5th Jul 2005 07:01
BP PLC05 July 2005 press release July 5, 2005 BP Second Quarter 2005 Trading Update This trading update is aimed at providing estimates regarding revenue andtrading conditions experienced by BP in the second quarter ending June 30, 2005,and estimates of identified non-operating items expected to be included in thatquarter's result. The second quarter margin, price, realisation, cost,production and other data referred to below are currently provisional, somebeing drawn from figures applicable to the first month or so of the quarter. All such data are subject to change and may differ quite considerably from thefinal numbers that will be reported on July 26, 2005. The trading update is produced in order to provide greater disclosure toinvestors and potential investors of currently expected outcomes, and toensure that they all receive equal access to the same information at thesame time. As described in the technical presentation on March 14, BP's second quarterresults will be reported under International Financial Reporting Standards(IFRS). In adopting IFRS, BP has decided to discontinue the use of pro formareporting for the ARCO and Burmah Castrol acquisitions. Comparative data foreach of the quarters of 2004 has been restated to reflect these and otherreporting changes. Full details are available on www.bp.com/investors. Resources Business: Exploration and Production Marker Prices 2Q'04 3Q'04 4Q'04 1Q'05 2Q'05 Brent Dated ($/bbl) 35.32 41.54 43.85 47.62 51.63 WTI ($/bbl) 38.28 43.88 48.29 49.88 53.08 ANS USWC ($/bbl) 36.99 41.82 42.62 45.07 50.01 US gas Henry Hub first of month index($/mmbtu) 6.00 5.75 7.07 6.27 6.74 UK gas price - National Balance Point(p/therm) 20.70 23.63 28.51 37.96 30.15 Urals (NWE - cif) ($/bbl) 32.32 37.23 37.75 42.54 48.08 Russian domestic Oil ($/bbl) 19.71 23.33 22.30 19.14 27.39 Overall BP production in 2Q'05 is expected to be broadly flat with 1Q'05. Excluding volumes from TNK-BP operations, production in 2Q is expected to be3,135 mboed, similar to 1Q'05. BP's net share of production from TNK-BP is anticipated to be approximately 975mboed. BP's average production for 2005 as a whole is expected to be in the range 4,100- 4,200 mboed, as indicated in our presentation on February 8, 2005. Relative to 1Q'05 liquids and gas realisations increased in line with markerprices. Planned higher revenue investment continues: in addition sector specificcost inflation reflects strong current commodity prices. Refining and Marketing Refining Indicator Margins ($/bbl) 2Q'04 3Q'04 4Q'04 1Q'05 2Q'05 USA - West Coast 15.41 11.28 10.36 12.88 14.53 - Gulf Coast 9.18 6.99 5.52 7.30 9.37 - Midwest 9.01 5.01 1.65 3.84 7.45 North West Europe 5.29 4.37 4.72 2.84 5.68 Singapore 2.80 5.48 8.02 4.98 6.30 Refining Global Indicator Margin*($/bbl.) 8.28 6.39 5.69 5.94 8.42 \* The refining Global Indicator Margin (GIM) is a weighted average based on BP'sportfolio. The overall refining GIM has been restated from that published in2004 due to the transfer of the Grangemouth and Lavera refineries to O&D. Actualmargins may vary because of refinery configuration, crude slate and operatingpractices. The second quarter's average refining Global Indicator Margin (GIM) was higherthan both 1Q'05 and 2Q'04. Relative to the first quarter, the improvement in2Q'05 of BP's actual margins is expected to be slightly lower than suggested bythe indicator margin due to the narrowing of heavy/sour crude discounts.Refining availability is expected to have been below that of either priorperiod. After a weak first quarter, marketing margins improved significantly during theearly part of the second quarter. From late May, rising crude and product pricesdampened marketing margins, partially offsetting the earlier gains. Marketingmargins are therefore expected to be above those of 1Q'05 but below those of2Q'04. In the Aromatics & Acetyls business, which is now reported as part of therefining and marketing segment, slower PTA demand growth in China reduced 2Q'05margins compared to those in 1Q'05. Gas, Power and Renewables Due to a weaker gas marketing contribution and seasonally lower NGL volumes,GP&R results are expected to be significantly lower than 1Q'05. Other Businesses and Corporate (including Olefins and Derivatives) Other Businesses and Corporate Other Business and Corporate results, excluding Olefins and Derivatives, areexpected to be in line with guidance given in our February '05 investor webcastfor an annual charge of $900m +/- $200m, indicating an expected quarterly chargeof around $175 - 275m in 2005. Olefins and Derivatives Olefins and Derivatives margins weakened from the strong levels of 1Q'05, buthave been partly offset by improved European refining margins. Overall volumesare expected to be higher compared to 1Q'05, reflecting the successful start-upsof the SECCO Joint Venture in China (BP 50 per cent) and an olefins unit inNorth America. Results for Olefins and Derivatives are now reported in OtherBusinesses and Corporate, but are also described separately in supplementaldisclosures in our Stock Exchange Announcement. Consolidation Adjustment The consolidation adjustment, previously included in the E&P segment results,and which removes the margin on sales between segments (mainly sales of Alaskancrude oil to US West Coast refining and marketing operations) is expected to benegligible in 2Q'05. Identified Non-Operating Items (NOIs) On March 23, 2005, an explosion and fire occurred in the Isomerisation Unit ofthe BP Texas City refinery. A charge for claims arising from the incident isexpected to be included in the 2Q'05 results. Other non-operating items in 2Q'05 are expected to amount to a total charge ofaround $500m, principally due to the mark to market of embedded derivatives. Interest Expense The total consolidated interest charge is expected to be slightly lower than in1Q'05., due principally to the absence of a 1Q'05 charge related to BP'sdecision to terminate certain financing leases related to Innovene assets. Tax Rate The effective tax rate for the quarter is expected to be around 32 per cent,similar to the prior quarter. Gearing Gearing for the quarter is expected to be slightly below the bottom end of our20-30 per cent band for net debt to net debt plus equity, reflecting continuedstrong cash generation. Distributions to Shareholders During the quarter the company bought back 203 million shares for a totalconsideration of $2.1bn. Shares outstanding at June 29 2005, excluding treasuryshares, were 21,179 million. As in previous quarters, BP has entered into anarrangement that allows it to continue the share buy back programme during theclosed period commencing on July 1. The 2Q'05 dividend of 8.5 cents per share announced at the time of our 1Q'05results was paid in June. The dividend to be paid in 3Q'05 will be announced onJuly 26 in conjunction with our 2Q'05 Stock Exchange Announcement. Rules of Thumb As indicated in BP's quarterly results presentation and strategy update onFebruary 8, 2005, the following rules of thumb can be used to estimate theimpact of changes in the trading environment on BP's 2004 full year pre-taxresults. The rules of thumb relating to oil and gas price movements reflectprices broadly comparable to those of today. They have been revised to reflectthe 2005 reporting and accounting changes. These rules of thumb are approximate. Particular differences may arise due to higher government shares of Explorationand Production revenues in some jurisdictions at current price levels, as wellas from variations between the refining Global Indicator Margin (GIM) and BP'srealized refining margins due to crude price levels and differentials, productprice movements and other factors. The GIM rule of thumb reflects thesensitivity to the overall group to changes in refining margins. Within therefining rule of thumb shown below, 13 per cent of the sensitivity shown relatesto the refineries transferred to the Olefins and Derivatives business. Manyother factors will affect BP's earnings quarter by quarter. Actual results in individual quarters may therefore differ significantly fromthe estimates implied by the application of these rules of thumb. 2005 Operating Environment Rules of Thumb: impact on operating profit per year Full Year Oil Price - Brent +/- $1/bbl $500m Gas - Henry Hub +/- $ 0.10/mcf $100m Refining - GIM +/- $ 1/bbl $1100m - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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