12th Jan 2005 07:00
BP PLC12 January 2005 BP Press Release January 12, 2005 BP Fourth Quarter 2004 Trading Update This trading update is aimed at providing certain estimates regarding revenueand trading conditions experienced by BP in the fourth quarter ending December31, 2004, and estimates of certain identified non-operating items expected to beincluded in that quarter's result. The fourth quarter margin, price,realisation, cost, production and other data referred to below are currentlyprovisional, some being drawn from figures applicable to the first month or soof the quarter. All such data are subject to change and may differ quiteconsiderably from the final numbers that will be reported on February 8, 2005.The statement is produced in order to provide greater disclosure to investorsand potential investors of currently expected outcomes, and to ensure that theyall receive equal access to the same information at the same time. Resources Business : Exploration and Production Marker Prices 4Q'03 2Q'04 3Q'04 4Q'04Brent Dated ($/bbl) 29.43 35.32 41.54 43.85WTI ($/bbl) 31.15 38.28 43.88 48.29ANS USWC ($/bbl) 29.43 36.99 41.82 42.62US gas Henry Hub first of month index($/mmbtu) 4.58 6.00 5.75 7.07UK gas price - National Balance Point(p/therm) 27.30 20.70 23.63 28.48 Overview : Exploration and Production Overall BP production in 4Q'04 is expected to be around 4,090 thousand barrelsof oil equivalent per day (mboed), up by some 4 per cent from 3,936 mboed in4Q'03, and over 4 per cent higher than 3Q'04 production of 3,906 mboed. Averageproduction for 2004 as a whole is expected to be around 3,995 mboed, an increaseof more than 10 per cent compared to 2003. Excluding Russia: Production in 4Q'04, excluding volumes from our Russian operations, is expectedto be approximately 3,125 mboed, over 5 per cent higher than the 3Q'04 level of2,961 mboed due to the continuing ramp-up of production in New Profit Centres(60 mboed) and the end of the turnaround season in Alaska and the North Sea (120mboed). During the quarter we achieved first production from the Holstein fieldin the Deepwater Gulf of Mexico. The operational impacts on production fromHurricane Ivan in the Gulf of Mexico and the blow-out in Temsah in Egypt areexpected to be around 80 mboed during the fourth quarter. Relative to 3Q'04, liquids realisations did not increase as much as the markers,reflecting discounts for heavier crudes and the timing of liftings. Relative to3Q'04, gas realisations in North America did not increase as much as the HenryHub marker due to regional pricing differences. Costs in 4Q'04 are expected to be around $250m more than in 3Q'04 due to higherexploration write-offs, repairs necessary as a result of Hurricane Ivan in theUS and the Temsah incident in Egypt, and planned increases in seismicinvestment. The 4Q'04 impact of Unrealised Profit in Stock (UPIS) is expected to increaseearnings by approximately $70m. Russia - BP net share Production in mboed 4Q'03 2Q'04 3Q'04 4Q'04TNK-BP: Oil 669 814 858 882TNK-BP: Gas 51 77 87 83Total 720 891 945 965Marker PricesUrals (NWE - cif) ($/bbl) 27.90 32.32 37.23 37.75Urals (Med - cif ) ($/bbl) 27.98 32.60 37.41 38.82Domestic Oil ($/bbl) 16.65 19.71 23.33 22.30 In 4Q'04, BP's net share of production from TNK-BP is anticipated to beapproximately 965 mboed, as shown in the table above. 2004 information includesTNK-BP's interest in Slavneft. During 4Q'04, Urals NWE marker prices increased by $0.52/bbl with thedifferential to Brent widening to approx $6.10/bbl. Domestic oil pricesdecreased slightly relative to 3Q'04 due to seasonal factors. Increases in export duty rates became effective on August 1, 2004. The fullquarter impact of this increase in duties, along with the effect of lagged dutyreference prices, is expected to reduce 4Q operating profit by approximately$170m relative to 3Q'04. Customer facing Businesses Refining Indicator Margins ($/bbl) 4Q'03 2Q'04 3Q'04 4Q'04USA- West Coast 6.09 15.41 11.28 10.36- Gulf Coast 3.53 9.18 6.99 5.52- Midwest 2.89 9.01 5.01 1.65North West Europe 2.21 5.29 4.37 4.72 Singapore 2.20 2.80 5.48 8.02 Refining Global Indicator Margin* ($/bbl) 3.14 7.89 6.20 5.60 \* The refining Global Indicator Margin (GIM) is a weighted average based on BP'sportfolio. Actual margins may vary because of refinery configuration, crudeslate and operating practices. The fourth quarter's average global indicator refining margin is lower than theprevious quarter, but higher than a year earlier. The refining margins actuallyexperienced by BP's refineries are expected to be slightly higher than in 3Q'04.Wider light/heavy spreads, higher clean fuels premia, locational advantages andsupply optimization all increased our realised margins relative to the genericindicators. Marketing margins are expected to be above those of the previousquarter. However the improvement in the Marketing operating environment relativeto 3Q is likely to be more than offset by a $300m charge primarily related to areview of carrying values of marketing assets. Petrochemicals Weighted Chemicals Indicator Margin ($/te) * 4Q'03 2Q'04 3Q'04 4Q'04 109 129 138 n/a \* The Chemicals Indicator Margin is a weighted average of externally-basedproduct margins. It is based on market data collected by Nexant (formerly ChemSystems) in their quarterly market analyses, then weighted on BP's productportfolio. This is described more fully in the Group's quarterly resultsreleases. Petrochemicals sales and margins continue to strengthen as industry utilizationrates rise. These benefits have partially been offset by foreign exchangeeffects in Europe which continue to affect costs. Gas, Power and Renewables Gas margins are expected to be substantially higher than 3Q'04. NGL margins haveremained at similar levels to those seen in 3Q'04.Identified Non-Operating Items Exceptional and non-operating items in 4Q'04 are expected to amount to a chargeof around $2bn pre-tax. The majority of this charge relates to thepetrochemicals segment, reflecting business exits, the closure of facilities,and asset impairments. Interest Expense The total interest charge is expected to grow by around one third compared with3Q'04. The increase in interest expense is due to an increase in debt, higherinterest rates and a reduction in the discount rate applied to provisions underUK GAAP. Tax Rate The effective tax rate for the quarter is expected to be around 35 per cent,similar to the previous quarter. The full year rate is expected to averagearound 35 per cent. Gearing Gearing for the quarter is expected to be just below the bottom end of ourtarget 25-35 per cent band. Debt has risen due to the impact of the Solvay jointventure buyout and the normal 4Q phasing of German motor fuel excise taxes. Share Purchases During the quarter the company bought back for cancellation 201 million sharesfor a total consideration of $2.0bn. For the year, the total number of sharesbought back for cancellation amounted to 822m at a cost of $7.5bn. Shares inissue as at December 31, 2004 were 21,526 million. As in previous quarters, BPhas entered into an arrangement that allows it to continue the share buy backprogramme during the close period commencing January 1. Rules of Thumb As indicated in BP's strategy presentation on March 29, 2004, the followingrules of thumb can be used to estimate the impact of changes in the tradingenvironment on BP's 2004 full yearpre-tax results. These rules of thumb areapproximate. In particular the impact of large movements in the tradingenvironment relative to that of 2003 may differ from those implied by the rulesof thumb. Particular differences may arise due to higher government shares ofExploration and Production revenues in some jurisdictions at current pricelevels, as well as from variations between the Refining Global Indicator Margin(GIM) and BP's realized refining margins due to crude price levels anddifferentials, product price movements and other factors. Many other factorswill affect BP's earnings quarter by quarter. Actual results in individualquarters may therefore differ significantly from the estimates implied by theapplication of these rules. 2004 Operating Environment Rules of Thumb: pre tax per year Full YearOil Price - Brent +/- $1/bbl $570mGas - Henry Hub +/- $ 0.10/mcf $110mRefining - GIM +/- $ 1/bbl $1120mPetrochemicals - CIM +/- $10/te $200m - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BP