BP Fourth Quarter and Full-Year 2010 Results
Release date: 01 February 2011
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Fourth quarter Third quarter Fourth quarter $ million Year 2009 2010 2010 2010 2009
4,295 1,785 5,567 Profit (loss) for the period(a) (3,719) 16,578 (848) 62 (953) Inventory holding (gains) losses, net of tax (1,195) (2,623)
3,447 1,847 4,614 Replacement cost profit (loss) (4,914) 13,955
18.38 9.83 24.55 - per ordinary share (cents) (26.17) 74.49 1.10 0.59 1.47 - per ADS (dollars) (1.57) 4.47
- BP's fourth-quarter replacement cost profit was $4,614 million, compared with $3,447 million a year ago. For the full year, replacement cost loss was $4,914 million compared with a profit of $13,955 million a year ago.
- The group income statement for the fourth quarter and full year reflects a pre-tax charge of $1.0 billion and $40.9 billion respectively related to the Gulf of Mexico oil spill. All charges relating to the incident have been treated as non-operating items. For further information on the Gulf of Mexico oil spill and its consequences see pages 3 - 5, Note 2 on pages 24 - 29 and Legal proceedings on pages 34 - 38. Further information on BP's fourth-quarter results is provided below.
- Non-operating items and fair value accounting effects for the fourth quarter, on a post-tax basis, had a net favourable impact of $250 million compared with a net unfavourable impact of $937 million in the fourth quarter of 2009. For the full year, the respective net unfavourable impacts were $25,436 million and $622 million. See pages 6, 20 and 21 for further details.
- The effective tax rate on replacement cost profit or loss for the fourth quarter and full year was 34% and 32% respectively, compared with 34% and 33% a year ago. Excluding the impact of the Gulf of Mexico oil spill, the effective tax rate for the fourth quarter was 33% and for the full year was 31%. In 2011, we expect the effective tax rate to be in the range 32-34%.
- Including the impact of the Gulf of Mexico oil spill, net cash used in operating activities for the fourth quarter was $0.2 billion and net cash provided by operating activities for the full year was $13.6 billion, compared with net cash provided in the same periods of last year of $7.3 billion and $27.7 billion respectively. The amounts for 2010 included a net cash outflow of $5.4 billion and $16.0 billion for the fourth quarter and full year respectively relating to the Gulf of Mexico oil spill.
- On 14 January 2011, BP and Rosneft Oil Company (Rosneft) announced that they had agreed a strategic global alliance. BP and Rosneft have agreed to seek to form a joint venture to explore and, if successful, develop three licence blocks on the Russian Arctic continental shelf. BP and Rosneft have entered into a related share swap agreement whereby, upon completion, BP will receive approximately 9.5% of Rosneft's shares in exchange for BP issuing new ordinary shares to Rosneft with an aggregate value of approximately $7.8 billion (as at close of trading in London on 14 January 2011), resulting in Rosneft holding 5% of BP's ordinary voting shares. See further information in Note 6 on page 31, Note 10 on page 33 and in Legal proceedings on page 38.
- Our 2010 reported reserves replacement ratio(b), excluding acquisitions and disposals, was 106% (details of which will be provided in BP Annual Report and Form 20-F 2010).
- Following a strategic review, we intend to divest the Texas City refinery and the southern part of our US West Coast Fuels Value Chain, including the Carson refinery, by the end of 2012 subject to all necessary legal and regulatory approvals. BP will ensure current obligations at Texas City are fulfilled.
- BP announced the resumption of quarterly dividend payments. The quarterly dividend to be paid on 28 March 2011 is 7 cents per share ($0.42 per ADS). The corresponding amount in sterling will be announced on 14 March 2011. A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the scrip dividend programme are available at www.bp.com/scrip.
- Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $346 million for the fourth quarter, compared with $302 million for the same period last year. For the full year, the respective amounts were $1,123 million and $1,302 million.
- Cash costs(c) for the fourth quarter and full year were slightly lower than in the same periods a year ago. In 2011 we expect a slight increase. Cash costs do not include amounts relating to the Gulf of Mexico oil spill.
- Total capital expenditure for the fourth quarter and full year was $5.5 billion and $23.0 billion respectively. Organic capital expenditure(d) in the fourth quarter and full year was $5.2 billion and $18.2 billion respectively. Organic capital expenditure for 2011 is expected to be around $20 billion. Disposal proceeds were $7.4 billion for the quarter, including $4.9 billion for deposits received relating to transactions expected to complete in subsequent periods. For the full year, disposal proceeds were $17.0 billion, which included $6.2 billion of deposits at 31 December 2010. We plan to deliver around $13 billion of further disposal proceeds in 2011.
- Depreciation, depletion and amortization in 2011 is expected to be around $0.5 billion higher than in 2010.
- Net debt at the end of the quarter was $25.9 billion, compared with $26.2 billion a year ago. The ratio of net debt to net debt plus equity was 21% compared with 20% a year ago. The group intends to reduce the net debt ratio to within the range of 10% - 20%.
Forward looking statements - cautionary statement:
This presentation and the associated slides and discussion contain forward looking statements, particularly those regarding energy demand and sources of supply; possible short term impact on costs and volumes from various actions to grow value; production growth and future production; refining margins; the petrochemicals environment; refinery turnaround activity and costs; cash costs and capital expenditure; disposals, including strategy and proceeds from disposals; completion of acquisitions; effective tax rate; maintenance of a cash liquidity buffer; reduction in the gearing ratio; payment of dividends; investments in safety and operational risk; increase in turnaround activity and impact on production; embedding of the operating management system; focus on competency capability and safety culture; actions of the Safety and Operational Risk organisation; the expected timing of the transition of control of the Gulf of Mexico response operations from the GC-IMT to the BP Gulf Coast Restoration Organization; internal organisational changes and advancing learning from the Gulf of Mexico (GoM) incident; the magnitude and timing of costs relating to the GoM oil spill; the magnitude of BP's ultimate exposure relating to the oil spill and potential mitigation by other parties; payments to the oil spill trust fund and return of any excess cash from the fund; availability of cash when payments to the fund cease; timing of investigations and litigation proceedings relating to the oil spill; restarting GoM activity; GoM production; start-up of projects and their contribution to production; depreciation, depletion and amortization; underlying average quarterly charge from other businesses and corporate; future exploration activity and spend; future upstream developments and ramp up of activities in Iraq; growth in TNK-BP, including investment and production; upstream strategy (including focus on safety improvements and operational risk reduction; relationships with large resource holders and National Oil Companies; exploration investment; shifting emphasis from volume to long-term value growth; investments in technology and capability); improvements in refining efficiency; move to new refining marker margin; refinery divestments; repositioning of US Fuels Value Chains (FVC) (including divesting Southern West Coast FVC and retaining Northern West Coast FVC) and halving US refining capacity; improvements in Eastern Hemisphere FVCs, including growth in margin capture and access; investment in Toledo and Whiting refineries; timing of Whiting refinery modernization project; growth in lubricants and petrochemicals; refining and marketing performance outlook, including performance improvement and growth in earnings and returns; investments in Alternative Energy; potential for biofuels as source of transport fuels; expansion of biofuels operations in Brazil; expected sanction of lignocellulosic ethanol production facility and advancing technology for biobutanol production. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including the timing of bringing new fields onstream; future levels of industry product supply; demand and pricing; OPEC quota restrictions; PSA effects; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought; the impact on our reputation following the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors, trading partners, creditors, rating agencies and others; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism or sabotage; and other factors discussed in this presentation, under "Risk factors" in our Annual Report and Accounts 2009 and our 2009 Annual Report on Form 20-F, filed with the US Securities and Exchange Commission (SEC) and under "Principal risks and uncertainties" in BP's Current Report on Form 6-K filed with the SEC on 28 July 2010.
Cautionary note to US investors:
We use certain terms in this presentation, such as "resources" and "non-proved resources", that the SEC's rules prohibit us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosures in our Form 20-F, SEC File No. 1-06262. This form is available on our website at www.bp.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or by logging on to their website at www.sec.gov.
Reconciliations to GAAP:
This presentation also contains financial information which is not presented in accordance with generally accepted accounting principles (GAAP). A quantitative reconciliation of this information to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on our website at www.bp.com