SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended June 30, 2004
BP p.l.c.
(Translation of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
----------- -----------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
----------- -----------
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO.
333-9790) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM F-3 (FILE NO. 333-65996) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-83180) OF BP AUSTRALIA CAPITAL
MARKETS LIMITED, BP CANADA FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP
CAPITAL MARKETS AMERICA INC. AND BP p.l.c., THE REGISTRATION STATEMENT ON FORM
S-8 (FILE NO. 33-21868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8
(FILE NO. 333-9020) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE
NO. 333-9798) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-34968) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-74414) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-102583) OF BP p.l.c. AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-103923) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS
REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS
SUBSEQUENTLY FILED OR FURNISHED.
Page 1
BP p.l.c. AND SUBSIDIARIES
FORM 6-K FOR THE PERIOD ENDED JUNE 30, 2004
Page
1. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the period January-June 2004. 3
2. Consolidated Financial Statements including Notes to Consolidated
Financial Statements for the period January-June 2004. 14
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - JUNE 2004
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
------------------------ --------------------------
($ million)
Turnover 69,091 54,426 136,693 116,457
======== ======== ======== ========
Profit for the period 3,896 1,585 8,714 5,804
Exceptional items, net of tax 99 (131) (1,201) (471)
-------- -------- -------- --------
Profit before exceptional items 3,995 1,454 7,513 5,333
======== ======== ======== ========
Profit for the period per ordinary share - cents 17.80 7.19 39.61 26.09
Dividends per ordinary share - cents 7.10 6.50 13.85 12.75
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes provided elsewhere in this Form 6-K
and with the information, including the consolidated financial statements and
related notes, for the year ended December 31, 2003 in BP p.l.c.'s Annual Report
on Form 20-F for the year ended December 31, 2003.
The financial information for 2003 has been restated to reflect (a) the transfer
of natural gas liquids (NGL) operations from Exploration and Production to Gas,
Power and Renewables on January 1, 2004; (b) the adoption by the Group of
Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17) with effect
from January 1, 2004; and (c) the adoption by the Group of Urgent Issues Task
Force Abstract No. 38 `Accounting for ESOP Trusts' with effect from January 1,
2004. For further information, see Note 2 of Notes to Consolidated Financial
Statements.
TNK-BP operational and financial information has been estimated.
The second quarter and first half trading environment was generally stronger
than a year ago with higher oil realizations and refining margins. For the three
months ended June 30, 2004 the Brent oil price increased $9.29 per barrel, the
Henry Hub gas price was up $0.60 per mmbtu, the refining Global Indicator Margin
more than doubled and the Chemicals Indicator Margin decreased $3 per tonne
compared with a year ago. For the half year, the Brent oil price was $4.90 per
barrel higher, the Henry Hub gas price was $0.12 per mmbtu lower, the refining
Global Indicator Margin was up $2.36 per barrel and the Chemicals Indicator
Margin was up $13 per tonne compared with a year ago.
Turnover for the three months and six months ended June 30, 2004 was $69.1
billion and $136.7 billion respectively, compared with $54.4 billion and $116.5
billion for the equivalent periods in 2003. The increase in turnover for the
second quarter reflects increases of around $15.1 billion from higher prices and
around $3.0 billion from foreign exchange movements, partly offset by a net
decrease of approximately $1.4 billion from lower sales volumes and a decrease
of approximately $0.6 billion related to lower production volumes following 2003
divestments.
The increase in turnover for the half year reflects $14.7 billion from higher
sales prices, $5.3 billion from foreign exchange movements and $1.9 billion from
higher sales volumes partly offset by a decrease of $1.3 billion related to
lower production volumes following 2003 divestments.
Profit for the three months ended June 30, 2004 was $3,896 million, including
inventory holding gains of $462 million. Profit for the three months ended June
30, 2003 was $1,585 million, after inventory holding losses of $951 million.
Inventory holding gains or losses represent the difference between the cost of
sales calculated using the average cost of supplies incurred during the period
and the cost of sales calculated using the first-in first-out method. Profit for
the six months ended June 30, 2004 was $8,714 million, including inventory
holding gains of $1,110 million. Profit for the half year ended June 30, 2003
was $5,804 million, after inventory holding losses of $152 million.
Profit before exceptional items was $3,995 million for the three months ended
June 30, 2004, compared with $1,454 million for the equivalent period of 2003.
Exceptional items are gains and losses on the sale of fixed assets and
businesses or termination of operations. Net exceptional losses in the second
quarter of 2004 were $99 million ($127 million before tax) and principally
relate to net losses from the divestment of certain upstream interests in
Indonesia and the US and charges associated with the termination of operations.
Net exceptional gains in the second quarter of 2003 were $131 million ($280
million before tax) and principally relate to gains on disposal of certain
upstream interests, partially offset by a provision for loss on disposal.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Profit before exceptional items was $7,513 million for the six months ended June
30, 2004, compared with $5,333 million for the equivalent period of 2003. Net
exceptional gains in the six months of 2004 were $1,201 million ($1,103 million
before tax) and principally relate to net gains from the sale of our interests
in PetroChina and Sinopec, partially offset by net losses principally relating
to the divestment of certain upstream interests, and charges associated with the
termination of operations. Net exceptional gains in the half year of 2003 were
$471 million ($674 million before tax) and principally relate to net gains from
the sale of certain upstream interests partially offset by a provision for loss
on disposal.
Profit before exceptional items for the three months ended June 30, 2004 is
after impairment charges of $160 million in Exploration and Production related
to a gas processing plant in the USA and a field in the Gulf of Mexico Shelf.
Profit before exceptional items for the three months ended June 30, 2003 is
after charging impairment of $108 million related to the Kepadong field in
Indonesia and a charge of $12 million in respect of our restructuring activities
in the UK in Exploration and Production, Veba integration costs of $41 million
in Refining and Marketing and a $5 million credit resulting from the reduction
in the provision for costs associated with closure of polypropylene capacity in
Petrochemicals.
Profit before exceptional items for the six months ended June 30, 2004 is after
an impairment charge of $160 million related to a gas processing plant in the
USA and a field in the Gulf of Mexico and an impairment charge of $186 million
related to our interests in two fields in Venezuela, Desarrollo Zuli Occidental
(DZO) and Boqueron, in Exploration and Production. Profit before exceptional
items for the six months ended June 30, 2003 is after an impairment charge of
$108 million related to the Kepadong field in Indonesia, an impairment charge of
$103 million related to the Yacheng field in China, charges of $102 million in
respect of our restructuring activities in North America and the UK and a $49
million write down of the Viscount asset in the North Sea in Exploration and
Production; Veba integration costs of $59 million in Refining and Marketing; a
$5 million credit resulting from a reduction in the provision for costs
associated with closure of polypropylene capacity in Petrochemicals; and a $130
million credit related to tax restructuring benefits.
In addition to the factors above, the increase in profit before tax for the
second quarter reflects higher liquids and gas realizations, higher refining
margins with some offset from lower marketing margins, higher contributions from
the natural gas liquids business in North America and the impact of the changing
production composition primarily from Russia offset by the impact of divestments
in 2003. These increases were partly offset by higher costs.
These factors also contributed to the increase in profit before tax for the half
year, which also reflected a higher contribution from the global LNG and Solar
businesses offset by lower Olefins margins and a lower marketing and trading
result.
Interest expense for the three months and six months ended June 30, 2004 was
$145 million and $297 million respectively, compared with $149 million and $325
million in the same periods of 2003. The decreases in both periods primarily
reflect lower interest rates and an increase in capitalized interest partly
offset by the inclusion of equity-accounted interest from the TNK-BP joint
venture. Other finance expense for the three months and six months ended June
30, 2004 was $76 million and $152 million respectively, compared with $127
million and $256 million in the same periods of 2003. The decreases in both
periods primarily reflect a reduction in net pension and finance costs partly
offset by the inclusion of the unwinding of the discount on the deferred
consideration for acquisition of the investment in TNK-BP.
Net taxation, other than production taxes, charged for the three months and six
months ended June 30, 2004 was $2,199 million and $4,021 million respectively,
compared with $1,744 million and $3,526 million in the equivalent periods last
year. The tax on exceptional items was a credit of $28 million and $98 million
for the second quarter and half year of 2004 respectively, compared with a
charge of $149 million and $203 million for the second quarter and first half of
2003. The effective tax rate was 36% and 31% for the three months and half year
ended June 30, 2004, compared with 51% and 37% for the equivalent periods of
2003. The reduction in the second quarter rate reflects the non-taxable
inventory holding gain reported in 2004 compared with the inventory holding loss
in 2003 and the reduction in the half year rate reflects the inventory holding
gain in 2004 and the low tax charge on the exceptional gains reported in the
first quarter of 2004.
Capital expenditure in the second quarter and first half of 2004 was $3.2
billion and $7.8 billion respectively. The amount for the first half includes a
$1.35 billion payment relating to the contribution of TNK's interest in Slavneft
within TNK-BP. Capital expenditure and acquisitions for the second quarter and
first half of 2003 was $3.3 billion and $6.2 billion. Excluding acquisitions,
capital expenditure for the three months and six months ended June 30, 2004 was
$3.2 billion and $6.4 billion respectively, compared with $3.2 billion and $6.1
billion respectively. Disposal proceeds in the second quarter and first half of
2004 were $0.66 billion and $3.5 billion respectively and in the second quarter
and first half of 2003 were $1.7 billion and $4.1 billion respectively.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Net cash inflow for the three months ended June 30, 2004 was $1.5 billion,
compared with an inflow of $2.4 billion for the equivalent period of 2003,
reflecting lower proceeds from the sale of fixed assets and lower cash inflow
from operating activities, partly offset by lower interest payments and higher
proceeds from the sale of businesses. Net cash inflow for the six months ended
June 30, 2004 was $5.3 billion, compared with $5.6 billion for the equivalent
period of 2003, reflecting higher cash flow from operating activities offset by
higher spending on acquisitions and lower disposal proceeds. Net cash inflow
from operating activities was $6.9 billion and $14.6 billion for the three
months and six months ended June 30, 2004 respectively, compared with $7.3
billion and $13.3 billion in the equivalent periods in 2003. The decrease for
the second quarter reflected higher working capital requirements and higher
share of profits of joint ventures and associated undertakings, partly offset by
higher profits and higher losses on sale of fixed assets and businesses. The
increase for the half year reflected higher profits, higher share of profits of
joint ventures and associates and higher gains on sale of fixed assets and
businesses partly offset by higher working capital requirements.
Net debt at June 30, 2004 was $18.2 billion compared with $20.2 billion at
December 31, 2003. The ratio of net debt to net debt plus equity was 20% at June
30, 2004 compared with 22% at December 31, 2003. This ratio shows the proportion
of debt and equity used to finance our operations, and can also be used to
measure borrowing capacity. In addition to reported debt, BP uses conventional
off balance sheet sources of finance such as operating leases and joint venture
and associated undertaking borrowings.
The Group has access to other sources of liquidity in the form of committed
facilities and other funding through the capital markets. BP believes that,
taking into account the substantial amounts of undrawn borrowing facilities
available, the Group has sufficient working capital for foreseeable
requirements.
In the normal course of business the Group has entered into certain long term
purchase commitments principally relating to take or pay contracts for the
purchase of natural gas, crude oil and chemicals feedstocks and throughput
arrangements for pipelines. The Group expects to fulfil its obligations under
these arrangements with no adverse consequences to the Group's results of
operations or financial condition.
The return on average capital employed was 17.1% for the second quarter of 2004
compared with 8.1% for the same period in 2003. Return on average capital
employed is the ratio of profit including minority shareholders' interest and
excluding post-tax interest on finance debt to average capital employed for the
period. Capital employed is the total of BP shareholders' interest, minority
shareholders' interest and finance debt. This performance measure is useful for
shareholders and management as an indication of capital productivity over the
long term. For the six months ended June 30, 2004 the return on average capital
employed was 19.0% compared with 14.1% in 2003. For further information on the
return on average capital employed calculation see page 67 of this report.
BP announced a second quarterly dividend for 2004 of 7.10 cents per ordinary
share. Holders of ordinary shares will receive 3.860 pence per share and holders
of American Depositary Receipts (ADRs) $0.426 per ADS. The dividend is payable
on September 7, 2004 to shareholders on the register on August 13, 2004.
Participants in the Dividend Reinvestment Plan or the dividend reinvestment
facility in the US Direct Access Plan will receive the dividend in the form of
shares, also on September 7, 2004. The Company repurchased for cancellation 225
million of its own shares during the quarter, at a cost of $2 billion. During
the first half, 380 million shares were repurchased and cancelled at a cost of
$3.25 billion.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS)
EXPLORATION AND PRODUCTION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
Turnover - $m 8,213 7,272 16,379 16,150
Profit before interest and tax - $m 4,302 3,431 8,552 8,155
Exceptional (gains) losses - $m 114 (333) (97) (766)
------ ------ ------ ------
Total operating profit - $m 4,416 3,098 8,455 7,389
====== ====== ====== ======
Results include:
Exploration expense - $m 108 101 244 213
Of which: Exploration expenditure written off - $m 22 43 89 93
Key Statistics:
Crude oil Average prices realized
by BP - $/bbl 34.47 25.73 32.85 28.50
Production - mb/d 2,321 1,712 2,331 1,771
Natural gas liquids Average prices realized
by BP - $/bbl 23.71 17.49 23.43 18.76
Production - mb/d 197 199 194 216
Total liquids(a) Average prices realized
by BP - $/bbl 33.27 24.90 31.85 27.47
Production - mb/d 2,518 1,911 2,525 1,987
Natural gas Average prices realized
by BP - $/mcf 3.68 3.39 3.74 3.64
Production - mmcf/d 8,425 8,439 8,512 8,727
Total hydrocarbons(b) Average prices realized
by BP - $/boe 27.66 22.43 27.06 24.49
Production - mboe/d 3,971 3,366 3,993 3,492
Brent oil price - $/bbl 35.32 26.03 33.67 28.77
West Texas Intermediate oil price - $/bbl 38.28 29.02 36.80 31.53
Alaska North Slope US West Coast - $/bbl 36.99 27.04 35.61 30.13
Henry Hub gas price (c) - $/mmbtu 6.00 5.40 5.84 5.96
UK Gas - National Balancing Point - p/therm 20.70 17.44 22.64 19.35
---------------
(a) Crude oil and natural gas liquids
(b) Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1
million barrels.
(c) Henry Hub First of the Month Index
Turnover for the three months ended June 30, 2004 was $8.2 billion, compared
with $7.3 billion in the corresponding period in 2003, reflecting an increase of
around $1.6 billion related to higher liquids and gas realizations, partly
offset by a decrease of around $0.6 billion due to lower production volumes (for
the BP Group excluding equity-accounted entities) as a result of divestment
activity in 2003.
Turnover for the six months ended June 30, 2004 was $16.4 billion compared with
$16.2 billion in the corresponding period of 2003, reflecting an increase of
around $1.5 billion related to higher liquids and gas realizations, partly
offset by a decrease of around $1.3 billion due to lower production volumes as a
result of divestment activity in 2003.
Profit before interest and tax for the three months and six months ended June
30, 2004 was $4,302 million and $8,552 million respectively, compared with
$3,431 million and $8,155 million for the equivalent periods in 2003. Profit for
the second quarter of 2004 included net exceptional losses before tax of $114
million, compared with gains of $333 million before tax for the equivalent
period in 2003. Profit for the first half of 2004 included net exceptional gains
of $97 million before tax compared with net gains of $766 million before tax for
the equivalent period in 2003.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
EXPLORATION AND PRODUCTION (concluded)
Total operating profit for the three months ended June 30, 2004 was $4,416
million (there were no inventory holding gains or losses) and is after
impairment charges of $160 million in respect of a gas processing plant in the
USA and a field in the Gulf of Mexico Shelf. Total operating profit for the
three months ended June 30, 2003 was $3,098 million after an impairment charge
of $108 million related to the Kepadong field in Indonesia and charges of $12
million in respect of restructuring activities in the UK.
Total operating profit for the six months ended June 30, 2004 was $8,455 million
including inventory holding gains of $8 million and is after impairment charges
of $160 million in respect of a gas processing plant in the USA and a field in
the Gulf of Mexico Shelf and impairment charges of $186 million related to our
interests in Desarrollo Zuli Occidental (DZO) and Boqueron in Venezuela. We
previously reported an exceptional loss on disposal of $217 million in respect
of these assets; however, the sales agreement has lapsed and we will retain our
interests in the fields. As a result of the lapse of the agreement, the
exceptional loss was reversed and an impairment charge was recognized in the
first quarter of 2004.
Total operating profit for the six months ended June 30, 2003 was $7,389 million
including inventory holding gains of $3 million and is after an impairment
charge of $108 million related to the Kepadong field in Indonesia, an impairment
charge of $103 million related to the Yacheng field in China, charges of $102
million in respect of restructuring activities in North America and the UK and a
$49 million write-down of the Viscount asset in the North Sea.
The primary reasons for the increase in operating profit for the second quarter
of 2004 compared with the second quarter of 2003 are higher liquids and gas
realizations of around $1,280 million combined with a net increase of around
$340 million due to the changing production composition primarily arising from
the greater proportion from Russia, offset partially by the impact of
divestments in 2003. Operating profit for the second quarter 2004 also includes
a charge of $87 million, reflecting an increase in the provision for unrealized
profit in inventory, which removes the upstream margin from downstream
inventories. This compares with a credit of $106 million in the equivalent
quarter last year.
The primary reasons for the increase in operating profit for the six months
ended June 30, 2004 compared with the six months ended June 30, 2003 are higher
liquids and gas realizations of around $1,150 million combined with a net
increase of around $300 million due to the changing production composition
primarily arising from the greater proportion from Russia, offset partially by
the impact of divestments in 2003. Operating profit for the half year 2004
includes a charge of $153 million, reflecting an increase in the provision for
unrealized profit in inventory compared with a charge of $19 million in the half
year 2003.
Production for the second quarter was up 18% from the second quarter of 2003, to
3,971 mboe/d. This reflects increased production from Russia partly offset by
divestments, lower seasonal gas takes in the North Sea, anticipated decline and
unplanned shutdowns at the Mars platform in the Gulf of Mexico and in Trinidad.
In the Gulf of Mexico, offshore installation of the Holstein and Mad Dog Spars
was completed, Holstein topsides have been installed, and the Thunder Horse
platform has left the construction yard in Korea. In Algeria, first gas sales
from the In Salah gas project have been achieved. In Azerbaijan, installation of
the Central Azeri jacket was completed. In Angola, the Kizomba A Floating
Production Storage and Offloading vessel arrived at the field location in Block
15 and hook-up to the tension leg platform is in progress. In Trinidad the Atlas
methanol plant was brought on line. In Australia, commissioning of North West
Shelf Train 4 has commenced with first gas delivered to the plant.
In the UK the Clair jacket and deck has been installed offshore. In Egypt, the
first steps were taken towards the development of a major LNG business, with
agreements signed to deliver natural gas to the Damietta plant.
In the second quarter we had a further exploration success in Angola with the
Venus discovery in offshore Block 31 and two discoveries in the Nile Delta in
Egypt, Temsah and Polaris.
Page 7
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
---------------------- -----------------------
Turnover - $m 45,467 34,874 87,161 74,369
Profit before interest and tax - $m 1,772 115 3,021 1,363
Exceptional (gains) losses - $m 18 49 158 101
------- ------ ------ ------
Total operating profit - $m 1,790 164 3,179 1,464
======= ====== ====== ======
Total refined product sales - mb/d 6,138 7,023 6,539 6,914
Refinery throughputs - mb/d 3,022 3,265 2,983 3,146
Refining availability (a) - % 95.1 96.7 95.1 95.4
Global Indicator Refining Margin (b) - $/bbl 7.89 3.27 6.25 3.89
---------------
(a) Refining availability is the weighted average percentage of the period that
refinery units are available for processing, after accounting for downtime
such as turnarounds.
(b) The Global Indicator Refining Margin (GIM) is the average of six regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity. The refining margins are industry specific measures rather than
BP specific, which we believe are useful to investors in analyzing trends
in the industry and their impact on our results. The margins are calculated
by BP based on published crude oil and product prices and take account of
fuel utilization and catalyst costs. No account is taken of BP's other cash
and non-cash costs of refining such as wages and salaries and plant
depreciation. The indicator margin may not be representative of the margins
achieved by BP in any period because of BP's particular refinery
configurations and crude and product slate.
Turnover for the three months and six months ended June 30, 2004 was $45.5
billion and $87.2 billion respectively, compared with $34.9 billion and $74.4
billion for the same periods in the prior year. The increase in turnover in the
second quarter of 2004 compared with 2003 was due principally to higher prices
contributing approximately $12 billion and foreign exchange movements
contributing approximately $3 billion, offset by lower trading and crude oil
sales of around $4 billion. The increase in turnover in the first half of 2004
compared with the first half of 2003 was principally due to higher prices
contributing approximately $12.5 billion and foreign exchange movements
contributing approximately $5.3 billion, partly offset by lower trading and
crude oil sales of around $4.8 billion.
Profit before interest and tax for the three months and six months ended June
30, 2004 was $1,772 million and $3,021 million respectively, compared with $115
million and $1,363 million for the equivalent periods in 2003. Profit in the
second quarter and first half of 2004 was after net exceptional losses before
tax of $18 million and $158 million respectively, which relate principally to
the disposal of Singapore Refining Company Private Limited (SRC) and the closure
of the lubricants operation of the Coryton Refinery in the UK. Profit in the
second quarter and half year of 2003 was after net exceptional losses before tax
of $49 million and $101 million respectively, related to the disposal of
approximately 2.4% of the North Germany Retail site network, offset by a gain of
$9 million from disposal of 21 Retail sites in Greece, and a gain of $9 million
from the disposal of the US Pipeline East Texas Crude line.
Total operating profit for the three months and six months ended June 30, 2004
was $1,790 million and $3,179 million respectively, including inventory holding
gains of $428 million and $957 million respectively. Total operating profit for
the three months and six months ended June 30, 2003 was $164 million and $1,464
million respectively, after inventory holding losses of $773 million and $153
million respectively, and is after charging Veba integration costs of $41
million and $59 million respectively.
The primary reasons for the increase in operating profit in the second quarter
of 2004 compared with the second quarter of 2003 reflects approximately $1
billion from improved refining margins, particularly in the US, due to strong
demand, coupled with below-normal inventories and the impact of industry-wide
planned and unplanned refinery maintenance. This increase was offset partly by
operational outages at the Texas City Refinery and higher purchased energy costs
of around $100 million. Marketing margins declined by approximately $200 million
and adverse foreign exchange movement impacted operating profit by approximately
$100 million.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING (concluded)
The main reasons for the increase in operating profit in the six months ended
June 30, 2004, compared with the six months ended June 30, 2003 reflected
approximately $1.2 billion from improved refining margins, particularly in the
US, due to strong demand, coupled with below-normal inventories and the impact
of industry-wide planned and unplanned refinery maintenance. This increase was
offset partly by operational outages at the Texas City Refinery and higher
purchased energy costs of around $100 million. Marketing margins declined by
approximately $300 million and adverse foreign exchange movements impacted
operating profit by approximately $200 million.
During the second quarter, BP continued the successful roll-out of
Ultimate(R)(a) generation gasoline and diesel fuels with launches in Germany and
Austria.
Also in the quarter, BP announced the closure of refining operations at the ATAS
Refinery in Mersin, south eastern Turkey. The site will continue to operate as a
fuels terminal.
The disposal of BP's interests in the Singapore Refinery Company Private Limited
was concluded on June 30.
Shortly after the second quarter, BP and the Singapore Petroleum Company Limited
(SPC) announced that conditional agreement had been reached for SPC to purchase
BP's Retail and LPG business in the Singapore retail network and related assets
for $70 million; the transaction completion is expected towards the end of 2004.
In the first quarter, BP and Lembaga Tabung Angkatan Tentera (LTAT) announced
that agreement had been reached for LTAT to purchase BP's 70% shareholding in
the BP Malaysia Sdn Bhd fuels business. Subject to receiving the necessary
regulatory consents, this transaction is expected to be concluded in the third
quarter of 2004.
(a) Ultimate(R) is a trademark of BP p.l.c.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
PETROCHEMICALS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
---------------------- -------------------------
Turnover - $m 4,805 4,197 9,315 8,318
Profit before interest and tax - $m 248 203 344 486
Exceptional (gains) losses - $m (6) (2) 148 (9)
------- ------ ------- -------
Total operating profit - $m 242 201 492 477
======= ====== ======= =======
Production (a) - kte 7,171 6,770 14,414 13,750
Petrochemicals Indicator Margin (b) - $/te 131(c) 134 128(c) 115
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) The Petrochemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Nexant in its quarterly market analyses, which we weight based on BP's
product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Among the products and businesses
covered in the CIM are the olefins and derivatives, the aromatics and
derivatives, linear alpha-olefins (LAOs), acetic acid, vinyl acetate
monomers and nitriles. Not included are fabrics and fibres, poly
alpha-olefins (PAOs), anhydrides, speciality intermediates, and the
remaining parts of the solvents and acetyls businesses. This measure is not
BP specific, rather it is an indicator of relative industry profitability
and BP's actual margins will differ. While not entirely representative of
BP's complete range of products, we believe it does provide investors with
useful information about the environment for BP's products.
(c) Provisional. The data for the second quarter is based on two months' actual
and one month of provisional data.
Turnover for the three months and six months ended June 30, 2004 was $4.8
billion and $9.3 billion respectively, compared with $4.2 billion and $8.3
billion for the equivalent periods in 2003. The increase in turnover for the
second quarter compared with the equivalent period in 2003 reflects an increase
of approximately $0.3 billion from higher sales volumes primarily in Asia and an
increase of approximately $0.3 billion from higher prices reflecting the capture
of higher feedstock prices in sales. The increase in turnover for the first half
of 2004 compared with the first half of 2003 was attributable to an increase of
$0.5 billion from higher volumes, primarily in Asia, and an increase of around
$0.5 billion from higher prices.
Profit before interest and tax for the three months and six months ended June
30, 2004 was $248 million and $344 million respectively, compared with $203
million and $486 million for the equivalent periods in 2003. Profit for the
second quarter and first half of 2004 included net exceptional gains before tax
of $6 million and exceptional losses of $148 million respectively, which were
associated largely with the sale of our Speciality Intermediates Business and
the exit of the Baglan Bay site in the UK. Profit for the second quarter and
first half of 2003 included net exceptional gains before tax of $2 million and
$9 million.
Total operating profit for the three months and six months ended June 30, 2004
was $242 million and $492 million respectively, including inventory holding
gains of $40 million and $161 million respectively. Total operating profit for
the three months and six months ended June 30, 2003 was $201 million and $477
million respectively, after inventory holding losses of $103 million and
including gains of $43 million respectively.
Operating profit for the three months ended June 30, 2004 compared with the
equivalent period in 2003 reflects higher realizations of around $330 million
more than offset by higher costs including adverse foreign exchange impacts,
higher energy costs and increased feedstock prices of around $440 million.
Operating profit for the six months ended June 30, 2004 compared with the
equivalent periods in 2003 reflects principally weaker Olefins margins in
Europe.
Petrochemicals production of 7,171 thousand tonnes in the second quarter of 2004
was 401 thousand tonnes above the second quarter of 2003. Higher production was
due to improved plant utilization and organic growth, including two new Asian
PTA plants coming on stream and increasing our share of Asian PTA joint
ventures. First half production was 664 thousand tonnes higher than a year ago
due to new Asian PTA capacity and higher asset utilization.
Page 10
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
During the second quarter we signed a heads of agreement with Sinopec, to build
a new 500 thousand tonnes a year acetic acid plant in China (BP share 50%). In
addition we signed a letter of intent to examine the viability of expanding
production at the BP Zhuhai PTA plant in China (BP share 85%) to 1,200 thousand
tonnes a year. We completed the sale of our Speciality Intermediates Business.
We have progressed with plans to consolidate the Olefins and Derivatives (O&D)
business into a stand-alone entity able to operate separately from the BP Group.
The BP Group plans to sell O&D in due course, possibly commencing the sale
through an Initial Public Offering, depending on market circumstances and
necessary approvals in the second half of 2005. We intend to retain the balance
of our petrochemicals portfolio, comprising the Aromatics and Acetyls business,
within Refining and Marketing.
Page 11
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS, POWER AND RENEWABLES
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
---------------------- ------------------------
Turnover - $m 18,434 14,910 39,409 32,990
Profit before interest and tax - $m 210 69 398 312
Exceptional (gains) losses - $m - (6) - (6)
------- ------ ------ ------
Total operating profit - $m 210 63 398 306
======= ====== ====== ======
Turnover for the three months and six months ended June 30, 2004 was $18.4
billion and $39.4 billion respectively, compared with $14.9 billion and $33.0
billion for the same periods in 2003. The increase for the quarter reflects
increases of $2.3 billion due to higher volumes and $1.2 billion due to higher
prices. The increase for the half year reflects increases of $6.2 billion due to
higher volumes and $0.2 billion due to higher prices.
Profit before interest and tax for the three months and six months ended June
30, 2004 was $210 million and $398 million respectively, compared with $69
million and $312 million for the equivalent periods in 2003. Profit for the
second quarter and first half of 2003 included exceptional gains of $6 million
before tax.
Total operating profit for the three months and six months ended June 30, 2004
was $210 million and $398 million respectively, after inventory holding losses
of $6 million and $16 million respectively. Total operating profit for the three
months and six months ended June 30, 2003 was $63 million and $306 million
respectively, after inventory holding losses of $72 million and $45 million
respectively.
Higher operating profit in the three months ended June 30, 2004 compared with
the equivalent period in 2003 reflected principally a higher contribution from
the natural gas liquids business in North America of $90 million. The increase
in operating profit in the six months ended June 30, 2004 compared with the
equivalent period in 2003 reflected higher contribution from the natural gas
liquids in North America of around $90 million, a higher contribution from the
global LNG and Solar businesses of around $50 million, partially offset by a
lower marketing and trading result of around $57 million.
During the second quarter 2004, the Guangdong Dapeng LNG Company Ltd. (BP share
30%) in China signed a series of milestone agreements relating to the Guangdong
LNG terminal and trunkline project which is due on stream in 2006. In addition,
since the end of the second quarter, the Tangguh LNG project in Indonesia (BP
share 37.16%) signed a sale and purchase agreement for the supply of 0.55
million tonnes per annum for a period of 20 years to Posco, who is currently
building an LNG import terminal at Gwangyang in South Korea. BP Gas Marketing
Ltd. has signed an agreement with the Egyptian Natural Gas Holding Company to
purchase LNG under a long term contract from the Damietta LNG plant which is
expected to start commercial production in 2005.
Page 12
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
OTHER BUSINESSES AND CORPORATE
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- -----------------------
Turnover - $m 132 129 253 240
Profit (loss) before interest and tax - $m (164) (153) 965 (319)
Exceptional (gains) losses - $m 1 12 (1,312) 6
------- ------ ------ ------
Total operating profit (loss) - $m (163) (141) (347) (313)
======= ====== ====== ======
Other businesses and corporate comprises Finance, the Group's aluminium asset,
and interest income and costs relating to corporate activities.
Profit or loss before interest and tax for the three months and six months ended
June 30, 2004 was a loss of $164 million and a profit of $965 million
respectively, compared with losses of $153 million and $319 million for the
equivalent periods in 2003. The second quarter of 2004 included net exceptional
losses before tax of $1 million, compared with $12 million before tax for the
equivalent period in 2003. The first half of 2004 included net exceptional gains
of $1,312 million before tax, which were associated with the sale of our
interest in PetroChina for $1.65 billion and our interest in Sinopec for $0.7
billion. The first half of 2003 included net exceptional losses before tax of $6
million.
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under `Group Results', with regard to working
capital, fulfillment of contract obligations, the timing of acquisitions and
divestments and the timing of new projects are all forward-looking in nature.
Forward-looking statements are also identified by such phrases as `will',
`expects', `is expected to', `should', `may', `is likely to', `intends', `plans'
and `believes'. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future and are outside the control of BP. Actual results may differ
materially from those expressed in such statements, depending on a variety of
factors, including the specific factors identified in the discussions
accompanying such forward-looking statements, future levels of industry product
supply, the timing of bringing new fields onstream, demand and pricing, exchange
rate fluctuations, operational problems, general economic conditions, political
stability and economic growth in relevant areas of the world, changes in laws
and governmental regulations, development and use of new technology, successful
partnering, the actions of competitors, the actions of competitors and third
party suppliers of facilities and services, natural disasters and other changes
to business conditions, prolonged adverse weather conditions, changes in public
expectations and other changes to business conditions, wars and acts of
terrorism or sabotage, and other factors discussed elsewhere in this report.
These and other factors may cause actual results and developments to differ
materially from those expressed or implied by these forward-looking statements.
Additional information, including information on factors which may affect BP's
business, is contained in BP's Annual Report and Annual Accounts for 2003 and
the Annual Report on Form 20-F for 2003 filed with the US Securities and
Exchange Commission.
2004 DIVIDENDS
On July 27, 2004, BP p.l.c. announced a second quarterly dividend for 2004 of
7.10 cents per ordinary share of 25 cents (ordinary shares), representing $0.426
per American Depositary Share (ADS) amounting to $1,536 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares is August 13, 2004, and payment will be made
on September 7, 2004.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan received the dividend in the form of shares on September 7, 2004.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million, except per share amounts)
Turnover - Note 3 71,154 54,790 140,634 117,219
Less: joint ventures 2,063 364 3,941 762
--------- ---------- --------- --------
Group turnover 69,091 54,426 136,693 116,457
Cost of sales 59,694 47,556 118,444 100,224
Production taxes - Note 4 424 382 949 886
--------- ---------- --------- --------
Gross profit 8,973 6,488 17,300 15,347
Distribution and administration expenses 3,399 3,406 6,639 6,650
Exploration expense - Note 5 108 101 244 213
--------- ---------- --------- --------
5,466 2,981 10,417 8,484
Other income 161 197 251 328
--------- ---------- --------- --------
Group operating profit 5,627 3,178 10,668 8,812
Share of profits of joint ventures 734 104 1,225 222
Share of profits of associated undertakings 134 103 284 289
--------- ---------- --------- --------
Total operating profit 6,495 3,385 12,177 9,323
Profit (loss) on sale of fixed assets and
businesses (127) 280 1,103 674
or termination of operations - Note 6
--------- ---------- --------- --------
Profit before interest and tax 6,368 3,665 13,280 9,997
Interest expense - Note 7 145 149 297 325
Other finance expense - Note 8 76 127 152 256
--------- ---------- --------- --------
Profit before taxation 6,147 3,389 12,831 9,416
Taxation - Note 9 2,199 1,744 4,021 3,526
--------- ---------- --------- --------
Profit after taxation 3,948 1,645 8,810 5,890
Minority shareholders' interest 52 60 96 86
--------- ---------- --------- --------
Profit for the period (a) 3,896 1,585 8,714 5,804
========= ========== ========= ========
Earnings per ordinary share - cents (a)
Basic 17.80 7.19 39.61 26.09
Diluted 17.43 7.16 38.77 26.00
--------- ---------- --------- --------
Earnings per American Depositary Share - cents (a)
Basic 106.80 43.14 237.66 156.54
Diluted 104.58 42.96 232.62 156.00
--------- ---------- --------- --------
Average number of outstanding ordinary
shares (thousand) 21,906,318 22,164,026 21,997,057 22,244,797
========= ========== ========= ========
---------------
(a) A summary of the material adjustments to profit for the period which would
be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2004 December 31, 2003
(Unaudited)
----------------- --------------------
($ million)
Fixed assets
Intangible assets 13,113 13,642
Tangible assets 91,275 91,911
Investments 19,034 17,458
------- -------
123,422 123,011
Current assets
Inventories 12,470 11,617
Receivables 36,347 33,902
Investments 172 185
Cash at bank and in hand 1,531 1,947
------- -------
50,520 47,651
------- -------
Current liabilities - falling due within one year
Finance debt 7,393 9,456
Accounts payable and accrued liabilities 44,859 41,128
------- -------
52,252 50,584
------- -------
Net current assets (liabilities) (1,732) (2,933)
------- -------
Total assets less current liabilities 121,690 120,078
Noncurrent liabilities
Finance debt 12,465 12,869
Accounts payable and accrued liabilities 5,728 6,090
Provisions for liabilities and charges
Deferred tax 14,539 14,371
Other 8,610 8,815
------- -------
41,342 42,145
------- -------
Net assets excluding pension and other
postretirement benefit balances 80,348 77,933
Defined benefit pension plan surplus 1,258 1,021
Defined benefit pension plan and other
postretirement benefit plan deficits (7,556) (7,510)
------- -------
(6,298) (6,489)
------- -------
74,050 71,444
Net assets
Minority shareholders' interest - equity 1,232 1,125
------- -------
BP shareholders' interest (a) - Note 12 72,818 70,319
======= =======
Represented by:
Capital shares
Preference 21 21
Ordinary 5,447 5,531
Paid-in surplus 4,785 4,480
Merger reserve 27,131 27,077
Retained earnings 35,424 33,177
Shares held by ESOP trusts (65) (96)
Other reserves 75 129
------- -------
72,818 70,319
======= =======
---------------
(a) A summary of the material adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 15
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
Net cash inflow from operating activities 6,917 7,346 14,591 13,307
------- ------- ------- -------
Dividends from joint ventures 7 28 185 41
------- ------- ------- -------
Dividends from associated undertakings 97 177 128 232
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 45 52 86 83
Interest paid (154) (446) (319) (653)
Dividends received 18 42 30 48
Dividends paid to minority shareholders (8) (11) (10) (13)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (99) (363) (213) (535)
------- ------- ------- -------
Taxation
UK corporation tax (388) (280) (710) (592)
Overseas tax (1,231) (1,573) (1,489) (1,893)
------- ------- ------- -------
Tax paid (1,619) (1,853) (2,199) (2,485)
------- ------- ------- -------
Capital expenditure and financial investment
Payments for fixed assets (2,764) (2,760) (5,705) (5,631)
Proceeds from the sale of fixed assets 352 1,652 3,191 3,969
------- ------- ------- -------
Net cash outflow for capital expenditure and
financial investment (2,412) (1,108) (2,514) (1,662)
------- ------- ------- -------
Acquisitions and disposals
Acquisitions, net of cash acquired (14) (150) (14) (150)
Proceeds from the sale of businesses 305 19 305 179
Net investment in TNK-BP joint venture - - (1,273) -
Net investment in other joint ventures (21) (2) (113) (16)
Investments in associated undertakings (148) (331) (581) (517)
------- ------- ------- -------
Net cash (outflow) inflow for acquisitions
and disposals 122 (464) (1,676) (504)
------- ------- ------- -------
Equity dividends paid (1,478) (1,386) (2,970) (2,783)
------- ------- ------- -------
Net cash inflow (outflow) 1,535 2,377 5,332 5,611
======= ======= ======= =======
Financing 2,155 1,355 5,753 4,954
Management of liquid resources (153) 93 (15) 106
Increase (decrease) in cash (467) 929 (406) 551
------- ------- ------- -------
1,535 2,377 5,332 5,611
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 16
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - concluded
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
Reconciliation of profit before interest and tax
to net cash inflow from operating activities
Profit before interest and tax 6,368 3,665 13,280 9,997
Depreciation and amounts provided 2,738 2,653 5,552 5,362
Exploration expenditure written off 22 43 89 93
Net operating charge for pensions and other
postretirement benefits, less contributions (34) 45 (57) (198)
Share of profits of joint ventures and associated
undertakings (868) (207) (1,509) (511)
Interest and other income (74) (100) (138) (148)
(Profit) loss on sale of fixed assets and businesses 127 (280) (1,103) (674)
Charge for provisions 50 29 117 58
Utilization of provisions (95) (209) (250) (325)
(Increase) decrease in inventories (1,412) 193 (1,165) 569
(Increase) decrease in debtors (1,400) 3,263 (2,986) (3,382)
Increase (decrease) in creditors 1,495 (1,749) 2,761 2,466
------- ------- ------- -------
Net cash inflow from operating activities 6,917 7,346 14,591 13,307
======= ======= ======= =======
Financing
Long-term borrowing (430) (208) (1,058) (1,223)
Repayments of long-term borrowing 434 607 1,270 1,010
Short-term borrowing (111) (418) (267) (1,044)
Repayments of short-term borrowing 314 388 2,722 4,287
------- ------- ------- -------
207 369 2,667 3,030
Issue of ordinary share capital for
employee share schemes (96) (14) (222) (81)
Purchase of shares by ESOP trusts 44 - 59 6
Repurchase of ordinary share capital 2,000 1,000 3,249 1,999
------- ------- ------- -------
Net cash outflow from financing 2,155 1,355 5,753 4,954
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 17
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the interim periods are unaudited and in the opinion of
management include all adjustments necessary for a fair presentation of the
results for the periods presented. The interim financial statements and
notes included in this Report should be read in conjunction with the
consolidated financial statements and related notes for the year ended
December 31, 2003 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
2. Restatement of comparative information
Comparative information for 2003 has been restated to reflect the changes
described below.
(a) Transfer of Natural Gas Liquids activities. With effect from January
1, 2004 natural gas liquids (NGL) activities have been transferred
from Exploration and Production to Gas, Power and Renewables.
(b) New accounting standard for pensions and other postretirement
benefits. With effect from January 1, 2004 BP has adopted Financial
Reporting Standard No. 17 'Retirement Benefits' (FRS 17). FRS 17
requires that financial statements reflect at fair value the assets
and liabilities arising from an employer's retirement benefit
obligations and any related funding. The operating costs of providing
retirement benefits are recognized in the period in which they are
earned together with any related finance costs and changes in the
value of related assets and liabilities. This contrasts with Statement
of Standard Accounting Practice No. 24 'Accounting for Pension Costs',
which requires the cost of providing pensions to be recognized on a
systematic and rational basis over the period during which the
employer benefits from the employee's services. The difference between
the amount charged in the income statement and the amount paid as
contributions into the pension fund is shown as a prepayment or
provision on the balance sheet.
(c) Accounting for Employee Share Ownership Plans. With effect from
January 1, 2004 BP has adopted Urgent Issues Task Force Abstract No.
38 'Accounting for ESOP Trusts'. This abstract requires that BP shares
held by the Group for the purposes of Employee Share Ownership Plans
(ESOPs) are deducted from equity on the balance sheet. Such shares
were previously classified as fixed asset investments.
Balance sheet at 31 December 2003 Restated Reported
-------- --------
($ million)
Fixed assets
Intangible assets 13,642 13,642
Tangible assets 91,911 91,911
Investments 17,458 17,554
-------- --------
123,011 123,107
-------- --------
Current assets 47,651 54,465
Creditors - amounts falling due within one year 50,584 50,584
-------- --------
Net current assets (liabilities) (2,933) 3,881
-------- --------
Total assets less current liabilities 120,078 126,988
Creditors - amounts falling due after more than one year 18,959 18,959
Provisions for liabilities and charges
Deferred taxation 14,371 15,273
Other provisions 8,815 15,693
-------- --------
Net assets excluding pension and other
postretirement benefit balances 77,933 77,063
Defined benefit pension plan surplus 1,021 -
Defined benefit pension plan and other postretirement
benefit plan deficits (7,510) -
-------- --------
Net assets 71,444 77,063
Minority shareholders' interest 1,125 1,125
-------- --------
BP shareholders' interest 70,319 75,938
======== ========
Page 18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Income Statements Three months ended Six months ended
June 30 2003 June 30 2003
(Unaudited) (Unaudited)
Restated Reported Restated Reported
-------- -------- -------- --------
($ million except per share amounts)
Exploration and Production 3,431 3,483 8,155 8,248
Refining and Marketing 115 67 1,363 1,266
Petrochemicals 203 212 486 504
Gas, Power and Renewables 69 37 312 258
Other businesses and corporate (153) (146) (319) (305)
-------- -------- -------- --------
Profit before interest and tax 3,665 3,653 9,997 9,971
Interest expense 149 191 325 411
Other finance expense 127 - 256 -
-------- -------- -------- --------
Profit before taxation 3,389 3,462 9,416 9,560
Taxation 1,744 1,768 3,526 3,573
-------- -------- -------- --------
Profit after taxation 1,645 1,694 5,890 5,987
Minority shareholders' interest 60 60 86 86
-------- -------- -------- --------
Profit for the period 1,585 1,634 5,804 5,901
======== ======== ======== ========
Distribution to shareholders 1,434 1,434 2,820 2,820
-------- -------- -------- --------
Profit per ordinary share - cents
Basic 7.19 7.41 26.09 26.52
Diluted 7.16 7.39 26.00 26.44
======== ======== ======== ========
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- ---------------------
($ million)
3. Turnover
By business
Exploration and Production 8,213 7,272 16,379 16,150
Refining and Marketing 45,467 34,874 87,161 74,369
Petrochemicals 4,805 4,197 9,315 8,318
Gas, Power and Renewables 18,434 14,910 39,409 32,990
Other businesses and corporate 132 129 253 240
------- ------- ------- -------
77,051 61,382 152,517 132,067
Less: sales between businesses 7,960 6,956 15,824 15,610
------- ------- ------- -------
Group excluding joint ventures 69,091 54,426 136,693 116,457
Share of sales of joint ventures 2,063 364 3,941 762
------- ------- ------- -------
71,154 54,790 140,634 117,219
======= ======= ======= =======
By geographical area
Group excluding joint ventures
UK 17,355 13,161 34,651 28,293
Rest of Europe 13,332 12,501 25,373 25,818
USA 33,541 24,103 65,344 53,444
Rest of World 15,787 12,102 31,604 25,838
------- ------- ------- -------
80,015 61,867 156,972 133,393
Less: sales between areas 10,924 7,441 20,279 16,936
------- ------- ------- -------
69,091 54,426 136,693 116,457
======= ======= ======= =======
4. Production taxes
UK petroleum revenue tax 46 58 172 191
Overseas production taxes 378 324 777 695
------- ------- ------- -------
424 382 949 886
======= ======= ======= =======
5. Exploration expense
Exploration and Production
UK 3 2 5 5
Rest of Europe 6 5 8 9
USA 63 47 160 84
Rest of World 36 47 71 115
------- ------- ------- -------
108 101 244 213
======= ======= ======= =======
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- ---------------------
($ million)
6. Analysis of exceptional items Profit
(loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production (114) 333 97 766
Refining and Marketing (18) (49) (158) (101)
Petrochemicals 6 2 (148) 9
Gas, Power and Renewables - 6 - 6
Other businesses and corporate (1) (12) 1,312 (6)
------- ------- ------- -------
Exceptional items before taxation (127) 280 1,103 674
Taxation credit (charge) 28 (149) 98 (203)
------- ------- ------- -------
Exceptional items after taxation (99) 131 1,201 471
======= ======= ======= =======
7. Interest expense
Group interest payable 147 163 296 350
Capitalized (52) (43) (102) (77)
------- ------- ------- -------
95 120 194 273
Joint ventures 39 17 80 30
Associated undertakings 11 12 23 22
------- ------- ------- -------
145 149 297 325
======= ======= ======= =======
8. Other finance expense
Interest on pension and other postretirement
benefit plan liabilities 491 460 991 920
Expected return on pension and other
postretirement benefit plan assets (491) (375) (989) (750)
------- ------- ------- -------
Interest net of expected return on plan assets - 85 2 170
Unwinding of discount on provisions 50 42 98 86
Unwinding of discount on deferred consideration
for acquisition of investment in TNK-BP 26 - 52 -
------- ------- ------- -------
76 127 152 256
======= ======= ======= =======
9. Charge for taxation
Current 2,165 1,406 3,871 2,987
Deferred 34 338 150 539
------- ------- ------- -------
2,199 1,744 4,021 3,526
======= ======= ======= =======
UK 366 379 711 830
Overseas 1,833 1,365 3,310 2,696
------- ------- ------- -------
2,199 1,744 4,021 3,526
======= ======= ======= =======
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis
Gas, Other
Exploration Refining Power businesses
By business and and Petro- and and
Production Marketing chemicals Renewables corporate Eliminations Total
----------- --------- ---------- ---------- ----------- ------------ --------
($ million)
Three months
ended June 30, 2004
Group turnover
- third parties 2,375 44,081 4,626 17,877 132 - 69,091
- sales between businesses 5,838 1,386 179 557 - (7,960) -
------------------------------------------------------------------------------------------
8,213 45,467 4,805 18,434 132 (7,960) 69,091
------------------------------------------------------------------------------------------
Share of sales by joint ventures 1,823 111 129 - - - 2,063
------------------------------------------------------------------------------------------
Equity accounted income 784 40 41 3 - - 868
------------------------------------------------------------------------------------------
Total operating profit (loss) 4,416 1,790 242 210 (163) - 6,495
Exceptional items (114) (18) 6 - (1) - (127)
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 4,302 1,772 248 210 (164) - 6,368
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 2,305 640 181 82 26 - 3,234
Three months
ended June 30, 2003
Group turnover
- third parties 2,090 33,710 4,042 14,455 129 - 54,426
- sales between businesses 5,182 1,164 155 455 - (6,956) -
------------------------------------------------------------------------------------------
7,272 34,874 4,197 14,910 129 (6,956) 54,426
------------------------------------------------------------------------------------------
Share of sales by joint ventures 168 112 84 - - - 364
------------------------------------------------------------------------------------------
Equity accounted income 161 37 2 (2) 9 - 207
------------------------------------------------------------------------------------------
Total operating profit (loss) 3,098 164 201 63 (141) - 3,385
Exceptional items 333 (49) 2 6 (12) - 280
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 3,431 115 203 69 (153) - 3,665
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 2,434 385 198 126 183 - 3,326
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis - continued
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------- -------- ------- ------- ------------ -------
($ million)
Three months ended June 30, 2004
Group turnover -third parties 10,828 11,884 32,634 13,745 - 69,091
-sales between areas 6,527 1,448 907 2,042 (10,924) -
------------------------------------------------------------------
17,355 13,332 33,541 15,787 (10,924) 69,091
------------------------------------------------------------------
Share of sales by joint ventures 43 86 52 1,882 - 2,063
------------------------------------------------------------------
Equity accounted income - (3) 27 844 - 868
------------------------------------------------------------------
Total operating profit (loss) 619 901 2,574 2,401 - 6,495
Exceptional items (56) 72 (20) (123) - (127)
------------------------------------------------------------------
Profit before interest and tax 563 973 2,554 2,278 - 6,368
------------------------------------------------------------------
Capital expenditure and acquisitions 333 274 1,452 1,175 - 3,234
Three months ended June 30, 2003
Group turnover -third parties 9,696 10,229 23,639 10,862 - 54,426
-sales between areas 3,465 2,272 464 1,240 (7,441) -
------------------------------------------------------------------
13,161 12,501 24,103 12,102 (7,441) 54,426
------------------------------------------------------------------
Share of sales by joint ventures 18 66 45 235 - 364
------------------------------------------------------------------
Equity accounted income 4 5 28 170 - 207
------------------------------------------------------------------
Total operating profit (loss) 93 528 1,592 1,172 - 3,385
Exceptional items 535 12 (92) (175) - 280
------------------------------------------------------------------
Profit before interest and tax 628 540 1,500 997 - 3,665
------------------------------------------------------------------
Capital expenditure and acquisitions 361 167 1,509 1,289 - 3,326
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis - continued
Gas, Other
Exploration Refining Power businesses
By business and and Petro- and and
Production Marketing chemicals Renewables corporate Eliminations Total
----------- --------- ---------- ---------- ----------- ------------ --------
($ million)
Six months
ended June 30, 2004
Group turnover
- third parties 4,774 84,376 8,990 38,300 253 - 136,693
- sales between businesses 11,605 2,785 325 1,109 - (15,824) -
------------------------------------------------------------------------------------------
16,379 87,161 9,315 39,409 253 (15,824) 136,693
------------------------------------------------------------------------------------------
Share of sales by joint ventures 3,456 227 258 - - - 3,941
------------------------------------------------------------------------------------------
Equity accounted income 1,332 77 98 2 - - 1,509
------------------------------------------------------------------------------------------
Total operating profit (loss) 8,455 3,179 492 398 (347) - 12,177
Exceptional items 97 (158) (148) - 1,312 - 1,103
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 8,552 3,021 344 398 965 - 13,280
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 6,128 1,104 347 143 37 - 7,759
Six months
ended June 30, 2003
Group turnover
- third parties 4,039 72,150 8,042 31,986 240 - 116,457
- sales between businesses 12,111 2,219 276 1,004 - (15,610) -
------------------------------------------------------------------------------------------
16,150 74,369 8,318 32,990 240 (15,610) 116,457
------------------------------------------------------------------------------------------
Share of sales by joint ventures 349 212 201 - - - 762
------------------------------------------------------------------------------------------
Equity accounted income 395 74 27 (3) 18 - 511
------------------------------------------------------------------------------------------
Total operating profit (loss) 7,389 1,464 477 306 (313) - 9,323
Exceptional items 766 (101) 9 6 (6) - 674
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 8,155 1,363 486 312 (319) - 9,997
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 4,552 922 294 213 213 - 6,194
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis - concluded
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------- -------- ------- ------- ------------ -------
($ million)
Six months ended June 30, 2004
Group turnover -third parties 23,008 22,746 63,709 27,230 - 136,693
-sales between areas 11,643 2,627 1,635 4,374 (20,279) -
------------------------------------------------------------------
34,651 25,373 65,344 31,604 (20,279) 136,693
------------------------------------------------------------------
Share of sales by joint ventures 84 174 91 3,592 - 3,941
------------------------------------------------------------------
Equity accounted income 2 2 44 1,461 - 1,509
------------------------------------------------------------------
Total operating profit (loss) 1,020 1,654 5,008 4,495 - 12,177
Exceptional items (101) 36 (170) 1,338 - 1,103
------------------------------------------------------------------
Profit before interest and tax 919 1,690 4,838 5,833 - 13,280
------------------------------------------------------------------
Capital expenditure and acquisitions 586 454 2,709 4,010 - 7,759
Six months ended June 30, 2003
Group turnover -third parties 20,615 21,286 52,494 22,062 - 116,457
-sales between areas 7,678 4,532 950 3,776 (16,936) -
------------------------------------------------------------------
28,293 25,818 53,444 25,838 (16,936) 116,457
------------------------------------------------------------------
Share of sales by joint ventures 46 155 87 474 - 762
------------------------------------------------------------------
Equity accounted income 3 2 63 443 - 511
------------------------------------------------------------------
Total operating profit (loss) 1,025 1,314 4,177 2,807 - 9,323
Exceptional items 524 (30) (237) 417 - 674
------------------------------------------------------------------
Profit before interest and tax 1,549 1,284 3,940 3,224 - 9,997
------------------------------------------------------------------
Capital expenditure and acquisitions 656 369 2,903 2,266 - 6,194
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
11. Analysis of changes in net debt Opening balance
Finance debt 19,937 19,042 22,325 22,008
Less: Cash 2,006 1,151 1,947 1,520
Current asset investments 328 228 185 215
------- ------- ------- -------
Opening net debt 17,603 17,663 20,193 20,273
------- ------- ------- -------
Closing balance
Finance debt 19,858 18,594 19,858 18,594
Less: Cash 1,531 2,115 1,531 2,115
Current asset investments 172 329 172 329
------- ------- ------- -------
Closing net debt 18,155 16,150 18,155 16,150
------- ------- ------- -------
Decrease (increase) in net debt (552) 1,513 2,038 4,123
======= ======= ======= =======
Movement in cash/bank overdrafts (467) 929 (406) 551
(Decrease) increase in current asset investments (153) 93 (15) 106
Net cash outflow (inflow) from financing
(excluding share capital) 207 369 2,667 3,030
Exchange of Exchangeable Bonds for
Lukoil American Depositary Shares - - - 420
Other movements 7 106 21 170
------- ------- ------- -------
Movement in net debt before exchange effects (406) 1,497 2,267 4,277
Exchange adjustments (146) 16 (229) (154)
------- ------- ------- -------
Decrease (increase) in net debt (552) 1,513 2,038 4,123
======= ======= ======= =======
12. Movement in BP shareholders' interest ($ million)
Balance at December 31, 2003 75,938
Prior year adjustment - change in accounting policy (see Note 2) (5,619)
-------
As restated 70,319
Profit for the period 8,714
Distribution to shareholders (3,019)
Currency translation differences (net of tax) (202)
Issue of ordinary share capital for employee share schemes 222
Net release of shares by ESOP trusts 33
Repurchase of ordinary share capital (3,249)
-------
Balance at June 30, 2004 72,818
=======
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Earnings per share
The calculation of basic earnings per ordinary share is based on the profit
attributable to ordinary shareholders, i.e., profit for the period less
preference dividends, related to the weighted average number of ordinary
shares outstanding during the period. The average number of shares
outstanding excludes the shares held by the Employee Share Ownership Plans.
The calculation of diluted earnings per share is based on profit
attributable to ordinary shareholders, adjusted for the unwinding of the
discount on the deferred consideration for the acquisition of our interest
in TNK-BP. The number of shares outstanding is adjusted to show the
potential dilution if employee share options are converted into ordinary
shares, and for the ordinary shares issuable, in three annual tranches, in
respect of the TNK-BP joint venture. The number of ordinary shares
outstanding for basic and diluted earnings per share may be reconciled as
follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- ---------------------
(shares thousand)
Weighted average number of ordinary shares 21,906,318 22,164,026 21,997,057 22,244,797
Ordinary shares issuable under employee
share schemes 89,784 54,194 71,504 70,293
Ordinary shares issuable as consideration for
BP's interest in the TNK-BP joint venture 446,636 - 498,077 -
----------- ----------- ----------- -----------
22,442,738 22,218,220 22,566,638 22,315,090
=========== =========== =========== ===========
14. Share-based compensation
BP accounts for share options granted to employees using the
intrinsic-value method. If the fair value of options granted in any
particular year is estimated and this value amortized over the vesting
period of the options, an indication of the cost of granting options to
employees can be made. The fair value of each share option granted has been
estimated using a Black-Scholes option pricing model.
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123, `Accounting for
Stock-Based Compensation', to share-based employee compensation.
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- ---------------------
($ million)
Profit for the period applicable to ordinary
shares, as reported 3,895 1,584 8,713 5,803
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (19) (23) (39) (47)
-------- -------- -------- --------
Pro forma net income 3,876 1,561 8,674 5,756
======== ======== ======== ========
(cents)
Earnings per share
Basic - as reported 17.80 7.19 39.61 26.09
Basic - pro forma 17.71 7.09 39.43 25.88
Diluted - as reported 17.43 7.16 38.77 26.00
Diluted - pro forma 17.35 7.06 38.60 25.79
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The consolidated financial statements of the BP Group are prepared in
accordance with UK GAAP which differs in certain respects from US GAAP. The
principal differences between US GAAP and UK GAAP for BP Group reporting
relate to the following:
(i) Group consolidation
Where the Group conducts activities through a joint arrangement that
is not carrying on a trade or business in its own right, the Group
accounts for its own assets, liabilities and cash flows of the
activity measured according to the terms of the arrangement. For the
Group this method of accounting applies to undivided interests in
pipelines from production facilities to terminals for shipping or
onward transmission (such as the Trans Alaska Pipeline System and UK
Central Area Transmission System) and oil and natural gas exploration
and production activities where the Group has a direct interest in the
field or a contractual right to a share of production. The operations
of the pipeline or field may be undertaken by one participant on
behalf of all other participants or by a company specifically created
for this purpose. In either case contractual arrangements specify the
allocation of costs between participants. US GAAP permits such
arrangements to be accounted for by proportional consolidation, which
is equivalent to UK GAAP.
Joint ventures and associated undertakings are accounted for by the
equity method. UK GAAP requires the consolidated financial statements
to show separately the Group proportion of operating profit or loss,
exceptional items, interest expense and taxation of joint ventures and
associated undertakings. In addition the Group's share of turnover of
joint ventures should be disclosed. For US GAAP the after tax profits
or losses (i.e. operating results after exceptional items, interest
expense and taxation) are included in the income statement as a single
line item.
UK GAAP requires the Group's share of the gross assets and gross
liabilities of joint ventures to be shown on the face of the balance
sheet whereas under US GAAP the net investment is included as a single
line item.
The following summarizes the reclassifications for joint ventures and
associated undertakings necessary to accord with US GAAP.
Three months ended June 30, 2004
(Unaudited)
-----------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
-----------------------------------------------
($ million)
Consolidated statement of income
Other income 161 574 735
Share of profits of JVs and associated undertakings 868 (868) -
Exceptional items before taxation (127) - (127)
Interest expense 145 (50) 95
Taxation 2,199 (244) 1,955
Profit for the period 3,896 - 3,896
Six months ended June 30, 2004
(Unaudited)
-----------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
-----------------------------------------------
($ million)
Consolidated statement of income
Other income 251 983 1,234
Share of profits of JVs and associated undertakings 1,509 (1,509) -
Exceptional items before taxation 1,103 - 1,103
Interest expense 297 (103) 194
Taxation 4,021 (423) 3,598
Profit for the period 8,714 - 8,714
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(i) Group consolidation (concluded)
Three months ended June 30, 2003
(Unaudited)
-----------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
-----------------------------------------------
($ million)
Consolidated statement of income
Other income 197 175 372
Share of profits of JVs and associated undertakings 207 (207) -
Exceptional items before taxation 280 - 280
Interest expense 149 (29) 120
Taxation 1,744 (3) 1,741
Profit for the period 1,585 - 1,585
Six months ended June 30, 2003
(Unaudited)
-----------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
-----------------------------------------------
($ million)
Consolidated statement of income
Other income 328 391 719
Share of profits of JVs and associated undertakings 511 (511) -
Exceptional items before taxation 674 - 674
Interest expense 325 (52) 273
Taxation 3,526 (68) 3,458
Profit for the period 5,804 - 5,804
(ii) Exceptional items
Under UK GAAP certain exceptional items are shown separately on the
face of the income statement after operating profit. These items are
profits or losses on the sale of fixed assets and businesses or
termination of operations and fundamental restructuring charges. Under
US GAAP these items are classified as operating income or expenses.
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iii)Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of assets acquired and liabilities assumed in a purchase
business combination, whereas under UK GAAP no such deferred tax asset
or liability is recognized. Under US GAAP the deferred tax asset or
liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales 123 457 252 1,149
Taxation (174) (455) (291) (1,183)
Profit for the period 51 (2) 39 34
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Tangible assets 5,791 6,084
Deferred taxation 5,818 6,149
BP shareholders' interest (27) (65)
======= =======
(iv) Provisions
UK GAAP requires provisions for decommissioning, environmental
liabilities and onerous contracts to be determined on a discounted
basis if the effect of the time value of money is material. The
provisions for decommissioning and environmental liabilities are
estimated using costs based on current prices and discounted using
real discount rates. Unwinding of the discount and the effect of a
change in the discount rate is included in interest expense in the
period. When a decommissioning provision is set up, a tangible fixed
asset of the same amount is also recognized and is subsequently
depreciated as part of the capital costs of the facilities.
On January 1, 2003 the Group adopted Statement of Financial Accounting
Standards No. 143 `Accounting for Asset Retirement Obligations' (SFAS
143). SFAS 143 requires companies to record liabilities equal to the
fair value of their asset retirement obligations when they are
incurred (typically when the asset is installed at the production
location). When the liability is initially recorded, companies
capitalize an equivalent amount as part of the cost of the asset. Over
time the liability is accreted for the change in its present value
each period, and the initial capitalized cost is depreciated over the
useful life of the related asset. Unwinding of the discount is
included in operating profit for the period.
The provisions for decommissioning under SFAS 143 are set up on a
similar basis to UK GAAP except that estimated future cash outflows
are discounted using a credit-adjusted risk-free rate rather than a
real discount rate.
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iv) Provisions - concluded
The cumulative effect of adopting SFAS 143 at January 1, 2003 resulted
in an after tax credit to income, as adjusted to accord with US GAAP,
of $1,002 million. The effect of adoption also included an increase in
total assets, as adjusted to accord with US GAAP, of $687 million and
a reduction in total liabilities, as adjusted to accord with US GAAP,
of $315 million. The effect of adoption on the three months and six
months ended June 30, 2003 was to decrease profit by $84 million and
$107 million respectively, before cumulative effect of accounting
changes as adjusted to accord with US GAAP.
Under US GAAP environmental liabilities are discounted only where the
timing and amounts of payments are fixed and reliably determinable.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales 23 45 85 61
Interest expense (50) (42) (98) (86)
Taxation (6) (2) (7) -
Profit for the period before cumulative
effect of accounting change 33 (1) 20 25
Cumulative effect of accounting change,
net of taxation - - - 1,002
Profit for the period 33 (1) 20 1,027
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Tangible assets (772) (835)
Provisions (553) (636)
Deferred taxation (78) (71)
BP shareholders' interest (141) (128)
======= =======
The following data summarizes the movements in the asset retirement
obligation, as adjusted to accord with US GAAP, for the six months
ended June 30, 2004.
($ million)
At January 1, 2004 3,872
Exchange adjustments 10
New provisions 32
Unwinding of discount 108
Utilized/deleted (97)
-------
At June 30, 2004 3,925
=======
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(v) Sale and leaseback
The sale and leaseback of an office building in Chicago, Illinois
in 1998 was treated as a sale for UK GAAP whereas for US GAAP it
was treated as a financing transaction. The remaining interest in
this building was sold in January 2003.
Provisions were recognized under UK GAAP in 1999 and 2002 to
cover the likely shortfall on rental income from subletting the
Chicago office building. As the original sale and leaseback was
not treated as a sale for US GAAP the provision was reversed for
US GAAP. Following the disposal of the building a provision has
now been recognized for US GAAP.
Under UK GAAP the profit arising on the sale and operating
leaseback of certain railcars in 1999 was taken to income in the
period in which the transaction occurred. Under US GAAP this
profit was not recognized immediately but amortized over the term
of the operating lease.
The adjustments to profit for the period and BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales (8) (4) (5) (112)
Taxation 3 2 2 39
Profit for the period 5 2 3 73
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Other accounts payable and accrued liabilities 22 24
Provisions 27 32
Deferred taxation (17) (19)
BP shareholders' interest (32) (37)
======= =======
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Goodwill and intangible assets
There are two main differences in the basis for determining goodwill
between UK and US GAAP which result in the amount of goodwill for US
GAAP reporting differing from the amount recognized under UK GAAP.
Goodwill represents the difference between the consideration paid in
an acquisition and the fair value of the assets and liabilities
acquired. Where shares are issued in connection with an acquisition UK
GAAP requires that the shares issued be valued at the time the public
offer becomes unconditional. For US GAAP the consideration is
determined at the date the offer is made.
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of the assets acquired and liabilities assumed in an
acquisition, whereas under UK GAAP no such deferred tax liability or
asset or liability is recognized. Under US GAAP the deferred tax asset
or liability is amortized over the same period as the assets and
liabilities to which it relates.
During the second quarter of 2004 the Group completed a goodwill
impairment review using the two-step process prescribed in SFAS 142.
The first step includes a comparison of the fair value of a reporting
unit to its carrying value, including goodwill. Where the carrying
value exceeds the fair value, the goodwill of the reporting unit is
potentially impaired and the second step is then completed in order to
measure the impairment loss, if any. No impairment charge resulted
from this review. For the purposes of this impairment review the
reporting unit is one level below an operating segment.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales (356) (343) (716) (685)
Profit for the period 356 343 716 685
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Intangible assets 2,398 1,669
BP shareholders' interest 2,398 1,669
======= =======
In accordance with Group accounting practice, exploration licence
acquisition costs are initially capitalized as an intangible fixed
asset and are amortized over the estimated period of exploration.
Where proved reserves of oil or natural gas are determined and
development is sanctioned, the unamortized cost is transferred to
tangible production assets. Where exploration is unsuccessful, the
unamortized cost is charged against income. At June 30, 2004 and
December 31, 2003, exploration licence acquisition costs included in
the Group's tangible fixed assets and intangible fixed assets, net of
accumulated amortization, were as follows.
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Exploration licence acquisition cost included
in fixed assets (net of accumulated amortization)
Tangible fixed assets 1,200 1,300
Intangible fixed assets 580 600
======= =======
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Goodwill and intangible assets (concluded)
Changes to exploration expenditure, goodwill and other intangible
assets, as adjusted to accord with US GAAP, during the six months
ended June 30, 2004 are shown below.
Additional
Gain on minimum
asset pension
Exploration exchange liability Other
expenditure Goodwill (see (viii)) (see (xiii)) intangibles Total
----------- -------- ----------- ---------- ----------- -------
($ million)
Net book amount
At January 1, 2004 4,236 10,838 148 43 237 15,502
Amortization expense (31) - (9) - (31) (71)
Other movements (8) 53 - - 15 60
----------- ----------- ----------- ----------- ----------- ---------
At June 30, 2004 4,197 10,891 139 43 221 15,491
=========== =========== =========== =========== =========== =========
Amortization expense relating to other intangibles is expected to be
in the range $50-$75 million in each of the succeeding five years.
(vii)Derivative financial instruments and hedging activities
Statement of Financial Accounting Standards No. 133, `Accounting for
Derivative Instruments and Hedging Activities' (SFAS 133) requires
that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction. To the
extent that certain criteria are met, SFAS 133 permits, but does not
require, hedge accounting.
In the normal course of business the Group is a party to derivative
financial instruments with off-balance sheet risk, primarily to manage
its exposure to fluctuations in foreign currency exchange rates and
interest rates, including management of the balance between floating
rate and fixed rate debt. The Group also manages certain of its
exposures to movements in oil and natural gas prices. In addition, the
Group trades derivatives in conjunction with these risk management
activities.
All oil price derivatives and all derivatives held for trading are
carried on the Group's balance sheet at fair value with changes in
that value recognized in earnings of the period for both UK and US
GAAP. Certain financial derivatives used to manage foreign currency
and interest rate risk that qualify for hedge accounting under UK GAAP
are marked to market under SFAS 133. Under US GAAP the fair values of
derivative financial instruments are shown as current assets and
liabilities as appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for certain of
these contracts is not directly related to the market price of natural
gas but to the price of other commodities or indices, such as fuel oil
or consumer price indices. Under SFAS 133, these contracts are
marked-to-market.
In October 2002, the FASB Emerging Issues Task Force (EITF) reached a
consensus with regards to EITF Issue No. 02-3, `Issues Involved in
Accounting for Contracts Under EITF Issue No. 98-10 "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities"'
(EITF 02-3). This consensus, which rescinded EITF Issue No. 98-10
`Accounting for Contracts Involved in Energy Trading and Risk
Management Activities' (EITF 98-10), requires all energy-related,
non-derivative contracts (such as transportation, storage, tolling,
and requirements contracts that do not meet the definition of a
derivative) to be accounted for as executory contracts on an accrual
basis. Under EITF 98-10, such contracts were accounted for at fair
value.
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii)Derivative financial instruments and hedging activities (concluded)
The consensus is applicable for all contracts executed after October
25, 2002. Application of the consensus to contracts existing prior to
October 26, 2002 is required to be accounted for as a cumulative
effect of a change in accounting principle effective for periods
beginning after December 15, 2002.
For BP's reporting under UK GAAP, energy-related non-derivative
contracts associated with trading activities are marked to market with
gains and losses recognized in the income statement.
The cumulative effect of adopting the consensus at January 1, 2003
resulted in an after tax credit to income, as adjusted to accord with
US GAAP, of $50 million.
EITF 02-3 also requires trading inventories to be accounted for at
historical cost. The Group marks trading inventories to market at the
balance sheet date. As such, a UK/US GAAP difference arises which
impacts both profit for the year and BP shareholders' interest due to
the difference in inventory valuations.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales 416 (447) 113 (435)
Taxation (133) 156 (31) 152
Profit for the period before cumulative
effect of accounting change (283) 291 (82) 283
Cumulative effect of accounting change,
net of taxation - - - 50
Profit for the period (283) 291 (82) 333
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Inventories 89 (150)
Accounts payable and accrued liabilities 294 (58)
Deferred taxation (48) (20)
BP shareholders' interest (157) (72)
======= =======
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in 2001, which led to the
exchange of businesses for an interest in a joint venture and an
associated undertaking, has been treated as an asset swap which does
not give rise to a gain or loss. Under US GAAP the transaction has
been treated as a disposal and acquisition which gave rise to a gain
on disposal. For US GAAP reporting, the gain is being recognized over
10 years.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales 8 6 13 11
Taxation (3) (2) (5) (4)
Profit for the period (5) (4) (8) (7)
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Intangible assets 139 148
Accounts payable and accrued liabilities (48) (51)
Deferred taxation 65 70
BP shareholders' interest 122 129
======= =======
(ix) Consolidation of variable interest entities
In January 2003, the FASB issued FASB Interpretation No. 46
`Consolidation of Variable Interest Entities' (Interpretation 46).
Interpretation 46 clarifies the application of existing consolidation
requirements to entities where a controlling financial interest is
achieved through arrangements that do not involve voting interests.
Under Interpretation 46, a variable interest entity is consolidated if
a company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a
majority of the entity's residual returns.
The Group currently has several ships under construction which will be
accounted for under UK GAAP as operating leases. Under Interpretation
46 certain of the arrangements represent variable interest entities
that would be consolidated by the Group. The maximum exposure to loss
as a result of the Group's involvement with these entities is limited
to the debt of the entity, less the fair value of the ships at the end
of the lease term.
The adoption of Interpretation 46 did not have a significant effect on
profit, as adjusted to accord with US GAAP. The adjustments to BP
shareholders' interest to accord with US GAAP are summarized below.
At At
June 30, December 31,
2004 2003
Increase (decrease) in caption heading (Unaudited)
----------- ------------
($ million)
Tangible assets 377 217
Accounts payable and accrued liabilities (377) (217)
BP shareholders' interest - -
======= =======
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(x) Pensions and other postretirement benefits
With effect from January 1, 2004 BP adopted Financial Reporting
Standard No. 17 `Retirement Benefits' (FRS 17). FRS 17 requires that
the assets and liabilities arising from an employer's retirement
benefit obligations and any related funding should be included in the
financial statements at fair value and that the operating costs of
providing retirement benefits to employees should be recognized in the
income statement in the periods in which the benefits are earned by
employees. This contrasts with Statement of Financial Accounting
Standards No. 87 `Employers' Accounting for Pensions' (SFAS 87) which
requires the cost of providing pensions to be recognized on a
systematic and rational basis over the period during which the
employer benefits from the employee's services. Under SFAS 87 the
difference between the amount charged in the income statement and the
amount paid as contributions into the pension fund is shown as a
prepayment or provision on the balance sheet.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2004 2003 2004 2003
----------------------- -----------------------
($ million)
Cost of sales 74 12 194 26
Other finance expense - (85) (2) (170)
Taxation (29) 24 (50) 47
Profit for the period (45) 49 (142) 97
======= ======= ======= =======
At At
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
($ million)
Other receivables falling due after more than one year 6,818 6,814
Provisions for liabilities and charges - other 6,893 6,878
Defined benefit pension plans surplus (1,258) (1,021)
Defined benefit pension plan and other postretirement benefit
plan deficits 7,556 7,510
Deferred taxation 872 902
BP shareholders' interest 5,351 5,523
======= =======
(xi) Dividends
Under UK GAAP, dividends are recorded in the period in respect of
which they are announced or declared by the board of directors to the
shareholders. Under US GAAP, dividends are recorded in the period in
which dividends are declared.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
June 30, December 31,
2004 2003
Increase (decrease) in caption heading (Unaudited)
----------- ------------
($ million)
Other accounts payable and accrued liabilities (1,536) (1,495)
BP shareholders' interest 1,536 1,495
======= =======
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xii) Investments
Under UK GAAP certain of the Group's equity investments are reported
as either fixed asset or current asset investments and carried on the
balance sheet at cost subject to review for impairment. For US GAAP
these investments are classified as available-for-sale securities.
Consequently they are reported at fair value, with unrealized holding
gains and losses, net of tax, reported in accumulated other
comprehensive income. If a decline in fair value below cost is 'other
than temporary' the unrealized loss is accounted for as a realized
loss and charged against income.
In February 2003, BP called its $420 Exchangeable Bonds which were
exchangeable for Lukoil American Depositary Shares (ADSs). Bondholders
converted to ADSs before the redemption date. For the six months ended
June 30, 2003, gains of $99 million were reclassified from
comprehensive income to net income.
The Group sold its investments in Petrochina and Sinopec in January
and February 2004, respectively, resulting in a gain on disposal of
$1,314 million. For the six months ended June 30, 2004 gains of $1,165
million were reclassified from comprehensive income to net income.
The adjustments to accumulated other comprehensive income (BP
shareholders' interest) to accord with US GAAP are summarized below.
At At
June 30, December 31,
2004 2003
Increase (decrease) in caption heading (Unaudited)
----------- ------------
($ million)
Fixed assets - Investments 159 1,924
Deferred taxation 56 673
BP shareholders' interest 103 1,251
======= =======
(xiii) Additional minimum pension liability
Where a pension plan has an unfunded accumulated benefit obligation,
US GAAP requires such amount to be recognized as a liability in the
balance sheet. The adjustment resulting from the recognition of any
such minimum liability, including the elimination of amounts
previously recognized as a prepaid benefit cost, is reported as an
intangible asset to the extent of unrecognized prior service cost with
the remaining amount reported in comprehensive income.
The adjustments to accumulated other comprehensive income (BP
shareholders' interest) to accord with US GAAP are summarized below.
At At
June 30, December 31,
2004 2003
Increase (decrease) in caption heading (Unaudited)
----------- ------------
($ million)
Noncurrent liabilities - accounts payable accrued liabilities 43 43
Deferred taxation 478 478
BP shareholders' interest (158) (158)
Intangible assets (277) (277)
======= =======
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The following is a summary of the adjustments to profit for the period and
to BP shareholders' interest which would be required if generally accepted
accounting principles in the USA (US GAAP) had been applied instead of
those generally accepted in the United Kingdom (UK GAAP).
Profit for the period Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
Profit as reported in the consolidated statement of income 3,896 1,585 8,714 5,804
Adjustments:
Deferred taxation/business combinations (iii) 51 (2) 39 34
Provisions (iv) 33 (1) 20 25
Sale and leaseback (v) 5 2 3 73
Goodwill and intangible assets(vi) 356 343 716 685
Derivative financial instruments (vii) (283) 291 (82) 283
Gain arising on asset exchange (viii) (5) (4) (8) (7)
Pensions and other postretirement benefits (x) (45) 49 (142) 97
Other 4 3 7 6
------- ------- ------- -------
116 681 553 1,196
------- ------- ------- -------
Profit for the period as adjusted to accord with US
GAAP before cumulative effect of accounting changes 4,012 2,266 9,267 7,000
Cumulative effect of accounting changes:
Provisions - - - 1,002
Derivative financial instruments - - - 50
------- ------- ------- -------
Profit for the period as adjusted to accord with US GAAP 4,012 2,266 9,267 8,052
======= ======= ======= =======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting changes 18.33 10.26 42.12 31.46
Cumulative effect of accounting changes
Provisions - - - 4.50
Derivative financial instruments - - - 0.23
------- ------- ------- -------
18.33 10.26 42.12 36.19
======= ======= ======= =======
Diluted - before cumulative effect of accounting changes 17.95 10.22 41.22 31.36
Cumulative effect of accounting changes
Provisions - - - 4.50
Derivative financial instruments - - - 0.22
------- ------- ------- -------
17.95 10.22 41.22 36.08
======= ======= ======= =======
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting changes 109.98 61.56 252.72 188.76
Cumulative effect of accounting changes
Provisions - - - 27.00
Derivative financial instruments - - - 1.38
------- ------- ------- -------
109.98 61.56 252.72 217.14
======= ======= ======= =======
Diluted - before cumulative effect of accounting changes 107.70 61.32 247.32 188.16
Cumulative effect of accounting changes
Provisions - - - 27.00
Derivative financial instruments - - - 1.32
------- ------- ------- -------
107.70 61.32 247.32 216.48
======= ======= ======= =======
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest June 30, 2004
(Unaudited) December 31, 2003
-------------- -----------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 72,818 70,319
Adjustments:
Deferred taxation/business combinations (iii) (27) (65)
Provisions (iv) (141) (128)
Sale and leaseback (v) (32) (37)
Goodwill and intangible assets (vi) 2,398 1,669
Derivative financial instruments (vii) (157) (72)
Gain arising on asset exchange (viii) 122 129
Consolidation of variable interest entities (ix) - -
Pensions and other postretirement benefits (x) 5,351 5,523
Dividends (xi) 1,536 1,495
Investments (xii) 103 1,251
Additional minimum pension liability (xiii) (277) (277)
Other (35) (43)
------- -------
8,841 9,445
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 81,659 79,764
======= ======
---------------
(a) The profit reported under UK GAAP for the three months and six months
ended June 30, 2003, and BP shareholders' interest at December 31,
2003, have been restated to reflect the adoption of FRS 17 and UITF
38. Consequently certain of the adjustments in the UK/US GAAP
reconciliation have also been restated. Profit and BP shareholders'
interest, as adjusted to accord with US GAAP, are unaffected by the
adoption of FRS 17 and UITF 38.
(b) One American Depositary Share is equivalent to six ordinary shares.
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
Profit for the period as adjusted to
accord with US GAAP 4,012 2,266 9,267 8,052
Currency translation differences (440) 1,775 (202) 1,493
Unrealized gains - 399 17 399
Unrealized losses (42) - - -
Less: reclassification adjustment for
gains included in net income - (99) (1,165) (99)
Additional minimum pension liability - - - -
------- ------- ------- -------
Comprehensive income 3,530 4,341 7,917 9,845
======= ======= ======= =======
Accumulated other comprehensive income at June 30, 2004 and December 31,
2003 comprised losses of $2,088 million and $3,438 million, respectively.
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Consolidated statement of cash flows
The Group's financial statements include a consolidated statement of cash
flows in accordance with the revised UK Financial Reporting Standard No. 1
(FRS 1). The statement prepared under FRS 1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS 1 cash flows are presented for (i) operating activities; (ii)
dividends from joint ventures; (iii) dividends from associated
undertakings; (iv) servicing of finance and returns on investments; (v)
taxation; (vi) capital expenditure and financial investment; (vii)
acquisitions and disposals; (viii) dividends; (ix) financing; and (x)
management of liquid resources. SFAS 95 only requires presentation of cash
flows from operating, investing and financing activities.
Cash flows under FRS 1 in respect of dividends from joint ventures and
associated undertakings, taxation and servicing of finance and returns on
investments are included within operating activities under SFAS 95.
Interest paid includes payments in respect of capitalized interest, which
under SFAS 95 are included in capital expenditure under investing
activities. Cash flows under FRS 1 in respect of capital expenditure and
acquisitions and disposals are included in investing activities under SFAS
95. Dividends paid are included within financing activities. All short-term
investments are regarded as liquid resources for FRS 1. Under SFAS 95
short-term investments with original maturities of three months or less are
classified as cash equivalents and aggregated with cash in the cash flow
statement. Cash flows in respect of short-term investments with original
maturities exceeding three months are included in operating activities.
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
($ million)
Operating activities
Profit after taxation 3,948 1,645 8,810 5,890
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,738 2,653 5,552 5,362
Exploration expenditure written off 22 43 89 93
Net charge for pensions and other postretirement
benefits, less contributions (34) 130 (55) (28)
Share of profits of joint ventures and associated
undertakings less dividends received (471) 30 (670) (118)
(Profit) loss on sale of businesses and fixed assets 127 (280) (1,103) (674)
Working capital movement (a) (982) 1,118 (54) (67)
Deferred taxation 34 338 150 539
Other (21) (288) (115) (347)
------- ------- ------- -------
Net cash provided by operating activities 5,361 5,389 12,604 10,650
------- ------- ------- -------
Investing activities
Capital expenditures (2,814) (2,803) (5,807) (5,708)
Acquisitions, net of cash acquired (14) (150) (1,287) (150)
Investment in associated undertakings (148) (331) (581) (517)
Net investment in joint ventures (21) (2) (113) (16)
Proceeds from disposal of assets 657 1,671 3,496 4,148
------- ------- ------- -------
Net cash used in investing activities (2,340) (1,615) (4,292) (2,243)
------- ------- ------- -------
Financing activities
Net proceeds from shares issued (repurchased) (1,948) (986) (3,086) (1,924)
Proceeds from long-term financing 430 208 1,058 1,223
Repayments of long-term financing (434) (607) (1,270) (1,010)
Net increase (decrease) in short-term debt (203) 30 (2,455) (3,243)
Dividends paid - BP Shareholders (1,478) (1,386) (2,970) (2,783)
- Minority shareholders (8) (11) (10) (13)
------- ------- ------- -------
Net cash used in financing activities (3,641) (2,752) (8,733) (7,750)
------- ------- ------- -------
Currency translation differences relating to cash
and cash equivalents (11) 43 (8) 52
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (631) 1,065 (429) 709
Cash and cash equivalents at beginning of period 2,334 1,379 2,132 1,735
------- ------- ------- -------
Cash and cash equivalents at end of period 1,703 2,444 1,703 2,444
======= ======= ======= =======
(a) Working capital:
Inventories (increase) decrease (1,412) 193 (1,165) 569
Receivables (increase) decrease (1,399) 3,245 (2,998) (3,411)
Current liabilities - excluding finance debt
increase (decrease) 1,829 (2,320) 4,109 2,775
------- ------- ------- -------
(982) 1,118 (54) (67)
======= ======= ======= =======
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Impact of new US accounting standards
Other postretirement benefits: In May 2004, the FASB issued Staff Position
No. 106-2 `Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003' (FSP 106-2).
The provisions of the Act provide for a federal subsidy for plans that
provide prescription drug benefits to Medicare-eligible retired employees
and meet certain qualifications. Alternatively, the Act allows prescription
drug plan sponsors to co-ordinate with the Medicare benefit.
BP's postretirement medical plans provide prescription drug coverage for
Medicare-eligible retired employees. The Group's obligation for other
postretirement benefits at June 30, 2004 and December 31, 2003 do not
reflect the effects of the Act. FSP 106-2 is effective for accounting
periods beginning after June 15, 2004. The Company continues to evaluate
the impact of the Act on its benefit plan design and accounting.
Tangible assets: The Securities and Exchange Commission requested the FASB
to consider whether oil and natural gas mineral rights held under lease or
other contractual arrangement should be classified on the balance sheet as
a tangible asset (property, plant and equipment) or as an intangible asset
(exploration expenditure). At its March 2004 meeting, the EITF reached a
consensus on Issue No. 04-2, (`Whether Mineral Rights are Tangible or
Intangible Assets') that all mineral rights should be considered tangible
assets for accounting purposes. In April 2004, the FASB issued FASB Staff
Position Nos. FAS 141-1 and FAS 142-1 (`Interaction of FASB Statements No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible
Assets, and EITF Issue No. 04-2, Whether Mineral Rights are Tangible or
Intangible Assets'), which amended SFAS 141 and 142 to remove mineral
rights as an example of an intangible asset consistent with the EITF's
consensus. The EITF consensus and the FASB Staff Position are effective for
reporting periods beginning after April 29, 2004.
Impact of new UK accounting standards
In December 2000, the UK Accounting Standards Board issued Financial
Reporting Standard No. 17 'Retirement Benefits' (FRS 17). This standard was
to be fully effective for accounting periods ending on or after June 22,
2003 with certain of the disclosure requirements effective for periods
prior to 2003. However, in November 2002, the UK Accounting Standards Board
issued an amendment to FRS 17, which allows deferral of full adoption to no
later than January 1, 2005; although the disclosure requirements apply to
periods prior to 2005. FRS 17 requires that financial statements reflect at
fair value the assets and liabilities arising from an employer's retirement
benefit obligations and any related funding. The operating costs of
providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value
of related assets and liabilities.
With effect from January 1, 2004, BP has fully adopted FRS17. This change
in accounting policy results in a prior year adjustment. Upon adoption,
shareholder funds at January 1, 2003 have been reduced by $5,601 million
and profit for the three months and six months ended June 30, 2003 has been
decreased by $48 million and $97 million respectively.
In addition, with effect from January 1, 2004, BP has also changed its
accounting policy for shares held in employee share ownership plans for the
benefit of employee share schemes.
Urgent Issues Task Force Abstract 38 `Accounting for Employee Share
Ownership Plan (ESOP) trusts' (Abstract 38) changes the presentation of an
entity's own shares held in an ESOP trust from requiring them to be
recognized as assets to requiring them to be deducted in arriving at
shareholders' funds. Transactions in an entity's own shares by an ESOP
trust are similarly recorded as changes in shareholders' funds and do not
give rise to gains or losses. This treatment is in line with the accounting
for purchases and sales of own shares set out in Urgent Issues Task Force
Abstract 37 `Purchases and Sales of Own Shares' (Abstract 37).
Abstract 37 requires a holding of an entity's own shares to be accounted
for as a deduction in arriving at shareholders' funds, rather than being
recorded as assets. Transactions in an entity's own shares are similarly
recorded as changes in shareholders' funds and do not give rise to gains or
losses. Abstract 37 applies where a company purchases treasury shares under
new legislation that came into effect in December 2003.
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new UK accounting standards - concluded
Urgent Issues Task Force Abstract 17 `Employee share schemes' (Abstract 17)
was amended by Abstract 38 to reflect the consequences for the profit and
loss account of the changes in the presentation of an entity's own shares
held by an ESOP trust. Amended Abstract 17 requires that the minimum
expense should be the difference between the fair value of the shares at
the date of award and the amount that an employee may be required to pay
for the shares (i.e. the `intrinsic value' of the award). The expense was
previously determined either as the intrinsic value or, where purchases of
shares had been made by an ESOP trust at fair value, by reference to the
cost or book value of shares that were available for the award. The effect
of adopting Abstract 17 was to reduce BP shareholders' interest at December
31, 2003 by $96 million; the impact on profit before taxation for 2003 was
negligible.
Impact of International accounting standards
An 'International Accounting Standards Regulation' was adopted by the
Council of the European Union (EU) in June 2002. This regulation, which
automatically becomes law in all EU countries, requires all EU companies
listed on a EU Stock Exchange to use 'endorsed' International Financial
Reporting Standards (IFRS), published by the International Accounting
Standards Board (IASB), to report their consolidated results with effect
from January 1, 2005. The IASB published 15 revised standards in December
2003 and the remaining standards of its stable platform on June 30, 2004.
The stable platform is the set of IFRS to be adopted on a mandatory basis
in 2005. A process of endorsement of IFRS has been established by the EU
for completion in due time to allow adoption by companies in 2005, but
objections to certain IFRS by certain EU member states may disrupt this
process.
BP has established a broadly based project team involving representatives
of business segments and functions to plan for and achieve a smooth
transition to IFRS. The project team is looking at all implementation
aspects, including changes to accounting policies, systems impacts and the
wider business issues that may arise from such a fundamental change. We
currently expect that the Group will be fully prepared for the transition
in 2005.
The Group has not yet determined the effects of adopting IFRS. Our
preliminary view is that the major differences between our current
accounting practice and IFRS will be in respect of hedge accounting,
accounting for embedded derivatives and other items falling within the
scope of the financial instruments standards, accounting for business
combinations, deferred tax and share-based payments.
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. TNK-BP operational and financial information
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
--------------------- --------------------
Production (Net of Royalties) (BP share)
Crude oil (mb/d) 814 - 790 -
Natural gas (mmcf/d) 450 - 416 -
Total hydrocarbons (mboe/d) (a) 891 - 862 -
======= ======= ======= =======
($ million)
Income statement (BP share)
Total operating profit 581 - 955 -
Profit (loss) on sale of fixed assets and businesses - - - -
Interest expense (26) - (56) -
Taxation (171) - (286) -
Minority shareholders' interest (10) - (20) -
------- ------- ------- -------
Net income 374 - 593 -
======= ======= ======= =======
---------------
(a) Natural gas is converted to oil equivalent at 5.8 billion cubic feet =
1 million barrels.
17. Condensed consolidating information
BP p.l.c. fully and unconditionally guarantees the payment obligations of
its 100% owned subsidiary BP Exploration (Alaska) Inc. under the BP Prudhoe
Bay Royalty Trust. The following financial information for BP p.l.c., and
BP Exploration (Alaska) Inc. and all other subsidiaries on a condensed
consolidating basis is intended to provide investors with meaningful and
comparable financial information about BP p.l.c. and its subsidiary issuers
of registered securities and is provided pursuant to Rule 3-10 of
Regulation S-X in lieu of the separate financial statements of each
subsidiary issuer of public debt securities. Investments include the
investments in subsidiaries recorded under the equity method for the
purposes of the condensed consolidating financial information. Equity
income of subsidiaries is the Group's share of operating profit related to
such investments. The eliminations and reclassifications column includes
the necessary amounts to eliminate the intercompany balances and
transactions between BP p.l.c., BP Exploration (Alaska) Inc. and other
subsidiaries.
BP p.l.c. also fully and unconditionally guarantees securities issued by BP
Australia Capital Markets Limited, BP Canada Finance Company, BP Capital
Markets p.l.c. and BP Capital Markets America Inc. These companies are
100%-owned finance subsidiaries of BP p.l.c.
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2004
Turnover 946 - 71,154 (946) 71,154
Less: Joint ventures - - 2,063 - 2,063
-----------------------------------------------------------------------------
Group turnover 946 - 69,091 (946) 69,091
Cost of sales 367 - 60,282 (955) 59,694
Production taxes 65 - 359 - 424
-----------------------------------------------------------------------------
Gross profit 514 - 8,450 9 8,973
Distribution and administration expenses 2 20 3,377 - 3,399
Exploration expense 1 - 107 - 108
-----------------------------------------------------------------------------
511 (20) 4,966 9 5,466
Other income 5 355 166 (365) 161
-----------------------------------------------------------------------------
Group operating profit 516 335 5,132 (356) 5,627
Share of profits of joint ventures - - 734 - 734
Share of profits of associated undertakings - - 134 - 134
Equity accounted income of subsidiaries 162 6,464 - (6,626) -
-----------------------------------------------------------------------------
Total operating profit 678 6,799 6,000 (6,982) 6,495
Profit (loss) on sale of fixed assets
and businesses or termination of
operations - (127) (127) 127 (127)
-----------------------------------------------------------------------------
Profit before interest and tax 678 6,672 5,873 (6,855) 6,368
Interest expense 22 501 492 (870) 145
Other finance expense 3 76 162 (165) 76
-----------------------------------------------------------------------------
Profit before taxation 653 6,095 5,219 (5,820) 6,147
Taxation 276 2,199 1,963 (2,239) 2,199
-----------------------------------------------------------------------------
Profit after taxation 377 3,896 3,256 (3,581) 3,948
Minority shareholders' interest - - 52 - 52
-----------------------------------------------------------------------------
Profit for the period 377 3,896 3,204 (3,581) 3,896
=============================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2004
Profit as reported 377 3,896 3,204 (3,581) 3,896
Adjustments:
Deferred taxation/business combinations (6) 51 57 (51) 51
Provisions 2 33 31 (33) 33
Sale and leaseback - 5 5 (5) 5
Goodwill - 356 356 (356) 356
Derivative financial instruments 7 (283) (283) 276 (283)
Gain arising on asset exchange - (5) (5) 5 (5)
Pensions and other postretirement benefits - (45) (40) 40 (45)
Other - 4 4 (4) 4
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 380 4,012 3,329 (3,709) 4,012
=============================================================================
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2003
Turnover 750 - 54,790 (750) 54,790
Less: Joint ventures - - 364 - 364
-----------------------------------------------------------------------------
Group turnover 750 - 54,426 (750) 54,426
Cost of sales 329 - 48,048 (821) 47,556
Production taxes 58 - 324 - 382
-----------------------------------------------------------------------------
Gross profit 363 - 6,054 71 6,488
Distribution and administration expenses - 118 3,288 - 3,406
Exploration expense 7 - 94 - 101
-----------------------------------------------------------------------------
356 (118) 2,672 71 2,981
Other income 5 235 173 (216) 197
-----------------------------------------------------------------------------
Group operating profit 361 117 2,845 (145) 3,178
Share of profits of joint ventures - - 104 - 104
Share of profits of associated undertakings - - 103 - 103
Equity accounted income of subsidiaries 103 3,353 - (3,456) -
-----------------------------------------------------------------------------
Total operating profit 464 3,470 3,052 (3,601) 3,385
Profit (loss) on sale of fixed assets
and businesses or termination of operations 1 282 279 (282) 280
-----------------------------------------------------------------------------
Profit before interest and tax 465 3,752 3,331 (3,883) 3,665
Interest expense 68 294 247 (460) 149
Other finance expense 2 127 175 (177) 127
-----------------------------------------------------------------------------
Profit before taxation 395 3,331 2,909 (3,246) 3,389
Taxation 178 1,744 1,595 (1,773) 1,744
-----------------------------------------------------------------------------
Profit after taxation 217 1,587 1,314 (1,473) 1,645
Minority shareholders' interest - - 60 - 60
-----------------------------------------------------------------------------
Profit for the period 217 1,587 1,254 (1,473) 1,585
=============================================================================
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2003
Profit as reported 217 1,587 1,254 (1,473) 1,585
Adjustments:
Deferred taxation/business combinations (3) (2) 1 2 (2)
Provisions (1) (1) 1 - (1)
Sale and leaseback - 2 2 (2) 2
Goodwill - 343 343 (343) 343
Derivative financial instruments (16) 291 291 (275) 291
Gain arising on asset exchange - (4) (4) 4 (4)
Pensions and other postretirement benefits - 49 (43) 43 49
Other - 3 3 (3) 3
-----------------------------------------------------------------------------
Profit for the period as adjusted
to accord with US GAAP 197 2,268 1,848 (2,047) 2,266
=============================================================================
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2004
Turnover 1,826 - 140,634 (1,826) 140,634
Less: Joint ventures - - 3,941 - 3,941
-----------------------------------------------------------------------------
Group turnover 1,826 - 136,693 (1,826) 136,693
Cost of sales 738 - 119,546 (1,840) 118,444
Production taxes 129 - 820 - 949
-----------------------------------------------------------------------------
Gross profit 959 - 16,327 14 17,300
Distribution and administration expenses 2 104 6,533 - 6,639
Exploration expense 1 - 243 - 244
-----------------------------------------------------------------------------
956 (104) 9,551 14 10,417
Other income 9 633 298 (689) 251
-----------------------------------------------------------------------------
Group operating profit 965 529 9,849 (675) 10,668
Share of profits of joint ventures - - 1,225 - 1,225
Share of profits of associated undertakings - - 284 - 284
Equity accounted income of subsidiaries 321 12,227 - (12,548) -
-----------------------------------------------------------------------------
Total operating profit 1,286 12,756 11,358 (13,223) 12,177
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,103 1,103 (1,103) 1,103
-----------------------------------------------------------------------------
Profit before interest and tax 1,286 13,859 12,461 (14,326) 13,280
Interest expense 44 972 955 (1,674) 297
Other finance expense 7 152 323 (330) 152
-----------------------------------------------------------------------------
Profit before taxation 1,235 12,735 11,183 (12,322) 12,831
Taxation 505 4,021 3,614 (4,119) 4,021
-----------------------------------------------------------------------------
Profit after taxation 730 8,714 7,569 (8,203) 8,810
Minority shareholders' interest - - 96 - 96
-----------------------------------------------------------------------------
Profit for the period 730 8,714 7,473 (8,203) 8,714
=============================================================================
Page 50
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2004
Profit as reported 730 8,714 7,473 (8,203) 8,714
Adjustments:
Deferred taxation/business combinations (9) 39 48 (39) 39
Provisions 2 20 18 (20) 20
Sale and leaseback - 3 3 (3) 3
Goodwill - 716 716 (716) 716
Derivative financial instruments - (82) (82) 82 (82)
Gain arising on asset exchange - (8) (8) 8 (8)
Pensions and other postretirement benefits - (142) (124) 124 (142)
Other - 7 7 (7) 7
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 723 9,267 8,051 (8,774) 9,267
=============================================================================
Page 51
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2003
Turnover 1,630 - 117,219 (1,630) 117,219
Less: Joint ventures - - 762 - 762
-----------------------------------------------------------------------------
Group turnover 1,630 - 116,457 (1,630) 116,457
Cost of sales 729 - 101,272 (1,777) 100,224
Production taxes 126 - 760 - 886
-----------------------------------------------------------------------------
Gross profit 775 - 14,425 147 15,347
Distribution and administration expenses - 325 6,325 - 6,650
Exploration expense 8 - 205 - 213
-----------------------------------------------------------------------------
767 (325) 7,895 147 8,484
Other income 11 382 302 (367) 328
-----------------------------------------------------------------------------
Group operating profit 778 57 8,197 (220) 8,812
Share of profits of joint ventures - - 222 - 222
Share of profits of associated undertakings - - 289 - 289
Equity accounted income of subsidiaries 228 9,400 - (9,628) -
-----------------------------------------------------------------------------
Total operating profit 1,006 9,457 8,708 (9,848) 9,323
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 676 674 (676) 674
-----------------------------------------------------------------------------
Profit before interest and tax 1,006 10,133 9,382 (10,524) 9,997
Interest expense 133 545 494 (847) 325
Other finance expense 5 256 353 (358) 256
-----------------------------------------------------------------------------
Profit before taxation 868 9,332 8,535 (9,319) 9,416
Taxation 389 3,526 3,212 (3,601) 3,526
-----------------------------------------------------------------------------
Profit after taxation 479 5,806 5,323 (5,718) 5,890
Minority shareholders' interest - - 86 - 86
-----------------------------------------------------------------------------
Profit for the period 479 5,806 5,237 (5,718) 5,804
=============================================================================
Page 52
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (concluded)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2003
Profit as reported 479 5,806 5,237 (5,718) 5,804
Adjustments:
Deferred taxation/business combinations (6) 34 40 (34) 34
Provisions (5) 25 26 (21) 25
Sale and leaseback - 73 73 (73) 73
Goodwill - 685 685 (685) 685
Derivative financial instruments - 283 283 (283) 283
Gain arising on asset exchange - (7) (7) 7 (7)
Pensions and other postretirement benefits - 97 (87) 87 97
Other - 6 6 (6) 6
-----------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting changes as adjusted to
accord with US GAAP 468 7,002 6,256 (6,726) 7,000
Cumulative effect of accounting changes:
Provisions 221 1,002 788 (1,009) 1,002
Derivative financial instruments - 50 50 (50) 50
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 689 8,054 7,094 (7,785) 8,052
-----------------------------------------------------------------------------
Page 53
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At June 30, 2004
Fixed assets
Intangible assets 422 - 12,691 - 13,113
Tangible assets 6,356 - 84,919 - 91,275
Investments
Subsidiaries - equity accounted basis 3,008 69,831 - (72,839) -
Other - 2 19,032 - 19,034
-----------------------------------------------------------------------------
3,008 69,833 19,032 (72,839) 19,034
-----------------------------------------------------------------------------
Total fixed assets 9,786 69,833 116,642 (72,839) 123,422
-----------------------------------------------------------------------------
Current assets
Inventories 78 - 12,392 - 12,470
Receivables 11,354 33,068 43,837 (51,912) 36,347
Investments - - 172 - 172
Cash at bank and in hand 3 3 1,525 - 1,531
-----------------------------------------------------------------------------
11,435 33,071 57,926 (51,912) 50,520
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 57 - 7,338 (2) 7,393
Accounts payable and accrued liabilities 1,102 5,390 51,138 (12,771) 44,859
-----------------------------------------------------------------------------
Net current assets (liabilities) 10,276 27,681 (550) (39,139) (1,732)
-----------------------------------------------------------------------------
Total assets less current liabilities 20,062 97,514 116,092 (111,978) 121,690
Noncurrent liabilities
Finance debt - - 12,465 - 12,465
Accounts payable and accrued liabilities 4,317 47 40,503 (39,139) 5,728
Provisions for liabilities and charges
Deferred taxation 1,743 - 12,796 - 14,539
Other provisions 498 186 7,926 - 8,610
-----------------------------------------------------------------------------
Net assets excluding pension and other
postretirement benefit balances 13,504 97,281 42,402 (72,839) 80,348
Defined benefit pension plan surplus - 1,176 82 - 1,258
Defined benefit pension plan and other
postretirement benefit plan deficits (82) - (7,474) - (7,556)
-----------------------------------------------------------------------------
Net assets 13,422 98,457 35,010 (72,839) 74,050
Minority shareholders' interest - equity - - 1,232 - 1,232
-----------------------------------------------------------------------------
BP shareholders' interest 13,422 98,457 33,778 (72,839) 72,818
=============================================================================
Page 54
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At June 30, 2004
Capital and reserves
Capital shares 3,353 5,468 - (3,353) 5,468
Paid-in surplus 3,145 4,785 - (3,145) 4,785
Merger reserve - 26,433 698 - 27,131
Other reserves - 75 - - 75
Shares held by ESOP trusts - (65) - - (65)
Retained earnings 6,924 61,761 33,080 (66,341) 35,424
-----------------------------------------------------------------------------
13,422 98,457 33,778 (72,839) 72,818
=============================================================================
The following is a summary of the adjustments to BP shareholders' interest
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 13,422 98,457 33,778 (72,839) 72,818
Adjustments:
Deferred taxation/business combinations 53 (27) (80) 27 (27)
Provisions 29 (141) (169) 140 (141)
Sale and leaseback - (32) (32) 32 (32)
Goodwill - 2,398 2,398 (2,398) 2,398
Derivative financial instruments (63) (157) (157) 220 (157)
Gain arising on asset exchange - 122 122 (122) 122
Pensions and other postretirement benefits 82 5,351 3,793 (3,875) 5,351
Dividends - 1,536 - - 1,536
Investments - 103 103 (103) 103
Additional minimum pension liability - (277) (277) 277 (277)
Other - (35) (35) 35 (35)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 13,523 107,298 39,444 (78,606) 81,659
=============================================================================
Page 55
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2003
Fixed assets
Intangible assets 424 - 13,218 - 13,642
Tangible assets 6,432 - 85,479 - 91,911
Investments
Subsidiaries - equity-accounted basis 2,814 78,076 - (80,890) -
Other - 2 17,456 - 17,458
-----------------------------------------------------------------------------
2,814 78,078 17,456 (80,890) 17,458
-----------------------------------------------------------------------------
Total fixed assets 9,670 78,078 116,153 (80,890) 123,011
-----------------------------------------------------------------------------
Current assets
Inventories 102 - 11,515 - 11,617
Receivables 11,150 24,300 43,341 (44,889) 33,902
Investments - - 185 - 185
Cash at bank and in hand (5) 3 1,949 - 1,947
-----------------------------------------------------------------------------
11,247 24,303 56,990 (44,889) 47,651
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 55 - 9,401 - 9,456
Accounts payable and accrued liabilities 1,541 6,746 48,376 (15,535) 41,128
-----------------------------------------------------------------------------
Net current assets (liabilities) 9,651 17,557 (787) (29,354) (2,933)
-----------------------------------------------------------------------------
Total assets less current liabilities 19,321 95,635 115,366 (110,244) 120,078
Noncurrent liabilities
Finance debt - - 12,869 - 12,869
Accounts payable and accrued liabilities 4,272 50 31,122 (29,354) 6,090
Provisions for liabilities and charges
Deferred taxation 1,745 - 12,626 - 14,371
Other provisions 505 216 8,094 - 8,815
-----------------------------------------------------------------------------
Net assets excluding pension and other
postretirement benefit balances 12,799 95,369 50,655 (80,890) 77,933
Defined benefit pension plan surplus - 1,093 (72) - 1,021
Defined benefit pension plan and other
postretirement benefit plan deficits (82) - (7,510) 82 (7,510)
-----------------------------------------------------------------------------
Net assets 12,717 96,462 43,073 (80,808) 71,444
Minority shareholders' interest - equity - - 1,125 - 1,125
-----------------------------------------------------------------------------
BP shareholders' interest 12,717 96,462 41,948 (80,808) 70,319
=============================================================================
Page 56
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2003
Capital and reserves
Capital shares 1,903 5,552 - (1,903) 5,552
Paid-in surplus 3,145 4,480 - (3,145) 4,480
Merger reserve - 26,380 697 - 27,077
Other reserves - 129 - - 129
Shares held by ESOP trusts - (96) - - (96)
Retained earnings 7,669 60,017 41,251 (75,760) 33,177
-----------------------------------------------------------------------------
12,717 96,462 41,948 (80,808) 70,319
=============================================================================
The following is a summary of the adjustments to BP shareholders' interest
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 12,717 96,462 41,948 (80,808) 70,319
Adjustments:
Deferred taxation/business combinations 62 (65) (127) 65 (65)
Provisions 27 (128) (155) 128 (128)
Sale and leaseback - (37) (37) 37 (37)
Goodwill - 1,669 1,669 (1,669) 1,669
Derivative financial instruments (63) (72) (9) 72 (72)
Gain arising on asset exchange - 129 129 (129) 129
Pensions and other postretirement benefits 82 5,523 4,047 (4,129) 5,523
Dividends - 1,495 - - 1,495
Investments - 1,251 1,251 (1,251) 1,251
Additional minimum pension liability - (277) (277) 277 (277)
Other - (43) (43) 43 (43)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 12,825 105,907 48,396 (87,364) 79,764
=============================================================================
Page 57
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2004
Net cash inflow (outflow) from
operating activities 594 (3,289) 9,235 377 6,917
Dividends from joint ventures - - 7 - 7
Dividends from associated undertakings - - 97 - 97
Dividends from subsidiaries - 6,339 - (6,339) -
Net cash inflow (outflow) from servicing of
finance and returns on investments 1 377 (100) (377) (99)
Tax paid (74) - (1,545) - (1,619)
Net cash inflow (outflow) for capital
expenditure and financial investment (96) - (2,316) - (2,412)
Net cash inflow (outflow) for acquisitions
and disposals - - 122 - 122
Equity dividends paid - (1,478) (6,339) 6,339 (1,478)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 425 1,949 (839) - 1,535
=============================================================================
Financing 417 1,948 (210) - 2,155
Management of liquid resources - - (153) - (153)
Increase (decrease) in cash 8 1 (476) - (467)
-----------------------------------------------------------------------------
425 1,949 (839) - 1,535
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 520 3,427 7,694 (6,484) 5,157
Net cash provided by (used in)
investing activities (95) - (2,194) 153 (2,136)
Net cash provided by (used in)
financing activities (417) (3,426) (6,129) 6,331 (3,641)
Currency translation differences relating to
cash and cash equivalents - - (11) - (11)
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 8 1 (640) - (631)
Cash and cash equivalents at beginning
of period (5) 2 2,337 - 2,334
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period 3 3 1,697 - 1,703
=============================================================================
Page 58
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2003
Net cash inflow (outflow) from
operating activities 372 (15,793) 22,767 - 7,346
Dividends from joint ventures - - 28 - 28
Dividends from associated undertakings - - 177 - 177
Dividends from subsidiaries - 18,133 - (18,133) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 43 (406) - (363)
Tax paid (47) (3) (1,803) - (1,853)
Net cash inflow (outflow) for capital
expenditure and financial investment (115) 22 (1,015) - (1,108)
Net cash inflow (outflow) for acquisitions
and disposals 3 - (467) - (464)
Equity dividends paid - (1,386) (18,133) 18,133 (1,386)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 213 1,016 1,148 - 2,377
=============================================================================
Financing 214 987 154 - 1,355
Management of liquid resources - - 93 - 93
Increase (decrease) in cash (1) 29 901 - 929
-----------------------------------------------------------------------------
213 1,016 1,148 - 2,377
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 328 2,379 20,763 (18,081) 5,389
Net cash provided by (used in)
investing activities (115) 24 (1,482) (42) (1,615)
Net cash provided by (used in)
financing activities (214) (2,374) (18,287) 18,123 (2,752)
Currency translation differences relating to
cash and cash equivalents - - 43 - 43
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (1) 29 1,037 - 1,065
Cash and cash equivalents at beginning
of period (10) (11) 1,400 - 1,379
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (11) 18 2,437 - 2,444
=============================================================================
Page 59
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2004
Net cash inflow (outflow) from
operating activities 1,134 (10,035) 22,809 683 14,591
Dividends from joint ventures - - 185 - 185
Dividends from associated undertakings - - 128 - 128
Dividends from subsidiaries 8 15,409 - (15,417) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (29) 683 (184) (683) (213)
Tax paid (74) (1) (2,124) - (2,199)
Net cash inflow (outflow) for capital
expenditure and financial investment (188) - (2,326) - (2,514)
Net cash inflow (outflow) for acquisitions
and disposals - - (1,676) - (1,676)
Equity dividends paid - (2,970) (15,417) 15,417 (2,970)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 851 3,086 1,395 - 5,332
=============================================================================
Financing 843 3,086 1,824 - 5,753
Management of liquid resources - - (15) - (15)
Increase (decrease) in cash 8 - (414) - (406)
-----------------------------------------------------------------------------
851 3,086 1,395 - 5,332
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 1,068 6,056 20,814 (15,538) 12,400
Net cash provided by (used in)
investing activities (187) - (4,002) 101 (4,088)
Net cash provided by (used in)
financing activities (873) (6,056) (17,241) 15,437 (8,733)
Currency translation differences relating to
cash and cash equivalents - - (8) - (8)
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 8 - (437) - (429)
Cash and cash equivalents at beginning
of period (5) 3 2,134 - 2,132
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period 3 3 1,697 - 1,703
=============================================================================
Page 60
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
17. Condensed consolidating information - concluded
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2003
Net cash inflow (outflow) from
operating activities 890 (13,540) 25,957 - 13,307
Dividends from joint ventures - - 41 - 41
Dividends from associated undertakings - - 232 - 232
Dividends from subsidiaries 10 18,133 - (18,143) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (22) 70 (583) - (535)
Tax paid (47) (3) (2,435) - (2,485)
Net cash inflow (outflow) for capital
expenditure and financial investment (212) 64 (1,514) - (1,662)
Net cash inflow (outflow) for acquisitions
and disposals 9 - (513) - (504)
Equity dividends paid - (2,783) (18,143) 18,143 (2,783)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 628 1,941 3,042 - 5,611
=============================================================================
Financing 628 1,924 2,402 - 4,954
Management of liquid resources - - 106 - 106
Increase (decrease) in cash - 17 534 - 551
-----------------------------------------------------------------------------
628 1,941 3,042 - 5,611
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 862 4,659 23,212 (18,083) 10,650
Net cash provided by (used in)
investing activities (212) 66 (2,027) (70) (2,243)
Net cash provided by (used in)
financing activities (650) (4,708) (20,545) 18,153 (7,750)
Currency translation differences relating to
cash and cash equivalents - - 52 - 52
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents - 17 692 - 709
Cash and cash equivalents at beginning
of period (11) 1 1,745 - 1,735
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (11) 18 2,437 - 2,444
=============================================================================
Page 61
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
------------------------- -------------------------
Average crude oil realizations - $/bbl
UK 33.99 25.16 31.60 28.60
USA 35.82 27.09 34.22 29.48
Rest of World 32.64 24.16 31.69 26.90
BP average 34.47 25.73 32.85 28.50
Average natural gas liquids realizations - $/bbl
UK 28.30 11.97 27.04 18.86
USA 23.13 17.80 22.71 18.05
Rest of World 22.17 20.16 23.36 21.63
BP average 23.71 17.49 23.43 18.76
Average liquids realizations (a) - $/bbl
UK 33.64 24.45 31.33 28.04
USA 33.67 25.61 32.36 27.55
Rest of World 31.90 23.93 31.14 26.58
BP average 33.27 24.90 31.85 27.47
Average natural gas realizations - $/mcf
UK 3.59 2.84 4.18 3.11
USA 5.11 4.52 4.91 4.91
Rest of World 2.54 2.53 2.60 2.63
BP average 3.68 3.39 3.74 3.64
Total hydrocarbons - $/boe
UK 28.78 21.15 28.60 23.99
USA 31.96 25.88 30.70 27.96
Rest of World 21.56 18.75 21.57 20.09
BP average 27.66 22.43 27.06 24.49
Average oil marker prices - $/bbl
Brent oil price 35.32 26.03 33.67 28.77
West Texas Intermediate oil price 38.28 29.02 36.80 31.53
Alaska North Slope US West Coast 36.99 27.04 35.61 30.13
Henry Hub gas price (b) ($/mmbtu) 6.00 5.40 5.84 5.96
UK Gas - National Balancing point (p/therm) 20.70 17.44 22.64 19.35
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 5.29 2.15 4.01 2.92
US Gulf Coast 9.18 3.59 8.05 4.86
Midwest 9.01 4.73 6.84 4.44
US West Coast 15.41 6.34 11.73 6.55
Singapore 2.80 0.66 3.11 1.81
BP average 7.89 3.27 6.25 3.89
Chemicals Indicator Margin (d) - $/te 131 (e) 134 128 (e) 115
Page 62
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS - concluded
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of six regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity. The regional indicator margins may not be representative of the
margins achieved by BP in any period because of BP's particular refinery
configurations and crude and product slate.
(d) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Nexant (formerly Chem Systems) in their quarterly market analyses, then
weighted based on BP's product portfolio. It does not cover our entire
portfolio of products, and consequently is only indicative rather than
representative of the margins achieved by BP in any particular period.
Amongst the products and businesses covered in the CIM are olefins and
derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs),
acetic acid, vinyl acetate monomers and nitriles. Not included are fabrics
and fibres, plastic fabrications, poly alpha-olefins (PAOs), anhydrides,
speciality intermediates, and the remaining parts of the solvents and
acetyls businesses.
(e) Provisional. The data for the second quarter is based on two months'
actuals and one month of provisional data.
The table below shows the US dollar/sterling exchange rates used in the
preparation of the financial statements. The period-end rate is the mid-point
closing rate as published in the London edition of the Financial Times on the
last day of the period. The average rate for the period is the average of the
daily mid-point closing rates for the period.
Three months ended Six months ended
June 30 June 30
US dollar/sterling exchange rates (Unaudited) (Unaudited)
2004 2003 2004 2003
------------------------- -------------------------
Average rate for the period 1.81 1.62 1.82 1.61
Period-end rate 1.81 1.65 1.81 1.65
Page 63
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
------------------------- -------------------------
Crude oil production
(thousand barrels per day) (net of royalties)
UK 321 325 333 383
Rest of Europe 80 80 76 85
USA 541 569 552 588
Rest of World 1,379 738 1,370 715
------ ------ ------ ------
Total crude oil production 2,321 1,712 2,331 1,771
====== ====== ====== ======
Natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 21 18 20 24
Rest of Europe 5 5 5 5
USA 140 144 139 155
Rest of World 31 32 30 32
------ ------ ------ ------
Total natural gas liquids production 197 199 194 216
====== ====== ====== ======
Liquids production (a)
(thousand barrels per day) (net of royalties)
UK 342 343 353 407
Rest of Europe 85 85 81 90
USA 681 713 691 743
Rest of World 1,410 770 1,400 747
------ ------ ------ ------
Total liquids production 2,518 1,911 2,525 1,987
====== ====== ====== ======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,213 1,407 1,284 1,602
Rest of Europe 136 103 139 117
USA 2,790 3,145 2,829 3,290
Rest of World 4,286 3,784 4,260 3,718
------ ------ ------ ------
Total natural gas production 8,425 8,439 8,512 8,727
====== ====== ====== ======
Total production (b)
(thousand barrels of oil equivalent per day)
(net of royalties)
UK 551 586 575 683
Rest of Europe 108 103 105 110
USA 1,163 1,255 1,179 1,310
Rest of World 2,149 1,422 2,134 1,388
------ ------ ------ ------
Total production 3,971 3,366 3,993 3,491
====== ====== ====== ======
Page 64
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
---------------------- ----------------------
Natural gas sales volumes (million cubic feet per day)
UK 2,495 2,581 2,761 2,896
Rest of Europe 266 421 354 447
USA 12,470 10,441 13,044 11,084
Rest of World 12,070 10,839 12,986 11,194
------- ------- ------- -------
Total natural gas sales volumes (c) 27,301 24,282 29,145 25,621
======= ======= ======= =======
NGL sales volumes (thousand barrels per day)
UK 8 1 6 3
Rest of Europe 3 - 2 -
USA 334 289 397 285
Rest of World 166 147 205 199
------- ------- ------- -------
Total NGL sales volumes 511 437 610 487
======= ======= ======= =======
Oil sales volumes (thousand barrels per day)
Refined products
UK 318 279 306 279
Rest of Europe 1,344 1,358 1,333 1,338
USA 1,724 1,822 1,726 1,787
Rest of World 665 607 672 626
------- ------- ------- -------
Total marketing sales 4,051 4,066 4,037 4,030
Trading/supply sales 2,087 2,957 2,502 2,884
------- ------- ------- -------
Total refined product sales 6,138 7,023 6,539 6,914
Crude oil 5,339 5,679 5,222 5,104
------- ------- ------- -------
Total oil sales 11,477 12,702 11,761 12,018
======= ======= ======= =======
Refinery throughputs (thousand barrels per day)
UK 404 416 400 397
Rest of Europe 871 991 878 973
USA 1,370 1,465 1,317 1,384
Rest of World 377 393 388 392
------- ------- ------- -------
Total throughput 3,022 3,265 2,983 3,146
======= ======= ======= =======
Petrochemicals production (thousand tonnes)
UK 856 714 1,696 1,583
Rest of Europe 2,726 2,681 5,454 5,444
USA 2,514 2,503 5,057 5,039
Rest of World 1,075 872 2,207 1,684
------- ------- ------- -------
Total production 7,171 6,770 14,414 13,750
======= ======= ======= =======
---------------
(a) Crude oil and natural gas liquids.
(b) Expressed in thousand barrels of oil equivalent per day (mboe/d). Natural
gas is converted to oil equivalent at 5.8 billion cubic feet: 1 million
barrels.
(c) Encompasses sales by Exploration and Production and Gas, Power and
Renewables, including marketing, trading and supply sales.
Page 65
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
---------------------- ----------------------
($ million)
By business
Exploration and Production
UK 211 220 364 416
Rest of Europe 45 73 93 124
USA 1,027 1,005 1,959 1,968
Rest of World (a) 1,022 1,136 3,712 2,044
------- ------- ------- -------
2,305 2,434 6,128 4,552
------- ------- ------- -------
Refining and Marketing
UK 82 66 159 139
Rest of Europe 173 64 265 168
USA 330 228 588 564
Rest of World 55 27 92 51
------- ------- ------- -------
640 385 1,104 922
------- ------- ------- -------
Petrochemicals
UK 22 30 42 30
Rest of Europe 53 21 91 52
USA 68 62 115 106
Rest of World 38 85 99 106
------- ------- ------- -------
181 198 347 294
------- ------- ------- -------
Gas, Power and Renewables
UK 5 24 6 32
Rest of Europe 3 9 5 24
USA 14 52 25 93
Rest of World 60 41 107 64
------- ------- ------- -------
82 126 143 213
------- ------- ------- -------
Other businesses and corporate
UK 13 21 15 39
Rest of Europe - - - 1
USA 13 162 22 172
Rest of World - - - 1
------- ------- ------- -------
26 183 37 213
------- ------- ------- -------
3,234 3,326 7,759 6,194
======= ======= ======= =======
By geographical area
UK 333 361 586 656
Rest of Europe 274 167 454 369
USA 1,452 1,509 2,709 2,903
Rest of World (a) 1,175 1,289 4,010 2,266
------- ------- ------- -------
3,234 3,326 7,759 6,194
======= ======= ======= =======
------------
(a) Six months ended June 30, 2004 included the investment in TNK's interest in
Slavneft within TNK-BP.
Page 66
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2004 2003 2004 2003
------------------------- -------------------------
($ million)
Profit for the period 3,896 1,585 8,714 5,804
Interest (a) 62 78 126 177
Minority shareholders' interest 52 60 96 86
------- ------- ------- -------
Adjusted profit 4,010 1,723 8,936 6,067
======= ======= ======= =======
Capital employed at beginning of period:
BP shareholders' interest 72,829 65,189 70,319 63,649
Minority shareholders' interest 1,181 1,047 1,125 638
Finance debt 19,937 19,042 22,325 22,008
------- ------- ------- -------
Capital employed 93,947 85,278 93,769 86,295
======= ======= ======= =======
Capital employed at end of period:
BP shareholders' interest 72,818 66,056 72,818 66,056
Minority shareholders' interest 1,232 1,016 1,232 1,016
Finance debt 19,858 18,594 19,858 18,594
------- ------- ------- -------
Capital employed 93,908 85,666 93,908 85,666
======= ======= ======= =======
Average capital employed 93,928 85,472 93,839 85,980
======= ======= ======= =======
ROACE 17.1% 8.1% 19.0% 14.1%
------------
(a) Excludes interest on joint venture and associated undertaking's debt
and is on a post-tax basis, using a deemed tax rate equal to the US
statutory tax rate.
Page 67
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
At June 30
(Unaudited) At December 31
2004 2003
--------- ----------
($ million)
Net debt ratio - net debt: net debt + equity
Gross finance debt 19,858 22,325
Cash and current asset investments 1,703 2,132
------- -------
Net debt 18,155 20,193
------- -------
Equity 74,050 71,444
Net debt ratio 20% 22%
======= =======
Page 68
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: August 3, 2004 /s/ D. J. Pearl
.........................................
D. J. PEARL
Deputy Company Secretary
Page 69