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BP's third quarter 2012 results

Release date: 30 October 2012
 

Download the full version of our third quarter 2012 results using the link below.

Third quarter Second quarter Third quarter $ million Nine months Nine months
2011 2012 2012 2012 2011
     
5,043 (1,385) 5,434 Profit (loss) for the period(a) 9,964 18,015
233  1,623 (747) Inventory holding (gains) losses, net of tax (110) (1,721)
     
5,276 238 4,687 Replacement cost profit (b) 9,854  16,294
187 3,447 483 Net (favourable) unfavourable impact of non-operating items and fair value accounting effects, net of tax(c) 3,800 378
     
5,463 3,685 5,170 Underlying replacement cost profit(b) 13,654  16,672
     
      Replacement cost profit    
27.85 1.25 24.62 - per ordinary share (cents) 51.82 86.28
1.67 0.07 1.48 - per ADS (dollars) 3.11 5.18
      Underlying replacement cost profit    
28.83 19.37 27.16 - per ordinary share (cents) 71.81 88.28
1.73 1.16 1.63 - per ADS (dollars) 4.31 5.30
     
  • BP's third-quarter replacement cost (RC) profit was $4,687 million, compared with $5,276 million a year ago. After adjusting for a net loss from non-operating items of $321 million and net unfavourable fair value accounting effects of $162 million (both on a post-tax basis), underlying RC profit for the third quarter was $5,170 million, compared with $5,463 million for the same period last year. For the nine months, RC profit was $9,854 million, compared with $16,294 million a year ago. After adjusting for a net loss from non-operating items of $3,475 million and net unfavourable fair value accounting effects of $325 million (both on a post-tax basis), underlying RC profit for the nine months was $13,654 million, compared with $16,672 million for the same period last year. RC profit or loss for the group, underlying RC profit or loss and fair value accounting effects are non-GAAP measures and further information is provided on pages 4, 19 and 21.
  • The group income statement included a net adverse impact relating to the Gulf of Mexico oil spill, on a pre-tax basis, of $59 million for the third quarter and $882 million for the nine months. All amounts relating to the Gulf of Mexico oil spill have been treated as non-operating items. For further information on the Gulf of Mexico oil spill and its consequences see pages 2 - 3, Note 2 on pages 23 - 28 and Legal proceedings on pages 32 - 40.
  • Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $198 million for the third quarter, compared with $234 million for the same period last year. For the nine months, the respective amounts were $640 million and $722 million.
  • Including the impact of the Gulf of Mexico oil spill, net cash provided by operating activities for the third quarter and nine months was $6.3 billion and $14.1 billion respectively, compared with $6.9 billion and $17.1 billion in the same periods of last year. Excluding amounts related to the Gulf of Mexico oil spill, net cash provided by operating activities for the third quarter and nine months was $6.4 billion and $17.1 billion respectively, compared with $7.8 billion and $22.8 billion for the same periods of last year. Reflecting our proposed transaction with Rosneft, we remain confident in delivering more than 50% growth in net cash provided by operating activities by 2014(d) assuming an oil price of $100 per barrel.
  • Net debt at the end of the quarter was $31.5 billion, compared with $25.8 billion a year ago. The ratio of net debt to net debt plus equity was 20.9% compared with 18.9% a year ago. Net debt is a non-GAAP measure. See page 5 for further information.
  • On 22 October 2012, BP announced that it had signed heads of terms for a proposed transaction to sell its 50% share in TNK-BP to Rosneft for cash consideration of $17.1 billion and Rosneft shares representing a 12.84% stake in Rosneft. In addition, BP would use $4.8 billion of the cash consideration to acquire a further 5.66% stake in Rosneft from the Russian government. For further information, see page 11.
  • BP today announced a quarterly dividend of 9 cents per ordinary share ($0.54 per ADS), which is expected to be paid on 21 December 2012. The corresponding amount in sterling will be announced on 10 December 2012. 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 bp.com/scrip.
  • The effective tax rate on replacement cost profit for the third quarter was 34%, compared with 31% a year ago. For the nine months the effective tax rate on replacement cost profit was 34%, the same as a year ago. Recently enacted changes to the taxation of UK oil and gas production resulted in a $256-million deferred tax adjustment in the third quarter 2012. An earlier change resulted in a $683-million deferred tax adjustment in the first quarter 2011. Excluding these adjustments the effective tax rate for the third quarter and nine months of 2012 was 30% and 32% respectively and 31% for the nine-month period for 2011. We now expect the full-year effective tax rate to be at the lower end of the 34 to 36% range.
  • Total capital expenditure for the third quarter and nine months was $6.1 billion and $17.2 billion respectively, of which organic capital expenditure was $5.9 billion and $16.5 billion respectively(e). We now expect 2012 full-year organic capital expenditure to be between $22 billion and $23 billion. Disposal proceeds were $1.4 billion for the quarter and $4.6 billion for the nine months.
  • Since the start of 2010, we have announced disposals for over $35 billion against our target of $38 billion, which includes a total of $6 billion for Upstream assets and $5 billion for Downstream assets since the end of the second quarter. In addition, we announced the proposed transaction with Rosneft for the sale of our share in TNK-BP, as described on page 1. (See pages 6, 8 and 11 and Note 3 on pages 28 – 29 for further information on these agreements.)
(a)Profit (loss) attributable to BP shareholders.
(b)See footnote (a) on page 4 for definitions of RC profit and underlying RC profit.
(c)See pages 20 and 21 respectively for further information on non-operating items and fair value accounting effects.
(d)This projection reflects our expectation that all required payments into the $20-billion Deepwater Horizon Oil Spill Trust fund will have been completed prior to 2014. The projection does not reflect any cash flows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill which may or may not arise at that time. As disclosed in Note 2 under Contingent liabilities on page 28, we are not able at this time to reliably estimate the amount or timing of a number of contingent liabilities.
(e)Organic capital expenditure excludes acquisitions and asset exchanges, and expenditure associated with deepening our natural gas asset base (see page 18).

 

Cautionary statement regarding forward-looking statements:
This presentation and the associated slides and discussion contain forward-looking statements, particularly those regarding: the timing and quantum of and timing for completion of contributions to and payments from the $20-billion Trust fund; the expected level of reported production in the fourth quarter of 2012; the expected levels of full-year underlying and reported production in 2012; the expected level of refining margins in the fourth quarter of 2012; the timing of and prospects for upgrades to the Whiting refinery; the expected level of refinery turnarounds in the fourth quarter of 2012; the expected level of petrochemicals margins in the fourth quarter of 2012; the expected level of the quarterly charge in Other Businesses and Corporate; the expected full-year effective tax rate; prospects for BP’s $38-billion divestment programme, and the intention to make $38 billion of disposals by the end of 2013; prospects for the completion of planned and announced divestments, and the timing for the receipt of and quantum of disposal proceeds; the level of full-year capital expenditure for 2012; the expected future levels of gearing and net debt; the expected terms of and timing of the execution of definitive agreements in respect of BP’s proposed transaction with Rosneft concerning the sale of BP’s stake in TNK-BP to Rosneft and the related acquisition by BP of shares in Rosneft (the Rosneft transaction);

the expected timing of completion of the Rosneft transaction; the expected level of BP’s holding of Rosneft stock following completion of the Rosneft transaction; expectations regarding the accounting treatment of BP’s expected share of Rosneft’s earnings, production and reserves; prospects for BP’s level of representation on Rosneft’s board of directors; BP’s intentions to use part of the proceeds from the Rosneft transaction to offset dilution to earnings per share; BP’s expectations of becoming a significant equity holder in Rosneft; BP’s intentions to hold Rosneft shares as a long-term investment; the prospects for and expected timing of certain investigations, claims, settlements and litigation outcomes; the timing of future MDL 2179 proceedings; the expected source of funding for the settlement agreements with the Plaintiffs’ Steering Committee (PSC); the expected date of the fairness hearing in respect of the settlements with the PSC; the expected level of unplanned outages and overall outages in 2013; BP’s plans for its 2013 turnaround program; the expected timing for completion of BP’s re-positioning of Downstream; BP’s intentions to actively secure new acreage in core areas and new frontiers; expectations regarding the ‘10-point plan’; expectations regarding the quarterly dividend payment and future distributions to shareholders; the anticipated increase of around 50% in operating cash flow by 2014, and the prospects for financial momentum in 2013 and 2014; the prospects for, timing and composition of future projects including expected Final Investment Decisions, start up, completion, timing of production, level of production and margins; the expected levels of cash margins in BP’s new upstream projects planned for start-up by the end of 2014; expectations about BP’s portfolio in the future; BP’s plans to increase upstream reinvestment; the expected level of capital expenditures on projects and wells between 2013 and 2017;

the expected level of production from higher margin areas through 2016; expectations for drilling and rig activity; the expected levels of and prospects for production and underlying production in the Gulf of Mexico in 2012 and through the end of the decade; the expected installation of new water injection facilities at the Thunder Horse field in 2014; expectations regarding the level of production at Thunder Horse through the end of the decade; the expected number of material prospects tested by BP’s drilling programme to 2015; the expected number of wells completed per year in the future; the expected number of wells that will target prospects with resource potential greater than a quarter billion barrels of oil equivalent; BP’s intended level of investment in seismic exploration in the future; the expected acquisition of 3D seismic surveys in Trinidad, Indonesia and Uruguay in 2013; expectations regarding the timing of completion of wells in 2012, including wells in Angola, Brazil, the North Sea and Namibia; and the expected level of free cash flow in Downstream following the completion of the Whiting modernisation project.

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 ability of the parties to the Rosneft transaction to negotiate satisfactory definitive agreements and the terms thereof; the actions of regulators and the timing of the receipt of governmental and regulatory approvals; strategic and operational decisions by Rosneft’s management and board of directors; the timing of bringing new fields onstream and of project start-ups; the timing of divestments; 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 under “Principal risks and uncertainties” in our Stock Exchange Announcement for the period ended 30 June 2012 and under “Risk factors” in our Annual Report and Form 20-F 2011 as filed with the US Securities and Exchange Commission.

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.

Statement of Assumptions
The operating cash flow projection for 2014 stated on slides 29 and 35 of this presentation reflects our expectation that all required payments into the $20 billion US Trust Fund will have been completed prior to 2014. The projection has been adjusted for BP’s proposed transaction with Rosneft and excludes BP’s share of TNK-BP dividends. The projection does not reflect any cash flows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill which may or may not arise at that time. As disclosed in the Stock Exchange Announcement, we are not today able to reliably estimate the amount or timing of a number of contingent liabilities.

Certain terms are used in this presentation, such as ‘reserves’, ‘resources’, ‘net resources’ and ‘recoverable 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. Tables and projections in this presentation are BP projections unless otherwise stated.

Stock Exchange Announcement: For further information on BP’s results, please see the Third Quarter Results Stock Exchange Announcement dated 30 October 2012

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