4th Apr 2005 07:01
BP PLC04 April 2005 Press Release April 4, 2005 BP First Quarter 2005 Trading Update This trading update is aimed at providing certain estimates regarding revenueand trading conditions experienced by BP in the first quarter ending March 31,2005, and estimates of certain identified non-operating items expected to beincluded in that quarter's result. The first quarter margin, price, realisation,cost, production and other data referred to below are currently provisional,some being drawn from figures applicable to the first month or so of thequarter. All such data are subject to change and may differ quite considerablyfrom the final numbers that will be reported on April 26, 2005. The statement 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. As described in the technical presentation on March 14, BP's first 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. Compared with pro forma, our first quarter results will reflect depreciation ofthe fair market value step-up related to these acquisitions. In 4Q'04 and 1Q'04this depreciation amounted to $124m and $141m, excluding impairments of $151mand $63m respectively. Compared to UK GAAP, goodwill related to acquisitions will no longer beamortised under IFRS. Goodwill amortisation in 4Q'04 and 1Q'04 was $351m and$360m respectively. In respect of equity accounted entities, such as TNK-BP, results under IFRS willbe shown after interest and tax charges and minority interest. BP's consolidatedinterest and tax expense and minority interest will be reduced by an exactlyoffsetting amount, so the consolidated post tax result is not affected. Theimpact of post tax and interest reporting for equity accounted entities on thesegment results in 4Q'04 was a reduction of $469m, and in 1Q'04 a reduction of$244m, principally in the Exploration and Production segment result. Fulldetails are shown in note 8 of the restated 2004 Stock Exchange Announcement(SEA) released on March 14. Results for our Olefins and Derivatives business, now named Innovene and whichincludes the Grangemouth and Lavera refineries, will be reported as part ofOther Businesses and Corporate. Full details are shown in note 7 of the restatedSEA. Comparative data for each of the quarters of 2004 has been restated to reflectthese and other reporting changes. Full details are available on www.bp.com/investors. Resources Business : Exploration and ProductionMarker Prices 1Q'04 2Q'04 3Q'04 4Q'04 1Q'05Brent Dated ($/bbl) 32.03 35.32 41.54 43.85 47.62WTI ($/bbl) 35.30 38.28 43.88 48.29 49.88ANS USWC ($/bbl) 34.22 36.99 41.82 42.62 45.07US gas Henry Hub first of month index($/mmbtu) 5.69 6.00 5.75 7.07 6.27UK gas price - National Balance Point(p/therm) 24.59 20.70 23.63 28.51 37.96Urals (NWE - cif) ($/bbl) 29.01 32.32 37.23 37.75 42.54Russian domestic Oil ($/bbl) 17.08 19.71 23.33 22.30 19.14 Overall BP production in 1Q'05 is expected to be around 4,090 mboed, broadly inline with 4Q'04. Excluding volumes from our Russian operations, production in1Q'05 is expected to be approximately 3,130 mboed, broadly similar to the 4Q'04level. BP's net share of production from TNK-BP in 1Q'05 is anticipated to beapproximately 960 mboed. BP's average production for 2005 as a whole is expectedto be in the range 4,100 - 4,200 mboed as indicated in our presentation onFebruary 8, 2005. Relative to 4Q'04 both liquids and gas realisations have moved broadly in linewith marker prices. Refining and Marketing Refining Indicator Margins ($/bbl) 1Q'04 2Q'04 3Q'04 4Q'04 1Q'05USA - West Coast 8.06 15.41 11.28 10.36 12.88- Gulf Coast 6.92 9.18 6.99 5.52 7.30- Midwest 4.67 9.01 5.01 1.65 3.84North West Europe 2.73 5.29 4.37 4.72 2.84Singapore 3.42 2.80 5.48 8.02 4.98 Refining Global Indicator Margin*($/bbl.) 4.89 8.28 6.39 5.69 5.94 \* 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 first quarter's average refining Global Indicator Margin (GIM) was slightlyabove that in the previous quarter, and higher than a year earlier. However, therefining margins actually experienced by BP's refineries are expected to bebelow those in 4Q'04, due to higher scheduled turnaround activity and negativeforeign exchange impacts compared with last quarter. Marketing margins havedecreased sharply in the first quarter relative to the previous quarter, andwere also below those of a year ago, reflecting pressure from rising crude andproduct prices. Within the Aromatics and Acetyls businesses, which are nowreported as part of the Refining & Marketing segment, tight market conditionsand high industry utilisation rates continued to support margins at similarlevels to 4Q'04. Gas, Power and Renewables Both NGL and gas marketing margins are expected to be lower than those seen in4Q'04, and similar to the level of 1Q'04. 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 expected charges of around$175 - 275m per quarter during 2005. Olefins and Derivatives Olefins & Derivatives margins strengthened significantly in 1Q'05, as industryutilization rates rose. Overall production volumes are expected to be in linewith 4Q'04. Results for Olefins and Derivatives, which includes Innovene, arenow reported in Other Businesses and Corporate, but will be described separatelyin supplemental disclosures 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 todecrease BP's pre-tax result by around $140m in 1Q'05. Identified Non-Operating Items (NOIs) Non-operating items in 1Q'05 are expected to amount to a credit of around $1.0bnpre-tax. This includes $1.1bn of disposal gains, mainly related to the sale ofBP's interest in Ormen Lange and the Interconnector pipeline. The Groupeffective tax rate will apply to these items. Interest Expense The total consolidated interest charge is expected to be around $60m higher thanin 4Q'04. This includes the impact of higher market interest rates and a 1Q'05charge related to BP's decision to terminate certain financing leases related toInnovene assets. Tax Rate The effective tax rate for the quarter is expected to be around 32-33 per cent,in line with the guidance given on March 14 for the impact of IFRS. Gearing Gearing for the quarter is expected to be at the bottom end of our 20-30 percent band for net debt to net debt plus equity. As announced on March 14, wehave adjusted the band to maintain the economic substance of our financialframework in view of the 2005 reporting changes. Debt has fallen due to theimpact of the normal release of working capital as a result of the 1Q phasing ofGerman motor fuel excise taxes, and the receipt of the remaining proceeds fromthe sale of our interest in the Ormen Lange field in Norway. Distributions to Shareholders During the quarter the company bought back 193m shares for a total considerationof $2.0bn. Shares outstanding at March 31 2005, excluding treasury shares, were21,368m. As in previous quarters, BP has entered into an arrangement that allowsit to continue the share buy back programme during the closed period commencingon April 1. The 1Q'05 dividend of 8.5 cents per share announced at the time of our 4Q'04results was paid in March. The dividend to be paid in 2Q'05 will be announced onApril 26 in conjunction with our 1Q'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 yearpre-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 approximateand incorporate the impact of the 2005 reporting changes noted above. 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. Many other factors will affect BP's earningsquarter by quarter. Actual results in individual quarters may therefore differsignificantly from the estimates implied by the application of these rules. 2005 Operating Environment Rules of Thumb: impact on operating profit per year 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