withRio Tinto. In addition, Alternative Energy and Dominion entered into a 50:50 joint ventureto develop a wind farm in Indiana with a nameplate capacity of 300MW and weformed a 50:50 joint venture with NRG Energy, Inc. for the development andoperation of a commercial wind farm, intended to be located in Texas and with anameplate capacity of 150MW. Since the end of the quarter, we announced ourintention to take a 50% stake in Tropical BioEnergia SA, a joint ventureestablished by Brazilian companies Santelisa Vale and Maeda Group, which isconstructing an ethanol refinery in Brazil and also plans to build a secondrefinery. In 2008, Alternative Energy expects to achieve total solar cell sales of 170MWand to install total gross capacity for wind generation of 1GW. We plan toreport changes to wind and solar capacity on a quarterly basis. Since thebeginning of 2007, additional solar manufacturing capacity has been added at ourMadrid plant and wind capacity has been added at Cedar Creek in Colorado, USAand Dhule in India. First Fourth First quarter quarter quarter 2008 2007 2007 =================================Total capacity as at period-end (megawatts)Wind(a) 373 373 32Solar(b) 228 228 201 ================================= (a)Wind capacity is the sum of the rated capacities of the assets/turbines thathave entered into commercial operation, including jointly controlled entities(gross). (b)Solar capacity is the theoretical cell production capacity per annum ofin-house manufacturing facilities, including jointly controlled entities(gross). Information on fair value accounting effects -------------------------------------------- BP uses derivative instruments to manage the economic exposure relating toinventories above normal operating requirements of crude oil, natural gas andpetroleum products as well as certain contracts to supply physical volumes atfuture dates. Under IFRS, these inventories and contracts are recorded athistoric cost and on an accruals basis respectively. The related derivativeinstruments, however, are required to be recorded at fair value with gains andlosses recognized in income because hedge accounting is either not permitted ornot followed, principally due to the impracticality of effectiveness testingrequirements. Therefore, measurement differences in relation to recognition ofgains and losses occur. Gains and losses on these inventories and contracts arenot recognized until the commodity is sold in a subsequent accounting period.Gains and losses on the related derivative commodity contracts are recognized inthe income statement from the time the derivative commodity contract is enteredinto on a fair value basis using forward prices consistent with the contractmaturity. IFRS requires that inventory held for trading be recorded at its fair valueusing period end spot prices whereas any related derivative commodityinstruments are required to be recorded at values based on forward pricesconsistent with the contract maturity. Depending on market conditions, theseforward prices can be either higher or lower than spot prices resulting inmeasurement differences. BP enters into contracts for pipelines and storage capacity which, under IFRS,are recorded on an accruals basis. These contracts are risk managed using avariety of derivative instruments which are fair valued under IFRS. This resultsin measurement differences in relation to recognition of gains and losses. The way that BP manages the economic exposures described above, and measuresperformance internally, differs from the way these activities are measured underIFRS. BP calculates this difference by comparing the IFRS result withmanagement's internal measure of performance, under which the inventory and thesupply and capacity contracts in question are valued based on fair value usingrelevant forward prices prevailing at the end of the period. We believe thatdisclosing management's estimate of this difference provides useful informationfor investors because it enables investors to see the economic effect of theseactivities as a whole. The impacts of fair value accounting effects, relative tomanagement's internal measure of performance, are shown in the table on page 3.Information for all quarters of 2005 - 2007 can be found at www.bp.com/FVAE. Cautionary statement: The foregoing discussion contains forward-lookingstatements particularly those regarding production, restoration of refineryeconomic capability, refining margins, likely continuing pressures on marketingbusinesses, improvements in refining availability, expected total solar cellsales and installed total gross capacity for wind generation. By their nature,forward-looking statements involve risk and uncertainty and actual results maydiffer from those expressed in such statements depending on a variety of factorsincluding the following: the timing of bringing new fields onstream; industryproduct supply; demand and pricing; operational problems; general economicconditions; political stability and economic growth in relevant areas of theworld; changes in laws and governmental regulations; exchange rate fluctuations;development and use of new technology; the success or otherwise of partnering;the actions of competitors; natural disasters and adverse weather conditions;changes in public expectations and other changes to business conditions; warsand acts of terrorism or sabotage; and other factors discussed in thisAnnouncement. For more information you should refer to our Annual Report andAccounts 2007 and our 2007 Annual Report on Form 20-F filed with the USSecurities and Exchange Commission. 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