25th Oct 2005 07:01
BP PLC25 October 2005 BP p.l.c. Group Results 3rd Quarter 2005 London 25 October 2005 FOR IMMEDIATE RELEASE STRONG ENVIRONMENT, STRONG PERFORMANCE --------------------------------------------------------------------------- Third Second ThirdQuarter Quarter Quarter Nine Months 2004 2005 2005 $ million 2005 2004 %======================= ==================== 4,818 5,591 6,463 Profit for the period* 18,656 14,065 Inventory holding (1,027) (610) (2,053) (gains) losses (3,774) (2,137)----------------------- -------------------- 3,791 4,981 4,410 Replacement cost profit 14,882 11,928 25======================= ==================== 9.61 12.67 11.86 - per ordinary share (pence) 38.08 29.93 17.49 23.42 21.04 - per ordinary share (cents) 70.07 54.48 29 1.05 1.40 1.26 - per ADS (dollar) 4.20 3.27======================= ==================== As a result of the announced sale, Innovene operations have been treated asdiscontinued operations and presented accordingly within this document. o BP's third quarter replacement cost profit was $4,410 million compared with $3,791 million a year ago, an increase of 16%. The result includes the loss on re-measurement to fair value of Innovene as a result of the recently announced divestment, and significant impacts from the effects of hurricanes Katrina and Rita. For the nine months, replacement cost profit was $14,882 million compared with $11,928 million, up 25%. O The third quarter result includes a net non-operating charge of $921 millon compared with a net non-operating charge of $394 million in the third quarter of 2004. For the nine months, the net non-operating charge was $1,201 million compared with a net gain of $189 million for the nine months of 2004. O The third quarter trading environment was generally stronger than a year ago with higher oil and gas realizations and higher refining margins, but with lower retail marketing and olefins margins. O Net cash provided by operating activities for the quarter and nine months was $6.4 billion and $22.5 billion, respectively, compared with $6.1 billion and $18.2 billion a year ago. O The ratio of net debt to net debt plus equity was 19% compared with 20% a year ago. O The quarterly dividend, to be paid in December, is 8.925 cents per share ($0.5355 per ADS) compared with 7.10 cents per share a year ago. For the nine months, the dividend showed an increase of 26%. In sterling terms, the quarterly dividend is 5.061 pence per share, compared with 3.910 pence per share a year ago; for the nine months the increase was 26%. During the nine months, the company repurchased 728 million of its own shares at a cost of $7.9 billion. BP Group Chief Executive, Lord Browne, said: "The recent hurricanes in the US have impacted our results. However, underlying performance is strong, amplified by high but volatile prices of oil, gas and products. The announced sale of Innovene for cash is a good outcome. We continue to invest in opportunities which remain robust to future changes in the operating environment, to pay an increasing dividend per share over time and to return excess free cash flow to investors". * Profit attributable to BP shareholders. Summary Quarterly Results Exploration and Production's third quarter result was up 36% on a year agoreflecting higher realizations in both liquids and gas, partially offset byslightly lower volumes and higher operating costs and revenue investments. The Refining and Marketing result reflects record refining margins butsignificantly lower retail marketing margins compared with a year ago. In Gas, Power and Renewables the result increased compared with a year agoprimarily due to higher contributions from the gas marketing business. Interest and Other finance expense was $181 million for the quarter comparedwith $162 million in the previous quarter. This reflects higher interest costspartially offset by higher capitalized interest. The effective tax rate on replacement cost profit of continuing operations was33.7%. Capital expenditure was $3.3 billion for the quarter; there were no significantacquisitions. Disposal proceeds were $0.2 billion. Net debt at the end of the quarter was $20 billion. The ratio of net debt to netdebt plus equity was 19%. During the third quarter, the company repurchased 332 million of its own shares,at a cost of $3.8 billion. These shares are held in treasury. On 7 October 2005, BP announced that it is to sell Innovene to INEOS. The $9billion cash sale, subject to regulatory approvals, includes manufacturingsites, markets and technologies. The sale is expected to be concluded early in2006. The commentaries above and following are based on replacement cost profit. TNK-BP operational and financial information has been estimated. The financial information for 2004 has been restated to reflect the following,all with effect from 1 January 2005: (a) the adoption by the group ofInternational Financial Reporting Standards (IFRS) (see Note 1); (b) thetransfer of the aromatics and acetyls operations from the former Petrochemicalssegment to the Refining and Marketing segment; (c) the transfer of the Olefinsand Derivatives operations from the former Petrochemicals segment to Otherbusinesses and corporate (as noted above we have announced the sale of Innoveneand have categorized the majority of Olefins and Derivatives as discontinuedoperations); (d) the transfer of the Grangemouth and Lavera refineries from theRefining and Marketing segment into Olefins and Derivatives; (e) the transfer ofthe Mardi Gras pipeline from the Exploration and Production segment to theRefining and Marketing segment; and (f) the transfer of the Hobbs fractionatorfrom the Gas, Power and Renewables segment to Olefins and Derivatives. Note 2provides further detail of the resegmentation. Non-operating Items Third Quarter$ million 2005 =======Exploration and Production (147)Refining and Marketing (154)Gas, Power and Renewables 95Other businesses and corporate (290) ------- (496)Taxation(a) 167 -------Continuing operations (329)Innovene Operations (759)Taxation(a) 167 (592) ------- -------Total for all operations (921) ======= (a) Non-operating items related to Innovene operations, primarily the loss on re-measurement to fair value, are tax effected at 22%; other non- operating items are tax effected at 33.7%, the effective tax rate for continuing operations. Reconciliation of Replacement Cost Profit to Profit for the Period Third Second Third Quarter Quarter Quarter Nine Months 2004 2005 2005 $ million 2005 2004============================= ================ 4,822 5,903 6,535 Exploration and Production 18,924 13,327 1,318 1,286 1,858 Refining and Marketing 4,565 3,903 30 174 314 Gas, Power and Renewables 892 420 Other businesses and (441) (156) (452) corporate (783) 400 Consolidation adjustment Unrealized profit (95) (4) (285) in inventory (442) (248) Net profit on transactions between continuing and 89 159 144 Innovene operations (a) 399 157----------------------------- ---------------- RC profit before interest 5,723 7,362 8,114 and tax 23,555 17,959----------------------------- ---------------- Interest and other (183) (162) (181) finance expense (544) (528) (1,657) (2,291) (2,674) Taxation(b) (7,444) (5,263) (52) (69) (68) Minority interest (198) (128)----------------------------- ----------------- RC profit for continuing operations attributable 3,831 4,840 5,191 to BP shareholders (c) 15,369 12,040============================= ================ Inventory holding gains (losses) for continuing 904 648 1,938 operations 3,547 1,854----------------------------- ----------------- Profit for the period for continuing operations attributable to BP 4,735 5,488 7,129 shareholders 18,916 13,894 Profit (loss) for the period 83 103 (666) from Innovene operations(d) (260) 171----------------------------- ----------------- Profit for the period attributable 4,818 5,591 6,463 to BP shareholders 18,656 14,065============================= ================ RC profit for continuing operations attributable to 3,831 4,840 5,191 BP shareholders 15,369 12,040 RC profit for Innovene (40) 141 (781) operations (487) (112)----------------------------- ---------------- 3,791 4,981 4,410 Replacement cost profit 14,882 11,928============================= ================ (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 and vice versa, be eliminated on consolidation from the discontinued operations, and attributed to the continuing operations. This net adjustment principally represents the net margin on crude refined by Innovene as substantially all crude for their refineries is supplied by BP and most of the refined products manufactured are taken by BP. The profits attributable to individual segments are 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) The third quarter effective tax rate on continuing operations of 33.7% is calculated as the tax charge ($2,674 million) divided by RC profit for continuing operations after interest ($8,114-$181=$7,933 million). (c) Replacement cost profit reflects the current cost of supplies. The replacement cost profit for the period is arrived at by excluding from profit inventory holding gains and losses. BP uses this measure to assist investors to assess BP's performance from period to period. Replacement cost profit is not a recognized GAAP measure. Operating cash flow is calculated from the starting point of profit before taxation which includes inventory holding gains and losses. Operating cash flow also reflects working capital movements including inventories, trade and other receivables and trade and other payables. The carrying value of these working capital items will change for various reasons, including movements in oil, gas and products prices. (d) See further detail in Note 3. Per Share Amounts Third Second Third Quarter Quarter Quarter Nine Months 2004 2005 2005 2005 2004================================ ===================== Results for the period ($m) 4,818 5,591 6,463 Profit* 18,656 14,065 3,791 4,981 4,410 Replacement cost profit 14,882 11,928-------------------------------- -------------------- Shares in issue at21,713,966 21,174,934 20,984,851 period end (thousand)20,984,851 21,713,966 - ADS equivalent 3,618,994 3,529,156 3,497,475 (thousand) 3,497,475 3,618,994 Average number of shares outstanding21,683,963 21,270,485 21,007,316 (thousand) 21,238,117 21,891,936 - ADS equivalent 3,613,994 3,545,081 3,501,219 (thousand) 3,539,686 3,648,656-------------------------------- --------------------- Per ordinary share (cents) 22.21 26.30 30.75 Profit for the period 87.84 64.24 RC profit 17.49 23.42 21.04 for the period 70.07 54.48 Per ADS (cents) 133.26 157.80 184.50 Profit for the period 527.04 385.44 RC profit 104.94 140.52 126.24 for the period 420.42 326.88-------------------------------- --------------------- * Profit attributable to BP shareholders. Exploration and Production Third Second ThirdQuarter Quarter Quarter Nine months 2004 2005 2005 $ million 2005 2004======================= ============== 4,827 5,906 6,536 Profit before interest and tax(a) 18,933 13,340 (5) (3) (1) Inventory holding (gains) losses (9) (13)----------------------- -------------- Replacement cost profit 4,822 5,903 6,535 before interest and tax 18,924 13,327======================= ============== Results include: Impairment and gain (loss) on sale of 16 (3) (106) businesses and fixed assets 831 (233) - - - - Environmental and other provisions - - Restructuring, integration and - - - rationalization costs - - Fair value gain (loss) on - (674) (53) embedded derviatives (887) - (35) 25 12 Other 37 (35)----------------------- -------------- (19) (652) (147) Total non-operating items (19) (268)======================= ============== 135 139 177 Exploration expense 476 379 of which: 34 47 93 Exploration expenditure written off 224 123======================= ============== Production (Net of Royalties) (b) 2,298 2,437 2,313 Crude oil (mb/d) 2,385 2,320 181 182 159 Natural gas liquids (mb/d) 176 190 2,479 2,619 2,472 Total liquids (mb/d)(c) 2,561 2,510 8,275 8,661 7,841 Natural gas (mmcf/d) 8,412 8,433 3,906 4,112 3,824 Total hydrocarbons (mboe/d)(d) 4,011 3,964======================= ============== Average realizations (e) 39.43 47.79 56.83 Crude oil ($/bbl) 49.07 34.93 28.77 29.86 36.70 Natural gas liquids ($/bbl) 31.30 25.13 38.29 45.95 54.80 Total liquids ($/bbl) 47.22 33.89 3.66 4.38 4.75 Natural gas ($/mcf) 4.45 3.71 30.08 36.11 41.68 Total hydrocarbons ($/boe) 36.97 28.03======================= ============== Average oil marker prices($/bbl) 41.54 51.63 61.63 Brent 53.68 36.31 43.88 53.08 63.18 West Texas Intermediate 55.43 39.18 41.82 50.10 60.91 Alaska North Slope US West Coast 52.08 37.70======================= ============== Average natural gas marker prices 5.75 6.74 8.53 Henry Hub gas price ($/mmbtu)(f) 7.19 5.81 UK Gas - National 23.63 30.15 29.26 Balancing Point (p/therm) 32.42 22.98======================= ============== (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 turnover 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 third quarter was$6,535 million, an increase of 36% over the third quarter of 2004. This resultbenefited from higher realizations in both liquids and gas, partially offset byslightly lower volumes and higher operating costs and revenue investments. Theresults of the third quarter were significantly affected by hurricanes Katrinaand Rita and their aftermath. The effects include profits foregone owing to lostoil and gas production from the US Gulf of Mexico and additional costs incurredbecause of damage to facilities. Net non-operating charges for the third quarter total $147 million, primarilyarising from fair value losses of $53 million on embedded derivatives relatingto North Sea gas contracts and a charge for impairment of $100 million inrespect of a field in the Gulf of Mexico Shelf following the hurricane damage,which continues to be assessed. The corresponding quarter in 2004 containednon-operating charges for impairments and other items of $42 million and gainson sales of assets of $23 million. Production for the quarter at 3,824 mboe/d was 2% lower than the third quarterof 2004. This primarily reflected the loss in production owing to the hurricanesin the Gulf of Mexico and higher planned maintenance shutdowns in the North Sea,partly offset by production growth from major projects in the New Profit Centresand TNK-BP. The replacement cost profit before interest and tax of $18,924 million for thenine months represented an increase of some 42% over the same period of theprevious year. This result benefited from higher realizations and higher volumespartly offset by higher operating costs and revenue investments. The nine monthsresult included net gains on sales of assets of $1,061 million, fair valuelosses of $887 million on embedded derivatives and charges for impairments of$230 million. In the Gulf of Mexico, repairs to the Thunder Horse are proceeding offshore,with production expected to start in the second half of 2006. The costs incurredto secure and repair the facility were $107 million for the quarter. Elsewhere, projects remain on track. In Azerbaijan, line-fill of theBaku-Tbilisi-Ceyhan (BTC) oil export pipeline continues and the inauguration ofthe Georgian section of the pipeline was held in early October. In Angola,Kizomba B started producing in early July. In Trinidad, both the Cannonballproject and the Atlantic LNG Train 4 remain on course for start-up of productionin the fourth quarter. In October, we announced the planned investment of $2.2billion in the Wamsutter natural gas field in Wyoming, USA. We have had continued exploration success in Angola with the 'Juno-1' 'Astraea-1' and 'Hebe-1'oil discoveries in ultra-deepwater Block 31. These bringthe number of successful discoveries that BP has drilled in Block 31 to nine.Also, we have made a second discovery offshore Sakhalin Island with theUdachnaya well. Customer Facing Segments Refining and Marketing Third Second ThirdQuarter Quarter Quarter Nine Months 2004 2005 2005 $ million 2005 2004======================= ============= 2,190 1,950 3,697 Profit before interest and tax(a) 8,010 5,733 (872) (664) (1,839) Inventory holding (gains) losses (3,445) (1,830)----------------------- ------------- Replacement cost profit 1,318 1,286 1,858 before interest and tax 4,565 3,903======================= ============= Results include: Impairment and gain (loss) on sale (18) 75 (14) of businesses and fixed assets 34 (123) (206) - (140) Environmental and other provisions (140) (206) Restructuring, integration and - - - rationalization costs - - Fair value gain (loss) on - - - embedded derivatives - - - (733) - Other (733) ------------------------ ------------- (224) (658) (154) Total non-operating items (839) (329)======================= ============= Refinery throughputs(b) (mb/d) 211 210 202 UK 192 205 696 671 687 Rest of Europe 668 712 1,417 1,350 1,328 USA 1,360 1,351 296 305 296 Rest of World 300 357----------------------- ------------- 2,620 2,536 2,513 Total throughput 2,520 2,625======================= ============= 95.1 93.1 92.6 Refining availability (%) 93.6 95.0======================= ============= Oil sales volumes (mb/d) Refined products 334 356 369 UK 354 318 1,406 1,346 1,402 Rest of Europe 1,357 1,359 1,696 1,656 1,674 USA 1,660 1,689 621 604 599 Rest of World 608 641----------------------- -------------- 4,057 3,962 4,044 Total marketing sales 3,979 4,007 2,627 2,129 2,010 Trading/supply sales 2,112 2,463----------------------- -------------- 6,684 6,091 6,054 Total refined product sales 6,091 6,470 3,679 4,123 3,888 Crude oil 3,882 3,833----------------------- -------------- 10,363 10,214 9,942 Total oil sales 9,973 10,303======================= ============== Global Indicator Refining Margin(c) ($/bbl) 4.37 5.68 7.78 NWE 5.46 4.13 6.99 9.37 17.12 USGC 11.31 7.70 5.01 7.45 13.40 Midwest 8.28 6.23 11.28 14.53 17.57 USWC 15.02 11.58 5.48 6.30 6.52 Singapore 5.94 3.90 6.39 8.42 12.35 BP Average 8.93 6.52======================= ============== Chemicals production (kte) 357 317 284 UK 918 986 799 735 771 Rest of Europe 2,312 2,410 1,194 1,107 890 USA 3,215 3,521 1,004 981 1,115 Rest of World 3,105 3,026----------------------- -------------- 3,354 3,140 3,060 Total production 9,550 9,943======================= ============== (a) Profit from continuing operations and includes profit after interest and tax of equity-accounted entities. (b) Refinery throughputs exclude the Grangemouth and Lavera refineries which are now treated as discontinued operations within Other businesses and corporate. (c) The Global Indicator Refining Margin (GIM) is the average of six 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. The GIM data shown above excludes the Grangemouth and Lavera refineries. Customer Facing Segments Refining and Marketing The replacement cost profit before interest and tax for the third quarter was arecord $1,858 million. This is compared to $1,318 million for the same periodlast year. The nine months' result was $4,565 million, an increase of $662million, or 17%, year-on-year. The quarter's result includes a charge of $154 million for non-operating items.This is primarily in respect of new, and revisions to existing, environmentaland other provisions. The non-operating charge for the corresponding quarter in2004 was $224 million. This quarter's result reflects record refining margins and significantly lowerretail marketing margins. The impact of hurricanes Katrina and Rita on thethird quarter's result was significant. The effects include margin foregone dueto refinery and other production shutdowns and supply disruptions to marketingoperations. BP's increase in the third quarter refining margin was lower thanthe increase reflected in the Global Indicator Margin (GIM) as a result of theactual yield differing from the yields assumed in the GIM. Refinery throughputs for the quarter and nine months were 2,513 mb/d and 2,520mb/d respectively, lower than in the corresponding periods of 2004 due to theeffects of the Texas City incident in March 2005 and the complete shut down ofthe refinery late in the quarter in advance of hurricane Rita. The Texas Cityrefinery is expected to resume production late in the fourth quarter, withinitial gasoline production expected during December. Marketing sales were 4,044 mb/d for the third quarter and 3,979 mb/d for thefirst nine months of the year, compared with 4,057 mb/d and 4,007 mb/d for thecorresponding periods in the previous year. The third quarter result reflectsdepressed retail marketing margins caused by a quarter of rapidly risingwholesale product prices not fully recovered in the market place. The marketingresult was also affected by supply disruptions caused by the hurricanes in theUSA, which led to plant shutdowns within the Aromatics and Acetyls business. During the quarter, we announced plans for a second PTA plant at the BP ZhuhaiChemical Company Limited site in Guangdong Province, China, subject to approvalfrom the Government. The new plant will have operating capacity of 900,000tonnes a year and will be the first plant to use BP's latest generation PTAtechnology. Also, the transaction announced in 2004 for the sale of BP's 70%shareholding in BP Malaysia Sdn Bhd to Lembaga Tabung Angkatan Tentera (LTAT)was successfully concluded. During early October, BP has agreed terms for the disposal to OsterreichischeMineralol Verwaltung Aktiengesellschaft (OMV) of BP's network of 70 Retail sitesin the Czech Republic and signed a letter of intent with Hindustan PetroleumCorporation Limited to form a 50/50 strategic joint venture covering therefining and marketing sector in India. Customer Facing Segments Gas, Power and Renewables Third Second ThirdQuarter Quarter Quarter Nine Months 2004 2005 2005 $ million 2005 2004======================= ============= 57 160 412 Profit before interest and tax(a) 990 431 (27) 14 (98) Inventory holding (gains) losses (98) (11)----------------------- ------------- Replacement cost profit 30 174 314 before interest and tax 892 420======================= ============= Results include: Impairment and gain (loss) on sale 16 20 (2) of businesses and fixed assets 81 16 - - 6 Environmental and other provisions 6 - Restructuring, integration and - - - rationalization costs - - Fair value gain (loss) - 67 91 on embedded derivatives 200 - - - - Other - ------------------------ ------------- 16 87 95 Total non-operating items 287 16======================= ============= Gas sales volumes (mmcf/d) 4,463 4,699 3,858 UK 4,651 5,091 485 382 300 Rest of Europe 356 398 13,585 14,501 15,552 USA 14,752 13,228 13,250 14,933 15,031 Rest of World 15,195 13,078---------------------- -------------- 31,783 34,515 34,741 Total gas sales volumes 34,954 31,795======================= ============== NGL sales volumes (mb/d) 9 4 7 UK 7 7 7 12 7 Rest of Europe 11 4 358 317 384 USA 358 385 161 162 178 Rest of World 197 190----------------------- -------------- 535 495 576 Total NGL sales volumes 573 586======================= ============== (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 third quarter andnine months was $314 million and $892 million respectively, compared with $30million and $420 million a year ago. The third quarter result is higher than the same period in 2004 primarily due tohigher contributions from the gas marketing business. The nine months result ishigher than the same period in 2004 reflecting higher gains from non-operatingitems as well as higher contribution from the operating businesses. Resultsreflect changes to fair value accounting following the introduction of IFRS in2005 which have created increased volatility in the Gas, Power and Renewablesresults. Other Businesses and Corporate Third Second ThirdQuarter Quarter Quarter Nine Months 2004 2005 2005 $ million 2005 2004======================= ============= Profit (loss) before (441) (161) (452) interest and tax(a) (788) 400 - 5 - Inventory holding (gains) losses 5 ------------------------ ------------- Replacement cost profit (441) (156) (452) before interest and tax (b) (783) 400======================= ============= Results include: Impairment and gain (loss) on sale (36) 34 4 of businesses and fixed assets 38 1,158 (283) 22 (296) Environmental and other provisions (274) (283) Restructuring, integration and (19) (28) (6) rationalization costs (77) (19) Fair value gain (loss) on - (14) 8 embedded derivatives (10) - - 3 - Other 3 ------------------------ ------------- (338) 17 (290) Total non-operating items (320) 856======================= ============= (a) Profit from continuing operations and includes profit after interest and tax of equity-accounted entities. (b) Includes the portion of Olefins and Derivatives not included in the sale of Innovene to INEOS. This includes the equity-accounted investments in China and Malaysia that were part of Olefins and Derivatives. Other businesses and corporate comprises Finance, the group's aluminium asset,interest income and costs relating to corporate activities. The group'sinterests in PetroChina and Sinopec were divested in early 2004. The thirdquarter's result includes a net charge of $290 million in respect ofnon-operating items. This includes a charge of $296 million relating to new, andrevisions to existing, environmental and other provisions. Dividends Payable June, September December September December and December 2004 2005 2005 2005 2004============================ =============== Dividends per ordinary share 7.10 8.925 8.925 cents 26.35 20.95 3.910 5.119 5.061 pence 14.630 11.577 42.60 53.55 53.55 Dividends per ADS (cents) 158.10 125.70---------------------------- --------------- BP today announced a dividend of 8.925 cents per ordinary share to be paid inDecember. Holders of ordinary shares will receive 5.061 pence per share andholders of American Depository Receipts (ADRs) $0.5355 per ADS share. Thedividend is payable on 5 December to shareholders on the register on 11November. Participants in the Dividend Reinvestment Plan (DRIP) or the DRIPfacility in the US Direct Access Plan will receive the dividend in the form ofshares, also on 5 December. Outlook BP Group Chief Executive, Lord Browne, concluded: "World economic growth appears to have been sustained at close to trend rates,despite the disruptions and uncertainties following hurricanes Katrina and Rita. "Crude oil prices averaged $61.63 per barrel (Dated Brent) in the third quarter,an increase of $10 per barrel from the second quarter average, and more than $20per barrel above the same period last year. Hurricanes Katrina and Rita resultedin the loss of as much as 1.5 mmb/d of production in the US Gulf of Mexico.However, in recent weeks, the temporary loss of Gulf Coast refining capacity andsigns of weaker consumption have caused crude prices to drift downward.Nonetheless, prices are expected to be well supported into the winter. "US natural gas prices averaged $8.53/mmbtu (Henry Hub first of month index) inthe third quarter, up nearly $2 per mmbtu versus the second quarter. HurricanesKatrina and Rita shut in about 20% of US domestic output and raised prices toaround imputed distillate parity. We expect US gas prices to continue to tradeclose to distillate parity. "Average global refining margins reached a record $12.35/bbl in the thirdquarter. Hurricanes Katrina and Rita caused extensive damage to refiningfacilities in the US Gulf, shutting-in 5mmb/d of refining capacity, of which 1.5mmb/d is yet to return to operation. Oil product stocks and anticipatedrecoveries in refining capacity generally are adequate to meet current demandbut the situation remains finely balanced and vunerable to further disruptionsor a colder than normal winter. Therefore, refining margins are likely to remainhigh during the fourth quarter. "During the third quarter, retail margins have been impacted negatively by highand rising product prices. As the fourth quarter opens, some easing in wholesalegasoline prices is evident. However, significant uncertainty exists about thestrength of the consequent margin recovery and the outlook for marketing marginsremains highly volatile. "We anticipate production from the deepwater Gulf of Mexico to be back tonormal, with the exception of the Shell-operated Mars project, by the end of theyear. Thunder Horse is expected to start production in the second half of 2006.The Texas City refinery is expected to resume production late in the fourthquarter, with initial gasoline production expected during December. "Our strategy is unchanged. We continue to execute it with discipline and focus.Our ability to capture the benefit of current prices and margin strengthunderpins continued dividend growth and continuing share buybacks subject tomarket conditions and constraints. Capital expenditure is now expected to beapproximately $14 billion for the year and around $15 billion in 2006." ---------------------------------------------------------------------- The foregoing discussion, in particular the statements under "Outlook", contains forward looking statements particularly those regarding capital expenditure, costs, demand, dividends, future performance, growth and other trend projections, margins, prices, production, share buybacks, supply and the timing of projects. 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 and 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 2004 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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