5th Feb 2008 07:01
BP PLC05 February 2008 BP p.l.c.Group ResultsFourth Quarter and Full Year 2007 London 5 February 2008 FOR IMMEDIATE RELEASE ----------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 % ========================== ========================= 2,880 4,406 4,399 Profit for the period* 20,845 22,000 1,015 (539) (1,427) Inventory holding (gains) losses (3,558) 253 -------------------------- ------------------------- 3,895 3,867 2,972 Replacement cost profit 17,287 22,253 (22) ========================== ========================= 10.37 9.94 7.66 - per ordinary share (pence) 45.10 60.38 20.08 20.34 15.69 - per ordinary share (cents) 90.20 111.10 (19) 1.21 1.22 0.94 - per ADS (dollars) 5.41 6.67 ========================== ========================= • BP's fourth-quarter replacement cost profit was $2,972 million,compared with $3,895 million a year ago, a decrease of 24%. For the full year,replacement cost profit was $17,287 million compared with $22,253 million, down22%. • The fourth-quarter result included a net non-operating charge of $1,030million, including pre-tax charges of $603 million for the impairment of USConvenience Retail and $338 million for restructuring, integration andrationalization costs associated with BP's Forward Agenda. This compares with anet non-operating charge of $152 million in the fourth quarter of 2006. For thefull year, the net non-operating charge was $272 million compared with a netnon-operating gain of $1,062 million in 2006. • Net cash provided by operating activities for the quarter and year was$4.3 billion and $24.7 billion respectively compared with $5.0 billion and $28.2billion a year ago. • The effective tax rate on replacement cost profit from continuingoperations for the fourth quarter was 45% compared with 25% a year ago. For theyear, the rate was 37% compared with 35% a year ago. The increased rate in thefourth quarter reflects the effect of inventory holding gains and losses, whichare eliminated in the replacement cost profit, while the tax charge remainsunadjusted and includes the tax effect on inventory holding gains and losses. Ifthis effect is excluded, the rate would have been 38% in the fourth quartercompared to 31% a year ago. • Net debt at the end of the quarter was $27.5 billion. The ratio of netdebt to net debt plus equity was 23% compared with 20% a year ago. • Capital expenditure, excluding acquisitions and asset exchanges, was$6.6 billion for the quarter and for the year was $19.2 billion. Total capitalexpenditure and acquisitions was $6.6 billion for the quarter and $20.6 billionfor the year. The year included $1.1 billion in respect of the acquisition ofChevron's Netherlands manufacturing company. Disposal proceeds were $0.4 billionfor the quarter and were $4.3 billion for the year. • The quarterly dividend, to be paid in March, is 13.525 cents per share($0.8115 per ADS) compared with 10.325 cents per share a year ago. For the year,the dividend showed an increase of 16%. The dividend increase marks a shift inthe balance between dividends and share buybacks as a means of returning valueto shareholders. In sterling terms, the quarterly dividend is 6.813 pence pershare, compared with 5.258 pence per share a year ago; for the year the increasewas 7%. During the quarter, the company repurchased 121 million of its ownshares for cancellation at a cost of $1.5 billion. For the year, sharerepurchases were 663 million at a cost of $7.5 billion. • Information on fair value accounting effects in relation to Refiningand Marketing and Gas, Power and Renewables is set out on page 10. * Profit attributable to BP shareholders. 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 ------------------ Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 =============================== ================= 5,063 6,343 7,648 Exploration and Production 26,927 29,647 312 376 (1,337) Refining and Marketing 2,617 5,283 470 (57) 219 Gas, Power and Renewables 558 1,376 (276) (451) (373) Other businesses and corporate (1,104) (947) (103) 59 (277) Consolidation adjustments (204) 52 ------------------------------- ----------------- 5,466 6,270 5,880 RC profit before interest and tax 28,794 35,411 ------------------------------- ----------------- (149) (173) (242) Finance costs and other finance income (741) (516) (1,347) (2,158) (2,561) Taxation (10,442) (12,331) (75) (72) (105) Minority interest (324) (286) ------------------------------- ----------------- RC profit from continuing operations 3,895 3,867 2,972 attributable to BP shareholders(a) 17,287 22,278 =============================== ================= Inventory holding gains (losses) from (1,015) 539 1,427 continuing operations 3,558 (253) ------------------------------- ----------------- Profit for the period from continuing operations attributable to 2,880 4,406 4,399 BP shareholders 20,845 22,025 Profit (loss) for the period from Innovene - - - operations(b) - (25) ------------------------------- ----------------- Profit for the period attributable to 2,880 4,406 4,399 BP shareholders 20,845 22,000 =============================== ================= RC profit from continuing operations attributable 3,895 3,867 2,972 to BP shareholders 17,287 22,278 - - - RC profit (loss) from Innovene operations - (25) ------------------------------- ----------------- 3,895 3,867 2,972 Replacement cost profit 17,287 22,253 =============================== ================= (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)See further detail in Note 2. Results include Non-operating Items ------------------------------ Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ================================ =============== (177) 22 (616) Exploration and Production 553 2,382 (53) (344) (1,146) Refining and Marketing (952) (384) 215 (8) (62) Gas, Power and Renewables (97) 181 (188) (205) (63) Other businesses and corporate (227) (75) -------------------------------- --------------- (203) (535) (1,887) (723) 2,104 51 189 857 Taxation(a) 451 (851) -------------------------------- --------------- (152) (346) (1,030) Continuing operations (272) 1,253 -------------------------------- --------------- - - - Innovene operations - (184) - - - Taxation - (7) -------------------------------- --------------- (152) (346) (1,030) Total for all operations (272) 1,062 ================================ =============== An analysis of non-operating items by type is provided on page 21. (a)Tax on non-operating items is calculated using the quarter's effective taxrate on replacement cost profit from continuing operations. Per Share Amounts ---------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 2007 2006 ================================ ====================== Results for the period ($m) 2,880 4,406 4,399 Profit(a) 20,845 22,000 3,895 3,867 2,972 Replacement cost profit 17,287 22,253 -------------------------------- ---------------------- Shares in issue at period end 19,510,496 19,019,579 18,922,786 (thousand)(b) 18,922,786 19,510,496 3,251,749 3,169,930 3,153,798 - ADS equivalent (thousand)(b) 3,153,798 3,251,749 Average number of shares outstanding 19,610,871 19,061,853 18,979,138 (thousand)(b) 19,163,389 20,027,527 3,268,479 3,176,976 3,163,190 - ADS equivalent (thousand)(b) 3,193,898 3,337,921 Shares repurchased in the period 310,385 128,253 121,175 (thousand) 663,150 1,334,363 Per ordinary share (cents) 15.04 23.18 23.15 Profit for the period 108.76 109.84 20.08 20.34 15.69 RC profit for the period 90.20 111.10 Per ADS (cents) 90.24 139.08 138.90 Profit for the period 652.56 659.04 120.48 122.04 94.14 RC profit for the period 541.20 666.60 -------------------------------- ---------------------- (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 inMarch. Holders of ordinary shares will receive 6.813 pence per share and holdersof American Depository Receipts (ADRs) $0.8115 per ADS. The dividend is payableon 10 March to shareholders on the register on 22 February. 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 10 March. Dividends Paid Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 2007 2006 ================================ ===================== Dividends paid per ordinary share 9.825 10.825 10.825 Cents 42.300 38.400 5.241 5.278 5.308 Pence 20.995 21.104 58.95 64.95 64.95 Dividends paid per ADS (cents) 253.80 230.40 ================================ ===================== Net Debt Ratio - Net Debt: Net Debt + Equity ----------------------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ================================ ===================== 24,010 25,245 31,045 Gross debt 31,045 24,010 2,590 2,410 3,562 Cash and cash equivalents 3,562 2,590 -------------------------------- --------------------- 21,420 22,835 27,483 Net debt 27,483 21,420 ================================ ===================== 85,465 91,494 94,652 Equity 94,652 85,465 20% 20% 23% Net debt ratio 23% 20% ================================ ===================== Exploration and Production ---------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ================================ ================= 5,057 6,347 7,643 Profit before interest and tax(a) 26,938 29,629 6 (4) 5 Inventory holding (gains) losses (11) 18 -------------------------------- ----------------- Replacement cost profit before interest 5,063 6,343 7,648 and tax 26,927 29,647 ================================ ================= By region: 1,534 703 816 UK 3,694 5,839 249 221 262 Rest of Europe 1,386 1,209 952 1,843 2,213 US 7,746 9,344 2,328 3,576 4,357 Rest of World 14,101 13,255 -------------------------------- ----------------- 5,063 6,343 7,648 26,927 29,647 ================================ ================= Results include: Non-operating items 289 33 (538) UK (173) 821 (13) 7 (3) Rest of Europe 535 43 (269) (15) 222 US 376 1,758 (184) (3) (297) Rest of World (185) (240) -------------------------------- ----------------- (177) 22 (616) 553 2,382 ================================ ================= Exploration expense 6 2 17 UK 46 20 - - - Rest of Europe - - 324 60 61 US 252 633 78 182 123 Rest of World 458 392 -------------------------------- ----------------- 408 244 201 756 1,045 ================================ ================= Production (net of royalties)(b) Liquids (mb/d) (net of royalties)(c) 239 151 199 UK 201 253 57 52 50 Rest of Europe 51 61 533 475 523 US 514 547 1,587 1,614 1,697 Rest of World 1,648 1,614 -------------------------------- ----------------- 2,416 2,292 2,469 2,414 2,475 ================================ ================= Natural gas (mmcf/d) (net of royalties) 888 582 853 UK 768 936 90 26 26 Rest of Europe 29 92 2,196 2,186 2,183 US 2,174 2,376 5,082 5,085 5,275 Rest of World 5,172 5,013 -------------------------------- ----------------- 8,256 7,879 8,337 8,143 8,417 ================================ ================= Total hydrocarbons (mboe/d)(d) 392 251 346 UK 333 414 73 57 55 Rest of Europe 56 77 912 851 900 US 888 957 2,463 2,492 2,606 Rest of World 2,541 2,478 -------------------------------- ----------------- 3,840 3,651 3,907 3,818 3,926 ================================ ================= Average realizations(e) 54.13 71.12 82.72 Total liquids ($/bbl) 67.45 59.23 4.38 3.93 4.83 Natural gas ($/mcf) 4.53 4.72 40.13 46.36 56.03 Total hydrocarbons ($/boe) 47.18 43.60 ================================ ================= (a)Profit from continuing operations and includes profit after interest and taxof 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 = 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. Exploration and Production ---------------------- The replacement cost profit before interest and tax for the fourth quarter was$7,648 million, an increase of 51% over the fourth quarter of 2006. This resultbenefited from higher reported volumes, higher overall realizations and thefavourable effect of lagged tax reference prices in TNK-BP, partially offset byhigher costs reflecting the impacts of sector-specific inflation, projectstart-up costs and higher depreciation charges. Additionally, the fourth-quarterresult was impacted by the retroactive effect of increased production taxes inAlaska, which were effective mid-year. The net non-operating charge for thequarter was $616 million and included fair value losses of $430 million onembedded derivatives related to North Sea gas contracts as well as restructuringcosts. The fourth quarter of 2006 included a net charge of $177 million. The replacement cost profit before interest and tax of $26,927 million for thefull year represented a decrease of 9% on the previous year. This resultbenefited from higher liquids realizations and the favourable effect of laggedtax reference prices in TNK-BP, but was impacted by lower gas realizations,lower reported volumes, higher production taxes and higher costs reflecting theimpacts of sector-specific inflation, increased integrity spend and higherdepreciation charges. Additionally, the full-year result was lower due to theabsence of disposal gains in equity-accounted entities in 2006, primarily the$892 million gain on TNK-BP's disposal of the Udmurtneft assets. The full-yearresult included a net non-operating gain of $553 million compared with a $2,382million gain in 2006. Reported production for the fourth quarter was 3,907mboe/d, 2% higher than inthe fourth quarter of 2006. After adjusting for the effect of acquisitions anddisposals and the impact of lower entitlement in our production-sharingagreements (PSAs), production was 3% higher than in the fourth quarter of 2006.Reported production of 3,818mboe/d for the full year was 3% lower than in 2006on a reported basis and was flat after adjusting for the effects ofacquisitions, disposals and lower PSA entitlements. During the fourth quarter, we started production at five BP-operated majorprojects: Mango and Cashima in Trinidad, Atlantis and King Subsea Pump in theGulf of Mexico and Greater Plutonio in Angola. Additionally, we had firstproduction from the Denise field in Egypt, where BP holds a 50% interest and,shortly after the end of the quarter, we also had first production from theMondo field within the Kizomba C development in Angola, where BP holds a 26.67%interest. Furthermore, we had further exploration success in Azerbaijan with the ShahDeniz SDX-04 discovery, in Angola with the Portia discovery and in Egypt withthe Satis and Taurus Deep discoveries. In December, we announced an agreement with Husky Energy Inc. to create anintegrated North American oil sands business, by means of two separate jointventures. In one, BP will take a 50% interest in Husky Energy's Sunrise field inAlberta, Canada, while in the other, Husky will take a 50% interest in BP'sToledo refinery. Also in December, the Libyan General People's Committee ratified the explorationand production agreement between BP and Libya's National Oil Company, which weannounced in May of 2007. During 2007, we extended our track record in achieving reported reservesreplacement of more than 100%, excluding acquisitions and disposals, in spite ofsignificant PSA effects associated with high oil prices. Refining and Marketing ------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 =============================== ================== (706) 936 26 Profit before interest and tax(a) 6,072 5,041 1,018 (560) (1,363) Inventory holding (gains) losses (3,455) 242 ------------------------------- ------------------ Replacement cost profit before 312 376 (1,337) interest and tax 2,617 5,283 =============================== ================== By region: 190 22 122 UK 1,097 351 336 492 278 Rest of Europe 1,652 2,249 (421) (527) (1,811) US (1,252) 1,353 207 389 74 Rest of World 1,120 1,330 ------------------------------- ------------------ 312 376 (1,337) 2,617 5,283 =============================== ================== Results include: Non-operating items 23 (4) (10) UK 667 15 (89) (16) (56) Rest of Europe (128) 93 25 (316) (977) US (1,181) (589) (12) (8) (103) Rest of World (310) 97 ------------------------------- ------------------ (53) (344) (1,146) (952) (384) =============================== ================== Refinery throughputs (mb/d) 188 - - UK 67 165 660 735 689 Rest of Europe 691 648 1,052 1,109 996 US 1,064 1,110 294 304 313 Rest of World 305 275 ------------------------------- ------------------ 2,194 2,148 1,998 Total throughput 2,127 2,198 =============================== ================== 81.6 83.4 84.0 Refining availability (%)(b) 82.9 82.5 =============================== ================== Oil sales volumes (mb/d) Refined products 354 350 328 UK 339 356 1,368 1,329 1,330 Rest of Europe 1,294 1,340 1,541 1,535 1,455 US 1,533 1,595 601 641 680 Rest of World 640 581 ------------------------------- ------------------ 3,864 3,855 3,793 Total marketing sales 3,806 3,872 1,920 1,687 1,696 Trading/supply sales 1,818 1,929 ------------------------------- ------------------ 5,784 5,542 5,489 Total refined product sales 5,624 5,801 1,959 1,709 1,659 Crude oil 1,885 2,110 ------------------------------- ------------------ 7,743 7,251 7,148 Total oil sales 7,509 7,911 =============================== ================== Global Indicator Refining Margin ($/bbl)(c) 2.49 3.82 4.84 NWE 4.99 3.92 7.92 12.58 6.82 USGC 13.48 12.00 5.42 14.31 3.39 Midwest 12.81 9.14 14.59 6.90 8.49 USWC 15.05 14.84 2.95 4.52 5.80 Singapore 5.29 4.22 6.30 8.05 5.68 BP Average 9.94 8.39 =============================== ================== Chemicals production (kte) 159 237 228 UK 967 990 797 587 660 Rest of Europe 2,650 3,156 976 1,117 1,088 US 4,328 3,464 1,357 1,569 1,497 Rest of World 6,083 6,454 ------------------------------- ------------------ 3,289 3,510 3,473 Total production 14,028 14,064 =============================== ================== (a)Profit from continuing operations and includes profit after interest and taxof 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 2006 and 2007, there was planned maintenance of asubstantial 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 result before interest and tax was a loss of $1,337 millionfor the fourth quarter of 2007 and was a profit of $2,617 million for the fullyear. This compares with a replacement cost profit before interest and tax forthe fourth quarter and full year of 2006 of $312 million and $5,283 millionrespectively. The fourth-quarter result included a net non-operating charge of$1,146 million, primarily reflecting impairment charges associated with our exitfrom the operated Convenience Retail channel in the US, restructuring costs, anda reassessment of certain provisions. The full-year result included a charge of$952 million for non-operating items compared with a charge of $384 million in2006. Compared with a year ago, the fourth-quarter result reflected a lower refiningmargin environment, higher refining outages and costs, including thoseassociated with the repair and recommissioning activities at our Texas City andWhiting US refineries, and a lower contribution from supply optimization. Thequarter's result also reflected the impact of a major scheduled turnaround atthe Toledo refinery. In addition, the charge for non-operating items wassignificantly higher than a year ago. These factors were partially offset by theeffects of continued strong performance from a number of our marketingbusinesses. The refining outages outlined above, and the majority of thenon-operating charges, related to our operations in the US, leading to thefourth-quarter loss of $1,811 million in the US (which included non-operatingcharges of $977 million). This compares with a loss of $421 million a year ago,which included a non-operating gain of $25 million. The average refining Global Indicator Margin (GIM) and BP's actual refiningmargin for the fourth quarter were both lower than those in the fourth quarterof 2006, mainly due to improved product stock levels and rising crude prices,most notably in the US. During 2007, the segment continued to focus on the restoration of operations atthe Texas City refinery and on investments in integrity management throughoutour refining portfolio. We have also focused on the repair and recommissioningof the Whiting refinery following the operational issues in March 2007. In manyparts of the refining portfolio and the other market-facing businesses, wedelivered high reliability and improved results versus 2006. However for thefull year, compared with 2006, the impact of the outages and recommissioningcosts at the Texas City and Whiting refineries, cost inflation, lower resultsfrom supply optimization and higher charges in respect of non-operating itemsmore than offset increased margins in both refining and marketing. Refining throughputs were 1,998mb/d for the quarter, 196mb/d lower than thefourth quarter of 2006. The reduction was mainly due to the effects of theCoryton refinery disposal, major scheduled turnarounds at the Rotterdam andToledo refineries, as well as the outage at the Whiting refinery; this waspartially offset by improvements in the remainder of the refining portfolio. Forthe full year, throughputs were 2,127mb/d, 71mb/d lower than in 2006. Refiningavailability for the quarter and full year was 84.0% and 82.9% respectively,higher than in the corresponding periods of 2006, reflecting the ongoingprogress towards Texas City recommissioning. Marketing volumes were 3,793mb/d in the fourth quarter and 3,806mb/d for thefull year, slightly lower than in the equivalent periods last year, reflectingreduced industry demand in Europe and supply disruptions caused by the outage atthe Whiting refinery. By the end of 2007, the Whiting refinery had recommenced sour crude processingand available distillation capacity exceeded 300,000bpd, in line with priorguidance. At Texas City, we have successfully recommissioned the threedesulphurisation and upgrading units necessary to allow restart of the remainingcrude distillation capacity. The final sour crude unit is mechanically completeand is expected to be fully operational during the first quarter. By mid-2008,we expect most of the economic capability at the Texas City refinery to havebeen restored. On 15 November 2007, BP announced that it would sell all of its company-ownedand company-operated convenience sites in the US. The majority of sites will besold to franchisees with the remaining sites sold to dealers and largedistributors (jobbers). On 5 December 2007, BP announced it had agreed to create an integrated NorthAmerican oil sands business with Husky Energy Inc., by means of two separatejoint ventures, one associated with BP's Toledo refinery. In mid-January 2008, BP and Sinopec signed a memorandum of understanding to adda new 650,000 tonnes per annum acetic acid plant at their YARACO joint venturein Chongqing, upstream Yangtze River, south-west China. This world-scale aceticacid plant, using BP's leading Cativa(R) technology, is expected to comeonstream in 2011. Gas, Power and Renewables ----------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ============================= ================ 468 (71) 304 Profit before interest and tax(a) 674 1,321 2 14 (85) Inventory holding (gains) losses (116) 55 ----------------------------- ---------------- Replacement cost profit (loss) before interest 470 (57) 219 and tax 558 1,376 ============================= ================ By region: 147 (85) (103) UK (178) 217 143 (37) (14) Rest of Europe (52) 123 114 (23) 23 US 128 692 66 88 313 Rest of World 660 344 ----------------------------- ---------------- 470 (57) 219 558 1,376 ============================= ================ Results include: Non-operating items 56 (12) (31) UK (74) 88 189 - (26) Rest of Europe (26) 189 - 4 (5) US 1 4 (30) - - Rest of World 2 (100) ----------------------------- ---------------- 215 (8) (62) (97) 181 ============================= ================ (a)Profit from continuing operations and includes profit after interest and taxof equity-accounted entities. The replacement cost profit before interest and tax for the fourth quarter andfull year was $219 million and $558 million respectively, compared with $470million and $1,376 million a year ago. The net non-operating charge for thefourth quarter was $62 million, comprising net fair value losses on embeddedderivatives, a provision for restructuring costs, a charge for the impairment ofa solar asset and a net disposal gain. The corresponding quarter of 2006included a net non-operating gain of $215 million. For the full year, the netcharge for non-operating items was $97 million compared with a net gain of $181million in 2006. The fourth-quarter result was lower than the same period in 2006 primarily dueto the change in non-operating items, described above, and lower contributionsfrom the marketing and trading business, partly offset by better NGL operatingperformance. The full-year result was also lower than in 2006 reflecting a netcharge for non-operating items (compared with a net gain last year) and lowermarketing and trading contributions, partly offset by improved NGL performance. In the fourth quarter of 2007, Alternative Energy commenced full commercialoperations at the 300MW Cedar Creek project in Colorado, US and at the 40MWDhule project in India. Information on fair value accounting effects is set out on page 10. Other Businesses and Corporate -------------------------- Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ========================= ================= (265) (462) (389) Profit (loss) before interest and tax(a) (1,128) (885) (11) 11 16 Inventory holding (gains) losses 24 (62) ------------------------- ----------------- Replacement cost profit (loss) before (276) (451) (373) interest and tax (1,104) (947) ========================= ================= By region: 280 124 (63) UK (10) (268) (97) (77) 23 Rest of Europe (35) (137) (319) (359) (316) US (901) (425) (140) (139) (17) Rest of World (158) (117) ------------------------- ----------------- (276) (451) (373) (1,104) (947) ========================= ================= Results include: Non-operating items 13 1 (26) UK (25) (12) (2) (11) 24 Rest of Europe 41 (5) (199) (199) (61) US (247) (75) - 4 - Rest of World 4 17 ------------------------- ----------------- (188) (205) (63) (227) (75) ========================= ================= (a)Profit from continuing operations and includes profit after interest and taxof equity-accounted entities. Other businesses and corporate comprises Treasury (previously referred to asFinance), the group's aluminium asset, interest income and costs relating tocorporate activities. The fourth quarter's result included a net charge of $63million in respect of non-operating items, compared with a net charge of $188million a year ago. 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. The Gas, Power and Renewables business enters into contracts for pipelines andstorage capacity which, under IFRS, are recorded on an accruals basis. Thesecontracts are risk managed using a variety of derivative instruments which arefair valued under IFRS. This results in measurement differences in relation torecognition 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 below.Information for all quarters of 2005, 2006 and 2007 can be found at www.bp.com/FVAE. Fourth Third Fourth Quarter Quarter Quarter Year 2006 2007 2007 $ million 2007 2006 ========================= ================= Refining and Marketing Unrecognized gains (losses) brought forward from (252) 274 367 previous period 72 283 (72) (367) (429) Unrecognized (gains) losses carried forward (429) (72) ------------------------- ----------------- Favourable/(unfavourable) impact relative to (324) (93) (62) management's measure of performance (357) 211 ========================= ================= Gas, Power and Renewables Unrecognized gains (losses) brought forward from 399 198 234 previous period 155 123 (155) (234) (107) Unrecognized (gains) losses carried forward (107) (155) ------------------------- ----------------- Favourable/(unfavourable) impact relative to 244 (36) 127 management's measure of performance 48 (32) ========================= ================= (80) (129) 65 (309) 179 20 46 (29) Taxation(a) 105 (96) ------------------------- ----------------- (60) (83) 36 (204) 83 ========================= ================= By region Refining and Marketing (27) 45 1 UK (52) 109 (60) 2 5 Rest of Europe (110) 101 (231) (142) (32) US (165) 13 (6) 2 (36) Rest of World (30) (12) ------------------------- ----------------- (324) (93) (62) (357) 211 ========================= ================= Gas, Power and Renewables 75 (22) (11) UK 1 63 - - - Rest of Europe - - 191 (19) 19 US (77) (59) (22) 5 119 Rest of World 124 (36) ------------------------- ----------------- 244 (36) 127 48 (32) ========================= ================= (a)Tax is calculated using the quarter's effective tax rate on replacement costprofit from continuing operations. Cautionary Statement: The foregoing discussion contains forward lookingstatements particularly those regarding refining production and capacity,disposals, intended expansion and new production capability. 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 on stream; industryproduct supply; demand and pricing; operational problems; general economicconditions (including inflation); political stability and economic growth inrelevant areas of the world; changes in laws and governmental regulations andquotas; exchange rate fluctuations; development and use of new technology; thesuccess or otherwise of partnering; the actions of competitors; naturaldisasters and adverse weather conditions; changes in public expectations andother changes to business conditions; wars and acts of terrorism or sabotage;and other factors discussed in this Announcement. For more information youshould refer to our Annual Report and Accounts 2006 and our 2006 Annual Reporton 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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