11th Jan 2006 07:00
BP PLC11 January 2006 January 11, 2006 BP Fourth Quarter 2005 Trading Update This trading update is aimed at providing estimates regarding revenue andtrading conditions experienced by BP in the fourth quarter ending December 31,2005, and estimates of identified non-operating items expected to be included inthat quarter's result. The fourth 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. Allsuch data are subject to change and may differ quite considerably from the finalnumbers that will be reported on February 7, 2006. This trading update isproduced in order to provide greater disclosure to investors and potentialinvestors of currently expected outcomes, and to ensure that they all receiveequal access to the same information at the same time. Resources Business: Exploration and Production Marker Prices 4Q'04 1Q'05 2Q'05 3Q'05 4Q'05Brent Dated ($/bbl) 43.85 47.62 51.63 61.63 56.87WTI ($/bbl) 48.29 49.88 53.08 63.18 60.01ANS USWC ($/bbl) 42.62 45.07 50.10 60.91 57.89US gas Henry Hub first of month index($/mmbtu) 7.07 6.27 6.74 8.53 13.00UK gas price - National Balance Point(p/therm) 28.51 37.96 30.15 29.26 65.30Urals (NWE - cif) ($/bbl) 37.75 42.54 48.08 57.13 53.23Russian domestic Oil ($/bbl) 22.30 19.14 27.39 36.60 31.73 Overall BP production in 4Q'05 is expected to be around 4,010 mboed. Excluding volumes from TNK-BP operations, production in 4Q'05 is expected to bearound 2,990 mboed. Production in 4Q'05 is expected to be higher than 3Q'05,reflecting continued growth in the new profit centres and the completion of theplanned maintenance season (primarily in the North Sea), partially offset by theimpact of Hurricanes Katrina and Rita (around 160 mboed in 4Q'05 vs. 135 mboedin 3Q'05). BP's net share of production from TNK-BP is anticipated to be approximately1,020 mboed. The contribution of TNK-BP to BP's financial results is expected tobe negatively impacted in 4Q'05 relative to 3Q'05 due to the lagged calculationof export duties in a declining market, largely offset by an expected gain ondivestments. Relative to 3Q'05 liquids and gas realisations have broadly tracked the markers,except for UK gas which is largely under contract and not priced on a spotmarket related basis. Approximately $130m of costs are expected to be incurred in the quarter, themajority to repair hurricane damage and the remainder in ongoing work on theThunder Horse facility. Refining and Marketing Refining Indicator Margins ($/bbl) 4Q'04 1Q'05 2Q'05 3Q'05 4Q'05USA- West Coast 10.36 12.88 14.53 17.57 8.90- Gulf Coast 5.52 7.30 9.37 17.12 11.64- Midwest 1.65 3.84 7.45 13.40 7.91North West Europe 4.72 2.84 5.68 7.78 5.51Singapore 8.02 4.98 6.30 6.52 4.42Refining Global Indicator Margin* 5.69 5.94 8.42 12.35 7.60 * The Refining Global Indicator Margin (GIM) is a generic indicator. Actualmargins realised by BP may vary significantly due to a variety of factors,including specific refinery configurations, crude slate and operating practices. The fourth quarter's average global indicator margin (GIM) was substantiallylower than the GIM for 3Q'05. The decline in BP's actual realised refiningmargins in 4Q'05 is expected to be similar to the decline in the GIM. Lower wholesale product prices resulted in a recovery in marketing marginsduring the fourth quarter relative to 3Q'05, which is expected to offset aroundhalf of the decline in refining margins. BP's Texas City Refinery was shut down as a result of Hurricane Katrinathroughout 4Q'05. Total refinery throughputs in 4Q'05 were significantly loweras a result. Storm-related supply disruptions also reduced volumes in a numberof our US-based businesses. The overall impact of the profits foregone as aresult of the closure of Texas City and Hurricane Katrina are expected to be inexcess of $400m in 4Q'05 relative to 3Q'05. Charges of more than $400m are expected to be taken in 4Q'05 as the initialtranche of a restructuring and efficiency programme in Europe. The phasing ofmarketing activities and refining maintenance in 4Q'05 is expected to result inhigher costs than 3Q'05. Gas, Power and Renewables Margins from the GP&R business are expected to be higher than 3Q'05 and similarto 4Q'04, as a result of strong gas marketing margins and seasonality. Other Businesses and Corporate (including Olefins and Derivatives) Other Businesses and Corporate The loss in Other Businesses and Corporate, excluding Olefins and Derivatives,is expected to be higher than in 3Q'05 due to cost phasing, but in line withguidance given in our February '05 investor webcast for an annual charge of$900m +/- $200m. Olefins and Derivatives Results for Innovene, which represents the majority of Olefins and Derivatives,have been treated as a discontinued operation since the announcement of the saleof Innovene on October 7th, with history restated accordingly, as required byInternational Financial Reporting Standards. We will provide supplementaldisclosures in our Stock Exchange Announcement. The sale of Innovene wascompleted on December 16th. Results for the retained portion of Olefins andDerivatives, primarily equity-accounted investments in China and Malaysia, willbe reported within Other Businesses and Corporate. Margins in the Olefins and Derivatives business strengthened in 4Q'05 from thedepressed levels of 3Q'05. Consolidation Adjustment The consolidation adjustment, which removes the margin on sales between segments(mainly sales of Alaskan crude oil to US West Coast refining and marketingoperations), is expected to amount to a credit of around $250m. Identified Non-Operating Items (NOIs) Non-operating items in 4Q'05 are expected to amount to a total charge of around$1.3bn, primarily as a result of a loss on embedded derivatives, related mainlyto the increase in UK gas prices relative to other indices over the full term ofBP's long term sales contracts. Interest Expense The total consolidated interest charge is expected to be similar to 3Q'05. Tax Rate The effective tax rate for the quarter on continuing operations is expected tobe around 33 per cent. Gearing Gearing for the quarter is expected to move further below the bottom end of our20-30 per cent band for net debt to net debt plus equity, reflecting continuedstrong cash generation and receipt of the proceeds from the sale of Innovene. Distributions to Shareholders During the quarter the company bought back 332 million shares for a totalconsideration of $3.7bn. Shares outstanding at December 30th 2005, excludingtreasury shares, were 20,651 million. As in previous quarters, BP has enteredinto an arrangement that allows it to continue the share buy back programmeduring the closed period commencing on January 3rd. The 4Q'05 dividend of 8.925 cents per share announced at the time of our 3Q'05results was paid in December. The dividend to be paid in 1Q'06 will be announcedon February 7th in conjunction with our 4Q'05 Stock Exchange Announcement. Rules of Thumb Important note: The rules of thumb shown below were provided with BP's strategyupdate on February 8th, 2005 and were intended to give directional indicators ofthe impact of changes in the trading environment relative to that of 2004 onBP's 2005 full yearpre-tax results. These rules of thumb are approximate. Asprices and margins have deviated sharply from those seen in 2004, and volatilityhas increased, these rules of thumb have become less accurate in quantifying theimpact of changes. Especially over short periods, changes in differentials,seasonal demand patterns, and other factors can be material. Particulardifferences may arise due to higher government shares of Exploration andProduction revenues in some jurisdictions at current price levels, as well asfrom 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, about 13 per cent of the sensitivity shownrelates to the refineries transferred to the Olefins and Derivatives business.Many other factors will affect BP's earnings quarter by quarter. Actual resultsin individual quarters may therefore differ significantly from the estimatesimplied by the application of these rules of thumb. 2005 Operating Environment Rules of Thumb: impact on operating profit per yearof changes relative to 2004 environment Full YearOil Price - Brent +/- $1/bbl $500mGas - Henry Hub +/- $ 0.10/mcf $100mRefining - GIM +/- $ 1/bbl $1100m - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BP